Remember all that stuff about how the credit crunch was going to usher in a new age of austerity? The financial industry would shrink; the gulf between the haves and the have-nots would close; and taxes would rise for the top earners, forcing them to contribute more to society.
Well, guess what? It didn’t happen.
In fact, we just had a “rich-get-richer” recession. U.K. data suggest the gap between the wealthy and the poor has widened. We can give up any idea that it is going to close by itself. The government usually bails out the rich; the wages that the highly skilled can command are rising all the time; and globalization means the well-off increasingly occupy a whole different economy than the rest of the country they live in.
While the U.K. economy as a whole may be struggling, people at the top end of the income range are doing surprisingly well.
A report last week by HSBC Holdings Plc, drawing on a YouGov Plc survey, concluded that the richest British households -- defined as those earning 100,000 pounds ($161,000) a year or more -- planned to increase their spending by 7.8 percent this year, even though some of that will be financed by saving less. Not much sign of austerity there.
The ordinary British family isn’t doing so well. The median pay increase was 2.2 percent in the last three months, less than inflation, which is running at 3.7 percent. In effect, the average person is getting poorer in real terms -- but those at the top are doing fine.
Wealthy London
London, by far the wealthiest region of the U.K., came through the recession in better shape than the rest of the country, according to Henry Overman, the director of the Spatial Economics Research Centre at the London School of Economics.
“It’s simply not a middle-class recession and a greater representation of the middle class is in the south east of England,” he said in a lecture last month.
Incomes and jobs suffered less in London than the rest of the country. House prices did better and kept on soaring at the top end of the market. Prime London properties rose 5 percent in the past year, according to Savills Plc. But average house prices fell.
Of course, inequality has been rising for some time. In the U.K., the Gini coefficient, a widely used measure of disparity in incomes, rose from 28 percent in 1983 to 34 percent in 2008/9, according to the Office for National Statistics. A score of 1 means incomes are evenly distributed, while 100 means just one person holds all of a nation’s wealth. Since 2005, it has been relatively stable. Now inequality is rising again...
Read more:
http://www.bloomberg.com/news/2011-02-08/rich-get-richer-as-governments-tout-austerity-commentary-by-matthew-lynn.html
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