How Super Rich Left Rest Of Us Behind

[The Masked Tulip]

http://news.bbc.co.uk/1/hi/programmes/newsnight/9382745.stm

But even as the global economy has grown overall, within countries, the gap between rich and poor has increased.

This winner-take-all phenomenon has been particularly stark in the US, where, between 2002 and 2007, 65% of all income growth went to the top 1% of the population.

But the divide has also widened in Britain, Canada, Germany and Scandinavia.

It has increased in the booming emerging markets, too - communist China now has a gap between rich and poor as big as that of the laissez-faire US.

This split between the super-rich and everyone else prompted three Citigroup analysts to conclude that "the world is dividing into two blocs - the plutonomy and everyone else".

As they explained in a 2005 report: In a plutonomy there is no such animal as "the US consumer" or "the UK consumer", or indeed the "Russian consumer".

[Traktion]

It's less 'winner takes all' and more 'rich never lose'. The first part is fine, as long as the latter isn't. Unfortunately, we live in a world where both are true.

EDIT: Just noticed this - 'the laissez-faire US' I assume the US is some land of make believe and not the United States of America.

Edited February 2, 2011 by Traktion

[Georgia O'Keeffe]

http://news.bbc.co.uk/1/hi/programmes/newsnight/9382745.stm

hmm let me guess exponentially expanding debt exacerbated by shockingly poor tax structures

[Traktion]

Emmanuel Saez, an award winning economist who is one of the premier students of the super-elite, has found that in 1916, the richest 1% of Americans received only one-fifth of their income from paid work.

In 2004, that figure had tripled, to 60%.

This bit is important. For all those asking to crank up the top rate of income tax, consider the above point... these people are above working.

EDIT: Just realised that the point quoted is saying this figure has decreased, but they still earn a lot from alternative incomes.

Edited February 2, 2011 by Traktion

[R K]

"The problem with 'Capitalism' is that sooner or later you end up with everyone else's money"

Me.

(Not that we have anything other than totally rigged markets everywhere we look)

[tomandlu]

http://news.bbc.co.uk/1/hi/programmes/newsnight/9382745.stm

The rich really need to think about where all this is heading. It's not a good place for them or us.

[shermanator]

The rich really need to think about where all this is heading. It's not a good place for them or us.

Too true. The ultimate endgame is revolution and/or economic collapse. As Sir Marty Sorrell pointed out in Davos, the last time we saw inequality on this scale was in, you guessed it......1929. If the BoE announce another round of QE, you'll know that the elite think they can get away with anything.

[billybong]

EDIT: Just noticed this - 'the laissez-faire US' I assume the US is some land of make believe and not the United States of America.

Indeed, it's farcical.

It might be laissez-faire for the bankers etc but in the main it's something else altogether, more like bureaucracy-faire.

[Guest sillybear2]

It's less 'winner takes all' and more 'rich never lose'. The first part is fine, as long as the latter isn't. Unfortunately, we live in a world where both are true.

EDIT: Just noticed this - 'the laissez-faire US' I assume the US is some land of make believe and not the United States of America.

As in letting malinvestments and bankrupt enterprises fail, not bailing and letting things stand and fall upon their own merits?

[aa3]

"The problem with 'Capitalism' is that sooner or later you end up with everyone else's money"

Me.

(Not that we have anything other than totally rigged markets everywhere we look)

[Britney's Piers]

Henry Ford realised there was no point in mass production if the masses couldn't afford to consume anything, which is why he favoured high wages for workers.

This is what the rich today have forgotten. Instead of trying to pay the highest wage economically viable, they are consantly searching for the lowest, it only works when there is ready credit to cover the difference. Everyone is on a hiding to nothing now.

Edited February 2, 2011 by Britney's Piers

[Scott Sando]

Why do you think they are putting a 40% tax rate on people who earn £35,000 a year, their plan is too wipe out the middle class because its the only class which can put any resistance to the elite.

[StainlessSteelCat]

There's an interesting book on this called Richistan.

[shermanator]

Why do you think they are putting a 40% tax rate on people who earn £35,000 a year, their plan is too wipe out the middle class because its the only class which can put any resistance to the elite.

