The 1% vs the 0.1%

Many of you might react to the FT’s story about the “squeezed 1%” by getting out the world’s smallest violin. I think this is a mistake. It reminds us that the damage done by inequality extends beyond the general social and economic harm. It hurts even those who are a long way up the income ladder.

First, some statistical context. Someone at the bottom of the top percentile of incomes is on about £120,000 a year. The top 0.1%, however, gets over £500,000. A very well-paid head-teacher, professor or NHS consultant might just get into the top 1%, but the top 0.1% comprises bankers, very successful entrepreneurs or bosses of big firms. As the IFS’s Paul Johnson says, “someone ‘only’ at the top 1% is much more like the average person than they are like someone at top 0.1%.”

This gulf between the 1% and 0.1% hurts the 1% in three ways.

One is simply that they are aware of it. For the poor, the rich are out of sight, out of mind: in fact, they grossly under-estimate just how much the rich make. The 1%, however, see it more clearly. We compare ourselves to people like us. And the 1% benchmark themselves against the 0.1%. They are often university contemporaries, so one might resent why the no-mark who was no smarter than him is earning five times as much. Or they might compare social utilities. A doctor covered in blood will wonder why he is paid so much less for saving somebody’s life than a banker is paid for – well, what? And of course the 1% sees the 0.1% close up. Just as no man is a hero to his valet, so nobody in the 0.1% is a hero to his underling. Middle-managers have a lively awareness of the short-comings of senior managers, as professors do of the foibles of vice-chancellors.

All this naturally breeds resentment. Experiments (pdf) by Philip Grossman and Mana Komai have confirmed this. They split subjects into rich and poor groups and gave everybody the option of destroying another’s wealth. They found that predations by the poor upon the rich were only a minority of attacks. Instead they found that the rich attacked other rich. This is consistent with reference group theory: we compare ourselves to those like us:

We find strong evidence of within class envy: the rich targeting the rich and the poor targeting the poor. Within the rich community, the target of envy is usually a wealthier subject whose wealth is close to that of the attacker; the attacker may possibly be trying to improve his/her relative ranking.

A second effect of the gap between the 0.1% and 1% is the subject of the FT’s article. The very rich price the reasonably rich out of houses and schools: top private school fees have soared in recent years because they market themselves to the global rich. As Rick wrote:

The painful fact for many people is that their jobs no longer pay enough for them to enjoy what they had been brought up to think of as a middle-class lifestyle. They can’t afford to live in the sort of house in the sort of street where they grew up. They can’t afford to send their children to the schools they went to. And those nice leafy hospitals their parents used to go to, forget it. The super-rich can still afford these things, though, so the prices keep going up, well beyond the reach of the old middle-classes.

The difference between the 1% and the 0.1% doesn’t, however, lie merely in what they can afford. There is perhaps an even bigger difference. A man (it’s usually a man) on £500,000 can reasonably look forward to quitting work or downshifting unless he has arranged his affairs especially badly. Somebody on a low six-figure salary, however, cannot. Instead, they often face years of stress – exacerbated by managerialism’s deprofessionalization of erstwhile professional jobs and to the fact that their inability to afford homes in central London condemns them to long and stressful commutes.

You will of course object here that this is also true for millions of workers far outside the 1%. You’d be bang right. And that’s the point. Class is not merely another yet another identity. It is an objective fact about your relationship to the means of production – about whether this puts you in a position (pdf) of subordination or domination. In many cases – not all but many – even those on six-figure salaries are in subordinate and stressful positions. They are objectively working class, however posh they might fancy themselves to be.

Which is why we need class politics. Whereas identity politics risks splitting us into mutually hostile ghettos, proper class politics has the potential to unite us – well most of us. One of the great marvels of capitalism is that we are so incapable of seeing this.

Comments

[Scratch]

"They split subjects into rich and poor groups and gave everybody the option of destroying another’s wealth. They found that predations by the poor upon the rich were only a minority of attacks. Instead they found that the rich attacked other rich. This is consistent with reference group theory:"

Heh. One presumes reference group theory has not been updated for the last 40-odd years.

[Laurent GUERBY]

Looks like something for this blog about managerialism:

https://www.institutionalinvestor.com/article/b1db3jy3201d38/The-MBA-Myth-and-the-Cult-of-the-CEO

[e]

Great post. Why we showcase any known instance of less than genteel behaviour (thought or deed) among a rank and file while also screeching about a middle class running the shop...you know, divide and rule.

[Matthew Turner]

Are we sure (upper) middle class living has got more expensive? I'm sceptical about holidays (cited in that post you link to) and probably housing (I just don't see how the rich, even inc foreigners, could have bought so many). I suspect a lot of this is people being s bit lower down the distribution that their parents..

