How the super rich got richer: 10 shocking facts about inequality

The gap between the super rich and the rest of us is spiralling out of control, with Britain’s 1% grabbing more than their counterparts anywhere else in Europe

• 
• • Danny Dorling
  • The Guardian, Monday 15 September 2014 19.10 BST

Living the high life: the richest 1% have got richer at the expense of the rest of us. Photograph: Getty Images

1. The top 1% no longer includes most doctors and head teachers

To be in the top 1% of earners in Britain today, a couple with no children would need a minimum income of £160,000. A single person can enter the 1% with a little less, while a couple with children would need more.

Hardly any GPs are paid enough to take their place in the top 1% any longer, despite the last decade’s huge hike in their pay; their incomes have been far outstripped by those of the financiers above them. The best-paid head teachers, too, used to be within the top paid 1% in society. They have seen pay rises higher than most teachers, but, again, they have been overtaken in the rankings by financiers, managers, accountants and lawyers. The 1% can pay their children’s university fees upfront. For the rest of us, it is debt. And, in recent years, the top doctors and teachers have become increasingly like the rest of us. There has always been a top 1%, but in the past it contained a wider range of people, including many who were respected more for the jobs they did. And the 1% is taking more and more. When I was a child, the 1% took a third of the share of national income they do today. Nowhere in Europe do they take as much as in the UK.

2. London is the home of the 1%

Per head, there are more so-called ultra-high net-worth individuals (UHNWI) in London than anywhere else on the planet. These are defined as people with $30m (£21m) or more in assets apart from their main home. The estate agents Frank Knight recently reported that 4,224 “Ultra” families were living in London, with the number expected to reach 5,000 by 2024. The attraction is not just London’s history, nightlife or its convenient time zone; it is Britain’s lax tax regime. As Pippa Malmgren, one-time economic adviser to George Bush, put it: “The crackdown on tax havens in Switzerland has removed these old options for new capital. As a result, there has been a huge influx of global capital into the UK.”

London’s wealthy elite also includes the largest concentration of Russian millionaires found outside of Moscow – at least 2,000, many of whom are also “Ultras”. It is impossible to accurately assess their wealth because so much of it is hidden. But the donations from many of them to the Conservative party suggest that they have a direct interest in maintaining the low tax – especially wealth tax – policies of that party. It is not just property that the Russians are buying.

3. The super rich can view the lower classes as subhuman

It is very hard to justify your huge wealth unless you see people beneath you as less deserving. Once the wealth gaps become very large, it is easier to get through the day if you see them as less able, less special. When earlier this month the civil society minister Brooks Newmark told people involved in charities that they should “stick to their knitting” rather than concern themselves with what might be causing the problems they were trying to remedy, he was exhibiting just such a “don’t worry your pretty little head” attitude.

At the extreme, the less fortunate may not be seen as people at all. That was the finding of a study from Princeton University in which MRI scans were taken of several university students’ active brains while they viewed images of different people. Researchers saw that photographs of homeless people and drug addicts failed to stimulate areas of the brain that usually activate whenever people think about other people, or themselves. Instead, the (mostly affluent) students reacted to the images as if they “had stumbled on a pile of trash”.

The more economic inequality there is in a country, the more people are prone to instantly size up each others’ status upon meeting. Some quickly cast their eyes down; others look over the shoulders of those they don’t think they need to respect. Social psychologists from Berkeley and Amsterdam have studied strangers in situations where one told the other of a difficult personal experience, such as a death in the family. The larger the social gap, the less compassion was shown. Such behaviour, and the acceptance of it as normal, becomes much more prevalent in those places where the 1% have taken the most.

A homeless woman in London: research has shown that the larger the social gap, the less compassion is shown to those worse off. Photograph: Chris Helgren/Reuters

4. In the last 15 years, inequality has spiralled

If the national minimum wage had kept pace with FTSE 100 CEO salaries since 1999, it would now be £18.89 per hour instead of £6.50. However, for some reason broadcasters rarely ask CEOs about the gulf between their pay and that of the poorest staff in their organisations. The unstated implication is that the lowest-paid staff are lucky to have any job at all, and only have what they have thanks to the benevolence of the 1%, with their superior leadership skills.

