The 2016 Rich List: Another sign that our economy is defunct
The 2016 Sunday Times Rich List is out and the ritual discussion of who's up and who's down has begun. Last year the headline was that in the 10 years prior, the wealth of the richest 1,000 Brits had doubled. This year the focus is on those few billionaires who have seen their wealth decline. It always takes the exception to prove the rule.
Minus the few affected by falling commodity prices and a bad run on the stock market, the general trend is the same - the rich are getting richer, to the tune of £28.5 billion in the last year, or nearly £78 million a day according to The Equality Trust.
Given recent revelations many will be asking how many of those on the Rich List are avoiding tax by putting their money offshore. My prediction? Many. The focus of this blog, however, is on the economic implications of the type of wealth accumulation we are witnessing.
If you focus on the musicians on the list, such as Adele, you might think the rich have forged a path from rags to riches and earned their wealth - you'd be wrong. Looking across the list I was shocked by how many of the richest are in the property market – profiting from the increase in property prices, known to the majority of us as the housing crisis.
The most obvious is the fifth richest person, the Duke of Westminster. He owns prime real estate in Belgravia and Mayfair in London, and because of rising land and house prices has an estimated wealth of £9.35bn, an increase of £790 million on last year. Not only is he gaining without having to work hard, he inherited the land so also won the lottery of birth.
But he's not the only one profiting without producing. Looking at the Rich List there are a number of people making money from simply owning land and property – Baroness Howard de Walden; Earl Cardogan, Jon Hunt who used to own Foxtons estate agency – the list goes on. What is it that these property and landowners are doing to make our economy grow? To create jobs? Some may be investing in new development, but for who? New builds in inner-London were sold for an average price of £659,459 in 2015 with a reported over-supply of luxury flats in the city.
Given that so many people are unable to buy a house and are trapped paying huge rents, or at least having to provide shelter for their children into their late 20s and 30s, one can only conclude that the gap between the haves and have-nots in the housing making has become ludicrous. Together it reminds us that we do not have an economy that is delivering for the majority.
Business people in the property market can be considered 'rentiers' - people who live off accumulated capital, making money from what already exists rather than creating new goods and growing the real economy. They are generating income without adding value. For Thomas Piketty, who wrote the best seller on wealth inequality, Capital in the twenty-first century, the high return to existing assets - such as housing - means that there is no incentive to invest in productive assets and create new wealth and help grow the economy. In a world where there is growing wealth accumulation at the top economic growth is thwarted because the rich hoard wealth rather than create it.
My husband is perturbed to see Wayne Rooney still at the top of the Sports Rich List; as a Manchester United fan (don't hold it against me!) he doesn't think Rooney's delivered in the past couple of years, rather he is still living off his former ability. As an economist, I look at the Rich List and see a list of people who are too often creaming off the economic returns of properties built hundreds of years ago.
It's about time that we change the economic game so that the majority of those on the Rich List are inventors and job creators, delivering for rather than taking from society and the economy.