Devil take the hindmost

The road to revolution (part 2)

On a holiday in Sri Lanka in 1980, I came to realise that two separate economies existed on that beautiful island. One was the economy in which the Sinhalese lived and worked. The other was the tourist economy. The two had almost no connection with each other, least of all in the prices.  

There can have been nothing new in that. Visitors from relatively affluent parts of the world to the poorer parts must always have been aware of the distinction. It still exists today. What is new is that it is now possible even for someone who is comfortably off to feel that way in Britain.

There has always, at all times of our history, been a large disparity in living standards between the rich and the poor. So far as I know, this has been true of every society in every age. No one has yet found a way of creating and maintaining an egalitarian society that grows constantly in prosperity. But the degree of disparity has varied, as has the willingness of the dispossessed to accept the status quo.

In advancing the thought last week (blog, 4 March) that a revolution in some form is not now unthinkable in Western democracies, including Britain, the thought behind the thought is that the wealth of the super-rich is now so huge, and is growing so fast, that the preparedness of everyone else to tolerate it is evaporating.

It may be true that, as a result of tax changes, the income gap between the richest 10% and the poorest 10% has narrowed since the financial crisis. But that ignores two crucial points. The first is that the new super-rich account for much less than 10% of the population, so that if one compared the relative incomes of the richest 1% with everyone else, the picture would probably look very different.

The second point is the distinction between income and capital. Assets of almost every kind have appreciated vastly in the past decade, while living standards have stagnated or shrunk. Anyone who owns a house or who has substantial investments is now a great deal wealthier. And these are the people in Britain who were already more affluent, because poor people don’t have assets. Judged by wealth, as opposed to income alone, the disparity between rich and poor must have increased enormously since 2008.

I don’t know exactly where I stand in all this. I have a comfortable life, but not a luxurious one. I doubt that I am in the top 10% of income earners, but I am probably in the top 10% by paper wealth. However, I do know that there is a whole sector of British life from which I am excluded. I cannot, for example, afford a season ticket at a Premiership club, or to eat at expensive restaurants, or to buy expensive wine, or to sit in expensive seats in a West End theatre. This is not said by way of complaint, but to ask that if I, as one of the top 10%, cannot afford to do these things, where does that leave the 90%?

There is, unquestionably, a new super-rich elite to be found in most countries of the world, sometimes their own countries, but more often not. I do not resent this fact in principle. Indeed, in one sense, it is a consequence of a growing global economy and therefore to be welcomed. What I resent are the attitudes of this elite towards those who are not part of it.

When Theresa May said “if you believe you’re a citizen of the world, you’re a citizen of nowhere,” she was understandably criticised for a remark that seemed to link her to an insular, nationalist perspective. However, what she may have meant was that, if you do not identify with one particular country, you are unlikely to feel much sense of social responsibility for any country. And that, I think, is true, and entirely relevant to this debate.

Much of the wealth generated by Britain’s Industrial Revolution was ploughed back by its beneficiaries into schemes of public welfare, principally for the benefit of their employees and their local communities. This practice was by no means universal, but it was widespread. It is now unheard of. The progressive assumption by government of all responsibility for social improvement first nationalised welfare and has now nationalised conscience. But for governments to perform this role, they need the money to do it – the scale of money that was once provided by private philanthropists and now needs to come from the super-rich by way of taxation.

Except it doesn’t. This elite, both as individuals and through the companies they own and run, pay their taxes – if they pay them at all – in the country with the most benign tax regime they can get away with selecting. There is no suggestion of moral responsibility for anyone, anywhere. Even in the most local of communities. As I wrote last year (blog of 27 August 2017), “the value of Apple’s new headquarters was assessed by Santa Clara county at $6.8 billion for local tax purposes. Apple has counterclaimed that it is worth less than 1% of that figure: $57 million.”

Governments everywhere appear powerless to affect this situation. Their own resources are so strapped that they cannot afford the astronomical fees involved in a sustained legal challenge to many dubious practices. They are too timid to make unilateral attempts to insist on the proper payment of national taxes, for fear that it will drive wealth away and end up reducing tax receipts, rather than increasing them. And they are too much in competition with each other to make a concerted international attempt to end the abuses.

I have no idea what difference it would make to government revenues if every British citizen and every company operating in Britain paid the tax that they are supposed to pay. But, whatever the amount, it is only one part of the argument. The other part is what people think is fair.

If someone in my position, comfortably off, a supporter in principle of the free market, without a radical history or a radical temperament, can think the present state of affairs as so unfair as to be untenable, so can almost anyone else. And, whatever power we lack, we can still put a cross on a piece of paper every five years.