If the top 1% actually created more jobs as they became wealthier, then ordinary people would be surrounded by employment opportunities in both the US and the UK. Instead, it is in Germany, where the wealthiest 1% receives in pay and bonuses half as much as their counterparts in the US, that unemployment is at a 20-year low. In countries that keep their top 1% in check, the highest earners work more effectively for the good of all, or at the very least create a little less misery.

5. Taxing more would cut down on greed

To reduce wealth inequalities, you introduce wealth taxes, as we did with inheritance tax a century ago. However, if you want to keep inequality under control, you need a high top rate of income tax. The top rate in Switzerland and Germany has not fallen for the past half century; in both countries the top 1% earners now take a slightly smaller share of total income than they did in the 1960s. In the US and the UK, the 1% have gained the most as top taxes have fallen the most.

Top taxes reduce income inequality not by raising revenue, but by deterring the greedy from asking for more money. When there is a tax rate of 60% or 70% on the slice of income above £200,000 or £250,000 a year, it makes little sense to pay employees much more than that.

By not paying a few people very high salaries, firms can save enormous amounts of money. If Barclays bank didn’t employ several hundred people on salaries of more than £1m, but on more reasonable, if still high incomes, it could employ several thousand more staff to work in local branches threatened with closure. Similarly, the BBC could make better programmes using more producers if a few celebrities at the top were paid less. It has already begun this process. A more equitable pay distribution allows far more people for the same cost, and the reward is greater productivity.

6. Maintaining inequality requires penalising the poor

The coalition government has already reduced the top rate of tax to 45%. Now it plans tougher benefit cuts for the poor. Under current financial plans, it will reward the top 1% even more in future, by cutting income taxes further. The rest of the top 20% can expect slight increases in their net income in the years up to 2016, while everyone else is impoverished. These figures are based on the Office for Budget Responsibility’s own projections. Meanwhile, the International Monetary Fund has produced statistics showing that George Osborne’s plans will cut the proportion of GDP going to the state to the lowest level in western Europe by 2015, and for the first time below that in the US.

A gold Ferrari sitting in a London street. The UK capital has become a playground for the super-rich.Photograph: Dan Kitwood/Getty Images

7. It is children who will suffer most from the spending cuts

The tax, benefit and spending changes now underway will hit households with children hardest. These make up a third of households, according to the children’s commissioner for England, but will suffer around two thirds of the cuts. On average, couples with no children will lose 4%, couples with children 9%, and lone parents 14% of their net income. Yet the 1% with children face no net cuts. Their loss of child benefit is more than outweighed by what they gain from tax cuts.

The 1% in the UK can afford to put money into a highly pressured education for their children. This does not necessarily make them happy. Many may prefer a normal family life to a boarding school, paid handsomely to squeeze the highest possible exam grades from them. They are expected to gain entry to some of the “best” universities and, in turn, to quickly secure a very highly paid job and do the same for their own children. They are not necessarily to be envied, but they come at a huge price, which others partly pay through austerity. One way of looking at the cost of the UK’s 1% is that it is equivalent to running 1,100 royal families.

8. Many other parts of the world are becoming more, not less, equal

In Switzerland and the Netherlands, the share of national income taken by the 1% has shrunk to historic lows. Inequalities have fallen since 1990 in Brazil and since 2000 in Sweden. Even in the UK, income inequalities since the 2008 crash have fallen back to early 1990s levels – if you strip out the very richest 1%. Only this tiny minority is still moving away from the rest. Since 2005, global economic inequalities have been falling, but again only if the wealth and income of the very richest is ignored. We are facing a fork in the road between having a majority global middle class, or most of us becoming a global service class employed to satisfy the needs of a tiny minority of super-rich individuals.

In spring this year, Oxfam revealed that some 85 of the world’s richest people now had as much wealth as the poorest half of all humanity. A few weeks later, Forbes magazine updated that estimate to just 67 people. Then, within days, they corrected that estimate on their website to 66 people, so fast was the wealth of the multi-billionaires rising in the world during early 2014. Such rapidly expanding bubbles always explode, and the larger they get, the more messily they end.

