The Labour MP Lloyd Russell-Moyle last month unexpectedly set the tone of the general election campaign when he appeared on BBC Radio 5 Live and declared that billionaires should not exist. With this pronouncement, Russell-Moyle brought the debate about billionaire wealth across the Atlantic from the US, where a tweet by an adviser to Alexandria Ocasio-Cortez — “every billionaire is a policy failure” — went viral earlier this year.
It is difficult to comprehend the sheer scale of UK wealth inequality, which is twice as high as income inequality. New research published today by the Equality Trust has shown that the five richest families in the UK control as much wealth as the poorest 13 million people and that the number of billionaires has almost doubled over the last decade. The top 1 per cent of the population now owns the same wealth as the bottom 80 per cent of the population.
What do these statistics actually mean? The five richest families have £39.4bn of wealth between them. This is an unimaginably large sum of money. It would take you 12 days to count to one million, but 32 years to count to one billion. You would have to spend the average annual salary in the UK — £29,000 — every day for a century to exhaust the wealth of a billionaire.
Those on the right will respond to these statistics by claiming that the UK’s billionaires have earned their wealth and that they have done so by contributing to the economy, creating jobs and boosting investment. The savvy businessman, or perhaps today the tech entrepreneur, is the image most likely to come to mind when one thinks of a billionaire.
In fact, in the UK, a more appropriate image would be a property tycoon or a hedge fund manager. The single largest source of wealth on the Sunday Times Rich List is property. Many billionaires have made their fortunes by buying up property on the cheap and waiting for house prices to rise, or by developing modest flats into luxury apartments before selling them off to international investors.
Another significant source of billionaire wealth in the UK is, unsurprisingly, finance. Those who have been born into wealth can become billionaires by investing their capital in financial markets, perhaps by starting a hedge fund or a private equity firm. In the heyday of Thatcherism, many billionaires made their wealth by buying up companies, stripping out their assets and selling them off to the highest bidder — a practice that remains common to this day.
In other words, the best way to become a billionaire in the UK is not through wealth creation but extraction. Most British billionaires have made their wealth by extracting economic rents from the production process: by monopolising a scarce resource — be that property, commodities, or intellectual property — and over-charging others for its use.
The other side of the wealth of the property tycoon is the poverty of the family being shunted between different forms of temporary accommodation because they cannot afford to keep a roof over their heads. The other side of the wealth of the private equity manager is the poverty of the worker he laid off to “turn around” his latest investment.
The other side of the wealth of the few is the poverty of the many. Fourteen million people in the UK are living in poverty — 4.6 million of whom are children. Children are going to school “unwashed” and “hungry” — nine out of ten schools in the UK are being forced to distribute clothes to students. 135,000 children will be homeless this Christmas, in a society with hundreds of people so rich that they couldn’t even count their wealth.
These patterns are replicated at the level of the international economy. Globally, the 26 wealthiest billionaires own as much wealth as the bottom 50 per cent of the population. And their wealth is not “earned” either. According to Oxfam, one-third of global billionaire wealth comes from an inheritance while another third comes from “crony connections to government and monopoly”. Much of the rest originates from land, oil or finance.
Billionaire extractivism is central to the multiple overlapping crises our economy faces today. The financial crisis, the housing crisis and the climate crisis are all directly linked to the extractive behaviour of the few. Solving these crises, and constraining vast wealth inequality, requires more than tinkering with the tax system.
Thomas Piketty found that modern capitalism is marked by a tendency for the returns to wealth to exceed the returns to labour. As long as this remains true, the only way to deal with wealth inequality will be to change the economy’s ownership structures.
Labour’s manifesto is built around this aim. Public ownership of the railways, mail and energy utilities will mean private shareholders are unable to extract ever-higher returns from the pockets of ordinary consumers. Inclusive ownership funds will give workers a stake in the corporations for which they work, allowing them to share in the returns generated by their hard work. The promise to build 150,000 new social houses a year will constrain the returns that can be generated in the private rented sector and improve housing affordability substantially.
Ultimately, questions of wealth and ownership are questions about the very nature of capitalism. Increasing public and collective ownership of society’s most important resources may be the only way to solve the climate crisis, deal with the legacy of the financial crisis and reduce the stark inequalities of wealth that mark our economy. But it would also represent a transformation in the nature of British capitalism unlike any since 1945. No wonder the billionaires are worried.