Great news! The Sunday Times has published its new Rich List... and wealthy people in Britain have never had it so good!
"The combined wealth of the top 1,000 has soared by £59 billion in one year to just under £360 billion," reports an article entitled Wealth Goes Supernova. "This near 20% rise over 2006 is one of the highest annual increases in wealth we have recorded since our first list was published in 1989. The past decade of Labour government under Tony Blair has proved a golden age for the rich, rarely seen in modern British history. When the Blair administration came to power in 1997, the wealth of Britain’s richest 1,000 stood at £98.99 billion. The £261 billion rise in the wealth of today’s top 1,000 represents a 263% jump over the past 10 years."
Whoopee! That's great news for everyone, because wealth trickles down from the richest to the poorest! Wealth spreads around! Or does it?
According to Bryan Caplan, author of "The Myth of the Rational Voter: Why Democracies Choose Bad Policies", the general public in many democracies don't believe that wealth trickles down. And according to him, they're wrong, and need decision-making taken out of their hands; economic decisions should be taken by a specially-appointed panel of economic experts. The electorate, you see, show fundamental ignorance of economics. Speaking on the BBC's Thinking Allowed, Caplan said:
"Compared to economists, the general public is much more skeptical about the social benefits of markets. So they tend to think that just because businesses are out for money -- and they are -- that the effects are going to be negative for society. This is not really true. An example I often use is that if you're at a restaurant, would you want your waiter to not be greedy? It's the very fact that he's interested in making some money that allows you to get good service from him."
Yay! Greed is good for all of us! Rational self-interest will create, through markets, the best of all possible worlds!
Not everybody on the programme agreed, though. Paul Whitely explained "the paradox of rationality":
"What is rational for an individual may not be rational collectively, and vice versa. We know that these collective failures of rationality are quite significant. To give you an example, by comment consent the Common Agricultural Policy that Europe runs is a terrible policy. It distorts markets, produces waste, environmental degradation, etc. Naturally enough, if politicians want to get rid of it, farmers oppose this. Farmers are not being irrational opposing it... it's something that brings them benefits."
Ah, there we have it. The rather more tough-minded, less rosy-spectacled approach. Different groups in society have different interests. What's in the interest of one group isn't necessarily in the interest of the others. And that applies particularly when one group is massively more rich or powerful than the others.
The property market in Britain "is bleeding millions of Britons dry", says Bricked In, an interesting report in today's Guardian, which says that up to half of first-time buyers have now been priced out of the UK housing market altogether. And again this idea of collective rational interest being the opposite of individual rational interest comes up:
"Equity, and all the consumer buying-power it represents, has helped to keep Gordon Brown's much-vaunted economy ticking over nicely for a decade - but we have acceded too easily in the assertion that what is good for the economy is necessarily good for the bulk of people. Rising prices are turning the trickle-down effect on its head: the richer people at the top get, the more they pay for scarce housing, and the more actively difficult they make it for everyone else."
In The New Statesman Faisal Islam looks at how different generations, as well as different income brackets, have different interests. British baby boomers, he says, have kicked away the ladder for the generation following them -- effectively robbing their own children of the things they had.
"If you are over 50, you will recall a blessed carelessness about money in your twenties and thirties that you probably took for granted at the time. You had free university tuition and, if your parents were sufficiently poor, full university maintenance grants. To that, add free dental care; cheap (relatively) houses with gardens; mutualised building societies; statutory retirement at 65 (probable retirement well before then); and final-salary private pensions."
"Demographics show the root of the problem. On the Office for National Statistics website there is an animation which shows age distribution in Britain. The population pyramids that once showed many young people at the bottom supporting a small number of older people at the top is being flipped on its head."
And there it is again. Trickle up, not trickle down. The young and struggling supporting the old and affluent, when it "should" be the other way around. The poor supporting the rich. Resources going to those who already have them, not those who need them. That gravity-defying inverted pyramid is the shape of our times. There's one consolation: it's completely unsustainable, materially and morally. So it won't be around for long.
Another reason it won't be around for long is that the current situation is a result of what economists call the "pig in the pipe". The pig is baby boomers and the pipe the decades they've been charging through, changing their priorities (and the world's) as they went. "They embraced social liberalism, flower power and a large state when they were teenagers, and low taxes, a smaller state and loadsamoney individualism in their period of high disposable income," says Faisal Islam. Then the pig realised that it, too, was mortal.