Thesis Number: #2 (Page 3 of 8)

You can become wealthy by creating wealth or by appropriating the wealth created by other people. When the appropriation of the wealth is illegal it is called theft or fraud. When it is legal economists call it rent-seeking.

The Welfare State sanctions income transfers as a safety net for people denied the opportunity to earn their living. Legitimate claimants on the public purse are supported by taxpayers in work. But there is a clear distinction between them and aristocrats who are the beneficiaries of vast landed estates. Both groups enjoy income that is transferred from others. But those who claim benefits from the Welfare State are expected to get back into work to earn their living – whereupon the benefits cease – while those who live off rents may do so in perpetuity, protected by the law of the land. We need to take a closer look at what is meant by a “transfer payment”.

Most people who benefit from income transfers in the form of rents are not criminals. They are co-opted into cheating by a statecraft that sponsors greed. One victim of the institutionalised process is Martin Wolf, the chief economic commentator of the Financial Times. He computed the gains he made out of the labours of others and explained how he has been enriched to the tune of nearly a million pounds for doing precisely nothing:

In 1984, I bought my London house. I estimate that the land on which it sits was worth £100,000 in today’s prices. Today, the value is perhaps ten times as great. All of that vast increment is the fruit of no effort of mine. It is the reward of owning a location that the efforts of others made valuable, reinforced by a restrictive planning regime and generous tax treatment – property taxes are low and gains tax-free (Wolf 2010).

Wolf’s case illustrates what has happened to most households. How did this state of affairs arise?

The post-war social settlement known as the Welfare State was the price that the culture of greed was willing to pay to preserve itself. Europe faced a dangerous period of transition. The deferential values of the feudal aristocracy were buried in the trenches of the First World War. By the 1940s, the people of Europe wanted a new way of living. The Welfare State provided the political cover that was necessary if the transfer of income to land owners was to be preserved. A second strand to the survival of the culture of the aristocracy was the expansion of the rent-seeking class. The strategy was successful. In Britain, for example, by the time Margaret Thatcher was elected Prime Minister in 1979, 85% of total personal wealth was owned by the top 20%. Inheritance – not the creation of new wealth – was the major determinant of wealth inequality (Harbury and Hitchens, 1979: 9, 136). Post-war generations were not endowed with a “level playing field”, either in education or work.

Blair followed the Thatcher years. He enjoyed a decade in power, with a political mandate to reverse the forces that cheated the unemployed youths to whom he directed his lesson in civics. Instead, he and his Chancellor, Gordon Brown, consolidated the forces that drive the get-rich land-led boom/busts (cf their “light touch” regulation of banks). They contributed to the organised chaos that undermines families and their homes. Blair’s policy failures opened the door for the formal attack on “benefit cheats”, the mantra of the Tory/Liberal Coalition that replaced the Blair/Brown era. The 2008 financial crisis provided the economic cover for the austerity policies that are unpicking the Welfare State. The banking scams provoked popular anger, but social activists failed to isolate the core problem. The culture of cheating will continue unchallenged for so long as people fail to recognise the deception in Blair’s dictum: “You only take out if you put in”.

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