9. Concentration of wealth at the top is unsustainable …

Wealth concentration damages economies. It focuses activity within finance and other services geared towards the super rich – resorts, hotels, all manner of servant duties – and away from actually productive work. It is far better to have a mixed economy where some manufacturing still takes place near to where goods are consumed. It is also damaging to rely on industries with high numbers of very low-paid employees. If you eat out half as much but pay twice as much for the privilege, then cooks, washers-up and waiters can be paid more, as they are in Switzerland. Nowhere in Europe “employs” unpaid interns in such numbers as Britain, including in its financial industry; this does not make a vibrant market economy.

Economists based in Hamburg, Göttingen and Harvard recently studied trends since 1961 in nine high-income countries and revealed that, as those at the very top take more, overall economic growth becomes more sluggish. It is not just that the richest leave less in the pay chest for everyone else: the chest fills more slowly when the 1% take more, when employees must get by on subsistence wages, when interns must work themselves into the ground for nothing.

10. But no one knows when the tipping point will come

It is exactly a century since the income and wealth of the 1% last began to fall abruptly. Inequality peaked in the years 1912 and 1913, when the organisation of British society was epitomised by the sleeping arrangements on the Titanic.

That world was changed by external events: the first world war, the 1916 Easter uprising, the Russian revolution of 1917, and the influenza pandemic of 1918 that killed 50 million people worldwide. Taxes rose rapidly. The job was finished by unions, politicians and suffragettes, the greed of the 1920s bankers and the crash of 1929. The net income of the 1% was cut in half by 1939.

Today there are not enough people to buy property in London at prices inflated by the greed of the 1%. Firms cannot sell enough to justify the largesse offered to a few at the top, and banks cannot legally or morally make enough profit to pay over 2,000 bankers more than £1m a year. Roughly half the voters of Scotland haven’t expressed their wish to leave the union in poll after poll because they see London and its inequalities as stable or sustainable.

We can see the rising dissent and anger and the changing of attitudes towards the rich, but not the precise event that will come to be labelled as the turning point, just as we could not a century ago. But it is coming. We may even have passed it. Note how pay at the top of the BBC has fallen, and that no banker today is paid what Bob Diamond received a few years ago. The language and moral sentiment is changing. By being angry and disgusted with the current extent of inequality, we make it unacceptable, and its defenders become pariahs. Gross economic inequality is as vile as racism, misogyny and hatred of the disabled; as damaging in effect; and as dependent on a small group of supporters who believe that just a few should have more and more and more, because they’re worth it.

Inequality for All – another Inconvenient Truth?

The powerful documentary Inequality for All was an unexpected hit at the recent Sundance film festival, arguing that US capitalism has fatally abandoned the middle classes while making the super-rich richer. Can its star, economist Robert Reich, do for economics what Al Gore did for the environment?

• 
• • Carole Cadwalladr
  • The Observer, Saturday 2 February 2013 21.00 GMT

Former US labour secretary Robert Reich at an Occupy Los Angeles rally in 2011. Photograph: David Mcnew/Getty Images

In one sense, Inequality for All is absolutely the film of the moment. We are living through tumultuous times. The economy has tanked. Austerity has cut a swath through the country. We're on the verge of a triple-dip recession. And, in another, parallel universe, a small cohort of alien beings – or as we know them, bankers – are currently engaged in trying to figure out what to spend their multimillion-pound bonuses on. Who wouldn't want to know what's going on? Or how it happened? Or why? Or if it is really true that the next generation down is well and truly shafted?

And yet… what sucker would try to make a film about it? It's not exactly Skyfall. Where would you even start? Because there are some films that practically beg to be made. And then there's Inequality for All; the kind of film that you can't quite believe that anybody, ever, considered a good idea, let alone had the passion and commitment to give it two years of their life.

How did you even come up with the idea of making a film about economics? I ask the director Jacob Kornbluth. "I know! People would roll their eyes when I told them. They'd say it's a terrible idea for a film." On paper it is, indeed, a terrible idea. A 90-minutedocumentary on income inequality: or why the rich have got richer and the rest of us haven't (I say "us" because although it's focused on America, we're snapping at their heels) and which traces a line back to the 1970s, when things stopped getting better for the vast majority of ordinary working people and started getting worse.

