The Office of National Statistics data published last month found that the richest 1%in the UK owned as much wealth as the poorest 55%. Oxfam, even more poignantly, calculated that 5 billionaire families controlled the same level of wealth as 20% of the population (i.e. 13 million people). In fact these figures almost certainly greatly underestimate the inequality in wealth because of the huge diversion of wealth to offshore tax haves which account for, on the latest estimate, some £21 trillions of savings.
It seems strange therefore that the Financial Times, in particular their right-wing political commentator Chris Giles, a close friend of Osborne, should be seeking to rubbish the conclusions of the French economist, Thamas Piketty, that inequality has been rising in the West since the 1970s. Even more they have been attacking Piketty’s contention that rising inequality is the central contradiction of capitalism. This was not just an intellectual cross-checking of data (which is always desirable in principle). What is at stake is the urge on the part of the Right to portray rising wealth as a social benefit spread across society, not a monopoly of a tiny elite.
The dispute is complicated by the fact that whilst income has been closely recorded and taxed since the 1840s, there has been no requirement, nor even any desire under conditions of neoliberal capitalism, to record, let alone tax, actual market wealth at all. Estimates of total wealth of all UK private households, now around £9.5 trillions, have had to be derived from the inheritance tax returns on estates large enough to pay it (just 6% of the total).
This problem was made worse still by the enormous shift of wealth, particularly since the 1980s, to offshore tax havens. Indeed the Inland Revenue estimated in 2005 that on top of ‘identified’ wealth in the UK, it had to be assumed that half as much in addition had either not been declared or belonged to people who slipped through the net. Hence the critical need for automatic sharing of bank information between States and banks so that national tax authorities can receive all the information they need to calculate the net wealth of every citizen.
Piketty did not claim, and did not need to, that there had been vast increases in wealth disparities since the 1970s – though others have claimed this, notably the Sunday Times Rich List which has asserted that the wealth of the ultra-rich 0.003% (just 1,000 persons) doubled in the post-crash period 2009-14 from £259bn to £519bn now. What Piketty demonstrated was that if capital persistently secured a higher rate of return (at some 5-6% a year) than the overall growth of the economy (around 2-3% a year), wealth inequality was bound to increase slowly but cumulatively.
That has indeed happened as the ‘euthanasia of the rentier’ which Keynes built into the postwar system has been steadily eroded, and much more dramatically after 1980. In terms of political economy there is no more important issue today than re-designing the system to euthanase the rentier class all over again.
You always ask questions Michael but never give answers. My answer to your headline question is no but that also there isn’t much we can do about the situation.