The wealth gap is not good for democracy

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The Telegraph has a long feature by Robert Preston which is an extract from his new book, Who Runs Britain? in which he looks at the roots of the current financial crisis and blames a political pact with the super-rich for impoverishing the rest of us. As he says:

There is collusion between most politicians, bankers and investors to avoid asking the big question: has the freedom of investment banks, private-equity firms and hedge funds to buy and sell what they like, when they like, gone too far? That would be to threaten the return to full throttle, whenever it comes, of the most successful machine in the history of the world for expanding the clone army of the super-rich.

The result is:

The sums of money now accruing to top talent, especially in financial services, have become absurdly large. Some people are earning in a single year sums that they would not be able to spend in a lifetime, or indeed the lifetimes of their children and children's children.

He asks:

Why should any of us care? For one thing, it's not healthy for democracy. The new super-rich have the means through the financing of political parties, the funding of think-tanks and the ownership of the media to shape Government policies or to deter reform of a status quo that suits them.

And he continues (amongst much else) with this:

But the biggest cost from the swelling of the super-rich class is an erosion of the fabric that holds together communities and the nation. The plutocrats who live here behave as though the UK is permanently on probation. They pay the least amount of tax they possibly can, a fraction in percentage terms of the tax most of us pay on the income we earn. They rarely allow themselves to be comfortable in their Britishness, whether they have been born here or have adopted the country. And they would never surrender their right and ability to move somewhere else should the financial tariff for staying in the UK rise above an unspecified threshold.

What's more, Gordon Brown's actions when Chancellor underpinned this idea of the super-rich doing us all a favour by living here, since he very carefully shied away from ever alienating them; which explains in part why the burden of tax increases has fallen on the vast majority who are not quite wealthy enough to relocate to Monaco or the Caymans.

And he makes clear, as I have done here, that this policy was entirely deliberate.

And as he notes:

[T]he reinvention of Britain as a giant tax haven also brings costs, for all the contribution of the immensely wealthy to economic growth. The inflated price of residential property has created wealthy ghettoes in parts of London and the South East where no one earning less than a few hundred thousand pounds a year can contemplate living.

That is a small example of a modern paradox: at a time of unprecedented prosperity, young people face greater financial uncertainty than they have for decades and many of those in middle age and on middle incomes would be justified in believing that the current economic and stock market boom had passed them by.

As he concludes:

What concerns me is the lack of serious public debate about how globalisation and deliberate Government policy have empowered those with particular financial talents to make vast sums of money for themselves, while disempowering the rest of us. The financial crisis of the summer of 2007 - manifested in the run on Northern Rock, the first run on a substantial British bank for 141 years - was a direct consequence of the pervasive and orthodox Anglo-American ideology that the liberalisation of global financial markets is both intrinsically good and unstoppable.

It isn't unstoppable. Some of us are determined to put spanners in the spokes. Not to be destructive, but because what is happening is destructive, and change for the better is possible. Now.

The book is available here.


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