Samizdata

A week or so ago, Ross Clark, the eminently sane columnist who writes for the Spectator, defended globalisation and attacked what he sees as a growing hatred of rich people. We see it in the endless bleating about the supposed Evil of private equity and hedge funds, or of financial speculators generally. Much of the reason, I think, for this hatred, is not that the rich are so much better off in relative terms than the poor – the poor probably don’t have the time or the inclination to spend time hating the rich – but that the rich are a lot better off than the broad middle class. In my experience, many anti-globalistas are middle class intellectuals, not poor folk living in state subsidised housing. As it becomes more difficult for middle class folk, for example, to educate their offspring privately without going into massive debt, and to buy a house for the same reason, naturally the Man on the Clapam Omnibus – or his US version – gets a bit cheesed off if he sees City financiers buying swanky homes or sending children to nice schools with ease.

But this hatred of wealth is dangerous and it draws on economic illiteracy. To demonstrate a good case of such dunderheadedness, in the print version of the Spectator (16 June, page 26), is this letter from a Mr Edward Collier, of Cheltenham, a traditionally genteel spa town in the west of England famed for its posh girls’ school and a rather fine horse racing festival in March:

“Sir, In his article “Hatred of the rich is back in fashion” (9 June) Ross Clark wondered “What about the people who sew £10,000 handbags together – surely the more that the wealthy spend on their handbags, the more they earn?” Does he really believe that the sewers of hyper-handbags earn more than those who sew the mundane totes of everywoman? They’re sewn by the same people, for God’s sake, and for the same pathetic pittance.”

I could quote more from this character, but you get the idea of where he is coming from. So let’s spell it out for this Sage of Cheltenham: if more people spend money on luxury goods, which typically often require more intensive labour to produce, such as fine leather handbags or Breitling wristwatches, this increases the profits of the people who make these things, and in turn, increases the demand for the skilled labour required to make them, and hence, raises the real wages of the persons who make them, and so on. If a luxury leather handbag really does require no more skill to produce than a bag one could buy for a fiver, then presumably this letter writer might have a quarter of a decent point, but he does not. He merely asserts that the “same people” produce high-value goods as cheap ones, and uses this to dismiss the argument that when rich people spend their milions, it recycles wealth back into the economy.

In fact, even John Maynard Keynes’ argument of stimulating demand to encourage production presumably was based on the notion that if people spend money in the shops, it creates jobs, and therefore is a good thing. What this character seems to be saying is that no matter how much money rich folk spend on luxury goods, it makes no difference whatever to the people who make them. Apparently, the money never reaches the poor downtrodden producers, but ends up in a few capitalists’ pockets. But presumably, if more money is spent on goods than before, then, other things being equal, the prices of those goods will rise or output will have to be increased. To argue that none of this process filters through into the living standards of people is quite extraordinary.

Meanwhile, this story, if it is true, is not going to help the blood pressure of Mr Collier, I fear.

I am looking forward to this book by Ross Clark.