"It always sounded so dry," says Kornbluth. "But then I'd tell people it's An Inconvenient Truth for the economy and they'd go, Ah!"

In fact, Inequality for All, which premiered at the Sundance film festival a fortnight ago, is anything but dry. It won not just rave reviews but also the special jury prize and a major cinema distribution deal, and while it owes an obvious debt to Al Gore's An Inconvenient Truth, it is, in many ways, a much better, more human and surprising film. Not least because, incredibly enough, it's actually pretty funny. And, in large part, this is down to its star, Robert Reich.

Reich is not a star in any obvious sense of the word. He's a 66-year-old academic. And he's been banging on about inequality for more than three decades. At one point in the film he looks quite downcast and says: "Sometimes I just feel like my life has been a total failure." An archive clip of him on CNN from 1991 looking fresh-faced and bushy-haired shows that he has literally been saying the same thing for decades upon decades. And yet, as he tells me cheerfully on the phone from his home in California, "It just keeps getting worse!"

These days he's a professor of public policy at the University of California at Berkeley and while he's not a figure we're familiar with in the UK, he's been part of American public life for years. At the start of the film, he introduces himself to a lecture hall full of students, telling them how he was secretary of labour under Bill Clinton. "And before that I was at Harvard. And before that I was a member of the Carter administration. You don't remember the Carter administration, do you?" The students remain silent. "And before that," says Reich with impeccable comic timing, "I was a special agent for Abraham Lincoln." He shakes his head. "Those were tough times."

Reich's books and ideas have been at the forefront of Democratic party thinking for a generation. He is an intellectual heavyweight, a veteran policymaker, a seasoned political hand, and yet he also has the delivery of a standup comedian. His ideas were the basis for Bill Clinton's 1992 election campaign slogan, "Putting People First" (they were both Rhodes scholars and he met Clinton on board the boat to England; he once dated Hillary too, though he only realised this when a New York Times journalist rang him up and reminded him). And they were still there at the heart of President Obama's inaugural address last month. America could not succeed, said Obama, "when a shrinking few do very well and a growing many barely make it". What Reich, basically, has been saying since the year dot.

What's extraordinary is how, somehow, these ideas have been translated into a narrative that shows every sign of being this year's hit documentary film. It certainly shocked Reich. He says he was amazed when Kornbluth first pitched the idea of a film. "He came and said that he'd read my book, Aftershock, and that he loved it and wanted to do a movie about it. And I honestly didn't know what he meant. How could you make a movie out of it?"

But Kornbluth has made a movie out of it. A really astonishingly good movie that takes some big economic ideas and how these relate to the quality of everyday life as lived by most ordinary people. The love and care and artistic flair that Kornbluth brought to it is evident in every frame. It was really really hard work, he tells me, to make something look that simple. But then "I grew up poor. So I've always been very aware of who has what in society." His father had a stroke when Kornbluth was five and died six years later. And his mother, who didn't work because she was raising three children, died when he was 18.

Any synopsis of the film runs the risk of making it seem dry again, but essentially it describes how the middle classes have come to have a smaller and smaller portion of the economic pie. And how, since 70% of the economy is based on the middle classes buying stuff, if they don't have any money to buy this stuff, it cannot grow. Meanwhile, the government has allowed the super-rich, the "one per cent", to take more of the nation's wealth. Half of the US's total assets are now owned by just 400 people – 400! – and, Reich contests that this is not just a threat to the economy, but also to democracy.

Kornbluth tells me that he initially had the idea of casting Reich in a feature film. "I'd seen him on TV and I just thought he'd make a great tax inspector in this film I was making. Although, actually, it turned out he was a terrible actor. But we hit it off. And I discovered that he and I share a sense of humour. I'm not a documentarian. My background is comedy. Yet I just thought that this could be an amazingly riveting film. To me it's the most important story of our time. And nobody was telling it. I kept on reading the papers and watching the news and I really wanted a story. I craved it. I just knew that to do it, we would have to make it as funny and human as possible."

And it's this, the gentle humour at the heart of the film, and the lightness of its direction, that are its winning ingredients, disguising what is, in fact, incredibly powerful. Because at heart Inequality for All is a revolutionary film. Or, at least, its dearest desire is to precipitate a revolution in the way that we think about economic matters. As Reich tells me, "the economy is not like the weather". It's not inevitable. It's not determined. "An economy does not exist in nature. We don't have to settle." And, crucially, it can be changed.

