Despite John Major's claim that it is his aim to create a classless society there is hardly a day goes by without new revelations coming to light concerning the fact that capitalism in Britain is as class-divided as ever between the rich and the poor.
Two recent publications confirm the inequality in the ownership of capital that is the basis of capitalism. The first is the 1995 edition of Social Trends, an official government publication. The second is the report on Income and Wealth published by the Joseph Rowntree Foundation. The Rowntree Report is mainly about the distribution of income but it contains a chapter on the distribution of wealth based on recent research as well as on government statistics.
The part on inequality in the distribution of income demolishes the misleading view put forward by the Tories (but not just by them) that because real incomes rose by 36 percent between 1979 and 1992 this meant that everybody became better off by that amount over the period. When the figure is broken down into income groups it becomes clear that only the top 30 percent had an increase of 36 percent or more; the great bulk of people didn't get this; 50 percent got less than this, 10 percent got no increase at all. while the bottom 10 percent ended up worse off in real terms, i.e. their standard of living actually fell; they had less to consume. Given these figures even the capitalist press was obliged to talk of the “rich getting richer and the poor getting poorer”.
When it comes to the distribution of wealth the first problem is the definition of “wealth”. There are at least four different definitions used by the government: (1) "marketable wealth”, or assets owned by persons that can be sold or cashed in; (2) "marketable wealth less value of dwellings”, which takes the value of privately-owned houses and flats out of the first figure; (3) marketable wealth plus the notional capitalised value of people’s accrued occupational pension rights, and (4) marketable wealth plus the notional capitalised value of both occupational and state pension rights.
The last two of these—sometimes called “personal wealth”—are quite useless as it is invalid to regard future pension rights as a capital sum belonging to the pensioner. These rights are not marketable and so this sum is entirely notional as far as the individual is concerned; they can't sell it or bequeath it. As far as they are concerned it isn’t part of their wealth, so it doesn’t make sense to say that they own it. All they have is the right to be paid a pension, which is what a pension right is and nothing more.
The absurdity of converting the legal right to an income into a notional lump sum which the person concerned is then said to own can be seen by looking at “income support" The law lays down that everybody has the right to have their income made up to a certain minimum level; if they have no other income then they have the right to be paid an income from the state equal to this level. Yet nobody has suggested that a person’s income support should be converted into a notional capital sum and attributed to them as their wealth. The absurdity of doing this is so obvious; these people are destitute, they have no wealth; that’s why the state has to pay them something. But there’s no difference in principle between a pension right and the right to income support. What is absurd in the one case is just as absurd in the other.
Adding notional sums for pension rights to the real assets that "marketable wealth” represents distorts the figures completely and makes people appear much richer than they actually are. For instance, a table in the Rowntree Report (Figure 50) shows that in 1992 total marketable wealth amounted to £1,689 billion. When a notional capital sum for pension rights and another for secure tenancies at below market rents are added the figure for “total wealth" increases to £3,325 billion, i.e. nearly doubles.
What this means is that nearly half of total so-called personal wealth is fictional as far as the persons who are supposed to own it are concerned. It has no real existence for them.
In fact most of it has no real existence at all since there are no real assets in the economy that correspond to it. It is true that this doesn’t apply to funded pension schemes but their value is only about a third of the value of the capitalised pension rights attributed to individuals in these government statistics and, in any event, it makes more sense to see the really-existing assets these funds represent as belonging to the employer who set up the scheme rather than to the future pensioners.
The way these false figures distort the facts can easily be demonstrated. The bottom half of adults own between them only 8 percent of marketable wealth, or an average of about £600 each. When all the fictional, non-marketable “wealth” is added their percentage share rises to 17 percent of a figure nearly twice as big. This increases their average “wealth”-holding to around £2,500. Suddenly, by the stroke of the statistician’s pen, they can be portrayed as more than four times wealthier than they actually are. It's all a nonsense but it is easy to see the political motivation behind it.
Wealth and capital
The only meaningful figures for the distribution of wealth are the first two: those showing the concentration of personal marketable assets and those showing this minus the value of houses and flats. The difference between these two can be seen from table 5.23 in the 1995 edition of Social Trends which gives the provisional figures for 1992:
For some purposes, the first column is valid—to show how much personal property individuals actually possess whether they invest it or whether they are consuming it. But, for demonstrating the inequality that is at the basis of capitalism, the second column is the more valid since socialists contend that capitalism is based on the inequality of ownership of wealth that provides an unearned income (i.e. on wealth that is invested as capital) rather than of all wealth, some of which is used for consumption (as are most houses).
What the second column shows is that the top 1 percent (less than half-a-million individuals) own nearly five times as much income-providing assets as the bottom 50 percent (some 22 million people). And that the top 5 percent own more (53%) than the bottom 95 percent (47%). Or, put differently, that out of every 20 people one of them owns more than the other 19 added together.
These figures haven’t changed much since 1976. If anything the rich have got richer, relatively as well as absolutely. In 1976 the top 5 percent owned 47%; they now own 53%; while the share of the bottom 50 percent has fallen from 12% to 6%.
Actually, even this second column doesn’t give the true picture of the inequality of capital ownership since it is only concerned with capital that is personally owned, i.e. that is attributable to individuals. An appreciable amount of capital, however, cannot be attributed to identifiable individuals as individuals; it is owned collectively as by the government, by trusts and by pension funds; it also includes any part of the assets of companies that is not attributable to shareholders.
This non-personal capital is equally part of total capital and when taken into account reduces the share of capital owned by the bottom 95 percent of the population. Capitalism really is based on their exclusion from the ownership and control of all but negligible amounts of capital.
How poor are you?
Just how negligible can be seen from a revealing 1994 study, quoted by the Rowntree Report, by three researchers based on data obtained by the 1991-2 Financial Research Survey carried out by National Opinion Polls (The Distribution of Wealth in the UK, James Barker, Andrew Dinot and Hamish Low, Institute of Fiscal Studies Commentary No 45, 1994). This shows (Figure 54) just how few financial assets most people own:
This means, as the Rowntree Report put it, that “half of all families had financial assets of less than £500 in a 1991-2 survey, and 90 percent less than £8,000”. This certainly puts things into perspective. Most people only receive trivial amounts of unearned income since their holdings of financial assets are so small.
Owning or buying your house and having an extra £10,000 - £15,000 invested somewhere is probably the height of most people’s ambition (though only a few of them are going to attain it, and then only within ten years of their deaths). But it is still not enough to get you into the top 5 percent and, if you are below pension age, it is certainly not enough to allow you to live on your unearned income and so free you from the necessity to seek an employer.
The income from an investment of £15,000 (which is the upper limit for the bottom 95 percent of the population) might top up your income if you’re retired but it’s only peanuts as far as those on the top 1 percent are concerned. There the lower limit is £36,801 and the upper limit is the sky, as the latest Sunday Times's (14 May) list of "Britain’s Richest 500" shows. Number One on the list are the Rausing brothers owning £4,000 millions-worth of wealth, followed by the Sainsbury family with £2,520 million. Fourth is the Duke of Westminster with £1,500 million. Mrs Windsor is seventeenth with a mere £450 million.
Adam Buick
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