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Why We Can't Afford the Rich: Cardiff launch

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Why We Can't Afford the Rich: Cardiff launch

  1. 1. 1913-1989 Top 1% income share – married couples and single adults 1990-2011 Top 1% income share – adults Top Income Shares in the UK 1914-2011 Source: Alvaredo, F., Anthony B. Atkinson, A.B., Piketty, T. and Saez, E. The world top incomes database, http://topincomes.g-mond.parisschoolofeconomics.eu/ , dd/mm/yyyy 16th April 2014
  2. 2. Wealth concentration at the top Collective wealth of the UK’s 1000 richest people 1997 = £98 billion 2008 = £413 billion 2010 = £336 billion 2012 = £414 billion 2013 = £450 billion 2014 = £519 billion Source: Sunday Times Rich List Cost of the NHS, 2014 = £127bn Office of National Statistics: http://www.ukpublicspending.co.uk/fed_spending_2014UKbn
  3. 3. Earned and Unearned Income Earned: conditional on producing goods and services Unearned and extracted - ‘because they can’: derived from ownership of assets wanted by others, rather than from contributions to the production and distribution of goods and services (asset-based) Recovering a lost vocabulary: ‘rentiers’, ‘property without function’ (Tawney), ‘improperty’ (Hobson), ‘illth’ (Ruskin), ‘functionless investor’ (Keynes), ‘the class of parasites’ (Marx)
  4. 4. New Era v. Richard Benyon
  5. 5. John Stuart Mill on Rentiers "Landlords grow rich in their sleep without working, risking or economising.” “If some of us grow rich in our sleep, where do we think this wealth is coming from? It doesn't materialize out of thin air. It doesn't come without costing someone, another human being. It comes from the fruits of others' labours, which they don't receive.“ (1848) Principles of Political Economy, Bk.v, Ch. II Photo: Wikipedia commons "John-stuart-mill 1". Licensed under Public domain via Wikimedia Commons.
  6. 6. ‘Investment’ • As wealth creation – focus on what is invested in (e.g. infrastructure, equipment, training). • As wealth extraction - focus on the financial gains from any kind of lending, saving, trading of financial assets or speculation – regardless of whether it contributes to any objective investment(wealth creation), or benefits others.
  7. 7. Billionaires’ Benefits Street: Bishops’ Row, London
  8. 8. Debt/usury
  9. 9. Source: Kennedy, M. (2012) Occupy money, New Society Publishers
  10. 10. Shares: a bizarre institution • 97+% are bought in secondary market – money doesn’t go to firm • Entitles owner to dividends and speculative gains – unearned income • Why are absentee, uncommitted shareholders the prime stakeholders in firms? • Why are workers/employees (present, committed and dependent), who produce the goods and services on which the firm depends, not stakeholders?
  11. 11. What about ‘the working rich’? • Salary earning – but from rentier organizations (e.g. financial institutions, property firms) i.e. rentiers-at-one-remove • Markets are not meritocracies . . . • ‘Because they can’ • Disempowered labour, empowered management, shareholder value
  12. 12. The Jobs/Dyson* defence: truly innovative people deserve everything they get • 1. how much would they have got, if they hadn’t owned (much of) their firms? • Working/entrepreneurial capitalists: Owners take the profit (financial and symbolic) produced partly by unacknowledged others. *Steve Jobs (Apple) $8.3billion; James Dyson (Dyson vacuum cleaners) £1.45billion
  13. 13. The Rule of the Rich but plutocracy is about more than toffs . . .
  14. 14. The rule of the rich • Structural – control commanding heights • Lobbying, thinktanks, political donations, consultancies/jobs for politicians, ‘researchers’, regulatory capture • Tax havens • TTIP – Transatlantic Trade and Investment Partnership • Legal corruption - ‘When plunder becomes a way of life for a group of men living in society, they create for themselves, in the course of time, a legal system that authorizes it and a moral code that glorifies it.’ (Bastiat) • Symbolic - philanthropy
  15. 15. Ill-gotten and ill spent
  16. 16. Christian Aid Poster
  17. 17. A diabolical double crisis of economy and climate
  18. 18. Contraction and convergence • Target C02 emissions per person = Capacity of earth to absorb C02, divided by world’s population • Rich countries – rapid cuts in emissions to meet target • Poor countries – rise in emissions permissible up to target • Plus contraction and convergence within countries
  19. 19. Back to basics • What’s an economy for? • Fair, promoting well-being, sustainable • What is wealth? • The good news: the well-being threshold • Different ways of life?
  20. 20. Suggestions . . . • Contract and converge • Wealth taxes, land-value tax and other taxes on unearned income • Controls on movements of capital • Reject TTIP • State funding of political parties • Nationalise energy companies. Green taxes. • Workers/employees and consumer reps as chief stakeholders in organizations • Massive investment in low CO2 energy • And many more . . .
  21. 21. Diolch yn fawr Andrew Sayer, Lancaster University http://asayer25.com
  22. 22. From the second, Citigroup Plutonomy Report Part 2 ‘Rising Tides Lifting Yachts’ Mar 5 2006 ”Our whole plutonomy thesis is based on the idea that the rich will keep getting richer. This thesis is not without its risks. For example, a policy error leading to asset deflation, would likely damage plutonomy. Furthermore, the rising wealth gap between the rich and poor will probably at some point lead to a political backlash. Whilst the rich are getting a greater share of the wealth, and the poor a lesser share, political enfranchisement remains as was -- one person, one vote (in the plutonomies). At some point it is likely that labor will fight back against the rising profit share of the rich and there will be a political backlash against the rising wealth of the rich. This could be felt through higher taxation on the rich (or indirectly through higher corporate taxes/regulation) or through trying to protect indigenous laborers, in a push-back on globalization -- either anti-immigration, or protectionism. We don’t see this happening yet, though there are signs of rising political tensions. However we are keeping a close eye on developments.” [emphasis in original] http://www.correntewire.com/sites/default/files/Citibank_Plutonomy_2.pdf
  23. 23. UK Earnings and productivity Source: Resolution Foundation (2012) Gaining from Growth: The Final Report of the Commission on Living Standards, p.24

