The news that the top 10 per cent of Britain’s population own half of the nation’s wealth is no news at all.
Neither, really, is the widespread reaction to this disparity, with most comments describing it as a failure of capitalism.
Of course reason falls silent whenever ideology speaks, so there’s no point arguing against this visceral feeling, especially since it betokens astounding ignorance of the most basic economic and social concepts.
However, if someone were to try to argue this inner conviction beyond the usual harangues, such an intrepid individual would be unsportingly easy to shoot down.
For, common superstitions apart, capitalism is the only economic system that delivers a more or less even distribution of wealth. ‘More or less’ are the operative words here, for income inequality reflects the inequality of ability, application, talent – and those things will disappear only when man does.
Conversely, a huge income gap between the elite and everyone else is a distinguishing feature of three types of modern economy: socialist, corporatist and criminal. Of the world’s major economies only Russia and China practise the last type on a serious scale, the former almost exclusively, the latter largely.
Most Western economies, on the other hand, are a mixed bag, in which socialist and corporatist elements are either prominent or even dominant, especially if we agree on the relevant terminology.
According to Marx, socialism is tantamount to public ownership of the means of production, which is to say the economy. This arrangement is in rude health throughout the West.
In Britain, for example, the government owns close to 50 per cent of the economy; in France, over 60 per cent. The corresponding figure for Stalin’s Russia was 85 per cent, still higher than in today’s France but the gap is narrowing. And in today’s communist China it is a mere 15 per cent, which means China isn’t even socialist by Marxist criteria, never mind communist.
Delving deeper, we’ll see that even much of the economy presumably residing in the West’s private sector isn’t owned by the capitalist, Marx’s bogeyman. Transferring ownership of giant global corporations to the public through stock-market flotation has created a situation where ownership and control have gone their separate ways. The public may nominally own a corporation, but it has next to no say in how it’s run, even if it’s being run into the ground.
The control rests in the hands of the directors, most of them increasingly coming from the professional managerial class. This is a distinctly modern phenomenon. ‘Management’ is now a popular academic discipline, and those who matriculate in it easily float not just from one company to the next, but also from one industry to the next – it doesn’t matter whether they manage an oil company, a bank or an NHS trust.
In an eerie sort of way this arrangement isn’t altogether different from that in the Soviet Union, where the public technically owned the economy, but where all the kudos went to the nomenklatura having none of the ownership but exercising all of the control.
The difference between today’s managers and yesterday’s capitalists is that the latter had their greed controlled by market demands, whereas the former operate with other people’s money, standing to gain massively in case of success and personally risking next to nothing in case of failure.
All those golden parachutes will help them land softly no matter what, and then go on to the next bonanza. This kind of arrangement doesn’t encourage the best human qualities to come to the fore – personal ambitions and appetites take over because, unlike capitalists, managers aren’t forced into a modicum of decent behaviour by the market.
That’s why, to cite one example, in the second half of the nineteenth century, when Marx’s dreaded capitalism was at its peak and robber barons at their most oppressive, the average ratio of income earned by US corporate directors and their employees was 28:1. Yet in 2005, when egalitarianism proudly reigned supreme, this ratio stood at 158:1 (a study jointly conduced by MIT and the Fed).
In other words, what separates today’s managers from the employees isn’t merely an earning gap but an unbridgeable chasm. This is a clear-cut Soviet arrangement, except that in the Soviet Union this division, though even wider and deeper than in today’s West, was largely expressed in subtler ways than just cash on the nail.
But let’s not despair. The top 10 per cent of the British population owning half the private wealth is still testimony to the residual capitalist elements in our economy.
The same proportion of the whole world’s wealth is in the hands of a mere one per cent of the population. So we have something to look forward to, an exciting game of catch-up.