“So a 17 year old has made a fortune and has now become a member of the ‘super rich’, the top 1%, and the plutocrats who are getting richer whilst we’re all getting poorer. It’s ludicrous the amount of money he has been able to earn, far beyond what I deem to be his ‘fair share’, and at a time when hard-working families are suffering this type of inequality is just unacceptable…”
OK, I’ll stop there. So we haven’t really (well, at least I haven’t) seen any news articles or blog pieces attacking Nick D’Aloisio for making £20 million by selling the smartphone app that he has designed to Yahoo. In fact, all of the coverage has been extremely positive: congratulatory that such an enterprising young man, with obvious talent and innovative ideas, has been able to make his fortune at such a young age. This should perhaps make us think: how can some people celebrate this guy’s success whilst at the same time they attack this group labelled “the rich”, which is made up in part by people like Nick?
Left-wing redistributionists who regularly engage in this politics of envy are very effective at painting all people with wealth as ‘fat cats’ or the sorts of crony capitalists which they know the public will despise. The distinctions about how money is earned are blurred into general anti-rich sentiment. But what this example shows in fact is that when someone is well rewarded for genuine talent, ability and endeavour, as opposed to who they know or how they have been able to effectively exploit regulations or lobby government for favours, the public is accepting of and celebrative of the huge rewards which come with it.
By-and-large, the UK population is supportive of meritocracy. Whilst we want government to provide the conditions so everyone has the possibility of succeeding, we recognise that we have different skills, motivations and talents which will be rewarded – and yes, some of us will get lucky. What conservatives, classical liberals and supporters of markets should be doing then is developing policies that break down crony capitalism and fight for opening up new markets to entrepreneurs and competitive pressures – to make it absolutely clear that we’re aren’t in favour of entrenched interests, but of the competitive process –the innovation which leads to the best products being created, real growth, and ultimately improvements in productivity and living standards.
As my City AM column today explained, the development of IT is changing the way markets work. If you design the best app or social media website, the low marginal costs of production or the network effects you can exploit can provide high rewards. This may, in the immediate future, lead to higher inequality. How we react to this ‘winner takes all’ economy will, in part, define how successful we are economically as a nation. Generalised anti-rich populism is simply not conducive to encouraging the people that can be successful, like Nick, in this ultra-competitive world.