1 December 2014

If you are reading this, you’re in the top 1% (probably)


Suppose I were to tell you that the world’s super-rich are pulling further away from the mass of humanity. Suppose I were to cite the latest figures, showing that the top one per cent now own half the world’s wealth while the bottom 50 per cent own just one per cent.

How does that make you feel? Outraged? Envious? All right, maybe that’s putting it too strongly, but the chances are you’re feeling at least a twinge of unease. After all, we are prompted by our genome to define wealth in relative as well as absolute terms. The Bronze Age farmer with a couple of mangy goats wouldn’t have been as attractive to potential mates as his neighbour with teeming flocks and herds. A measure of disquiet over vast wealth disparities is only human.

But suppose I were now to tell you that you might very well be in the top one per cent yourself; and, that, if you’re not, you’re almost certainly in at least the top five per cent. The net assets of the world’s average person, including housing, are worth just £1,950. If your possessions come to £500,000, you’re in the top percentile – a threshold that takes in most London homeowners. If we look at income rather than assets, the one per cent mark is £22,000 a year. Still feeling upset?

I’ve noticed that Leftists try to be as indeterminate as possible when they talk of “making the rich pay”. The rich are constantly invoked – “Tax the rich!” “Eat the rich!” – but rarely identified. A rare exception was the Occupy Movement, which quantified being rich as being in “the one per cent”. But, as we’ve just seen, that definition is wider than you might think. It takes in 17 million Americans and three million Britons – including, almost certainly, many of the protesters.

The reason anti-wealth campaigners tend to be imprecise is that they want you to define rich as “someone earning more than me”. They aim to incite your grievance, though they encourage you to rationalise it to yourself as justice. This is easily enough done. Imagine you had a very wealthy uncle, with a country estate in Britain, a villa in the Caribbean, a yacht and a private jet. You’d find it easy enough to convince yourself that he should give you an allowance of a thousand pounds a month. He’d hardly notice it, after all, whereas it would make a huge difference to you.

Of course, your imaginary uncle might see things very differently. He’d tot up the cost of maintaining his homes, paying his gardener, cleaning his pool, running his jet. He’d point out that, not only had he had to work jolly hard to afford these things, but he was still working long hours to maintain them. He’d perhaps add that he already makes considerable donations to charitable causes, and that some of these causes are a great deal more deserving than you are. If you were rude enough to ask him whether he really needed his villa on Mustique, he might reply, with King Lear, “reason not the need”. Or he might, if he were of a less literary bent, ask whether you really needed your iPhone.

The best way to put yourself in the wealthy uncle’s shoes is to imagine someone lower down the income scale making precisely the same argument about you. What you spend on your mobile phone bills could feed a family in Rio’s favelas. What you spent on your jeans could restore the sight of a Congolese with cataracts. Do you really need these things?
In global terms, you are that rich uncle. The fact that you’re reading these words online is enough to tell me that. Now, looking around from your new, avuncular perspective, perhaps you will wonder about the efficacy of giving away your assets to anyone who could reasonably claim to need them more than you do. After all, you might sell everything you have, and spend every penny on soup kitchens in Brazil and cataract operations in the Congo. Would that reduce the number of poor people in the world, or would it simply add one more to their number?

Sure, there may be a moral argument for asceticism. When an otherwise righteous fellow asked Jesus whether there was anything else he ought to do, he got a slightly scary reply: “If thou wilt be perfect, go and sell that thou hast, and give to the poor”. But, of course, most of us are not perfect, any more than was the unfortunate chap who asked the question. And, in any case, whatever the moral benefit to the donor, such redistribution won’t end poverty. Jesus was pretty unequivocal about that, too: “For ye have the poor with you always, and whensoever ye will ye may do them good.”

How, then, should we “do them good”? Massive redistribution may not work; but the creation of new wealth does. As John F Kennedy once said, the surest route out of poverty is a secure job. And (though the priapic shyster didn’t add this) the surest way to create jobs is through the market.

Don’t take my word for it. Look at what is happening globally. Extreme poverty – defined as living on less than $1.25 a day at 2005 prices – is falling faster than ever, and in every part of the world. Thirty-six per cent of the world’s population were indigent on this measure in 1990; by 2011 it was 15 per cent. The UN’s “millennium development goal” of halving poverty between 1990 and 2015 has been achieved years ahead of schedule. On every metric, the people at the bottom of the income scale are doing better: longevity, literacy, infant mortality, calorie intake, height.

Why? Because the socialist countries where poverty was most widespread have, in large measure, joined the global trading system. China has been transformed since it allowed private ownership in 1978. Africa now contains most of the world’s fastest-growing economies. India, while never socialist, had been held back by the Fabianism of its ruling élites. Now it, too, is experiencing stunning economic expansion.

What has made poor people richer? The same phenomenon that has made rich people richer: capitalism. Sure, the free market can widen wealth disparities; but it does so in the context of rising living standards for most people in most places at most times. No other economic system can make such a boast.

Of course, if we really did “eat the rich” – if the top one per cent were magically to lose their assets overnight – the world would certainly become more equal. But it would also become poorer, and that poverty would be felt at every level as investment dried up and markets shrank. Socialists regard that as a price worth paying. I don’t.

Daniel Hannan is a Conservative Member of the European Parliament and blogs at www.hannan.co.uk. His other CapX articles can be found here.