Yes I really do mean we can’t afford the rich. The richer they are, the more likely they are to be extracting more wealth than they create. Why We Can’t Afford the Rich is not about the rich as individuals but about the mechanisms by which they accumulate excessive wealth – wealth that others, by and large, have created.
I’m arguing that these mechanisms are both unjust and dysfunctional, and have a lot to do with the crisis. The mechanisms primarily involve controlling key assets – like land, property and money – that others lack but need, and using them to extract wealth via rent, interest payments, profit from production, dividends, capital gains, and speculative gains.
Here’s an example: you have, or buy, a house purely to rent out to others. The production costs of the house have already been paid for. Once you have deducted any maintenance costs, then that rent is unearned income, as are any capital gains resulting from rising house prices. The house already existed and was paid for, so the rent is something for nothing, because you haven’t provided anything that didn’t already exist.
Say you get £10,000 in rent. That money can only have value if there are goods and services to buy with it. This means that those who produce those goods and services (who rely on earned income) – have to produce a surplus over and above what they can consume with their own wages or salaries to provide you with £10k worth of goods and services. This is one of the ways the rich can siphon off wealth produced by others.
So the first and biggest part of the book is called ‘A guide to wealth extraction’, and it goes through these mechanisms, including some of the less visible ones that figured in the financial crisis.
The second part is about the wider causes of economic inequalities between people – things like their different economic inheritances and how this depends on the economic history of their countries rather than how hard they work. It shows that what people get in markets has little to do with merit or effort but a lot to do with luck and power. The idea of meritocracy may be appealing to the rich, but it’s a dangerous lie, indeed it functions as a kind of libel on the 99%.
Part three is about the crisis, and the role of the rich within this. It shows how the globalisation of industry from the 1970s onward weakened labour in the old industrialized countries, allowing big firms to engage in a race to the bottom for cheap labour, low taxes, and lax environmental and employment regimes. Deregulation of finance allowed a bonanza in the growth of mechanisms of wealth extraction, which we are now paying for in austerity.
With wealth goes power, political power. Part four examines the rise of the rich in politics – the overshadowing of democracy by plutocracy. It shows how a shifting mass of the global rich and big business increasingly funding and infiltrating and dominating governments, and rigging the rules of the economy in their favour.
The wealth of the rich is not only ill-gotten, but ill-spent. This is the topic of part four. It’s a waste of resources, and it encourages those with less to emulate them, so production is diverted from producing basic needs to producing under-used luxuries and symbols of opulence. It’s also madly unsustainable. And the rich not only tread most heavily on the planet but many of them have financial interests in continued unsustainable growth and fossil fuel extraction.
And the conclusion? We need economies that are fair (which actually means much more equal), conducive to well-being, and sustainable. More equal countries tend to have greater well-being, and it’s been found that once people get above a moderate income, their well-being doesn’t improve with further increases in pay. So we don’t need to consume the earth to live well. But to stand any chance of saving the planet, the 99% need to take back power and wealth and create a saner, fairer economy.
Photo: Gideon malias, Creative Commons
Who is your book aimed at ?
Anyone who’s alarmed by the rapid growth of inequality, particularly the astonishing concentration of wealth at the top and what that’s doing to our societies;
Anyone who’s outraged by the way those responsible for the financial crisis have managed to offload the costs onto the public and then blame the welfare state;
Anyone who’s alarmed by the domination of politics by the rich, and what that means for democracy;
Anyone who’s concerned about the way the rich and powerful are avoiding doing anything serious about global warming.
Why did you write this book?
All the above reasons. Plus:
We need a new way of thinking about economics: economies should serve societies, not vice versa. Economics is – or should be – about ‘provisioning’ – how societies provide the wherewithal to live well and sustainably. It’s about relations between people, between producers and consumers, among fellow workers, between employers and employees, buyers and sellers, lenders and borrowers, landlords and tenants, and so on, whether they are known to each other or strangers.
I felt that the mechanisms of wealth extraction, and the misleading words used to describe them – like ‘investment’ – could be explained quite simply. And I didn’t want to just preach to the converted in their own language, but write in a way that anyone who takes an interest in how society is changing could follow. So although I’m used to writing academic books, I thought I’d have a go at a more reader-friendly style of writing, and one less constrained by the usual self-censorship that academics learn to apply. Although it’s not spattered with references and qualifications like academic books are, I have tried to research it as rigorously as I would in writing for an academic audience, and acknowledge all my sources carefully. Time will tell if I’ve succeeded.