Link to this page: http://www.socialistparty.org.uk/issue/447/5324
How the rich became super-rich
TWO OF the world's richest multi-billionaires, Warren Buffett and Bill Gates, recently announced in a publicity exercise that they are giving away large parts of their vast wealth to philanthropic ventures. Here, BOB SEVERN reviews Rich Britain by Stewart Lansley. This book shows how, more typically, the mega-rich in Britain use greed and power to make, and look after, their fortunes.
LAST YEAR, 2005, there were eight times as many millionaires in Britain as there were ten years before. Author Stewart Lansley says that the new super-wealthy are being lionised by politicians with a common argument that getting rich does not hurt anybody but instead helps take society forward. Tony Blair is quoted as saying he wants a society of 'levelling up' rather than 'levelling down'.
However, the book shows that the new rich are not that 'new'. Most 'self-made' entrepreneurs like Richard Branson actually came from fairly well-off backgrounds. And much of Britain's land and business ownership belongs to the same few families as at the end of the 19th century.
Today's rich are relatively far richer than 30 years ago, with a far wider wealth gap between rich and poor too. By 2002, the richest 1% of Britain owned nearly 30% of wealth (saleable assets and property), while Britain's poorest 50% owned little above 5%.
This book is packed full of useful facts and figures but it does not live up to the cover's promise of giving a "bold agenda for building a fairer society." Throughout the book, Lansley keeps returning to the idea of three main periods of wealth division. The first was before the 1929 Wall Street crash, when there was little limit on wealth with little social welfare for the poorest.
Then there came the second period of greater equality - "the great levelling" - when there was, according to Lansley, a "natural limit" on personal wealth which was not imposed by governments but by a political and social consensus. Since the 1980s, Lansley writes, we have been in a third period where we are returning to the inequality of before 1929.
Lansley mentions deregulation, privatisation, globalisation and the growth of the finance markets from the late 1970s onwards. However, his explanation of why this happened goes little beyond a "fundamental change in our cultural and political attitudes".
The book also shows how, in the past 25 years, more of the 'tax burden' has been taken away from the super-rich and been put onto middle-class and working-class people. British authorities, says Lansley, treat the super-rich as a "special case" with few corporations paying the full 30% tax rate. Alongside this, Lansley writes that billionaires hire teams of accountants to make sure they pay as little tax as possible.
One method of tax evasion is registering a company in a tax haven. For example, the Cayman Islands has 600 banks, only 50 of which are physically 'there', only 31 actually trade with residents of the island - the rest solely serve millionaires!
Another method is pressuring governments to 'let them off' taxation. News Corporation, Rupert Murdoch's media empire, has barely paid anything in UK tax since 1980. When a cross-Atlantic task force was formed to look at why News Corp pay so little tax in the UK, USA and Canada, the investigation was called off for fear of a Murdoch backlash.
THE BOOK also shows how the rich are far less generous than working-class people. Chapter one starts with the example of tax-avoiding retail billionaire Philip Green when speaking at Oxford University's Said Business School in October 2005.
One student challenged him to invest in some of their new business ideas. Green looked uncomfortable at first but, when pressed, announced that he would invest £500,000 in the best idea. Lansley points out that £500,000 is pocket money to Green, who pays himself £3 million a day!
The philanthropy of the rich is usually self-rewarding. It is suggested that Microsoft boss Bill Gates gives to charity in an attempt to outdo Microsoft's rivals and buy back public support following the company's high-profile legal problems.
The Bill and Melinda Gates Foundation has spent $32 billion on health projects, including anti-aids programmes in Africa (though the people who are likely to gain most out of this are pharmaceutical company bosses, not the ill!). Before he set up the foundation, Gates was criticised for being mean.
Lansley, though, thinks there are some generous and well-meaning billionaires. He gives Sir Peter Vardy as an example for donating £2 million to fund the South Middlesbrough City Academy school. What he fails to mention is that the government gives over £20 million in return!
