Class in Britain
As bankers gain pariah status, William D. Rubinstein discusses Britain’s changing attitudes towards the wealthy.
The most important lesson to be drawn from modern history about the wealthy is that they are challenged and hated in societies where upward social mobility is blocked; but are tolerated, even lauded, in societies where upward social mobility appears to exist.
Revolutionary action against the rich, although it is almost always led by small radical groups, has proven to be most successful in societies like France before 1798 or Russia before 1917, where status and power appear to be monopolised by an elite which opposes the inclusion within it of new rising groups. In societies in which existing elites appear more readily to accept new additions to their numbers and in which realistic opportunities exist (or appear to exist) for upward mobility, there is generally much less hostility to riches and wealth.
The uniquely ubiquitous ideological hold of capitalism throughout virtually the entire political spectrum of the United States in modern times has probably been due to the fact that the central myth of American culture, the ‘rags to riches’ story, ‘From Log Cabin to White House’and any of its variants, is widely believed to be true. There have been enough examples of this myth in real life to make it seem plausible.
Modern British history presents an interesting test of this theory. Prior to the 19th century, while the great landowners dominated the heights of wealth, status and power in Britain, arrivistes quickly joined their ranks through the purchase of land, the gaining of seats in Parliament and the acquisition of titles. Britain’s traditional landed aristocracy seldom or never regarded trade as beneath it and never erected any caste-like barriers to the inclusion within the established elite of new blood. Indeed, it often encouraged it and the success of new men and families was often highlighted as a feature of British society, a kind of pale parallel to America’s myth.
The enormous political battle over the Great Reform Act of 1832 can be viewed in part as a clash between old and new wealth, with old, traditional money giving way, to their long-term advantage, before it was too late. Yet it was always an argument made by opponents of reform that the unreformed Parliament had ample opportunities for business magnates and selfmade men to enter and that it was not closed to them.
Opposition to the wealthy as a matter of ideological principle probably first appeared in the British political arena in the 1880s with the foundation of the Fabian Society, the writings of Henry George and the beginnings of trade union power. It became a politically significant issue with the rise of the ‘New Liberalism’, which favoured and enacted higher direct taxes to pay for the beginnings of a welfare state and a larger military budget. The pre-1914 Liberal Party of Asquith and Lloyd George was certainly not opposed to the rich or to wealth accumulation, but was in fact dominated by ‘radical plutocrats’who accepted Joseph Chamberlain’s notion that the rich would have to pay a ‘ransom’ in order to keep most of their holdings. (Asquith’s father-in-law, Sir Charles Tennant, was probably the richest man in Scotland.)
Real and unarguable inroads into the holdings of the rich came, very broadly, between 1914 and 1990, especially in the decade or so after 1945 when uniquely high rates of taxation virtually eliminated most of the very rich in Britain. In 1953, one Inland Revenue officer claimed that there were only 36 persons in Britain with an after-tax income of £6,000 or more (equivalent to about £200,000 today), representing a pre-tax income of around £56,000, the approximate return on wealth of £1 million.
The Labour Party approved of this situation; indeed, many on the left thought it not extreme enough. Toleration and approval of this level of confiscatory taxation was popular, in part through remembrance of Victorian and Edwardian poverty and of mass unemployment during the inter-war years; in part because it financed a successful welfare state; and partly, too, because it was used to finance Britain’s residual role as a semi-Great Power with worldwide responsibilities.
As economic opportunities rose after 1945, and as middle-class aspirations and lifestyles became attractive across the whole class structure, enormously high rates of taxation came to be viewed as counterproductive.
Since the 1970s, the pendulum has swung almost fully in the other direction, symbolised by the cutting of the top marginal rate of income tax to 40 per cent in 1988. The period since the 1990s has, indeed, been a golden age of the super-nouveau riche, the rise of self-made multi-millionaires on a scale probably not seen before, or even during, the late-Victorian and Edwardian periods. More significantly, these trends were fully accepted by New Labour, a marked feature of the Blair premiership.
The present recession will plainly be a test of whether there will be any going back, or whether, even on the left, socialism is now genuinely dead. If very high rates of taxation are now seen as harming enterprise and entrepreneurship, it is difficult to see them being re-enacted, and the unprecedented level of national debt will be an interesting test of where public opinion stands. It seems unlikely that, having enjoyed relative affluence and the consumer society for so long, ordinary Britons will want anything else.