Wednesday, 11 May 2016

Extreme wealth is not a "victimless crime"

Warning! Wealth-creators at work!
Twenty-five hedge fund managers took home $13 billion in earnings last year, according to a new report. Easy enough to be appalled, outraged, disgusted - or even impressed - but what does this really mean for the rest of us?

The assumption is that these people with the Midas touch are applying their hard work, ingenuity and good fortune to generating vast quantities of wealth, of which they then take a substantial cut. They are merely the most successful of the millions of people across the world who are trying to make money in investment markets.

But that phrase "generating vast quantities of wealth" is misleading. The wealth that comes through managing investments is not "created" or "generated" from new, but is reallocated away from other people. This might mean other professional investors losing out, but more often it means society at large. As employees, customers and tax-payers we all contribute to investor profits.

Politicians on all sides have for decades peddled the idea that encouraging people to get extremely rich is good for the rest of us. Whether it's Boris Johnston "humbly thanking the super-rich" or Peter Mandelson famously "intensely relaxed about people getting filthy rich as long as they pay their taxes", we've been led to believe that rich people have to "make" wealth before the rest of us can have a share in it.

The reality is quite the opposite. Wealth is created by people making and doing things that other people want and need. Things like growing food, making furniture, laying bricks, cooking meals, looking after each other, writing books, cleaning toilets, teaching young people, healing sick people, giving care to the elderly. Investors get rich by buying up this wealth-creating work as cheaply as possible, then creaming off as much of its value as they can.

Extreme wealth is not a "victimless crime". It's everybody else's wealth, concentrated into the hands of a small number of people, encouraged by the economic system. That system has had its day. It is time for change.

Photo: © CQC/Joe D Miles - ImageCapture via Flickr under this licence

No comments:

Post a Comment