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.

    Philanthropy?

    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!

    Socialist society

    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.