If this is so, and I'm inclined to agree, the elite are playing a dangerous game. History shows that most revolutions stem not from the working classes but the bourgeois middle classes as they can't be bought off so easily with bread & circuses and they're generally smarter too.

Look at the student protests - contrary to popular myth, these aren't underclass rioting but sons/daughters of the middle class (you can tell by the accents). Personally I'd be surprised if the elite (however strong they've become) will beat the middle classes in the end.

[SomethingHasToGive]

Why do you think they are putting a 40% tax rate on people who earn £35,000 a year, their plan is too wipe out the middle class because its the only class which can put any resistance to the elite.

I don't think either of those statements are correct.

I think they are only doing it to balance the books as a result of the £1000 increase in personal allowance. The 40% tax rate change is minimal ( £200 a year extra or 54p a day for a taxpayer already on 40%, less for those who just got hit with it ). I don't think they will be wiped out by such a change. House Price Increases over the last few years are more damaging to their finances ( assuming they bought an overpriced house ). It will have consequences for reducing the child benefit bill and therefore removing it from more upper middle income people though.

I'm pretty sure that the elites aren't afraid of people on upper-middle incomes. The ones they should be afraid of are those with nothing to lose.

[Guest sillybear2]

Henry Ford realised there was no point in mass production if the masses couldn't afford to consume anything, which is why he favoured high wages for workers.

This is what the rich today have forgotten. Instead of trying to pay the highest wage economically viable, they are consantly searching for the lowest, it only works when there is ready credit to cover the difference. Everyone is on a hiding to nothing now.

The rich thought they'd found a way around that problem by lending the surpluses back to the workers via the money markets, so you keep aggregate demand high, can demand the purchasing power back at some point in the future and generate interest in the interim. Can anyone spot a flaw in this model?

Also, once you have a race to the bottom all the competition must follow or go to the wall. There needs to be an ultimatum, start paying a living wage OR face higher corporation taxes (with zero avoidance tricks) and let the state step in an redistribute in a haphazard fashion.

Edited February 2, 2011 by sillybear2

[Scott Sando]

If this is so, and I'm inclined to agree, the elite are playing a dangerous game. History shows that most revolutions stem not from the working classes but the bourgeois middle classes as they can't be bought off so easily with bread & circuses and they're generally smarter too.

Look at the student protests - contrary to popular myth, these aren't underclass rioting but sons/daughters of the middle class (you can tell by the accents). Personally I'd be surprised if the elite (however strong they've become) will beat the middle classes in the end.

Expect more and more taxes on the middle class too feed the parasitic elite, fuel, food, carbon tax, VAT everything, where is the line in the sand.

[Harry Sacks]

Why do you think they are putting a 40% tax rate on people who earn £35,000 a year, their plan is too wipe out the middle class because its the only class which can put any resistance to the elite.

It's nothing to do with money, it's all about lack of awareness and apathy.

[Traktion]

Henry Ford realised there was no point in mass production if the masses couldn't afford to consume anything, which is why he favoured high wages for workers.

This is what the rich today have forgotten. Instead of trying to pay the highest wage economically viable, they are consantly searching for the lowest, it only works when there is ready credit to cover the difference. Everyone is on a hiding to nothing now.

If we are at peak debt, along with (near) zero interest rates, this logic will be rediscovered again. Wages have to increase, now that additional credit - even when near free - is no longer repayable, if a there are to be buyers of any goods made.

Consider this same point framed in the global economy. The developed world (consumers) has borrowed all it can and now the developing world (producers) have to start spending it on stuff made by the developed world, in order for balance to return; you can't just take indefinitely, as eventually there will be nothing more for them to give.

In short, the developed world need to start producing more and the developing world needs to consume more. Balance needs to return.

[miko]

I don't think either of those statements are correct.

I think they are only doing it to balance the books as a result of the £1000 increase in personal allowance. The 40% tax rate change is minimal ( £200 a year extra or 54p a day for a taxpayer already on 40%, less for those who just got hit with it ). I don't think they will be wiped out by such a change. House Price Increases over the last few years are more damaging to their finances ( assuming they bought an overpriced house ). It will have consequences for reducing the child benefit bill and therefore removing it from more upper middle income people though.

