Pointing fingers at the plutocrats

Robert Nolin
London Telegraph
Saturday January 26, 2008

In an extract from his provocative book Who Runs Britain?, Robert Peston looks at the roots of the current financial crisis and blames a political pact with the super-rich for impoverishing the rest of us

When the going was good, investment bankers, hedge fund managers and partners in private-equity firms all did very nicely from the bonuses and the capital gains and the fees generated by the frenetic manufacturing of deal after deal after deal. Many of them are now paying a price for failing to understand the risks they were taking on. Don't weep for them. They have already extracted fortunes.

It is most of us who are paying for their foolhardiness, as the pricking of a financial bubble they created has a negative impact on all our prosperity. Months, possibly years, may go by before banks are prepared to lend as freely as they had been doing. The price of money is going up for all of us, and the economy is slowing down, because regulators and governments did not dare stop the over-exuberant behaviour of greedy traders, bankers and financiers. In fact, the Government encouraged the excesses of these super-rich individuals and their financial servants because they were thought to be good for London and good for Britain.

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There is collusion between most politicians, bankers and investors to avoid asking the big question: has the freedom of investment banks, private-equity firms and hedge funds to buy and sell what they like, when they like, gone too far? That would be to threaten the return to full throttle, whenever it comes, of the most successful machine in the history of the world for expanding the clone army of the super-rich.

The triumph of the super-rich has been the most striking social phenomenon of the New Labour years. The presence on British soil of a disproportionate number of immensely wealthy people, who are becoming wealthier by the minute, has been encouraged by Tony Blair and Gordon Brown. On their watch, thanks to benign tax rules, Britain has become a billionaire's paradise. In a whole range of businesses and industries, the talent of individuals is rewarded in tens of million of pounds, while the relatively poor are getting poorer.

In this jungle, where the super-predators feast best, some 30,000 people earn more than £500,000 a year, and their average income is £1.1m. They are the top 0.1pc of British earners with a combined income of £33bn, or about 4pc of all personal earnings in the UK. That is more than the value of the entire economy of Vietnam, a country with a population of 84m.

To appreciate the growing gap between the very rich and the rest, you have only to look at the ratio of bosses' pay to that of employees in general. An annual review by Income Data Services showed that the median total earnings of the chief executives of the FTSE 100 companies - the UK's 100 largest quoted companies - in the financial year 2005/06 was £2m, up 20pc on the previous year.

Full article here.

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