Predictably, this is all to do with the fall-out from the credit crunch; five years of economic retrenchment that still shows little sign of resolving itself. We can define these years in another way: as the tail end of 'Reaganomics', or the period when the liberalising process that, roughly speaking, began in 1980 with the election of Ronald Reagan as US president expired from its own excesses.
And it's as well to remember where Reaganomics - and its UK equivalent, Thatcherism - came from. They were a reaction to the decay of the process that had been labelled 'Butskellism' in the UK, and in the US - although it got no epithet - was associated with the redistributive legislation of presidents Kennedy and Johnson from 1961 to 1965. By the late 1970s in the UK, Butskellism had morphed into an inflation-inducing, wealth-destroying system that generated Tony Benn and Arthur Scargill as its emblematic demons; while today we have the likes of WPP's Martin Sorrell and Bob Diamond of Barclays as symbols of the last twitches of Thatcherism (Messrs Barlow and Carr are actually more sprites than demons).
You can see where this argument is going. Or you can if I say there is nothing new about this pattern of oscillation between freedom and equality; between capitalism and socialism; between the concentration of wealth and its dispersion. Forget about Butskellism and Reaganomics, most likely this process started in Mesopotamia and the cradle of civilisation. Certainly it was present in Ptolemaic Egypt, in ancient Greece and in ancient Rome. As for China, many imagine it's in its first serious relationship with capitalism. Nonsense. China's history has been a 2,000-year struggle between the forces of socialism and capitalism, starting with the Emperor Wu Ti (140-87 bc), who took land into public ownership, built extensive infrastructure, instituted sophisticated taxation and regulated prices by stockpiling and selling rice as market conditions dictated. It worked brilliantly, for a while.
Still, don't take my word for it that history is this giant feedback mechanism where something starts small, builds momentum, veers out of control, then flips. The thought was prompted when I learnt that Ray Dalio, arguably the world’s most successful hedge-fund manager, rates The Lessons of History (Simon & Schuster) by Will and Ariel Durant as one of the most influential books he has read.
Great minds and all that because this little 100-page gem is one of several books - along with Conrad's Heart of Darkness, Jane Austen's Emma and much of Wodehouse - to which Bearbull returns time and again. When I am not sure where we are in the great scheme of things, a refresher from the Durants (they were a husband-and-wife team) will generally put me right.
However, on one matter related to wealth and its distribution I would take issue with the Durants. They say: "Since practical ability differs from person to person, the majority of such abilities, in nearly all societies, is gathered in a minority of men. The concentration of wealth is the natural result of this concentration of ability and regularly recurs in history."
The problem with this statement is that it takes no account of the mismatch between the concentration of wealth and the concentration of ability. No one would doubt that the rich are smart. The difficulty arises when it becomes plain that their rewards are out of proportion to their superior abilities, which is why Gary Barlow is getting such flak. It is as if people's abilities are distributed around their average 'normally' (and I use the word in its statistical sense). This means their abilities differ far less than the bosses of FTSE 100 companies and their apologists would have us believe, and really, really clever people are very rare. Simultaneously, however, the distribution of rewards follows a so-called 'power-law' formula, where outsize observations (really fat pay packets, for example) occur much more often than in a normally-distributed pattern.
To the extent that analysis of the credit crunch is telling us lots about power-law distributions in the world of finance, perhaps this will be extended to tell us how wealth could be distributed more equitably.
Meanwhile, we are entering a phase where equality, socialism, regulation, redistribution and taxation are favoured at the expense of freedom, capitalism, wealth creation and the trickle-down effect. The early stages are - and will continue to be - painful; hence the lower investment returns. At some stage, perhaps when the rich and clever stop whingeing, we will reach a new equilibrium that treats equity investors kindly - much like the UK in the late 1950s and early 1960s. Make the best of it. The Durants also tell us that all nations face "a choice between private plunder and public graft". Before too long the effects of the public graft that are a concomitant of equality will be so debilitating as to make a return to the system that ultimately ends in private plunder quite enticing. And so it goes.
