We’ve been conned by the rich predators of Davos

Aditya Chakrabortty in The Guardian



Davos: ‘This week, some of the richest people on Earth will gather high up a snowy mountain in the world’s biggest tax haven.’ Photograph: Ruben Sprich/Reuters


As metaphors go, this one takes some beating. This week, some of the richest people on Earth will gather high up a snowy mountain in the world’s biggest tax haven. Most will have paid big money to attend the three-day meeting in Davos: the most exclusive memberships cost somewhere in the region of £100,000 each. From there, they will relay thoughts on global risks and opportunities to the ski-jacketed press corps. They will talk about gender inequality and technological innovation. The message will go out: however turbulent the global economy, it is being capably stewarded.

These are our economic elites as they want the rest of us stuck on the flatlands below to see them: big-thinking, well-intentioned, hard-working – and thoroughly meritocratic. This is also how they justify the mammoth rewards they enjoy: we sweat for it; we’re worth it. The follow-up is usually only implied, but it is the one that underpins the entire system: put in enough hours and this could be you. 

Set against that promise the finding from Oxfam that 62 billionaires have more wealth than half the world’s population – 3.5 billion people – share between them.

Ponder those numbers for a moment because they make up possibly the most grotesque ratio in the world economy today. Go through the 62 richest people and plenty of names jump out to show that any notions of meritocracy are a big fat lie. None of those 3.5 billion men, women, boys or girls will be born into a fortune such as that enjoyed by the Waltons of Walmart fame, in which just six people own $149bn. Nor will they ever get to be a Saudi royal such as Prince Alwaleed bin Talal, worth $26bn.

I could pull out plenty of other names giving the lie to the complacent notion that this is the era of the self-made plutocrat. The top of the money tree is still festooned with inheritances. Just look at the widow of chocolatier Michele Ferrero, Maria Franca Fissolo, who at 98 is the fifth wealthiest woman on the planet; the offspring of the Lidl and Aldi dynasties and the three Mars siblings who are worth $80bn. One doesn’t need to be a Bolshevik to see that many of the world’s super-rich are recipients of dumb luck, born into the right family at the right time.

But that grotesque index tells us that something else has gone badly wrong. At the start of this decade, 388 billionaires owned as much as half the world. By 2011, that number had plunged to 117. Last year, it had fallen to 80. In other words, in the five years since the world recession, the very richest have grown inexorably wealthier. And that’s not because the global economy is booming, as every worker on a pay freeze and every family seeing their benefits cut knows. It’s because we are living in a period of trickle-up economics, in which the middle- and working-classes have handed over money to those right at the very top.

The 80s were the decade of trickle-down economics, with Thatcher and Reagan cutting taxes for the richest and promising that everyone else – from Easington to Port Talbot, Pittsburgh to Milwaukee – would soon feel the benefits. By contrast the past half-decade has been about trickle-up economics, in which the world’s most powerful central bankers have launched policies that have been explicitly about boosting the fortunes of the richest. The disbursement of thousands of billions in quantitative easing both in the US and the UK from 2009 onwards was meant to raise asset prices – and assets are by definition in the hands of the wealthy.

No wonder the Bank of England admitted that 40% of the gains from its £375bn QE programme went to the top 5% of British households. No wonder Stanley Druckenmiller, the billionaire hedge fund manager, labelled QE: “The biggest redistribution of wealth from the middle-class and the poor to the rich ever.”

The figures prove him right. According to the Berkeley economist Emmanuel Saez, between 2009 and 2012 the top 1% of American households took 91 cents out of each extra dollar that the country earned. The other 99% of Americans had to share the remaining 9 cents between them.

This didn’t happen in a fit of absent-mindedness. Rather, decades of burgeoning inequality – of the Davos set scooping more and more of the gains from growth – have enabled the super-rich to pretend that their narrow sectional interests are what’s good for the world economy. Policies as manifestly unfair as QE would never have happened in a fairer economy – the UK and US would have relied instead on public investment and government programmes.

