Sam Wilkin (2015) Wealth Secrets of the 1%. How the Super Rich Made Their Way to the Top.

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Roll up. Roll up. You too could become one of the super-rich. The kind of person that if they won a couple of million on the National Lottery would hand the winnings to their son or daughter and advise their child to buy lunch and keep the change, but don’t give any to some poor bastard, because they’ll probably spend it  on drink and drugs.


I’ve been reading the Sunday Mail’s sly propaganda campaign against Abellio who run the train network in Scotland. It has focused on things that many of us would be familiar with from the days of British Rail. Trains overcrowded and late. The use of rolling stock that is antiquated and dirty. A relatively recent innovation has been to criticise the pay the director running such service gets (I can’t be bothered googling who that is, and does it really matter?) British Rail was a monopoly. Scot Rail a branch of that monopoly had to put its operations out to tender. Are we any better off? The answer is no. And my concern isn’t solely with our poor, dilapidated, rail network. James Meek Private Island: Why Britain Now Belongs to Someone Else shows that in rail, we subsidize other nation’s taxpayers, in this case Holland. Energy companies, water companies, postal services and council housing there has been that old cliché winners and losers. The winners have been the rich and losers the poor, with a regressive tax system taking away the institutions we built and giving them to the rich. Then taxing us again, because they aren’t efficient enough.  The big beast (or elephant) in the room is our NHS. Scotland and England have different systems but both use around a third of our taxation budget to fund the NHS. This is a beneficent monopoly system under siege. And as Nicholas Timmins a biographer of the welfare state observes, post-war America used to come over here looking for ideas on how to run a health service. We’ve flipped that now and look increasingly likely to sell out in the interest or dogma of efficiency savings, that mantra of the rich that penalises the poor and blames them for being poor.

For every Rockefeller rolling up and eating up competition as with Standard Oil in a series of horizontal and vertical acquisitions and mergers there’s a Carlos Slim, who won the right to operate a monopoly in fixed-line telephone services. That might not sound that great. Certainly nowhere near the value of our NHS, but a 2012 OECD report suggested he was the richest man in the world. How did this happen? Simple. Meek touched on it. We can do it or we can let someone else do it for us. Think of the stupidity of not building schools, letting someone else do it, paying them economic rent over an extended period, then complaining later because the walls to schools fall down.   Like cheap and nasty food we always pay more in the long run. Someone eats for free.


SECRET #2. BIGGER IS STILL BETTER. The argument goes that diseconomies of scale set in when a business, such as healthcare gets too big. Or the US military, the biggest user of oil in the world. Nobody much argues with the US military. Or Amazon. Or Walmart. Or Microsoft. This reminded me of Philip Green, that former -or is he still-  darling of the Conservative Party. Green whom they asked for advice, gave him a knighthood. Green notorious diddler of  pensioners, whom like everyone else, he ripped off to fund his extravagant life style in a tax haven. Try this trick at home.  One of his regular suppliers was told she was getting x price, then when she fulfilled her quota was taken aside and told she’d need to take y price. Why? Because Green, like Walmart, Amazon or the US military has the big stick, or leverage. A valid argument here is that the NHS, for example, doesn’t use its leverage to ensure profits for drug companies are not excessive. But for the super wealthy, there’s no such thing as excessive.

SECRET #3. THE WORST PLACE TO DO BUSINESS IS REALLY THE BEST. Perhaps not North Korea. But perhaps soon it may be. Bill Browder Red Notice showed that after the fall of the Berlin Wall, when the USSR economy contracted by 50% and the average return on capital was 5% his company, Hermitage Capital, generated returns of 1500%. What’s not to like? Hans Chung’s mantra that economics is politics applies here. The workshop of the world is China, but he reminds us that like his country, South Korea, these used to be considered economic basket cases. The African continent would be a good bet, but with the moron’s moron as President of the richest country in the world and the likelihood of nuclear war ratcheted up, if fallout doesn’t get us, global warming will. Place your bets.


That old favourite if we give you money we must have a reasonable expectation that we will get it back ( a return on our investment). Unless of course, you’re a too-big-to-fail bank. Let me put that into perspective. Royal Bank of Scotland (RBS) losses since 2008, £50 billion. RBS loss this financial year, around £7 billion. Chancellor of Exchequer Philip Hammond’s budget giveaway to Scotland under the Barnett formula, £350 million, a figure disputed by the Scottish National Party. That’s one bank. Rich people don’t get punished for not paying their way.



If you live in a council house you are scum. If you rent your house from someone else you’re a sucker, throwing away good money after bad. If you own your own house, outright, you’ve got a revenue stream and money to burn, or borrow. But, of course, to be truly rich you don’t just own property. For example, only around 130 of the 1600 fortunes listed in Forbes Global Rich List are in real estate. You own a portfolio of wealth because you own the people on the land and they create wealth for you. In the post-Soviet collapse billionaires mushroomed overnight.


Britain is a good place to live if you’re rich. It’s a county that keeps giving. The United States advisers, such as Steve Bannon’s aim is, like Lenin’s, to destroy the state. A simple formula: give money to the rich in tax breaks and it will trickle down. It doesn’t. Get rid of red tape. That sounds great. What it means is displacing costs onto the poor for things like health care and to everyone else for necessities such as clean air and water. Simple solutions to complex problems always work for the rich. To borrow a phrase it’s ‘dictatorship by tedium’. Nobody pays much attention to Phil Hammond’s budget speech. We’ve heard it all before. Yawn, more tax on whisky. I don’t drink whisky. Less welfare spending. Serves them right.


