The rich think their luxury lifestyles are coveted. But that’s not the feeling that immodest spending evinces these days
I don’t normally care much about Burberry, the dynasty of beige, who bang on so much about heritage that they put me off not just their own umbrellas but also tomatoes and the Tower of London. Yet when they post a profits warning following flat year-on-year sales for the past 10 weeks, and a drop in sales for the past fortnight, and MoneyWeek magazine says, “we told you to get out of the luxury goods market” – then everything looks more interesting.
Merryn Somerset-Webb, the magazine’s editor, explains: sales were driven by the Chinese super-rich who, being mostly in the Communist party, could never afford even a snazzy dog coat or neckerchief on their posted salaries.
A combination of the economic slowdown in China and a sudden surge of connectivity whereby anyone who identifies your fancy timepiece can now blog about it, means that ostentatious wealth has become as dangerous to the party high command as it would be for the perpetrators of a recent heist. Our Beijing correspondent has reported numerous cases of officials now under scrutiny for their flamboyant spending.
But you can’t write this off as a problem specific to the Chinese, even while the precise elaboration of their corruption could probably only happen in China. In Italy, MoneyWeek reports, there has been a quadrupling of the ownership levies on high-performance cars. Meanwhile in the UK, Nick Clegg returned from summer touting a new wealth tax.
If that fails to take root in public discourse it will most likely be because of Clegg’s own unpopularity – the idea itself chimes with the majority view, exacerbated by the cut in higher rate tax, that the rich aren’t just insulated from this austerity drive but are actively gaining from it.
Incomes at the top increase out of all proportion to the productivity of their businesses; median incomes are significantly lower than they were in 2001. High profile tax avoidance and evasion render the situation more toxic, as the very people who are most favoured by our economic circumstances still balk at making their contribution to it.
Point any of this out, however, and immediately Tory voices chant “the politics of envy”; Bernard Jenkin responded with this charge directly to Clegg’s speech; Michael Fallon made the accusation against the whole country, garnishing it with the (ahem) rather inflammatory idea that we should be “saluting” rich people, rather than finding ways to tax them.
Now, this would be a decent argument to have if you were looking at two people (or groups) who were merely proximal to one another but otherwise unrelated. Say for simplicity we had adjacent fields, and mine got flooded but yours was fine. I would argue that the disparity in itself was a problem, as was the randomness of the event. So you should help me out, first for the sake of harmony, and second to insulate yourself against some future misfortune, whereupon I’d help you. But you could argue that your good luck was none of my business, and only my bad luck had given me cause to peer into your field in the first place; every argument proceeding from that was simply post-rationalised envy. I’d think there was something defective at your core, but I wouldn’t think you were irrational.
However, such examples obviate the parable by showing how porous and connected all our finances are, and how unlikely it is that anybody has become rich or poor by the hand of God. A Chinese official who can afford a watch 250 times the value of his monthly salary can only be a kleptocrat – if he were a “wealth creator”, as a public official, that wealth would stay in the public purse.
As for the Italians suffering the Lamborghini penalty, the focus on luxury motors was part of a wider clampdown on tax evasion that saw the government stop and search “supercar” drivers, with stunning results: eight million missing euros from a tax fraud near Venice; three million more from a man in Bergamo. This is just in the last two months. An amusing side-effect is that you can now pick up a secondhand Ferrari for the price of a new Polo, because these people would rather have a fire-sale of their status symbols than pay a proper amount of tax into their crashing economy. It is not envious to point that out, any more than it would be to complain about a mugger who could run faster than you.
In Britain, the wealth creators whom Fallon would have us salute are a bit more diffuse than the Chinese political class and lower profile, often, than the Italian Ferrari fancier. But the focus is the same: are they merely going about their business more successfully than everyone else, or are they evading tax, or avoiding it so strenuously that it amounts to not paying any?
Are they chief executives who earn 202 times more than the person at the bottom of their pay spine? The tolerance band of human ability simply isn’t wide enough for any one person to be 202 times better than anyone else. Does their money come from the public purse, in contracts at which they fail but get paid anyway, because “that’s how contracts work” (as Nick Buckles, the chief executive of G4S, told the home affairs select committee on Tuesday)? Does their wealth derive from banking?
People in the bracket of great wealth sometimes make the misapprehension that the world is envious because they envy one another; but actually envy is the last thing you’d feel towards someone whose fortune had contributed directly to your misfortune. Well, maybe not quite. The very last thing would have to be the desire to salute.
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