The Vardy Foundation, a Christian group headed by Vardy, gets to runs the school and has the power to change the curriculum (as well as staff pay and conditions). So now with our money, creationism (the claim that god created the earth in seven days) is taught as a science while Darwinism (evolution) is taught just as another scientific theory! How generous of Sir Peter!
The author thinks that there are deserving and undeserving rich; that some rich businessmen, entre-preneurs and landowners have helped society advance and have been rewarded with a fair share of wealth as a result.
Tescos, he believes, deserve to be the second highest-paid boardroom (they 'earned' £31 million in 2004) in Britain. So, the directors of this massive supermarket chain deserve to take home millions for paying most of their staff little above the minimum wage then?
Where the book falls down is its insistence that there can be, and are, 'nice capitalists'. Lansley thinks that (capitalist) societies can have a lower wealth gap without damaging their economy and uses mainland Europe as the example to show this. However, the governments of Europe are trying their best to follow Britain and America in privatising public services and attacking workers' rights.
This is shown by the fast-track Thatcherism of Germany, where unemployed workers are being forced into one-Euro an hour jobs, which has made that country take over from Britain as the leading example for the rest of European capitalism to follow.
The US, British and European capitalists are not trying to level-up, but instead are in a race to the bottom! Action taken by French workers made their government take back the CPE - the law that meant employers could sack young workers in the first two years of their contract without any explanation or redundancy pay. This shows it is only action by working-class people that keeps Europe any more 'egalitarian' than Britain!
LANSLEY'S HOPE for 'nice capitalism' or a return of post-war 'equality' is shown in his seven-step solution for a fairer society. These steps, including "tougher tax regulation" and a "maximum wage", are little more than modest law reforms. He says there is "no overwhelming reason to believe that the prioritisation of short-term profit is best for society or industry".
However he doesn't even mention public ownership, suggesting instead a "shift in business culture". If these steps had much impact on the bosses' profits, as already shown by the book, capitalists would hire a few more accountants to find loopholes. Or, if needed, they could threaten a "strike of capital", as they did in the 1960s when Harold Wilson's Labour government proposed a small profit tax.
Though the book gives several examples of which trade (or inheritance) made certain people wealthy, it does not show where value comes from and how capitalists make their profits. Capitalists do not 'earn'; they make money by owning factories, land and capital. Value comes from labour - it is workers, not bosses, who produce and distribute goods and services - so profits are made from not paying workers the full value of their labour.
This means that the working class cannot afford to buy back what they produce which, alongside other processes inherent in the capitalist system, leads to economic crises. This contradiction of capitalism still existed in the 'more egalitarian' era, and when a massive crisis was triggered in the 1970s, capitalists started to peel back on social welfare instead of their wealth.
Nor does the book really explain why there was a more 'egalitarian attitude' from the 1930s onwards, which was not simply that the capitalist class had better morals!
Lansley does give some credit to the 'agenda' of the post-war Labour government which introduced the NHS, took major industries and utilities into public ownership, and started a massive programme of council housing.
During the post-war upswing, capitalism, under the pressure of the working class, was forced to provide basic resources including free education, decent housing and guaranteed healthcare.
In those days, too, Labour represented a rank-and-file membership of hundreds of thousands of working class people, and millions more through the trade unions. That meant they were prepared to put some pressure on the ruling class.
Since the 1970s, while capitalists have carried out a worldwide offensive to protect their profits, right-wing Labour and trade union leaders have aided them by making the Labour Party one that, like the Tories and Liberal Democrats, represents the rich.
Rich Britain is worth reading for the information on who the super-rich are and how they are ripping off the rest of society. But the pathetic solutions it gives to create a 'nicer capitalism' actually show the need for a socialist society, run by and for the millions, not the billionaires.
In The Socialist 6 July 2006:
Socialist Party NHS campaign
Campaign for a New Workers Party
Socialist Party youth and students
Socialist Party campaigns
International socialist news and analysis
Socialist Party review
Socialist Party workplace news