But the film's main stroke of brilliance is to put Reich, the unlikely hero, at the centre. "I had never done anything political before," says Kornbluth. "I didn't consider myself political. But seeing his example, the way that he has fought this fight for so many years has been an absolute inspiration to me. I see it in his students, they really do walk out of his lectures and want to change the world."

As in An Inconvenient Truth – or "the most lucrative PowerPoint presentation in history", as one critic called it – the film is structured around a lecture, or rather series of lectures: Reich's incredibly popular wealth and poverty class at Berkeley. But it is only loosely used as a vehicle. There are also news clips and interviews and stylised graphics and archive footage.

And what the film tries to do is thread together evidence that many people know about – the increasing struggle of the middle classes to just get by, the way that the top 1% of society has unshackled itself from the rest of us and has seen its income increase exponentially, and the ever-increasing cost of the traditional avenues of improvement, such as higher education – and weave it into a cohesive and convincing narrative. It is, in some respects, a theory of everything. Reich charts the three decades of increasing median income after the second world war, a period he calls "the great prosperity" and then examines what happened in the late 1970s to put an end to it. The economy didn't falter. It kept on growing. But wages didn't.

The figures that Reich supplies are simply gobsmacking. In 1978, the typical male US worker was making $48,000 a year (adjusted for inflation). Meanwhile the average person in the top 1% was making $390, 000. By 2010, the median wage had plummeted to $33,000, but at the top it had nearly trebled, to $1,100,000.

"Something happened in the late 1970s," we hear him tell his Berkeley class. And much of the rest of the film is working out what happened.

Some inequality is inevitable, he says. Even desirable. It's what makes capitalism tick. But at what point does it become a problem? When the middle classes (in its American sense of the 25% above and below the median wage) have so little of the economic pie that it affects not just their lives but the economy as a whole.

Reich's thesis is that since the 1970s a combination of anti-union legislation and deregulation of the markets contrived to create a situation in which the economy boomed but less of the wealth trickled down. Though for a while, nobody noticed. There were "coping mechanisms". More women entered the workforce, creating dual-income families. Working hours rose. And increasing house prices enabled people to borrow.

And then, in 2007, this all came crashing to a halt. "We have exhausted all the options," he says. There's nowhere else left to go. It's crunch time.

It's crunch time that so many working families understand too well. They may not be familiar with the theory of income inequality but they haven't been able to avoid noticing that they've got less money in their pockets. "I've always thought that kitchen-table economics is the most important topic to most people," says Reich. "Their wages, their jobs, getting by. I've always tried to relate economics to where people live. That's why I was so excited about the film."

The human stories of working American families struggling to cope are at the emotional centre of the film. At a Q&A after the Sundance screening, a third of the audience admitted that they'd cried during the film at some point.

There's Erika and Robert Vaclav, for example, who pay $400 a week to keep their daughter in after-school care so that Erika can work on the checkout at Costco. "And I'm trying to work out if I should get her a phone so that she can walk home from school alone, and I know she's OK, or if I should continue paying the money." They lost their house when Robert was made redundant from his job as a manager at the now defunct electrical retailer Circuit City. And, it gradually transpires, that he's a student in Reich's wealth and poverty class at Berkeley.

"How much money do you have in your checking account?" Kornbluth asks Erika from off camera as she drives her daughter to school. "$25," she says and her voice starts to crack and waver.

One of Reich's greatest sources of humour is himself. In the opening shots of the film, the camera follows him walking to his car, a Mini Cooper. "I sort of identify with it," he says. "It's pretty little. I feel we are in proportion. Me and my car. We are together facing the rest of the world."

Later he takes a box out of the back of his car. "I always travel with my box," he says and explains that he suffers from a rare genetic condition – Fairbanks disease – that led to him only growing to 4ft 10in in height. The box is what he always takes to public-speaking events so that he can reach the podium.

