Tax cuts for the wealthy? Bumper pay rises for the executive classes? When will we learn: the policy of giving to the rich and taking from the poor is the cause of the crisis, not the solution.

The way it should be

We surely must admit the years before the bust were good. We had money to spend and things to buy. We had jobs to make the things we bought with the money we earned. Money, in the words of the old song, made the world go round. It was a result of our spending that companies grew, profited, invested, and employed us. So what went so horribly wrong?

Those halcyon days were like being at a great restaurant where the Maître d'  served us excellent steak at knock down prices. We were satisfied, the restaurant was profitable, all seemed excellent. But when we pushed our chairs back intending to get up we fell over. 

It took our collapse to realise the horrible truth. The restaurant was serving us steaks sliced from our own legs. The good times were paid for by money borrowed on our own houses and credit cards. When we got up with no meat left on our legs (nor any equity left in our houses) we collapsed. The banks and the World economy crashed too. 

As the graph below, by the Resolution Foundation, shows in the years up to the 2008 bust only the highest paid 20% were actually saving. The rest were funding their spending with debt.

The great rip-off of the boom years, and the ultimate cause of the bust, was that the profits of our spending were not being shared. The borrowing figures in the graph above show it. The stagnant wages of the 90% in the graph below show it. The distribution of wealth in the Bank of England graph at the bottom of this post shows it. 

When will we learn this lesson? And who are the "we" that need to learn the lesson?

http://g-mond.parisschoolofeconomics.eu/topincomes/ 

The "We" are not the beneficiaries of the great sucking: the great sucking of wealth out of the 90%. The lesson for them - those who occupy the leather benches of government, swivelling chairs in the City, and seats on big company boards - is carry on with more of the same. Even during a bust they prosper. 

"We" is the rest of us.

The good times should have been shared in the form of lower prices, better returns on our pensions and savings, and better pay. That would have created the virtuous circle, with a real chance of sustainable prosperity for all. Good for the 1%, the 10%, and the 90% of Britons.

Sadly we were ripped off. Hypnotised by all the borrowed spending money, we accepted the assurances of politicians, regulators and business lobbies that high pay and bonuses were the rightful rewards paid to the excellent few for providing the prosperity of the many. In reality we were just consuming our own assets. "Prosperity" for the 90% meant eating ourselves alive.

The way it is

Growth is driven by confident consumers spending their money. This spending depends more on ordinary Britons than on the wealthiest. Whatever you might think about where the money is, while the top 10% have most of the wealth the figures show that it is the bottom 70% that does most of the spending.

Some will argue that the profits of a company are rightfully due to those who own it. A report by the Bank of England shows how this has concentrated the nation's wealth in the hands of the few, with half the nation having no financial assets (savings and investments) at all.


But just as the workers in a company owe their living to the company owned by its shareholders, the company owes its living to the country. Each of us, from the highest to the lowest, owns one share in Britain: our vote (exercisable when we come of age). Britons have a right to expect a fair distribution of the national wealth. If not in the form of salaries and returns on our savings, then in the form of taxation.

Lobbyists paid by the elites have been threatening for decades that their masters will leave. But the exodus never transpires. The 75% top tax rate announced in France simply takes from the wealthiest that which they have in greatest abundance - money. The French plutocracy are no more likely to abandon their champagne and baguettes than ours is to desert our warm beer and crisps. And, even if they do, the maths shows they are eminently replaceable. Did Barclays tank when Bob Diamond was defenestrated?

So, what do "we" have to do?

• Step 1: Dig ourselves out of the bust with a well targeted Wealth Tax.
• Setp 2: Understand that the source of all rip-offs is excessive pay.
• Step 0: Elect a party into government that will do the above. Because "we" can't.