Massive inequality has allowed the 1% to buy political influence as never before in postwar history. Indeed, the super-rich now practically write their own tax laws – such as the way senior executives of Britain’s biggest businesses were invited by George Osborne to advise on overhauling corporation taxes. They get to ensure that tax havens are treated with due leniency, all the better to hide their trillions in them. They buy their own politicians, as with the shadow-bankers who funded the Conservative election campaign or the billionaire Koch brothers using their fortune to tip the US presidential contest. Indeed, the more ambitious decide to become politicians. Think not just of Donald Trump but former bond trader turned media mogul turned mayor of New York Michael Bloomberg.

The great mistake made by the mainstream left and right, even by NGOs such as Oxfam, is in imagining that the super-rich, now enjoying such massive riches, are somehow playing by the same rules as the rest of us. That they are “wealth creators” providing jobs and investment for the rest of us, or that they might give up their tax havens. If that ever were the case, it isn’t now. A tiny minority has gained from massive tax cuts and legislative leniency about where they shove their money. They have siphoned off gains in salaries and profits wherever possible and enjoyed hundreds of billions flowing into their asset markets. Meanwhile, the rest of us who provide the feedstock for their revenues see our welfare states hollowed out, our wages frozen and our employers failing to invest. But none of that matters very much in Davos.

Capitalism simply isn't working and here are the reasons why

Economist Thomas Piketty's message is bleak: the gap between rich and poor threatens to destroy us

• 
• • Will Hutton
  • The Observer, Saturday 12 April 2014 20.30 BST

Thomas Piketty has mined 200 years of data to support his theory that capitalism does not work. Photograph: Ed Alcock for the Observer

Suddenly, there is a new economist making waves – and he is not on the right. At the conference of the Institute of New Economic Thinking in Toronto last week, Thomas Piketty's book Capital in the Twenty-First Century got at least one mention at every session I attended. You have to go back to the 1970s and Milton Friedman for a single economist to have had such an impact.

Like Friedman, Piketty is a man for the times. For 1970s anxieties about inflation substitute today's concerns about the emergence of the plutocratic rich and their impact on economy and society. Piketty is in no doubt, as he indicates in an interview in today's Observer New Review, that the current level of rising wealth inequality, set to grow still further, now imperils the very future of capitalism. He has proved it.

It is a startling thesis and one extraordinarily unwelcome to those who think capitalism and inequality need each other. Capitalism requires inequality of wealth, runs this right-of-centre argument, to stimulate risk-taking and effort; governments trying to stem it with taxes on wealth, capital, inheritance and property kill the goose that lays the golden egg. Thus Messrs Cameron and Osborne faithfully champion lower inheritance taxes, refuse to reshape the council tax and boast about the business-friendly low capital gains and corporation tax regime.

Piketty deploys 200 years of data to prove them wrong. Capital, he argues, is blind. Once its returns – investing in anything from buy-to-let property to a new car factory – exceed the real growth of wages and output, as historically they always have done (excepting a few periods such as 1910 to 1950), then inevitably the stock of capital will rise disproportionately faster within the overall pattern of output. Wealth inequality rises exponentially.

The process is made worse by inheritance and, in the US and UK, by the rise of extravagantly paid "super managers". High executive pay has nothing to do with real merit, writes Piketty – it is much lower, for example, in mainland Europe and Japan. Rather, it has become an Anglo-Saxon social norm permitted by the ideology of "meritocratic extremism", in essence, self-serving greed to keep up with the other rich. This is an important element in Piketty's thinking: rising inequality of wealth is not immutable. Societies can indulge it or they can challenge it.

Inequality of wealth in Europe and US is broadly twice the inequality of income – the top 10% have between 60% and 70% of all wealth but merely 25% to 35% of all income. But this concentration of wealth is already at pre-First World War levels, and heading back to those of the late 19th century, when the luck of who might expect to inherit what was the dominant element in economic and social life. There is an iterative interaction between wealth and income: ultimately, great wealth adds unearned rentier income to earned income, further ratcheting up the inequality process.

