Instead of ogling at the hyper-rich as seems de rigeur with a media flattered by wealth and celebrity, it is worth looking at the implications of the polarisation of society revealed by today’s Sunday Times Rich List – a world divided not so much as the 99% from the 1%, but rather from the 0.1%, the 0.01% or even the 0.001%.
Philip Beresford’s annual research reveals that the richest 1,000 persons in the UK, just 0.003% of the adult population – and you don’t qualify unless you have a handy £75m – have increased their wealth by no less than £35bn in the last year alone. Since the financial crash 4 years ago, their wealth has soared by a staggering £190bn. That’s just their gains.
All told their collective total wealth has now reached a mind-boggling £449bn. Just 200 mof them are now worth £318bn, while the richest 100, only 0.0003% of the electorate, now have wealth estimated at £257bn – in other words each of them on average possesses wealth exceeding £2.5bn. There are now 88 billionaires in Britain, 11 more than the year before.
This surge towards ever more extreme inequality really matters. First, in paying down the budget deficit a la Osborne (instead of the more sensible Keynesian approach to kickstarting the economy), the poorest quarter of the population are being made to pay £18bn in benefit cutswhilst the ultra-rich are not being made to pay at all. At a time when the the very richest 1,000 have increased their wealth in the last year by 11%, real wages in the UK have fallen by 7% in the last 2 years and are still falling.
A fair policy, by contrast, would reduce the deficit by levying a capital gains tax charge on the post-crash gains of this Midas-rich 1,000 which should raise up to £53bn (at the current 28% rate), more than enough to kickstart the economy and create a million or more jobs – without any increase in public borrowing.
Second, there is a strong link between extreme inequality and instability. The two great crashes of the last century in 1929-31 and 2008-9 were both preceded by big rises in inequality. The reason is that wage-based demand in rich economies accounts for about two-thirds of economic demand, and both in the 1920s and 2000s the wage share fell.
British wage-earners today have around £100bn less in their pockets than if national income was shared now as it was in the late 1970s. This can only increase the likelihood of a triple dip recession and a very long-drawn-out stagnation.
Third, this massive polarisation in wealth dangerously concentrates economic power. The interests of the hyper-rich align less and less with the national interest because their wealth is invested globally and their political influence is directed not towards UK national recovery but towards unfettered corporate power, the consolidation of tax havens, unrestrained globalisation, and a public sector increasingly gutted by privatisation and outsourcing.
