Fresh from inflicting incomparable suffering on sick and disabled people (10,000 people have died shortly after the Con-Dem Work Capability Assessment) the incomparable Chris Grayling has warned of the terrible consequences of raising taxes on very rich people. Such a selfish, envious act, he counsels, would only come back to haunt us because we would “clobber” wealth creators.
It would be remiss, therefore, not to investigate this mysterious alchemy of wealth creation and the strange degree to which it believed to be the exclusive property of the very rich.
The very rich in the UK at the moment can be divided into three categories:
1. Major shareholders in corporations. Not small investors but large institutions owning hundreds or thousands of shares – other companies, banks, hedge funds, pension funds, extremely wealthy individuals. They all receive dividends paid out of the company’s profit. Theirs is an entirely passive role, they do nothing to create wealth; they just get it. The economist David Schweickart has called this a “tax on enterprise”
2. Large companies owning natural resources or monopolies such as water, electricity generation or the railways. They were frequently gifted these resources from the government or bought them for a song. They do all they can to sweat these assets as comprehensively as they can, clobbering (to use a current phrase) their largely captive market of customers for the benefit of their shareholders (see category 1). Wealth creation is not one of their activities.
3. Private landlords. Not all very rich but large companies are moving into this field and property companies are becoming darlings of the stock market. Landlords obviously make money through rent, the receiving of money by virtue of owning an asset in the first instance. As private tenants know all too well, they do very little, frequently sweet fanny adams, to maintain or, heaven forbid, improve these assets. Wealth creation, my foot.
Do entrepreneurs exist? Of course they do. But to deliberately equate them with capitalists is ideological subterfuge of the first order, and to downplay the immense contribution of workers (whose product is appropriated) to wealth creation, equally deceptive. "As any economist will confirm," writes Schweickart, "unless labour costs are less than the value added by labour, there will be no profit." Society needs new creations, new ways of doing things; it needs entrepreneurship that benefits everybody. What it does not need is the siphoning of the massive wealth it creates to tiny minorities.
It occurs to me that the late, socialist Clause 4 of the British Labour Party’s constitution is oddly suited, with some minor adjustments, to the modern-day Conservative Party. The Labour Party does not want it anymore anyway, so it’s going spare.
And the new, improved 2013 version:
“To secure for the capitalists, by hand or brain, the full fruits of everybody else’s labour and the most inequitable distribution thereof that may be possible upon the basis of the private ownership of the means of production, distribution and exchange, and best obtainable system of undemocratic and hierarchical administration and control of each industry or service.”
Succinct, catchy, and it captures the Conservatives’ USP perfectly.