The postman at the door is stooped by his burden like an allegorical statue of Labour Oppressed by Capital. His wearisome, low-waged task is to deliver a copy of Thomas Piketty’s Capital in the Twenty-First Century — or perhaps multiple copies all round the town, since this breezeblock of a thesis on the iniquities of accumulated wealth stands second in this week’s bestseller lists, pipped only by the life story of someone called Guy Martin. His core argument — the celebrity French economist Piketty, that is, not Martin, who turns out to be a celebrity motorbike racer and lorry mechanic — is that the return on unfettered capital will always exceed the rate of economic growth as a whole, including average earnings, so that the rich will go on getting relatively richer. Unless, that is, they are subjected to the punitive wealth taxes Piketty would like to see applied across Europe.
His arguments have been picked apart by reviewers, including our own Ferdinand Mount. But he has clearly caught the mood of those on both sides of the Atlantic who believe (with some justification, let’s acknowledge) that both the pain of the financial crisis and the benefits of the recovery so far have been too unequally shared. Capital in the Twenty-First Century will be endlessly quoted by Labour and Lib Dem politicians calling for a mansion tax, and if Ukip’s achievement next May is to ease Ed Miliband into Downing Street, that levy on rising house values may be only the first of a wave of ‘Piketty taxes’.
But policymakers should remind themselves of what Matthew Lynn wrote here last year, citing a study by none other than Thomas Piketty before he was famous. Low-growth France, which has a wealth tax, turned out to be more unequal than high-growth America, which does not, leading Lynn to the conclusion that a mansion tax which diverts capital from business investment ‘will make us all poorer and less equal’. Anyone in danger of being seduced by Piketty’s prose (in Arthur Goldhammer’s silky translation) should also refer to last Saturday’s FT, which catalogued apparent errors in Piketty’s data that, when cleaned up, ‘do not show any rising wealth inequality [in Europe] after 1970’.
I suspect we’d all be more enlightened, and more encouraged to put 21st-century capital to productive use, if we devoted time to reading parables of self-made success through struggle rather than flawed intellectual assaults on the rich. I’ve ordered a copy of Guy Martin: My Autobiography.
A job for Boris
One thing the Euro-election results highlighted is how very different London now is from the rest of the country, and even from its own hinterland. Labour’s share of the vote in the capital was twice what it was in the south-east and east; Ukip’s was half. No doubt that reflects different attitudes to the hot issue of immigration, many London voters being immigrants themselves — but the strength of Labour, which at the local level seized several boroughs from the Tories, also speaks of rising resentment against the capital’s extremities of wealth. London’s economy, roughly a fifth of all UK output, is expected to grow at more than 4 per cent this year — drawing in migrant workers and rich safe-haven seekers alike from the rest of the world, as well as human and financial capital from the rest of the country. Its house prices are well over double the national average and rising twice as fast, making desirable postcodes inaccessible to the vast majority of home-buyers. Tower Hamlets, neighbour to the money-citadel of Canary Wharf, has the UK’s highest level of child poverty.
All this forms a picture of a city-state that is now more like Hong Kong than it is like provincial England — a teeming entrepot with a constantly changing population, offering golden opportunities for those who grasp them but hardship for those who do not. What was striking about the vote count in Monday’s early hours was that only the late London result pushed Labour ahead of the Tories nationally. If that’s the pattern, Labour will only be kept out of power next year if more Londoners are persuaded that the capital’s opportunities genuinely outweigh its inequalities. Boris Johnson is surely the man to persuade them: isn’t it his duty to park Downing Street ambitions and offer himself for a third mayoral term?
Saga of disappointment
If ever there was a flotation designed to appeal to the Baby Boomers — the generation around retirement age who Thomas Piketty would no doubt regard as unfairly cushioned by their accumulated wealth and entitlements — it was Saga, the ‘over-50s lifestyle’ group that (as ads for last week’s share sale reminded us) grew out of a small family-run hotel in Folkestone. Priced at the bottom of its indicative range at 185p a share, valuing the company at £2.1 billion, the issue was oversubscribed but not spectacularly so, and after an initial rise the price dropped back below 185 pence on the opening day. The result is a much smaller capital-raising than Saga and its advisers envisaged and no bonanza for the owners, who include a clutch of private equity firms as well as Saga management.
What went wrong? Much of the fizz had already gone out of this spring’s new issue market, but investors seem to have been particularly deterred by Saga’s flat profit record, large debts and confusing profile: principally an insurance business these days, it prefers to present itself as a broadly based consumer services and holiday operator. Some of those shrewd old Baby Boomers must also have been put off by the presence of the private equity boys, whose urge to cash out will be act as a depressant on the share price going forward.
Regular Saga customers who invested but foresee no profit on the shares will soon feel it’s time to take their business elsewhere.Those who didn’t may well be planning — to the irritation of left-wing economists as well as their own offspring — on blowing their capital on a Saga cruise instead.