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The UK and developed economies are undergoing a systemic, long-term transfer of wealth from the working class, middle class and the state to a super-rich elite.
This concentration of wealth in the hands of a few will inevitably lead to the financial collapse of both the state and the middle class.
Because the poor have already been asset-stripped, the wealthy and their political allies are now turning on the middle class.
Governments are more indebted now than anytime since the second world war. They owe hundreds of billions to the wealthy who’ve leant them money over decades through government bond purchases.
To cover the soaring interest on this debt, governments will increasingly tax the middle class because they are the only group left with meaningful wealth to extract.
You can see this through incremental increases on taxes targeting workers. And particularly the freezing of tax thresholds leading to workers paying more tax as wages nominally increase with inflation.
The wealthy use their passive incomes from existing wealth to buy up a fixed supply of assets, such as housing and land – outbidding you for these things. This pushes up asset prices.
A self-perpetuating cycle is created where the resulting high prices are inaccessible to salary-dependent individuals, but massively benefit the wealth holdings of the already rich.
This leads to middle class people taking on more and more debt, owed to the rich, to buy basic assets IE homes.
Let’s take an example. The former Prime Minister Rishi Sunak is worth an estimated £700 million.
He can conservatively earn £35 million per year in income from this as interest or dividends, for example. This is known as passive income.
Someone like Rishi Sunak will use this passive income to buy more assets. Let’s say 35 houses in London worth £1m each. Every year. And more and more over time as his wealth increases.
Housing in London has a fixed supply and there is a lot of demand for it. To compete with Rishi Sunak to buy these houses, ordinary people will need to take on a huge mortgage. Or they simply won’t be able to afford to.
The passive income of the wealthy creates extra demand in the economy for fixed assets, such as houses, pushing the prices up. This is great for the rich, but terrible for ordinary people.
As the rich increase their wealth year over year exponentially, it eventually squeezes everyone else in the economy out of being able to afford to buy any assets.
After the Second World War, British people taxed the rich aggressively and built the welfare state. The two went hand in hand. You can only have a thriving social democracy with a strong middle class and a protected working class. And to have a strong middle class you need to keep the wealth of those at the top in check.
The 50s, 60s, 70s and 80s were the only time in history when society successfully created decent living conditions for ordinary people. This was done by aggressively redistributing wealth.
We are now losing this.
Poverty is rising, health is declining, public services are crumbling. People are losing trust in the government and each other. Far right politics is surging.
The only way to reverse the decline is to aggressively tax the wealth back from the super rich, and strengthen the middle and bottom of our society.
Next: what’s the solution?