He was bullied as a child "because that's just what happens when you're small" and repeatedly beaten up. His grandmother consoled him by telling him that when he was 10, 11 or 12 he'd shoot up. He never did. "It's never been a conscious thing on my part but that feeling of being bullied, and feeling vulnerable, has stayed with me. And maybe it's because of that that I can empathise with poor people. Because they are the most vulnerable. There is no one to protect them."

In the film, he tells how he made strategic alliances with older boys who could protect him. And years later, he discovered that one of them had travelled down to Mississippi to register voters and had been tortured and then murdered. "That changed my life," he says.

"He has never cashed in," says Kornbluth. "He's an incredibly smart guy and he could have found a way to correlate that into money as so many people do. But he never has. He has absolute integrity. It's almost shocking now for someone not to do that. I mean one of the film-makers I admire is Mike Leigh. And he does McDonald's commercials and I was like 'Whoa!' when I found out but I can't hold it against him. You can't hold it against anybody who's trying to make a living. But it makes Rob all the more amazing. He doesn't sit on boards. Or on thinktanks. He draws a modest salary. He has this absolute moral compass. And he's still trying to change the world."

In the 60s and 70s, this wasn't such a surprising thing. Reich recounts how he grew up "in a time of giants". His first job was working for Bobby Kennedy. Changing the world was what everyone wanted to do.

The world has changed. Just not in the way many thought it would. We fell victim to what Reich calls "the huge lie". That the free market is good. And government is bad. Government makes the rules, Reich keeps on reminding us, over and over. And it decides who benefits from those rules, and who is harmed. And increasingly, that boils down to the rich and the poor.

Perhaps the most surprising voice in the film is Nick Hanauer's. He's just your ordinary, everyday billionaire. One of the 1%. Except that he believes – like Warren Buffett – that he doesn't pay enough tax. And that hammering the middle class, the ones who buy actual stuff, who create demand, which in turn creates jobs and more taxes, is simply bad for the economy. "I mean, I drive the fanciest Audi around, but it's still only one of them… Three pairs of jeans a year, that will just about do me."

The system simply isn't working, he says. It's put the millionaires and the billionaires, the Nick Hanauers and the Mitt Romneys – the people that Republican rhetoric describes as job creators – at the centre of the economic universe, rather than what Hanauer calls the true job creators – the middle classes.

The problem is, he says, is that they've been attacked from every side. He was one of the initial investors in Amazon, a business of which he's "incredibly proud", but he points out that on revenues in the last three months of 2012 of $21bn (£13bn), Amazon employs just 65,600 people. "If it was a mom and pop retailer, it would be 600,000 people, or 800,000 or a million."

Globalisation and technology have played their role. But so has the government. For decades, under both Republicans and Democrats the highest rate of tax didn't dip below 70%. Now, Hanauer says he pays 11% on a six-figure income. Hanauer believes that if he was taxed more, he would be better off, because his company – he's a venture capitalist and his family own a pillow factory – would sell more products, and he would, therefore, make more money.

This is inequality imposed from the top. Reich's charts show that for years, chief executives' earnings kept in step with other employees. And then in 2000-03 "It went kerbluey", by which he means off the charts.

Which is where it still is. In the UK, Royal Bank of Scotland, having covered itself in glory in the Libor interest-rate fixing scandal, is currently contemplating bonuses for its investment banking division of £250m, according to reports last week. This, to put it another way, is the annual wage bill for at least 12,500 of its call-centre workers. Because this isn't just an American problem. It's a British one too.

"If there was upward mobility it would be OK," says Reich in the film. "But 42% of children born in poverty in the USA will stay there. In Denmark it's 24%. Even in Great Britain, where they still have an aristocracy, it's 30%."

It's probably a shocking statistic for Americans to hear. The problem is that by every index you can measure, inequality is worsening in Britain. There are fewer opportunities to overcome the barriers of your birth in the UK than in any other country in Europe. One of the most chilling moments in Inequality for All for a British audience is that how, faced with the same choices that America had in the 70s, we have, in the last year or so, taken the same path.

One of the key moments for Reich was the underinvestment in education, particularly higher education in the 70s. This was when America introduced tuition fees and its workforce started to fall behind the rest of the world's. When opportunities for those from low- and middle-income backgrounds began shrinking: precisely where the UK is today.

It's not just that wages have remained flat in America – as they have in the UK – it's that the expenses of everyday life have soared, in particular education and healthcare.

