Are the very rich wealthier than ever before? Advance notices of the new edition of W D Rubinstein's book, Men of Property, suggests that this is one of the findings. And if this is the trend, does it matter?
I divide the history of the rich in modern Britain into three periods. The first covers the Industrial Revolution when huge fortunes were made. This spanned the 100 years from the final decades of the 18th century to some point towards the end of the 19th century. To contemporary eyes, what solid foundations such fortunes must have seemed to have had - canals, railways, machinery, cotton and wool manufacturing, shipping and shipbuilding. The owners of these businesses rarely sought a stock market quotation that might have magnified their wealth. But with low or non-existent rates of taxation, they had no need. Subsequently their businesses were absorbed by others or withered and died. Yet only the other day I was introduced to a clergyman who, it was claimed, was the richest parson in the Church of England - because he was heir to an engineering fortune. It seemed like an incident out of a Victorian novel.
The second period had a 90-year span - from, say, the 1880s to the 1970s. Of course fortunes were made during this time, but the argument is that they were not on the same scale as what went before and what came afterwards. Not even William Morris of Morris cars, or the brewing Guinnesses or the mustard-making Colemans or the soap-manufacturing Levers, or even the cinema-owning Ranks were as rich as their predecessors or successors. But is this so surprising? The period contained two world wars and the great slump of the 1930s. Free trade was replaced by protectionism. Rates of personal taxation became onerous. Profits were under pressure from union power. Only in the last two decades of the period did the stock exchange open up with the arrival of unit trusts and pension funds.
This is the general picture, but there were exceptions to it. I once asked a very successful gold bullion dealer how he had made so much money in the post-war years when currency restrictions were extremely tight. His answer was that it was because of the restrictions that he had made his fortune. I think I understood what he meant, but I didn't care to press him any further.
We are now 25 years into a third period of wealth creation. Many of the inhibiting factors of the previous 100 years have been reversed. The Cold War came to an end and the impact of regional wars is limited, even if the oil price spikes upwards. Not only is there no sign of a 1930s-style depression but economic growth has been maintained over lengthy periods. Free trade is back but in a new form - globalisation. The trades unions have been weakened.
These two factors have held down wages and bolstered profits. At the same time, rates of taxation on income have been substantially reduced. And stock markets have become steadily more liquid as savers have sought to benefit from these trends by buying equities.
Indeed stock markets are the indispensable mechanism for the inflation of wealth. At their simplest level they put a capital value on a stream of profits, so that the entrepreneur can sell the business he or she has built up for, say, 20 times the net income. In this way, a business with annual profits after tax of £3m is valued at £60m or so. What, then, does a senior executive working for a very large company do where such a profitable exit in unavailable? He or she persuades colleagues that similar rewards should be created for them, either through high salaries with big bonuses dependent on performance or by granting stock options. Or both. Stock options are essentially a method of artificially putting senior executives into the same position as they would have been had they founded the enterprise themselves and obtained their original shares cheaply.
Then globalisation takes the rewards thus created up a further level. For a sufficient number of executives do cross the Atlantic - or just the Channel - for it to be an argument that American salaries or Continental pay scales are relevant to what British executives are paid. There is global competition for the most talented managers.
I am reluctant to say that the coming of the internet with its amazing facilities, which has led to the development of a whole range of new types of business which haven't needed large supplies of capital, is a reason why the rich are wealthier than ever. For it isn't obviously a more profound invention than was, for example, the steam engine and its application to transport by rail and by sea.
However, the very rich have had one more lucky break - the arrival of the cult of celebrity. This has meant that the display of wealth is no longer objectionable, but merely worthy of note. The lifestyles of the very rich are thoroughly documented by the media without creating resentment.
Envy is at a low ebb in British society. This may be because the very rich today are often self-made. But they do have children. They do try by any means they can to pass on their wealth to their families without paying tax. There are in fact creating a new class of the idle rich, just as the Victorian entrepreneurs did. Envy is quiescent not extinct.Reuse content