David Beckham is worth £125m. Lakshmi Mittal, the steel magnate, is the richest man in Britain with assets of £27.7bn. Wayne Rooney earns £90k a week, and Mr Vacuum, James Dyson, has got three quarters of a billion. To pop the L’Oreal question: Are they worth it?
We are all tussling at the moment with the question of the deserving rich. We don’t pass judgement any longer on how people got poor. Policy argument just stresses about how much they are helping themselves to get out of it. But what about the rich?
We may have banned fox hunting, but right now the hounds are in full cry after the bankers and the brokers who, despite the best efforts of government, have brought our financial system to its knees. Now we realise that they were trading in unsustainable debt-laden products sold to people who couldn’t pay. An activity which brought no conceivable benefit to society at large but unfeasible amounts of money to them through what Warren Buffett’s business partner, Charlie Munger, has called ‘the croupier’s take’. Are we still, as Peter Mandelson once famously declared in the early days of New Labour, ‘intensely relaxed about people getting filthy rich’? And if we are, under what circumstances?
The answer is we are pretty contradictory about it. Footballers and movie stars dazzle us and we seldom begrudge them their wealth as long as they dignify their skill and respect their profession. But the brokers and the bankers are highly suspect. They have managed to distance themselves from any kind of responsibility for their actions. They continue to try and justify their financial hocus pocus on the basis that their dealing creates efficient pricing in the market and thus guides capital to its most productive use. Nonsense. Google and Microsoft have added to productivity. But all the hedge funders and the derivative guys have done is – with the aid of huge computer power – invent more and more mathematically Byzantine models designed to shift money between savers and borrowers, while top slicing every transaction for themselves in bonuses.
Should we be taking a moral view of this? And should it begin with some clear notion that what each of us does must benefit not just ourselves? If we approve of productive wealth, then should we penalise unproductive wealth? That doesn’t dampen aspiration, it just gives it a moral value. This means challenging the myth that all rich people contribute to the productiveness of the economy. It means the end to the assumption that just because people work long hours and under great stress that they are somehow justified in their huge rewards. We have to ask the rich how they make their money. Because some of them add to society and some of them just leech off it. Dyson and Mittal, and the entrepreneurs, who built companies that provide jobs and stimulate innovation, have a justifiable case to make for their wealth. Not least because if they fail in their endeavours, they (and their families) take the hit. The hedge funders, however, have sought every means to distance themselves from responsibility for their actions. Their bonuses have been short-term and their loyalty to their own returns has been set far above any loyalty to the primary investor.
Much of the needed turnaround in our attitudes will be driven by leadership in business and in government, as Alistair Darling demonstrated on 7 November when he challenged each banker one by one to pass on the 1.5 per cent interest rate cut to the consumer. As part of the culture change there is also a need for better regulation. The so-called ‘grey panthers’ of the FSA must be fiercer in their interrogation of the City. Bonuses should be awarded only on a long-term basis. There could be tax incentives for fair value investment and disincentives for non-productive speculation at a secondary level. We can incentivise philanthropy to a far greater extent and create an obligation to put back a good proportion of what you earned.
Above all, we must stop equating all wealth with wealth creation, productivity and a benefit to society. As we have now found out, too much of the activity of the rich has been wealth destroying. And they are the undeserving rich. Government has a role in expressing our displeasure in a practical way and encouraging and rewarding the productive rich. Some of the rich may yet get to heaven, but we should tell the undeserving to queue behind the camels and squint through the eye of the needle.