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We can afford the coronavirus crisis – with a just economy

The richest 1000 people in the UK could easily pay off the cost of coping with the pandemic – but they will fight hard not to.

Paul Rogers author pic
Paul Rogers
20 April 2020
An Embraer Legacy 600 jet similar to the one that took the banker's party to France
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Markus Eigenheer/Flickr. CC BY-SA 2.0. Some rights reserved.

By 10 April the COVID-19 pandemic seemed to have peaked in Spain and Italy but was still spreading alarmingly in the UK, which looked likely to end up with the worst death toll in Europe. On that day, tabloids in the UK picked up the story of a wealthy banker in London chartering a private Embraer Legacy 600 jet to fly him and six other middle-aged men and three young women to Marseille-Provence Airport.

There they were to transfer to three helicopters to fly them to a luxury £25,000-a-night villa complex near Nice. Instead, they were met by French police at the airport and told to leave, whereupon the leader of the group replied, “I have money, let’s talk.” This was to no avail, and they all departed, nine back to the UK and one to Berlin.

This was an extreme response of wealth to the virus: many other initiatives have been much more positive. Even so, when the crisis eventually eases governments will have huge debts to pay as they try to rejig their economies. In a more perfect world they would lean heavily towards a global green economy, but that is a case still to be argued and won. In the immediate future the question is much more one of where the money will come from.

After the 2008 financial crisis the UK created huge amounts of liquidity under the banner of ‘quantitative easing’ and fed mainly through to those financial institutions deemed too big to fail. There was more direct borrowing of over £160 billion, repaid largely by severe cuts in many public services. Austerity was the price that had to be paid: there was apparently no alternative for the incoming Tory-led government in 2010, even if that crisis stemmed originally from the financial deregulation of the Thatcher era combined with sheer hubris and conceit in the financial world.

The ‘Rich List’

There are various ways for the current government to meet the costs of the present crisis. These include more quantitative easing, long-term indebtedness and, of course, more austerity. One avenue unlikely to be followed, however, is to ensure that the rich pay their dues. That is often cried down as the politics of envy, but the politics of justice might be a fairer description.

The Sunday Times annual ‘Rich List’ shows just how much wealth is now controlled by a narrow sector of British society. The 2020 list is not out yet but at the start of 2019 the wealth of the richest thousand people in the UK stood at £771 billion and had increased by £47 billion in a year. Each of those thousand plutocrats was £47 million wealthier, on average, than the year before – an increase close to a million pounds a week. Extraordinary as that seems, it was not an aberration: in fact, it was lower than preceding years.

This was because 2018 had been a troubled year for the economy because of the uncertainty about Brexit. The figures for the start of 2018 showed a wealth increase averaging £66 million per person, and the figure for the previous year was an average of £83 million.

These massive figures are difficult to comprehend so it is perhaps best to stick to just two:

  • The richest thousand people in Britain have collective wealth of £771 billion, far higher than estimates of additional government borrowing needed this year of £218 billion.
  • The increase in the wealth of this cohort in the three years to 2019 was £196 billion. Even allowing for inflation, this is itself close to the additional borrowing requirement.

There are caveats to using this data: it is just one way of measuring wealth and it has its problems. The methodology does change from year to year, which may make comparisons a bit tricky, and people move in and out of the richest thousand, so it is not quite the same people each year. Comparing different years should really take into account inflation, but that is currently low. Finally, concentrating just on the thousand wealthiest makes it very easy to forget the tens of thousands of very wealthy individuals who are outside the list – the ‘poorest’ people to make the 2019 ‘Rich List’ still had comfortably over £100 million each.

The list inevitably under-assesses wealth: it relies on data in the public domain and cannot therefore include the numerous subterfuges that the seriously wealthy have thanks to the accountants and lawyers who staff a veritable industry of tax avoidance (technically legal), not to mention plenty of questionable specialists in tax evasion (illegal). Staying legal, there is a welter of opportunities for using tax havens and other offshore facilities that are estimated to stash away $6 trillion around the world.

