Few tears will be shed for the disappearance of a considerable portion of Sir Philip Green’s fortune. According to The Sunday Times rich list, his Arcadia empire now has no net value. For many, this will be seen as a timely comeuppance.
We can, of course, do better than that and use this instead to illustrate a much more basic and important point. Technological change wipes out every fortune in the end. Thus our solution to whatever complaints we might have about wealth inequality will be – should be – to strive to have more of that technological change. This also accords with our basic intuitions about wealth.
As even the Guardian columnist Polly Toynbee has repeatedly pointed out we’re all a lot more relaxed about the people who made a fortune enjoying it, a lot less so about those whose grandfather did. Given that those who drive such technological change are the people making the piles of cash, the people losing wealth those either behind the curve or having inherited from the last disruptions, the effects of such change accord with our prejudices on the subject.
This is parallel to another point oft made but little believed – technological change wipes out every monopoly in the end. For the same reason too, as and when the basis of what makes money alters then that’s as shifting sands below the foundations of the established order. Whether it’s those who have a stranglehold, that monopoly, on some vital part of the societal system or those who are simply riding high on ownership of a goodly piece of it matters not to the outcome. We change the manner the economy functions and we’ve just built a bypass around their tollgates.
Specifically for Arcadia and Green some 17 or 18 per cent of retail sales now take place on the internet. Some 15 or 16 per cent of British retail space is now empty. This is not a coincidence, obviously enough. The value of retail brands has fallen, the value of retail property has done so too. That’s just what technological change does: reduces the wealth of the incumbents.
We can also look to history for evidence of this happening before. The Engels Pause was that unfortunate period when all the gains of the Industrial Revolution were going to the capitalists and landlords, not the workers. There are arguments to be had about how much of that was about measurement but average living standards unquestionably started to rise substantially in the 1840s. Which is when we abolished the Corn Laws and stopped the landlords from collecting all the higher incomes in the form of high wheat prices feeding through into rents on agricultural land.
What really mattered though was that this left the British economy open to two technological changes. The ocean going steamship – and the end of the American Civil War – opened up the prairies as suppliers of bread to the British working classes. The later arrival of the railways to the Ukraine did the same there.
Two large agricultural depressions followed, in the 1870s and 1890s, something from which the grand aristocratic fortunes, based as they were on landholdings, never recovered. It’s notable that those estates around the grand houses don’t produce enough to even maintain those palaces, let alone build them as they did. That is, the overturning of that embedded wealth wasn’t really about Death Duties, other taxes, or any other government policy. It was government not protecting allowing the technological change that followed.
We’ve thus something important to note about the wealth inequality that concerns so many, even Thomas Piketty and his tome on capital. Yes, it’s entirely true that dynastic fortunes are being made in these new techs that assail the old order. But the more we continue to have that technological change the less dynastic those fortunes are going to be. The system contains within itself its own cure for its ailments. A Radcliffe or Dyson fortune, a Bezos or Zuckerberg one, they’ll last only as long as the productive assets composing it survive being usurped by yet another disruptor.
Grand fortunes not embedding themselves into the fabric of the society aren’t in fact a problem. Even the most vociferous of opponents worry much more about inherited privilege than earned. Thus we want our socioeconomic system to be – if we’re worried about that wealth inequality that is – that free market capitalism which so encourages just such technological advance. Actually, is the only system that’s ever worked among human beings in producing it at a rate faster than population size changes.
It’s unlikely to make it onto the t-shirts at the demos but ‘kill inequality with capitalism’ does have the one sterling advantage of actually being true.