I'm pretty sure that the elites aren't afraid of people on upper-middle incomes. The ones they should be afraid of are those with nothing to lose.

Most people on the circa 40k pay bracket with a mortgage and two kids are a few pay packets away from disaster . Compared to £6 an hour 40k looks like riches , take away tax Ni ( going up again ) , travel to work , mortgage energy , food, running a car and most of them will have little savings add in the loss of child allowances and they will be living right up to their max.

The loss of a job soon puts them in the same place as those with nothing to lose.

[Traktion]

To add, you can also draw parallels between the old and young. Both private and public debt has redistributed wealth from the young to the old. If the old don't spend it, the young can't earn it. As much of the wealth of the old, is the debt of the young, it is easy to see how this could be self defeating (read: defaults by young => loss of wealth by the old).

There are large imbalances both at the national and international level. These need resolving if we are to move forward.

[Scott Sando]

The Elite don't pay tax, why should any freeman pay tax.

[Democorruptcy]

Newsnight on Monday night had Jeremy Paxman discussing company tax avoidance with someone from UK Uncut and the Institute of Directors.

37:17 into here http://www.bbc.co.uk/iplayer/episode/b00y9xtm/Newsnight_31_01_2011/

Was there any truth in this article?

MANY of the BBC’s highest-paid presenters have set up service companies that help them to pay less tax and will enable them to escape the full impact of Labour’s 50% levy on the rich.

Long-serving stars including Jeremy Paxman, Fiona Bruce and James Naughtie have set themselves up as freelance contractors rather than staffers.

The device enables the BBC and its presenters to lower their tax bills legally, leaving the rest of the country to shoulder a larger burden.

A Sunday Times investigation has found more than 20 BBC presenters who are classed as freelance for tax purposes and have set up service companies to channel their earnings.

The tax payable by a star such as Paxman, earning £1m, would be £627,000 from April if he were on staff, compared with £520,100 corporation tax and dividend tax if he used a service company and paid out the entire fee as a dividend.

http://entertainment.timesonline.co.uk/tol/arts_and_entertainment/tv_and_radio/article6860238.ece

[Guest sillybear2]

I don't think either of those statements are correct.

I think they are only doing it to balance the books as a result of the £1000 increase in personal allowance. The 40% tax rate change is minimal ( £200 a year extra or 54p a day for a taxpayer already on 40%, less for those who just got hit with it ). I don't think they will be wiped out by such a change. House Price Increases over the last few years are more damaging to their finances ( assuming they bought an overpriced house ). It will have consequences for reducing the child benefit bill and therefore removing it from more upper middle income people though.

I'm pretty sure that the elites aren't afraid of people on upper-middle incomes. The ones they should be afraid of are those with nothing to lose.

In terms of a popular revolt that's undoubtedly true, especially if you run out of class traitors in order to keep control of the streets Things often aren't that brutal at the ballot box.

However, our rulers also know it's a relatively small number of people that keeps society functioning smoothly, just look at how things regressed in post revolutionary Iran after the middleclass were exiled, same in Iraq after the sanctions.

Was there any truth in this article?

So the Beeb and the hypocritical luvvie classes are packed full of champagne socialists, I'm shocked to my core.

Edited February 2, 2011 by sillybear2

[Authoritarian]

If we are at peak debt, along with (near) zero interest rates, this logic will be rediscovered again. Wages have to increase, now that additional credit - even when near free - is no longer repayable, if a there are to be buyers of any goods made.

Consider this same point framed in the global economy. The developed world (consumers) has borrowed all it can and now the developing world (producers) have to start spending it on stuff made by the developed world, in order for balance to return; you can't just take indefinitely, as eventually there will be nothing more for them to give.

In short, the developed world need to start producing more and the developing world needs to consume more. Balance needs to return.

Imo the China argument is overplayed, take our gilts market for example, the largest proportion is held by insurance companies and pension funds, and although overseas investors are 2nd on the list their holdings are easily offset by the amount of foreign debt that is held here in the UK. My link

The most import trade imblance is the internal one between the producers and the rentiers, unfortunately you cannot produce your way out of that predicament.

Edited February 2, 2011 by Chef