Rory Sutherland Rory Sutherland

Tax me more, but don’t touch my dishwasher

The nature of inequality has changed since the last century. It may no longer be as helpful

issue 13 February 2016

There was a big fuss a year or so ago about a book by a French chap called Piketty about wealth inequality. He suggested capitalism, aside from an anomalous period between 1930 and 1979, inexorably concentrated wealth at the top.

One interesting defence of inequality is that the rich, by adopting technologies early, redistribute far more of their wealth than we realise by funding R&D and innovation. The first people to pay top dollar for a flat-screen TV or a dishwasher are unwittingly subsidising their wider adoption. As Hayek observed of early adopters of technology: ‘We depend on them, for they finance the invention and reinvention of products whose cost falls to a point where we can afford them’.

When Hayek was writing in 1960 this was inarguably true. The status rivalry of the time was at least focused on buying goods which were useful enough to became mass-produced and mainstream. (If you ever need a laugh, read anti-consumerist literature from the 1960s, which sneers at the lower middle class for aspiring to own ‘pointless luxuries such as fridges and washing machines’.)

My grandfather was a prosperous doctor in Wales from the 1920s to the 1950s. Back then, whole categories of expenditure were available to him which were unaffordable to most people in his town. Foreign travel, a car, radios, televisions, recorded music, fridges, dishwashers, restaurant meals, theatre visits. (In 1930, a bottle of whisky cost a working man’s weekly wage.) All are now available to the median Brit. One reason property crime has fallen in Britain is that the rich no longer own much that the poor want to steal. (A friend of mine was mugged at knife point and asked to hand over his mobile phone; the mugger took one look at it, sneered, and handed it back.

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