Extreme concentrations of wealth are not only unjust but economically dysfunctional.
“The rich get richer and the poor…” People have long known how that phrase ends, but the astonishing accumulation of wealth in a few hands is now attracting attention from Oxfam through to Davos and the IMF. Eight billionaires are reported to own as much as the bottom 50 per cent of the world’s population. In the UK, just 10 per cent of adults own half of the nation’s wealth.
But why would this trouble the IMF? The answer is that such concentrations of wealth are dysfunctional for the economic system. They happen because wages are repressed and the richest use their wealth to speculate on assets that are in short supply, such as housing or land, producing sky high prices for property and rents. A single building in Hong Kong has just sold for $5bn. The effect is that small businesses close as rents are high, it is difficult for labour to move and there is a reduction in aggregate demand. Put simply, people can’t buy goods and services if most of their money is going on rents and mortgages. To keep up in this scramble, the population becomes laden with debt and those who sell the loans become even richer.
To reverse this process, the state should intervene very firmly and tax wealth. The question is, which politicians are going to put their hands up first and say they are actually going to do it. In Scotland, Richard Leonard has now proposed the policy as part of his Labour leadership campaign. His suggestion of a 1 per cent tax on the wealth of the richest 10 per cent would raise £3.7bn to invest in the economy. This is a good start, since it is important to establish the principle that this form of taxation can be developed.
In 2010, I suggested it as an alternative to the cuts and austerity programme which was then being initiated. My proposal was for a tax of one fifth of the wealth of the richest 10 per cent in the UK, which would then would have been sufficient to pay off the entire national debt. In Scotland, we now have the chance of taking up the possibly that was missed. It is certainly needed here, since our level of private wealth and ownership is extreme, …read more
Source:: New Statesman