Last October, an independent commission in the UK led by the Resolution Foundationpredicted that in 2020 wages for low- to middle-income families would be the same as they were in 2000. And yet everything else will have gone up. We too are facing the crunch.

In December, the Office for National Statistics found that richest 10% of people in Britain own 40% of the national wealth. In London and the south-east, one in eight households has almost £1m of assets. The bottom half of the country has no net property wealth and only £4,000 in pensions savings. For them, there is just rising prices. And the ever diminishing possibility of things ever being different for them or their children.

"Where America leads, sadly the rest of the world follows. This same thing is affecting people all over the world," says Reich. "If nothing is done to reverse this trend, Britain will find itself in exactly the same place as America in just a few years' time."

Earlier in the week, I notice that he'd tweeted: "Britain's austerity economics is complete disaster. Its economy shrinking." And pasted a link to the Wall Street Journal in which the head of the IMF took George Osborne to task. When I ask him about it, he calls our austerity economics "a cruel hoax". Cruel because "it hurts people who have been hurt enough". And a hoax because, "It simply doesn't work. Look at the figures."

It should be our crunch time too. We have more people living in poverty who have jobs than those who don't, according to Oxfam. The average British citizen – the average – is three pay cheques away from destitution. And with the entire country poised on the brink of a triple-dip recession.

Perhaps the unlikeliest thing about Robert Reich is how very chipper he is. Even though, by every measure, inequality has got worse in the United States since he started preaching his doctrine. He doesn't seem to let it get to him.

There are clips of him from the 90s when he used to be a regular pundit on Fox News, but as American politics has moved to the right, he has found himself cast as a dangerous leftie. "Robert Reich?" says a pundit on one news clip. "He's a communist. A socialist." It's not a coincidence that he makes a point of saying in the film that he is not, and never has been, a member of the Communist party. And he and Kornbluth go to extraordinary lengths not to mention the word "Sweden" or "Japan" and barely even "Germany".

No good will come of telling the American people what funny foreigners get up to. It is, instead, rather gently subversive, the aesthetic opposite of any film by Michael Moore. It tries to politely prod its viewers into looking at the world differently rather than beating them around the head with a heavy wooden bat marked "polemic".

But American politics has become so polarised, so ideologically vicious, that it's only a matter of time before it's attacked by the right as Stalinist propaganda. "But I'm used to that," he says. "I've been attacked at a personal level for the last 30 years. I'm just excited that this might trigger a debate. Though I'm trying not to get my hopes up."

Crunch time in the US is looking ugly. Reich believes that both the Tea Party and Occupy movements spring from the same sense of anger and frustration that people fear. That politics will become more polarised, more extreme, more hate-filled.

One of the key pieces of research that Reich cites is a study of tax data by Emmanuel Saez and Thomas Piketty which shows that the years of peak income inequality in America were in 1928 and 2007. Right before both crashes. "The parallels are striking," he says. It's also striking what happened in the years after 1928. How in Germany, to take a random example, worldwide depression also led to a vicious polarisation of right and left. And certain other outcomes.

Could that happen in America? "Oh good heavens, I hope not!" he says. "Though when you go into periods of economic insecurity with widening inequality which puts the middle class under stress, you create fertile ground for demagogues from left or right. The politics of hate. The politics of fear. We're already seeing that."

And yet, despite, it all, he remains hopeful. "Change has always been difficult," he says. It's why he teaches. If he can't change the world, maybe his students will. Or people who watch the film? I ask and get a classic, understated, deadpan but not entirely unoptimistic Reichian reply. "I'm trying to keep my expectations in check."

What happens to a Lottery winner?

Lottery millionaires each fund six jobs a year, study shows

3,000 £1m-plus winners have created another 3,780 millionaires among family and friends and contributed £750m to GDP

• Caroline Davies
• guardian.co.uk, Monday 22 October 2012 00.05 BST

Some of the National Lottery's 3,000 millionaire winners. Photograph: David Parry/PA

The balls have dropped and all six numbers match, so it's time to buy that Audi, book the holiday in the US and phone the estate agent. At least, that's what most lottery millionaires do, according to an analysis of spending and investment by jackpot winners.

