A return to normality

It is easy to mock the most strident critics of capitalism, like Bernie Sanders and Jeremy Corbyn. It’s harder to ask whether they might actually have a point. Consider the past ten years of evidence. Since the collapse of Lehman Brothers, wages for ordinary workers have been on the floor — even today, the average pay packet in Britain is lower than it was before the crash. The main response to the crisis has been to print money, through quantitative easing and ultra-low rates. This artificially inflates assets. And who benefits? Those who have the most assets: in other words, the very rich.

Since the crash, the amount of wealth in Britain has risen by more than £4 trillion — almost half of which has accrued to the richest 10 per cent of households. The prices of the assets typically owned by the ultra-rich has risen even faster. Vintage Ferraris have quadrupled in price, as have similar collectibles. This is the magic of quantitative easing: Bank of England figures suggest that it has increased the assets of the richest households by £125,000 while reducing the lot of the poorest by £300.

And now, at long last, there are signs of this era coming to an end. Worldwide economic growth is back, stoked by the largest tax cut in the recent history of the world’s largest economy. It has long been hard to justify rock bottom interest rates; now it is impossible. The markets are adjusting to this fact, and volatility is back.

As Liam Halligan points out, the trigger for this week’s wobble in world stock markets was the news that US workers’ wages are rising fast. Donald Trump’s tax cuts are having quite an effect: companies are paying bonuses to their staff and hiring more people.