Editor's Notes

  • Why I wrote this book – widening inequality and what it’s doing to our society
    outraged monstrous lie – that the welfare state is to blame for the crisis –
    those who are worried by the lack of action on climate change
    Return of the rich is unjust, dysfunctional and unsustainable – But first let’s look at the return of the rich
    - although I’m an academic I’ve tried to avoid an academic style of writing . . .
  • Total Spending £546.4 billion  
      Pensions £143.2 billion  
      Health Care £126.7 billion  
      Education £41.9 billion  
      Defence £44.3 billion  
      Welfare £58.0 billion
  • Ricardo, J.S. Mill, Marx, J.A.Hobson, Ruskin, Tawney, Henry George Just when unearned income was making a huge comeback – the distinction got forgotten
    Unwarranted – they get it because they can. Warranted – they get it because it’s judged to be right by others. Needs based. Earned includes public sector e.g. teaching or
    E.g. state pension granted/donated unearned income; private pensions asset-based, extracted unearned income
  • Benyon admits to his family having been a landowner in the area for 150 years
    Benyon joins up a lot of the dots in the picture of the rich class – richest MP in Westminster - £110m, bedroom tax,
    He’s rentier – someone whose wealth . . .
  • Mill – like Piketty – noted how

    Smith, Ricardo, Marx, Henry George, Winston Churchill, R.H.Tawney, Michael Hudson – even Milton Friedman . . .
  • The second has become more commonly seen – plus reluctance to acknowledge a) that public expenditure includes investment and b) that most of the first kind made by private firms is financed internally from profits rather than from loans or shares. Academics tend to use this term for the latter.
    One of the extraordinary things about capitalist rationality or irrationality is that it matters little to capitals and individuals whether their investments are productive or predqtoryas long as they yield a return. Ideologically the slippage between the two meanings is of enormous importance – those who are involved in ‘investment’ defend themselves by passing off their activity as investment.
  • Let’s acknowledge that lots of people see their houses as investments – even if they do no more than maintain them as they are, they expect them to rise in value – why? Any money they make in this way is unearned income - . . . . Lots of people are part-time, small-time rentiers – but it still a way of siphoning off wealth
  • Rentier income – unearned income based on control of assets that are used not for producing goods and services but for extracting unearned income from others who lack that control
    Friend e.g.
    Usury
  • The genius of credit
  • UK gains slightly more skewed to rich
    Usury – redistributes wealth from the poor to the rich – international level – poor countries borrowing from rich countries
    - Personal level
  • Tradeable shares
  • Stiglitz
  • Dyson £1.45billion 84yrs Jobs 266
    - Remember Wright
  • Finance – Bonds
    Rule of the rich
    ‘When plunder becomes a way of life for a group of men living in society, they create for themselves, in the course of time, a legal system that authorizes it and a moral code that glorifies it.’
    (Frederic Bastiat, French writer and economist.)
    From http://www.nakedcapitalism.com/2012/10/john-kenneth-galbraith-on-the-moral-justifications-for-wealth-and-inequality.html#qvYXvQ1HKPM5ihYI.99
  • Mike Berners Lee Addicts and dealers
  • Care work valued – less competition – focus on service rather than competition to cut costs and climb greasy pole of league tables – should competing be our god, or should service and cooperation? Is our goal to consume more and more stuff?
  • Not a conspiracy – the Citigroup writer was trying to recruit support from clients – hostile brothers
  • ×