Sam Wilkes uses the example of Cornelus Vanderbilt in the 1860s taking over the New York & Harlem Railroad. The incestuous banking network J.P. Morgan created described in a report to U.S Supreme Court sounds very Putinish or indeed Trumpish, or both together:

J.P. Morgan (or a partner), a director of the New York, New Haven and Hartford Railroad, causes the company to sell to J.P.Morgan and Company an issue of bonds. J.P.Morgan and Company borrow the money to pay the bonds from the Guarantee Trust Company, of which Mr Morgan (or a partner) is a director. The New Haven spends the proceeds of the bonds in purchasing steel rails from the United States Steel Corporation, of which Mr Morgan (or a partner) is a director. United States Steel Corporation spends the proceeds of the rails in purchasing electrical supplies from the General Electric Company of which Mr Morgan (or partner) is a director…[and so on].

Good luck making those billions. Just remember to love money more than your friends, because you won’t have any. Not really. You’ll have servants and shape-shifting alliances. I could quote Jimmy Reid’s rat-race polemic here, it still stands true.

I’m not with the rats. I’m with the common working man. We find secrets in strange place and, funnily enough, I’m quoting here from a character in another Scottish writer, William McIlvanney’s ‘Laidlaw’ novel, Strange Loyalties:

Any social contract is a two-way agreement. It’s one thing to make the people serve the economy. But the economy must also serve the people. If we disadvantage the present of one section of society, we disadvantage the future of all society. The children of the well-off will not just inherit the wealth of their parents. They will also inherit the poverty of the parents of others. Even self-interest, if it is wise, will concern itself with the welfare of all. Not just the poor will inherit the bad places. All of us will.

One in five children in Scotland are classified as living in poverty. My loyalty is with these people, not the pampered rich, super-rich or mega-rich. Whatever way you want to put it, they haven’t been paying their way. The problem is ours.  Rat race. You better believe it.

James Meek (2014) Private Island Why Britain Now Belongs to Someone Else.

‘Greed is good’ said Gordon Gekko in Wall Street. But that was in 1987. Even then before banks were bailed out with thousands of trillions of electronic money, dollars or pounds, take your pick, greed was only good for a few. I remember the crash. Nothing changed the next day. I felt the same. I was trying to think of a new word for all the money I’d lost and figured a scudillion was good enough. After selling all my assets I was left with the chewed end of a pencil, but that was enough to write a note to myself not to be downhearted, start a new and innovative business empire.

The problem as Meek shows is there is nothing new for us to salivate over. No new shiny IPhone that does all sorts of things that you don’t need. No new car with shiny exterior and nought to sixty in the time it takes to pick your nose. Just the same old rich people stealing from poor people. How do they do it?

It’s a simple trick. Never own. Rent. Don’t own a company, rent it to the next person that wants to buy it. In the meantime, rent the money you need to buy the company that everybody wants but nobody wants to pay for and charge the person that can least afford to pay it the maximum amount.  In effect, tax the poor for the benefit of the rich.

Meek looks at a number of ‘industries’. Privatised mail. This is an easy in. Somebody somewhere has got to deliver the mail. It’s a statutory duty. Six days a week the mail has to be delivered to its destination. He looks at the Dutch and German models for privatisation. They are looking to come here. TNT pay their workers less and they work longer hours. Seems like a good deal for shareholders. Letters and parcels still get delivered. Postal workers lose out on pensions, working conditions, sick pay all the kind of things you’d expect, but hey, who gives a shit about them? The government hasn’t decided that’s the way to go, the market has and the market is alway right. Right?

In Signal Failure, Meek looks at railways. In particular he looks at the West Coast Line and how it was a scudillion over budget. The latest figure was £10.5 billion, but like most conservatives that was a conservative estimate. How did they get that figure. Well, first they sacked everybody that knew about maintenance of rail tracks. Then they hired in experts that had been watching Star Trek repeats and had magic up a new gadget that put trains in the same place at the same time, but they’re not really there. Then they float that idea on the market. Everybody buys shares. Railtrack goes bankrupt. The government steps in and says we didn’t know. Virgin Trains get paid millions for not running trains. Then they decide after a few folk are killed the signalling devices and tracks dating from the steam-train error is no longer fit for purpose. Start again.

Privatised water. This is interesting because too much water and the system grinds to a halt, too little water and…you’ve guessed it. The one consistent is that those that need it -that’s everybody- pay increased prices when either of these two conditions are met. It’s a regressive tax. There are also two ways of financing infrastructure changes. Selling shares (equity) in the company, which dilutes the price of existing shares and theoretically brings down the dividend or  borrow the money and pay interest on that payment. Borrowing means that in the future that money needs to be paid back, but hey in the meantime we’ve got scuddilions and shareholders can slap each other on the back and pay themselves increased dividends. Whoever heard of a shareholder or directors voting against giving themselves a pay rise? Meek gives us the example of Maquarie a hedge-fund attempting to purchase Thames Water with borrowed money that can be offset against the loss that they make when they start trading. Only poor people pay tax.

Meek does chapters on electricity, the NHS and privatized housing. I’m sure you get the gist of it. The rich get rich, the poor get poorer. That’s not economics, that’s ideology at work in Britain.