Winners and losers

Meanwhile COVID-19 is widening the wealth-poverty divide in the UK in many ways. Some members of the elite might have seen falls in their investments, but the nature of the economic crisis means that few investors will suffer the sudden fall from grace that so many of their predecessors did in 1929. Meanwhile there is money to be made, not least by hedge funds. One US fund got a 4,144% return on a market collapse in March, and another in the UK made £2.4 billion when bets on market volatility delivered huge returns.

Across other sectors there have been notable winners. The Guardian reported (16 April, page 11) that the Walton Family, part owners of Walmart and its UK arm, Asda, have seen their combined net worth rise 5% to $169 billion. Amazon’s share price rose over 30% in a month, confirming Jeff Bezos as the world’s richest person at $138 billion.

At the other end of the scale, lockdown is especially damaging for the poorest people. According to the British charity The Food Foundation, 1.5 million people in the UK have gone without food for a whole day and twice that number are in households where someone skips meals. People who are short of money can’t save by buying in bulk or spending time shopping around when prices rise. Both issues have contributed to a substantial rise in the use of food banks, up 300% in some areas. Worse still, there has been an increase in domestic violence and less contact with vulnerable children.

As journalist Frances Ryan comments:

Almost 2 million people were already undernourished before coronavirus hit, with one in five under-15s living with an adult experiencing food insecurity after a decade of austerity. Hunger, much like insecure housing or domestic abuse, is not a new phenomenon. There were already cracks in our society, and we should have known that given the slightest pressure they would cause it to shatter.

Even those who might ordinarily just about manage are finding themselves slipping though the gaps in the hurriedly organised relief system.

In these extraordinary circumstances it would be possible to enact emergency legislation with immediate effect. A windfall tax on the wildly wealthy followed by the introduction of a wealth tax, increased inheritance tax and a serious policy of tackling tax avoidance and evasion would all have positive results and would also be popular among wide sections of public opinion. But the wealthy elites would resist powerfully.

The Corbyn lesson

An early grumbling from this small but powerful sector was heard in the UK early last year when the Brexit disarray seemed as though it might lead to political collapse and then the election of a coalition led by Jeremy Corbyn. The 2019 ‘Rich List’ was being drawn up at the time and its compiler, Robert Watts, reports in his introduction on conversations with the worried wealthy at the prospect of what Watts termed ‘Corbygeddon’.

One investment manager was convinced that Labour would not only bring in a wealth tax but would insist it applied to British citizens who had moved abroad. To avoid this British passports would need to be ditched. Others were moving family trusts overseas and still others were cashing in their UK investments so that they could wire funds abroad at short notice should the worst happen and Corbyn’s gang of Marxists take control.

Around the same time, The Economist reported on a sell-out event put on by an investors’ club on “How to Corbyn-proof your wealth”. It also reported the view of a FTSE100 company chair that in the event of a Labour government the rich “would take all the money offshore, wait for the economy to collapse, and come back and get richer”.

To help ensure that their version of political sanity prevailed, a few singularly wealthy individuals were pouring money into the Conservative Party. openDemocracy’s Dark Money Investigations project has tracked this, citing one Conservative dining club as being particularly significant in the run-up to last December’s election. Members, who are worth at least £45.7 billion, donated more than £130 million to the Conservatives over the decade, including between 58% and 67% of all Conservative donations declared to the Electoral Commission during 2019.

Resisting power

Even in these circumstances and facing this kind of power, there are much more optimistic possibilities, many of them being covered in the ourEconomy project. The welter of community responses to the crisis gives some sense of the public mood, with thousands of support groups right across the country. Support for the NHS has rocketed, with an increasing awareness of the courage of staff and volunteers, at least fifty of whom have already given their lives to care for others.

We do not yet know what a post-COVID-19 world will look like, except that it will have to be very different if we are to respond positively to the impact of the virus as well as the even bigger challenge of preventing climate breakdown. That is possible and there is much to be done but it is well to recognise that there will be determined opposition from the world’s elites and a determination to maintain the status quo.

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