Since its launch in 1994, the lottery has created 3,000 millionaires who have won more than £8.5bn in total, at an average of £2.8m each. The trickle-down effect means that between them they have created a further 3,780 millionaires among their children, family and friends, according to the forecasting consultancy Oxford Economics.

Most winners (59%) give up work straight away, but 19% carry on doing the day job and 31% do unpaid voluntary work. The good news for the economy is that 98% of winners' spending remained in the UK. Through their spending on property, vehicles and holidays, it is estimated that each winner keeps six people in a full-time job for a year.

Winners have contributed almost £750m to GDP, and generated more than £500m in tax receipts for the Exchequer. The bulk of the money went on property, with £2.72bn spent on winners' main properties, and £170m in paying off existing debt and mortgages.

Maintaining income was a priority, with £2.125bn spent on investments. Gifts to family and friends accounted for £1.17bn, and £680m was spent on cars and holidays.

The study, commissioned by Camelot to mark the 3,000 winners milestone, was based on research from 100 £1m-plus winners. It found that in total the 3,000 winners have purchased 7,958 houses or flats in the UK, or 2.7 each, spending £3.3bn. Most winners (82%) changed their main residence, spending an average £900,000.

The new home is likely to come with a hot tub, with almost a third (29%) putting that on their shopping list. A walk-in wardrobe was a must for 28%, almost a quarter (24%) opted for a property behind electric gates, and 22% had a games room, with 7% installing a snooker table.

Larger properties need maintaining, and 30% of winners employed a cleaner and 24% a gardener. A small proportion (5%) employed a beautician.

Audis were the favourite cars of 16% of winners, with Range Rovers and BMWs also popular purchases (11% each), as well as Mercedes (10%) and Land Rovers (5%). Winners spent £463m on 17,190 cars, with the average price of their favourite being £46,116.

Holidays were also a priority. The majority (68%) choose five-star hotels overseas. The US was the favoured destination for 27%, followed by the Caribbean (9%). Closer to home, however, UK caravan sales have benefited. Over the past 18 years, 10% of millionaires have bought a caravan, generating sales worth about £7.4m.

Some winners (15%) have started their own businesses, 9% have helped others to do so, and 6% have invested in or bought other people's businesses. Businesses started or supported by lottery winners employ 3,195 people, according to the study.

Andy Logan, co-analyst and author of the report, said: "The effect of a win spreads much further and wider than we anticipated. Not only does it transform the lives of friends and family, but each win has a measurable effect on the UK economy, especially with so much of it being spent in the UK. The use of each win creates a ripple effect across this generation and very often the next."

£1m buys foreign investors right to live in Britain

Foreign millionaires are flocking to use a little-known immigration scheme that allows wealthy individuals to jump to the top of the queue for permanent residency.

The most recent figures from the Home Office show that more than 400 people applied to use the investor visa scheme in the 12 months to the end of June. This compares with a total of 331 people in 2011 and fewer than 200 in 2009. Photo: PA

By Harry Wilson

9:30PM BST 06 Oct 2012

Rich Russians and Chinese are increasingly using "investor visas" that allow wealthy foreigners to effectively buy the right to live in the UK in return for buying at least £1m of gilts or shares and bonds in British companies.

Top London private bankers have expressed concerns at the number of people using the scheme to gain permanent resident status, arguing that the authorities should consider raising the amount of money needed to gain residency.

"The £1m threshold was put in place more than 20 years ago and is not the obstacle it once was. We have seen a huge increase in demand from Russians, Chinese and people from the Middle East wanting to move to London and it is clear that given the unlimited demand the time may have come to charge more for entry," said on senior London banker.

The most recent figures from the Home Office show that more than 400 people applied to use the investor visa scheme in the 12 months to the end of June. This compares with a total of 331 people in 2011 and fewer than 200 in 2009.

Mark Pihlens, chief executive of Invest UK, which advises wealthy foreigners on investing in Britain, said political instability in the Middle East as well as China and Russia had driven the spike. "People want to take out a second option on where they and their children can live," he said. 2012

Wealthy foreign nationals can speed up the process by investing greater amounts. Investments of more than £5m and £10m mean permanent residency could be gained within as little as two years.