Andrew Sayer, Why We Can’t Afford the Rich

Andrew Sayer, Why We Can’t Afford the Rich, Policy Press, 2015, 1 44732 079 1, hbk, xi + 433 pp, £19.99

The rich are getting richer: their incomes are streaking ahead of the rest; their wealth is growing even faster; they dominate politics; they control the ideological landscape that enables them to keep on getting richer; they control the media and therefore politics and so manage to keep open the channels that enable them to amass yet greater wealth at the expense of everyone else; and, contrary to what some of them might tell us, the rich aren’t on average more talented than the poor, and their wealth doesn’t trickle down to the poor. This is a quietly angry book, full of facts and figures that show the rich to be a major cause of the inequality that Wilkinson and Pickett revealed in their book The Spirit Level and of the injustice that Danny Dorling described in his book Injustice. How do the rich do it? They inherit family money, make business decisions that work out, gain control of companies, or develop financial instruments; and by cornering the ownership of land and productive capital, and therefore the rents and profits that they generate, and by gaining control of much of the flow of money in our society – much of which they have channelled into offshore tax havens – they create yet more income and wealth for themselves, and corner even more of the land, capital, and financial control.

The book is full of educational material: on the different effects of earned and unearned income; on the inequalities generated by the difference between good quality jobs and low quality jobs; and on the inherited social and economic capital that makes impossible a meritocratic society. Sayer shows how the rise of the rich and the growth of the financial sector have gone hand in hand, and how together they caused the recent financial crisis out of which the rich have come richer than ever. It is the poor, and not the rich, who have suffered: and it is the rich who, by the ways in which they spend their money, as well as by the ways in which they collect it, distort the economy and threaten the future of the planet.

There are two groups of people in Andrew Sayer’s sights: the richest 1% (or sometimes the richest 0.1%, or 0.01%); and people who live in the richest countries. The reader will sometimes need to be clear which group is under discussion. For instance, the richest 7% of the world’s population create 50% of the carbon emissions that cause global warming, so more people are responsible for global warming than are responsible for causing the financial crisis: but there is also a sense in which whichever definition of ‘the rich’ we are using, ‘the rich’ are a problem to the poor.

Sayer’s final chapter contains some suggestions as to what we might do about the situation that he so carefully describes. As he suggests, there is plenty of redistribution at the moment from the poor to the wealthy, whereas what our society needs is redistribution on the basis of need:

Child benefit and benefits for carers should be as normal as wages … At present, universal benefits for such things are frequently attacked for giving taxpayers’ money to well-off parents or pensioners. But the problem here is not the universal benefit, but the prior inequalities. With major reductions in inequality, the problem becomes unimportant. (p.346).

Then comes Sayer’s wish list: the breakup of media empires; reform of political party funding; land and minerals nationalisation; a land value tax; state control of interest rates and of money creation; industrial democracy; the banning of unproductive complex financial instruments; the abolition of tax havens; a financial transaction tax; a wealth tax; carbon taxes; a global minimum wage; and ‘a universal basic income to replace most specialised benefits, providing both security and a simplified welfare system’ (p.361). Sayer might have added that current means-tested benefits impose an effective tax rate of between 85% and 96% on the lowest owners, whereas the highest earners face a maximum tax rate of only 47%, and that this difference is a major cause of growing inequality. A Citizen’s or Basic Income would reduce the effective tax rate suffered by the poor and would therefore reduce inequality.

If anyone is looking for evidence for the statements ‘the rich are getting richer’ and ‘inequality is increasing’, then they will find plenty of it here. In that sense it is a depressing book. But the final chapter, by offering a series of solutions (some of which we should regard as short term options, and others as long term possibilities), turns the book into a hopeful one.