The Decade The Rich Won

I watched this two-part BBC documentary and thought it was very good. Never thought I would see Jeremy Corbyn, Steve Bannon and Nick Clegg in the same documentary. It’s a talking heads format with little or no narration, which I think works well here. Even with its ostensibly neutral format, it feels so anti-wealth that it could almost come from Channel 4 or the Guardian. And thank goodness for that. Of course, the problems of the rich getting richer go back much further than the last ten years, but the specificity is useful here.

My vague take on the financial crisis is that bailing out the banks was necessary. But it should have come with much, much harsher penalties for the bankers. Instead of giving them massive bonuses for taking absurd risks, the price of bailouts should have been removal of the upper echelons. Paying them ludicrous salaries “in order to attract the best people” was a complete fallacy; these were the people who caused the crisis and rewarding them makes no sense at all. It would have been far better for everyone had the likes of Fred Goodwin et al. sodded off. We should have agreed that banks were indeed (unfortunately) too big to fail, protected customer’s money, but as the price of this broken up the largest banks and made the sector boring and stable again.

I disagree with George Osbourne when he says that people make the case for investing regardless of the state of the economy, as though it necessarily means you shouldn't always invest. Yes, “austerity” works in some cases, when you’re going to take a predictable, short-term hit, and/or you do have some genuinely avoidable inefficiencies. But as a long-term political strategy it was shite. It’s self-evident that when things are going well you should invest in public resources. However, when things go badly, you still need to invest - it’s just a question of what you invest in. Obviously you can’t stimulate an economy by investing everything in, say, marmalade. That’s just never going to do much at all. But if you invest it in things people need : health, education, workplace training, infrastructure, you’ll get a trickle-up effect of a rising tide lifting all mixed metaphors. Trickle down doesn’t work because that’s not primarily where wealth is generated. Give a million to a millionaire and they’ll hoard it, give it to someone poor and they’ll spend it back into the economy. Keeping the money tied up in stocks or assets is bad.

(Look, this doesn't in any way mean that people can't have nice things. They can, in fact, have lots and lots of very nice things, and there's nothing wrong with wanting lots of stuff - sustainability notwithstanding. It's just that wanting to have literal or figurative piles of money for the sake of it, when there are people struggling to eat, for god's sake, is unarguably wrong.)

Likewise I disagree with Phil Hammond that there was no choice apart from quantitative easing. The documentary's main point is that QE caused the value of assets to increase, meaning the rich got richer without having to lift a finger. Yes, this did save the banks, but as the documentary graphically illustrates, it exacerbated the already difficult problems of social and financial inequality. And as it came with no real penalty for the banks, it didn't do anything to change the culture that led to the problem in the first place. The point made repeatedly is that enormous - staggering, horrifying - sums of money were found to fix the banks, while nothing much at all was done for ordinary people. I don't accept that that can possibly be necessary or unavoidable.

(It was also quite interesting to here how Theresa May did actually have policies to put a stop to much of this, though it's totally unclear if this would have worked. Needless to say, her marketing was useless, as nobody had a clue... mind you, for a Tory to say, "let's get a grip on the banks" would have been disbelieved by literally everyone.)

My working hypothesis is that above some threshold, the primary means of increased wealth is your existing wealth. You can't easily make £1 million starting from £10. But you can easily make another £1 million by investing some portion of an existing £10 million - the main thing you need to get super-rich is money itself. Not talent, and not even luck, but pure resources. You can't make sound investments if you haven't got anything to invest. And this certainly seems to be the case writ large here, as the rich got richer by doing exactly nothing.

All this sounds very left-wing, and I suppose it is. But I realised when they covered the Panama papers that I don’t actually care about rich people being rich much at all. To be honest I’d completely forgotten Cameron’s dodgy dealings, as per the recent post on corruption, someone doing underhand dealings isn’t really what bothers me (also, lesson for Boris, Cameron swiftly apologised and the story ended pretty quickly, but I digress). I care much more about when the rich get richer through injustice, as especially so in this case. Making assets artificially more valuable is manifestly unfair. They didn’t do anything to earn the extra wealth, it was just magically gifted them. And again, far worse was that nothing much at all was done for the poorest people who actually needed extra money.

Surely, we would have been better off if we’d either/both : (a) employed a heavy wealth tax on the richest people who were enriched further thanks to QE, (b) just directly given all these hundreds of billions of pounds to the poorest people and let them go on a wild spending spree. I am only half-joking on point (b) - this was basically what was done to rejuvenate post-war America, and it worked marvellously. I wish they had asked that to the interviewees : why wouldn't giving money to poor people have helped the economy ?