Readers letters
Ian Crossley asks about damping factors and the stock market.
I believe the problem is not the basic mathematics, as Paul Weighell suggests, nor yet pure human avarice that John Gayfer blames.
The stock market is the summation of wealthy individuals' weighted opinions of the future which wealthy individuals are bringing us. Each is acting selfishly – don’t blame them, that’s what The Market demands.
Those people are quite ignorant of what happens lower down the scale. Polly Toynbee and David Walker, in 'Unjust Rewards', record a City type saying, “I can’t see how anyone can manage under £100,000 pa”. I know personally a young man whose bonus alone is £100,000 per quarter.
Unfortunately, per JK Galbraith, “those whose wealth is such that they are under no compunction to spend it all, will, when times become a little difficult, keep it in cash, or in banks, who may be unable to find suitably solvent borrowers. That cash does not translate into demand, and the bad situation worsens, companies lay off workers, who cease spending, as do those who are still in jobs, but fearful. And we spiral down.” Which is where we are today.
It doesn’t happen overnight, and in the run-up, great inequality of incomes arises.
Among the advanced countries, those with greater income inequality have higher rates of homicide, the crime that is most reliably recorded, teenage pregnancy, incarceration, heart disease, and lower life expectancies, just to start. In essence, it is stressful to live on a steep income slope, where a slip is disastrous, climbing back extremely difficult - and stress is harmful.
And it’s not just a case of keeling over at 85 rather than 88. When inequalities increased in the UK in the 80s, death rates, which are the inverse of life expectancy, began to rise in about two years. For the under 45s.
As an engineer, not an economist, I would like to see tax rates for the top slice rising steeply according to a formula linking them to income inequality, providing a stabilising negative feedback. This would allow the richest to keep the status symbol of multi-million incomes, and provide cash contribute to a Keynesian economic recovery.
Keynesian economics, began the recovery from the 30s slump. Milton Friedman, Thatcher’s guru, argued against them in the 80s, but a few years later, said “I was wrong”.
For those interested in such matters, and like seeing figures and charts describing problems, I would strongly recommend 'Unhealthy Societies' by Richard Wilkinson which is very readable, less academic than his earlier works. Better still is 'The Spirit Level', which he jointly authored with Kate Pickett.
Bill Hyde, Offham, Kent
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