The extravagances and incredible social tensions of Edwardian England, belle epoque France and robber baron America seemed for ever left behind, but Piketty shows how the period between 1910 and 1950, when that inequality was reduced, was aberrant. It took war and depression to arrest the inequality dynamic, along with the need to introduce high taxes on high incomes, especially unearned incomes, to sustain social peace. Now the ineluctable process of blind capital multiplying faster in fewer hands is under way again and on a global scale. The consequences, writes Piketty, are "potentially terrifying".

For a start, almost no new entrepreneurs, except one or two spectacular Silicon Valley start-ups, can ever make sufficient new money to challenge the incredibly powerful concentrations of existing wealth. In this sense, the "past devours the future". It is telling that the Duke of Westminster and the Earl of Cadogan are two of the richest men in Britain. This is entirely by virtue of the fields in Mayfair and Chelsea their families owned centuries ago and the unwillingness to clamp down on the loopholes that allow the family estates to grow.

Anyone with the capacity to own in an era when the returns exceed those of wages and output will quickly become disproportionately and progressively richer. The incentive is to be a rentier rather than a risk-taker: witness the explosion of buy-to-let. Our companies and our rich don't need to back frontier innovation or even invest to produce: they just need to harvest their returns and tax breaks, tax shelters and compound interest will do the rest.

Capitalist dynamism is undermined, but other forces join to wreck the system. Piketty notes that the rich are effective at protecting their wealth from taxation and that progressively the proportion of the total tax burden shouldered by those on middle incomes has risen. In Britain, it may be true that the top 1% pays a third of all income tax, but income tax constitutes only 25% of all tax revenue: 45% comes from VAT, excise duties and national insurance paid by the mass of the population.

As a result, the burden of paying for public goods such as education, health and housingis increasingly shouldered by average taxpayers, who don't have the wherewithal to sustain them. Wealth inequality thus becomes a recipe for slowing, innovation-averse, rentier economies, tougher working conditions and degraded public services. Meanwhile, the rich get ever richer and more detached from the societies of which they are part: not by merit or hard work, but simply because they are lucky enough to be in command of capital receiving higher returns than wages over time. Our collective sense of justice is outraged.

The lesson of the past is that societies try to protect themselves: they close their borders or have revolutions – or end up going to war. Piketty fears a repeat. His critics argue that with higher living standards resentment of the ultra-rich may no longer be as great – and his data is under intense scrutiny for mistakes. So far it has all held up.

Nor does it seem likely that human beings' inherent sense of justice has been suspended. Of course the reaction plays out differently in different eras: I suspect some of the energy behind Scottish nationalism is the desire to build a country where toxic wealth inequalities are less indulged than in England.

The solutions – a top income tax rate of up to 80%, effective inheritance tax, proper property taxes and, because the issue is global, a global wealth tax – are currently inconceivable.

But as Piketty says, the task of economists is to make them more conceivable. Capital certainly does that.

Cricket - Were the good old days really better?

Let's break it down to a few parameters and try to make an objective analysis

Rob Steen

March 20, 2013

Comments: 6 | Login via  | Text size: A | A

	The stakes might be higher these days, but the DRS has struck a blow for honesty © Getty Images  Enlarge

Technology or human eyesight? Helmets or bare bonces? Covered or uncovered pitches? Back-foot no-ball law or front? Arlott or Bumble? Does any breed of sporting spectator spend quite so much time as we cricket folk when it comes to debating the merits of the way we were and the way we are? Granted, our baseball and boxing counterparts in particular might scoff at such a suggestion, but they haven't seen their game repackaged as three distinct products.

