The intra-contradictions of capitalism, Part 147

Hat tip: Dave Osler's blog: apparently the picture above is doing the rounds at London's Private Equity houses.

My birthday Monday. Not 100% tip-top condition for this weekend's celebrations, but I'll survive. Looking forward to the end of 2007 & the start of 2008. Looking forward to doing absolutely sod-all over the Festive Period except eat, drink, sleep, meet friends and play scrabble on Facebook. My batteries need not so much recharging as taking back to the shop...I'm crawling towards the finishing line of 2007.

Anyway, saw this below a few days back. One thing I've noticed increasingly in the last year (apart from realising how much I really hate spoilt rich kids & why more roads should have pedestrian bridges to get over them) is how much the middle classes hate, and are getting screwed over by, the super-rich. If you want to see angry extended rants about the iniquities and general crapness of the UK banking, insurance and pensions' "industries", the Mail on Sunday financial section offers a lot more than Socialist Worker, I can tell you! I've mentioned it in a couple of my blog posts but this is a good one of what it's like on the front-line here: ie London and the Home Counties. I could say something about the bourgeoisie creating its own grave-diggers but...


If I had a little money...The rich are richer - and more ostentatiously so - than ever. The middle classes, unable to keep up, are becoming angry. Aditya Chakrabortty reports on a growing social divide
The Guardian, Saturday December 8, 2007

Special moments at Movida are heard before they are seen. They start when the usual nightclub music stops, and the theme tune from Superman or Rocky strikes up. Everyone knows what that signifies: a customer has just made a Big Spend.
This time round, some Tony Bennett comes on: "It's the good life, full of fun, seems to be the ideal." Sure enough, a procession of waiters marches into the VIP area. High above their heads, each carries a shallow white basin. Inside is a giant bottle of Cristal champagne, with a big white sparkler fizzing at its neck. Each costs £7,000. There are three of them. The man who appears to have shelled out £21,000 on designer booze stands on a sofa. "Oh the good life, lets you hide all the sadness you feel," sings Tony; but poignancy is not for this spiky-haired, T-shirted thirtysomething. Open-mouthed, he faces the dancefloor and jabs his arms roofwards: a triumphant striker in front of a home crowd.


Many of us have only ever heard about London's ultra-wealthy; Movida is where you see them: bankers and paunchy foreign businessmen, footballers and celebs. It also pulls in plenty of money, as evidenced by the silver Bentley and other expensive cars parked outside, and the £150,000 or so that routinely gets spent at a single VIP table in one night.

The club's next money-spinner is a Christmas cocktail. Some may think a Christmas cocktail means eggnog and lemonade, but this is a blend of rare cognacs and gold leaf in a crystal glass, complete with an 11-carat white diamond. It costs £35,000.

Plenty of their customers can afford that. After one especially big evening, a businessman was asked by staff if he felt at all guilty. Not really, he replied. "By tomorrow morning, I'll have earned more in interest than I spent last night."

In 1998, so great was the unease over pay in the Square Mile that the Mansion House held a debate: "This house believes that City salaries are totally fair and justified". Hundreds of banking grandees turned up and, after attacks on the fill-yer-boots brigade as "smug and complacent", voted against the motion.

The mainstream political response to such lavish rewards was, essentially, a shrug. "We are intensely relaxed about people getting filthy rich," said Peter Mandelson. Like other New Labourites, he believed that politicians should not get in the way of the people at the top, but help those at the bottom. Targets were set for child poverty, help was given to pensioners; but politicians did not tackle the inequality that had grown so much under Margaret Thatcher.

Less than a decade later, the consequences of this hands-off approach are apparent, nowhere more so than in London. There has been a boom in financial markets and years of runaway City pay; the city has turned into a favourite bolthole for the international business elite. This new, global class of financiers and business people, often lumped together as the "super-rich", has left everyone else far behind and very anxious.

The most affected group is the middle class, who have been used to keeping the upper class just within their sights. Now, however, the new rich are racing off into the distance - taking with them any hope the middle class might have had of also making pole position one day.

No wonder the mid-market Daily Mail attacks the super-rich, with headlines about "fat cats getting fatter" and "private equity pillagers". Such pieces give weight to the accusation that this is the politics of envy. Another thing that annoys the Mail - and others - is that many of the super-rich are "non-doms"; people of foreign descent who pay little tax here. Hence columns titled "Why I deplore the billionaires who contribute so little to Britain".

It's not just the jaunty souls on the rightwing press who are worked up. Philip Gould, the pollster and co- architect of New Labour, has noticed that the "wise people" in his focus groups are getting antsy. He says, "They talk about insecurity, migration and - in London - this phenomenon of the super-rich."

