Sunday, December 05, 2010

Cliches of 2010 #4

"Society as a whole benefits from extreme wealth at the top".

You've heard it time and again. Believers in the Ideology of Number One tend to cling onto the moral justification that obscene levels of wealth will inevitably "trickle down" to the rest of society - as famously spelt out by Ronald Reagan in 1981.

"Cut tax on the rich and turn a blind eye on tax avoidance and even you, overworked, casual and on low pay will feel better off".

According to the Believers, the super wealthy generate employment and investments and make people like Tony Blair and Peter Mandelson feel tremendously excited.

However, if the Believers were right, the last 30 years (which have been extremely generous to the "wealth creators") wouldn't have resulted in such a steady decline of real wages and salaries for the poorer half of the population (see this).

The binge in corporate profits has been inversely proportional to salaries paid to ordinary mortals. Wages as a proportion of national GDP went from a peak of 64.5 per cent in the mid-1970s to 53.2 per cent in 2008 (link- see figures 1, 2 and 4).

In Britain, the bottom 50% now own a staggeringly low 1 per cent of the country's "marketable wealth". The only thing ordinary workers have seen increase is personal debt which tripled in the last ten years (see this - page 2).

Quite simply, there is no correlation whatsoever between the fortunes of the most loaded and the rest of the country. In fact, maybe there is, but in reverse.

If still in doubt, just look at this simple fact: in 2009, at the height of the biggest economic crisis in decades, "the 1,000 richest people in the country increased their wealth by £77 billion". It was, according to the Sunday Times, "easily the biggest annual rise in [...] 22 years".

No wonder the usual suspects froth at the mouth when the prospect of higher tax rates for the rich and a clampdown on tax avoiders is even mentioned. It would be tantamount to disaster, vandalism and "plundering from career politicians", they say - quoting psalm after psalm from The Free Market Bible.

So-called "wealth creators" in Britain have never had it so good. The most devastating economic crash happened under a system with low corporation tax, a reputation for low tax on the wealthy, tax havens in Crown dependencies (see this), the most flexible labour market in Western Europe and a property system inviting speculation with open arms.

For some, it's never enough.

#3 "There are jobs out there if you really want one".
#2 "The Royal Family brings in tourism revenue".
#1 "Iain Duncan Smith is a kind and honourable man".


Tim Hardy said...

Fantastic series of cliches!

This particular one is a belief (sadly swallowed by New Labour too) that enrages me the most.

The myth of "trickle down wealth" utterly fails to confront the fact that the presence of the rich impoverishes everyone else in a society because prices (notably of property) rise to meet the elite's ability to pay.

A rising tide may lift all boats: but most of us do not have boats so more and more are finding themselves drowning.

Labour was quite happy to use rising property prices to distract people from the fact that their salaries were stagnating but it seems pretty clear (unsurprisingly) that the Conservatives/Lib Dems don't want to do anything about the on-going crisis which cannot end well with growing millions priced out while millions of others are in hock to the banks for far more than the homes they live in are worth by any historic measure of value.

(Correction, they are doing something: with characteristic humanity, they're kicking the poorest and most vulnerable out of their state funded housing rather than regulating the rental market.)

It's also almost comic that it is precisely the parties who are happy to justify tax evasion and light regulation of the super-rich on the grounds that this means "more crumbs for the poor" who are utterly unwilling to support the idea that a society might benefit from the presence of the university educated.

Johnny T said...

Your last point: What they're doing is not comical at all. The current government is being very coherent about it. Education will soon be the preserve of the rich again, even more than it is now.

The myth of "trickle down wealth" is particularly blatant if you look at house prices in London. Wealth trickled down so much that in the space of twenty years undreds of thousands were priced out by the increasing number of millionaires setting up camp there.