"Before the Fall? Reflections on cricket in England during the 1950s" is that sagacious social historian David Kynaston's contribution to an annual lecture series at Lord's. A prolific author and academic whose books range from Austerity Britain to W.G.'s Birthday Party, Kynaston uses ten criteria to compare past with present: aesthetic, meritocratic, competitive, craft, excitement, personalities, sportsmanship, walking, crowd behaviour, "mattering", and coverage. Overall, he concludes, "it comes out pretty even".

Loath as I am to take issue with such an esteemed chronicler - and bearing in mind that I had yet to celebrate my third birthday when the 1950s ended - this strikes me as a perfect case of nostalgia overshadowing, if not fact, then assuredly common sense.

Given that we are six weeks away from the 50th anniversary of the most far-reaching of cricket's innovations,the limited-overs game (90 years, it should be noted, after the first knockout cup event was abandoned after a solitary match), now seems an apt moment to stand back and reflect on how far we have come and whether, on balance, we have advanced. Most of Kynaston's categories will do nicely, although it feels reasonable to merge walking and sportsmanship (is the former not an intrinsic, if extreme, aspect of the latter?).

Before we begin, let's reel back to a revealing Daily Express survey from that summer of '63: the "Better Cricket Competition". Readers were invited to make five suggestions to improve the County Championship, then the planet's lone competition for full-time pros. The judges - Alec Bedser, Doug Insole and Norman Preston, editor of Wisden - assessed 2000-plus entries, from whence came sundry proposals: overseas players, Sunday play, promotion and relegation, over-restricted first innings, more overs per hour, 15-pace run-ups, rewards for faster scoring, leg-before decisions to dissuade pad-play, and eight- or even ten-ball overs.

The more sensible of these would soon be woven into the first-class fabric, though it is intriguing to note that the judges were unanimous in insisting that the most pressing need was the elimination of time-wasting. In this respect, at least, it seems fair to say that cricket in 2013 lags a vast way behind 1963, though whether this matters is another kettle of cod entirely. It certainly didn't seem terribly important to those who completed the recent public surveys conducted by the ECB and Cricket Australia.

And so to the Kynaston Test. Not unnaturally, some of his sub-divisions permit more objective analysis than others. So, for all that he rightly deems it to be "somewhere near the core pleasure", let's dispense with the aesthetic, the "sensory aspect". The way he sees it, much has been lost through the arrival of "helmets, garish-coloured clothing, umpires no longer in white coats, sponsors' markings on the playing arena" and the "continual noise and exaggerated celebrations" of the players; such preoccupations will strike younger generations as profoundly old hat, not to say downright petty and daft.

Meritocratic
Fifty Aprils ago marked the start of the first English season to be unencumbered by the distinction between shamateurs and professionals: all hail the new meritocracy. Now, thanks to the multiplicity of formats, the ultimate meritocracy is with us: not only can even an Afghan earn a penny or two, you can have a disobedient body, like Shaun Tait does, and still put in a fruitful day's work by bowling four overs. Today: 2pts

Competitive
In the 1960s the average Test total was 323; over the past ten years it has been 350. Yet before we get too carried away with this apparent widening of the gap between bat and ball, the rise in scoring rates (from 2.49 runs per over to 3.27) has compensated handsomely for the reduction in the number of overs per day, the upshot being that the ratio of conclusive results has soared from to 53% to 74%. Throw in the fact that standards are far more uniform - while only England, Australia and West Indies were regular winners in the first period, this year alone has seen New Zealand take a one-day rubber against South Africa and force England to follow on, India all but reverse 2011-12's 4-0 loss to Australia, and Bangladesh trade 600s with Sri Lanka - and it's another no-contest. Today: 2pts

Craft
Uncovered pitches might have asked more of batsmen (and commensurately less of bowlers) but immeasurably more is demanded of today's practitioner. Who knows whether undimmable titans such as WG, Bradman or SF Barnes would have been so adaptable, but there is no question that Hashim Amla, Marlon Samuels and Graeme Swann are as effective over 20 overs and 50 overs as over five days. 1pt apiece