Once the man Tony Blair relied on to check the popular mood, Gould now describes the disquiet he has observed among middle-earners being asked to move down a bit. This is hardly Blairite talk, as he acknowledges: "I feel really uneasy about capping aspiration in any way." Yet if his diagnosis is correct, more tax on the super-rich is one policy prescription that could follow.

If you want to see how the discussion could develop, cast an eye across the Atlantic. US pundits coined the term "anxious middle" to refer to a middle class that feels not only unable to keep up with the rich but increasingly worried by economic competition from China, India and other developing countries. In the run-up to next year's presidential elections, leading Democrat candidates have all become very aggressive about putting an end to the Bush era of tax cuts for the rich. Middle-income America is in a far worse position than its British equivalent, but the "anxious middle" could be the next American import.

Swaths of London and its south- eastern hinterland have become so exclusive they might as well be declared off-limits to the middle class. It's not just the ultra-expensive nightclubs and restaurants; it's also the house prices that are far out of reach of anyone not already on the property ladder.

"There's segmenting along class lines," says the economic geographer Danny Dorling. "It's a return to an Upstairs Downstairs ethic where there are certain areas you just can't go. Except these aren't wings of a house; they're parts of a region."

Any ripple in the housing market spreads a long way, as those who can no longer afford their ideal go looking for the next best. The scruffy London borough of Newham is an unlikely home for a Russian oligarch, but house prices there have risen 240% in the past decade, while average wages have gone up by closer to 40%. Unless house prices fall a long way, Newham is unaffordable to most residents who haven't bought already.

The house-price boom has not all been due to the super-rich, but it causes two huge headaches for everyone else. The first is commuting times, as those who can't afford to live in a desirable area close to their work are forced to make longer journeys. The second big worry is about one's children: how will they get on the property ladder? According to the Conservative MP David Willetts, this was the insecurity his party picked up on this autumn when it proposed a cut in inheritance-tax bills - a policy the Labour government swiped.

"Smart politics is like being a good doctor," he says. "The anxiety about inheritance tax that we responded to was really the anxiety among the middle classes about how their children were ever going to afford a house."

Another area of middle-class angst the Conservatives are targeting, says Willetts, is education. Schools have become the subject of fierce competition between middle-class parents, increasingly either paying private school fees or premiums on property in good catchment areas.

But the politics of anxiety need not be Tory blue. There is also scope for progressives to tackle the cause of all the anxiety by actually reducing the wealth gap and taxing the super-rich more.

So how do the middle classes feel about those on the other side of the new wealth gap? Purley, in Surrey, is not a bad place to start. Part of the commuter belt, it's solidly Tory and so middle class it was picked as the home of the sitcom couple Terry and June.

Smug yet ambitious, the pair spent their time trying to impress Sir Dennis, the company boss, and win Terry a job on "the top floor". A lot has changed since the sitcom's heyday, and a real Sir Dennis would not be likely to come over for dinner these days; not now top company bosses earn 98 times as much as the average worker.

According to Jeremy Way, a long-time local estate agent, the self-satisfaction of Terry and June-era Purley disappeared a long time ago: "A lot of people around here are living on tick." Again comes the mention of school fees.

On to the local rugby club, with its carpark of muddy Renault Clios. Where Movida was full of dresses that came to a rather abrupt end, the uniform here is fleeces and beanie hats. Ian Martin is one of the few stood on the touchline. After more than 25 years in Purley, he's moved to a "hutch" in London for an easier commute. So what does he make of what's happened to the capital?

"London now is England offshore," he says. It's rich, it's lightly taxed, and it's increasingly foreign. "I don't mind that so much - it's the empty second homes that get me. It's when these people take a bolthole in London, which they leave unoccupied 10 months of the year: that pisses me off.'

He is not especially indulgent towards the new rich. "All these celebrities: what have they ever done? Shoot each and every one of them and the economy would motor on."

His comment illustrates a point that the sociologist Richard Sennett makes: "People used to believe that if you were on a good income you probably deserved it. But super-rich money is often seen as ill-gotten, unearned. When you see a Russian oligarch in a posh jeweller's like Asprey, you certainly don't think 'he must be better than me'."

Instead, you probably spend more of your own money in an attempt to keep up. The run-up to Christmas has seen newspapers littered with luxury gifts. The Times ran a How-to guide to tiaras, with the come-on line: "What? You don't have one yet?"

"Luxury is completely relative. It's something that makes you stand out from the pack," says Robert Frank, an American economist who has written about how the middle classes spend to keep up with the rich. "It starts when a company chief executive has a coming-of-age party for his daughter, 50 Cent comes to play, the daughter invites 400 of her closest friends - and they all leave with video iPods."

That surely doesn't apply to all luxury items, I ask, and tell Frank about Movida's £35,000 cocktail. There is a sharp intake of breath.

"No," he says. "That has 'Tax Me' written all over it."