The Corruptions of Money

Why other people getting super-rich is bad news for you

Here’s a stab at idealism: that through regulation, suggestion and education, the impacts of the individual on the world should be those of one person, and should not be multiplied by the amount of money that they are able to spend. Like Ed Miliband, I haven’t read all of Piketty’s book, ‘Capital in the 21st Century’, but I am aware of the central argument: that when the return on capital is greater than the rate of economic growth over the long term, concentration of wealth in the hands of a few is inevitable. Intuitively this makes sense to me, and there is certainly plenty of evidence for it. There will always be arguments over what level of inequality is most desirable, but that’s not what I want to focus on here. Rather, this article is about the impacts of inequality, not the sufferings of the less well off, but the abuses of the wealthy, be they individuals or corporations. So let’s list some:

1. A higher disposable income usually leads to a higher carbon footprint. This can be in experiences consumed, such as long haul air travel, or in products, such as expensive cars which have greater embodied energy from the manufacturing process than more basic models. And a high footprint means you are damaging the climate at everybody’s expense.

2. The corruption of the political system by large individual donations. This is difficult to avoid, even with US-style Political Action Committees. In Europe we have seen major scandals in Spain and Turkey, involving construction companies bribing the most powerful politicians. The German Chancellor Helmut Kohl had a slush fund, the origins of which he never revealed, while French president Jacques Chirac was found guilty of corruption charges relating to his time as mayor of Paris. Buying influence distorts democracy and renders elections less meaningful. To take an example, the interests of the average Conservative voter are unlikely to tally with the interests of their hedge-fund backers.

3. Tax avoidance. Efforts to circumvent means for the redistribution of resources are usually abetted by the purchase or co-option of the best professional brains in the jurisdiction. Recent examples include the K2 scheme used by Jimmy Carr and others, which allowed them to pay just 1% of tax by receiving earnings as a ‘loan’ from an offshore company. Another would be BBC presenters who are paid through a private service company. This avoidance of responsibility undermines the social contract and increases public cynicism.

4. The employment of lobbying firms and political donations to influence governments worldwide to approve mineral or resource extraction against the wishes of the local (or wider) population. To object to resource extraction is to be cast as an obstacle to inevitable and desirable development. This is despite the undeniable reality that to avoid destabilising the climate, and to prevent unnecessary deaths through pollution, we need to stop burning coal, and avoid the diversion of fracking.

5. The use of the arts and education to provide good public relations, such as BP sponsoring the Tate Galleries, and Shell sponsoring concerts at the Southbank Centre. Shell has been accused of arming rebel groups in Nigeria and following a ‘divide and rule’ policy, and is engaging in risky Arctic oil drilling, while BP was partially responsible for the worst oil spill in history at Deepwater Horizon. They are not entities which deserve a warm glow.

6. Large corporations generate excessive bargaining power, driving wages down to below the poverty level in the developing world, such as in the garment industry, or food and flowers that are flown into the developed world. The size of the orders are so huge, and the risk of losing them to the producers so great, that they will agree to terms they would not accept if there were a more level playing field. In short, there is a huge asymmetry of bargaining power between rich and poor countries. Similar problems in the UK between supermarkets and farmers have led to a supermarket regulator being set up to avoid the worst abuses.

The common thread running through these problems is how the power of accumulated capital can be used to distort democracy. Access to meaningful votes, fair wages, a safe climate and influence over your local environment are all threatened. Furthermore, as the tax take declines, the amount of resources available for expenditure on services such as health and education decreases.

The solutions are a mix of government-led measures, and individual education and choice. Regulation must provide for living wages, tighten rules on lobbying organisations, close tax loopholes and bring in a General Anti-Avoidance Regulation, cutting out the schemes which are de jure legal and de facto repulsive. A personal carbon quota remains a long term goal for those serious about equity. Public money should be spent on political education, to engage voters, counter the cynicism and spotlighting of the media, and promote understanding of how and why to make ethical choices. Informed and responsible capitalism covers what we buy in the supermarket to where we invest. Consumers need to know about independent product endorsement by the likes of the Fair Trade Foundation, the RSPCA, or the Marine Stewardship Council, and about ethical ranking of pensions. Yet what we need most of all are proper global wealth taxes. Attacking the cause of the problem will always be more effective than fire-fighting the symptoms. This means closing down tax havens and making all tax a matter of public record. Secondly, there should be a tax on assets. The concentration of wealth in expensive UK property is huge, and prices have risen so high that getting on the housing ladder is not just a matter of hard work, it’s a matter of inter-generational wealth transfer for the fortunate.

Taken together, these steps move us towards a world where there is something like equal citizenship, and where human beings are viewed as ends in themselves, not merely as vectors of production and consumption. A world in which getting rich is no longer a pursuit that is likely to have negative impacts on everybody else.