Excitement
Two words should suffice: "Virender" and "Sehwag". Or "Kevin" and "Pietersen". Or "De" and "Villiers". Or, if we're being thoroughly modern, "Shikhar" and "Dhawan". Or, if we're being meritocratic, "Lasith" and "Malinga" or "Saeed" and "Ajmal". Put it another way: when those of us who can remember that far back try to recall feeling excited while watching the game half a century ago, the options are generally confined to "Garry" and "Sobers". It helps, of course, that we can now trust our own eyes rather than parrot the word of others. Today: 2pts

	Does cricket matter more than it did? In numerical terms, given growth in population, communication technology, access to games and ICC membership and funding, of course it does. But is it healthy for an essentially trivial pursuit to matter more?

Personalities
Comparing characters from different eras is even more ludicrous than comparing Jonathan Trott and his distant ancestor Albert (though we can at least claim with some confidence that Albert, the only batsman to clear the Lord's pavilion with a single blow, was the more aggressive). Again, greater visibility predisposes us to favour the likes of Shane Warne, but this is counterbalanced by largely unpublicised stories from an era when sportsfolk were less closely monitored and hence able to get away with more.

Hugh "Toey" Tayfield is justly celebrated as the greatest of South African spinners, but it was a complete revelation to me to learn, this very week, not only that he was a rampant womaniser who died penniless and largely forgotten in a hospice, but that during the 1960 Old Trafford Test he had been due to appear in court for allegedly failing to repay a £230 loan ("He was a slow bowler and even a slower payer" quipped the prosecution lawyer). We know Sobers and Ted Dexter would have been "personalities" in any era, but given the greater rewards for notoriety today, Tayfield might have met a very different end. 1pt apiece

Sportsmanship
You could be forgiven, here, for concluding that higher stakes and more frequent fixtures have left today lagging miles behind yesterday, but is that truly the case? "Long after the unenterprising cricket of this Test is forgotten, people will talk of two incidents which brought to a head the question of whether batsmen should 'walk'." So attested Basil Easterbrook in Wisden of the 1965 Newlands Test, referring to Eddie Barlow's decision to ignore two appeals for catches (both rejected) and Ken Barrington's self-ordered exit following a thin nick that eluded detection - arguably the least profitable act of vengeance in the game's history. On the other hand, the capacity of the DRS to expose the truth economists has sired, if not a revival of this most honest (if class-ist) of sporting customs, then certainly a few more incidences than I can recollect witnessing in previous decades. 1pt apiece

Crowd behaviour
Of the 11 riotous contests Ray Robinson analysed in The Wildest Tests, one was played in 1933, the others in the first quarter-century after the Second World War. Had he completed the book in 2002 rather than 1972, he would not have had many to add. Sure, there may be less inclination to applaud the opposition, but add comfier seats, more efficient policing of drunkenness and better protection from the elements to the joie de vivre of the Barmy and Swami armies, and there seems little reason not to believe things have improved.Today: 2pts

Mattering
Much the trickiest category. Does cricket matter more than it did? In numerical terms, given growth in population, communication technology, access to games and ICC membership and funding, of course it does. Kynaston disagrees, citing the rise in matches, freedom of player movement and alternative leisure activities alongside a decline in the ritual nature of the fixture list and a tighter focus on city-centre venues. But is it healthy for an essentially trivial pursuit to matter more? How often in days of yore did a bad result convince Indians or Sri Lankans to kill themselves? Yesterday: 2pts

Coverage
There is, of course, no comparison here whatsoever, whether in depth or breadth or even - because we see and know and understand more - quality (literary worth, again, is strictly a matter of taste). At the risk of sounding as disinterested as a mongoose pronouncing judgement on a drunk and disorderly cobra, the range and geographical sources of the voices on this site surely supply incontrovertible proof that we've never had it so good. Hell, if the residents of the Tower of Babel had co-existed this peacefully, we'd all be speaking Hebrew now. Today: 2pts

Final score: Today 13, Yesterday 5

Let's face it: nostalgia simply ain't what it used to be.