Robert Peston: We need to worry about the super-rich

The BBC Economics editor explains why we need to close the gap between the wealthy and the poor

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My first encounter with ideas about inequality was aged ten, in our kitchen, when I said to my mum that it was surely sensible for people who are better at certain jobs to be paid more. “That is what the Conservatives believe,” she said. “But in this house we take a different view.”

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And thus, feeling slightly put down, I began my lifelong passion for the politics and economics of inequality – which I’m lucky enough to be able to indulge in the two-part programme The Price of Inequality on Radio 4. What I am particularly interested in is how the views of the well-heeled establishment have changed on all this over the past 40-odd years.

I am writing from the World Economic Forum meeting at Davos, the annual super-swanky gathering of the rich and powerful on top of a Swiss mountain. And I will struggle to find any of the billionaires here prepared to say a word in favour of the widening gap between rich and poor.

But it was not always so. In the 1980s a new consensus on the right of politics, inaugurated by Margaret Thatcher in Britain and Ronald Reagan in the USA, was that corporate leaders and entrepreneurs had to be given tax cuts and big cash rewards as incentives to create and expand businesses that would generate jobs and prosperity for all of us. If greater inequality flowed from that, it was a price worth paying for the growth that would make all of us better off. 

That at least was the theory. And it was such a powerful idea that it was adopted by Tony Blair and New Labour – elected in the famous 1997 landslide on a pledge not to raise taxes.

Even Gordon Brown, always a bit to the left of Blair, was so persuaded that those making massive personal fortunes in the City were helping Britain that he cut capital gains tax and further enriched private-equity plutocrats, who borrow to buy entire businesses.

Robert Peston in Switzerland

All of which, after the great crash of 2008, feels like another world. Today, politicians of both left and right are uncomfortable that, over the course of the past 20 years, the gap between rich and poor in many countries has widened to an extent and at a pace we haven’t seen since the 19th century (though it’s very important to note that, thanks in large part to the rise and rise of China, the income gap between countries has narrowed).

The reasons why the rich have got spectacularly richer don’t just concern tax cuts. Among other things they stem from the spectacular increase in the pay of the bosses of big companies, the explosive growth of finance as an industry, the surge in the price of property and assets, and a technological revolution that has turned founders of digital businesses into members of the super-rich at record-breaking speed. Even the normally conservative International Monetary Fund is uneasy about worsening inequality.

The case against it is usually seen as having two legs. It makes the economy more dangerously prone to booms and busts, because the growing army of have-nots have to take on risky amounts of debt to support their living standards; and the creation of mind-bogglingly rich new dynasties confers excessive privilege and power, and hobbles social mobility.

To be clear, worrying about all this is not to engage in the politics of envy, or it need not be. It is to take part in the big debate of our age, which is how to make globalisation serve the interests of millions and millions of people across the rich developed world, whose living standards are stagnating and who are increasingly hostile to the established political parties.

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The Price of Inequality is on Radio 4 Tuesday 3rd February at 9.00am