The Office for National Statistics recently calculated that the UK's national wealth now stands at £5.3 trillion. The Guardian reported that Britain was therefore worth just 211 times the personal wealth of Bill Gates. The fact that a rich country, with a population of 60m, can be worth only 211 times more than a single individual is testament to staggering inequality in the ownership of global wealth. In the past, the case would have been made for socialising Bill Gates's assets. But with that idea discredited by the failures of state control, people on the left have turned to how assets can be spread more evenly. The soon-to-arrive child trust fund, or "baby bond," has opened a bridgehead towards what Labour's last manifesto called a "fourth pillar of the welfare state." In April 2005, parents will open accounts for their children which, with government contributions, will mean that all young people will turn 18 endowed with a capital asset.
The 20th century saw a gradual dispersal of wealth in Britain - by which I mean the stock of assets, including savings, shares, housing, land and other property that people own. In the first 50 years of the century, after Lloyd George's 1909 "people's budget," there was a shift of wealth away from the super-rich to the upper-middle class. This had important effects, especially on land holdings and country estates. But by 1950, half of all personal wealth was still owned by the richest 1 per cent of the population, and 85 per cent was held by the top 10 per cent.
Throughout the 1950s, 1960s and 1970s, as the middle classes grew and home-ownership spread, the distribution of wealth became more equal. By 1979, the share of the wealthiest 1 per cent had fallen to about 20 per cent. Unlike the prewar period, the shift was not confined to the top of society. The bottom four fifths of the population saw its share increase from under 10 per cent in the 1930s to a third by 1980. The story of the 20th century is one of a partial dispersal of "old wealth."
But in the late 1970s, the trend towards greater asset equality halted and then, from the mid-1990s, it reversed. In 1970, the top 10 per cent held 65 per cent of the wealth. This fell to 50 per cent by 1980, stayed relatively level in the 1980s, with a gentle reduction to 47 per cent, but then increased from the mid-1990s to 56 per cent by 2001.
Interestingly, trends in wealth inequality do not parallel those for income. Income inequality rose very sharply in the 1980s, but levelled off in the 1990s just as wealth inequality started to increase. It is likely that many who reaped the rewards of Thatcherism invested their increased incomes in property, stocks and shares, and this accounts, in part, for increased wealth inequality in the 1990s.
There is another concern. If increased income inequality in the 1980s fuelled growing wealth inequality in the 1990s, is there a danger that wealth inequality will now contribute to growing income inequality in a feedback loop?
Market income other than wages and salaries, which is largely derived from wealth investments, contributes more to the income of the richest. In 2002-3, the top 10 per cent of the working-age population received over 4 per cent of their income from investments compared with under 1 per cent for those in the lowest 10 per cent of the income distribution.
The relationship between income and wealth inequality is a complex one. But we need to understand these trends and press on with finding ways of spreading assets more evenly.