[Toby]

Another terrific post. But I’m left with two questions:

1. Is the tension you cite between 1% and 0.1% not the same as between the 0.1% and the 0.01%?

2. Could you expand on why having the 1% identified as working class would help?

The class distinction serves to divide, and is recasting the boundary at the 0.1% level an effort to unite a greater proportion of the population (really very nearly everyone) different from saying that the idea of class politics is not useful after all? Or is it to just form a tougher coalition against the top 0.1%?

[KevinCarson1]

No sympathy at all. Most of the bottom nine-tenths of the top 1% are doing bullshit jobs -- bean-counting, guard labor, gatekeeping -- for the top tenth that wouldn't exist in a rational, egalitarian society. And the managerial stratum, as a whole, is an enormous suck on production workers' wages, whether or not its total income actually equals that of rentiers; simply returning managerial/supervisory salaries to the same share of total labor compensation they received in the '70s would alone raise production workers' pay by a quarter or more. The plantation overseers may not be as rich as the planters, but they're still parasites.

[Brian]

Conversations I’ve overheard in the last couple of years:

“We’re both barristers and we can’t even afford a flat in Tooting”.
“I went to Heathfield and my husband went to Eton. But no chance we can afford private schools for our children”.
“Rich foreigners have bought up the houses in Kensington we should have been living in.”

My friend, an accountant, says there has always been social churn. But this seems different to me. And at some point the foremen for the billionaire class, I hope, will say sod this for a game of checkers.

[Scratch]

The one that shocks me is the professoriate. Casualising and impoverishing one's core ideological cadre strikes me as a little hubristic.

Then again they seem to be almost without exception devoted to feral liberalism which is presumably testament to the accuracy of the 0/1%'s analysis.

[Matthew Turner]

“We’re both barristers and we can’t even afford a flat in Tooting”.

So who is living in Tooting then?

[georgesdelatour]

The 0.1% hurt the rest of us mainly because they’re able to get governments to enact their policy preferences, not because their individual spending decisions heavily skew markets and strain public services. Ultimately there just aren’t enough of them to make that much difference, except in highly localised areas; and anyway, they probably use “the commons” (public transport, state schools, the NHS) far less than the median citizen does.

For instance, the 0.1% may cause property bubbles in certain specific locations (Malibu, Manhattan, San Jose, Chelsea etc). But their individual property purchases aren’t the main driver of the broader property/housing crisis. We’re currently adding around a million people to the UK population every three years. That’s 20 times more people than the entire 0.1%. It’s got to have more of an effect on the elevated demand for homes, the elevated congestion on London’s commuter trains and tubes, and the elevated demand for school places and NHS treatments; even if some of these new Britons come to work in construction, transport, education or health.

[Adrian]

Or we are deep into a structural demographic pattern where an expanded and entitled 'Elite' are in serious competition for the lifestyles they are 'entitled' to.

This situation in history has created some of the most severe political crisis in the history of the west from civil war to bloody revolution, and there is no good reason to suspect that the continuing competition between the established and seeking elites, will ferment even further political and civil strife.

Brexit, an example of a punch up between these elite factions, is already causing severe political strife as the state attempts to reconcile and buy of these competing factions, by hollowing out the classes below to pay for the exercise.

The attempt by the French government to make the non-elite classes pay for the downside of elite supporting policies is not going well, and were is not for the endlessly phlegmatic English constitution and the appeal to ingrained xenophobia, that the non elite classes would be already violently engaged on the streets.

The only way - history says - to escape the effect of this structural position, aside from civil war or revolution to winnow the elite class, the predominate cause of this situation, is through lethal pandemic. Unlikely with modern medicine.

We are at the active beginning of this process, the main crisis is yet to unfold.

[georgesdelatour]

@Adrian

Are you alluding to Peter Turchin’s theory of “Elite Overproduction”? I think he’s on to something.

[Adrian]

@georgesdelatour

Absolutely. Structural Demographics in lockstep with serious crisis. We're in the middle, or at the serious start? The question is going to have to be, will the Elites roll over and allow taxation and redistribution to winnow the wealth, or refuse to budge and see violent breakdown?

Given that it's hard to defuse the crisis through the traditional weapon of inter-state war, because of nuclear weapons, that some form of new highly redistributive social contract will be the only way to avoid serious social dislocation.

However, the unfailing position of the elites to see themselves as the answer and not the problem, mitigates against a non-violent accord?

Given that historically the only way to defuse these crisis is to reduce the overpopulation issue in fairly short order, I can't see any easy way out.

But perhaps climate collapse and the affect on food supply and production might do that anyway?