Picasso’s Les Femmes d’Alger was this week sold in New York for an astonishing $179.3 million – nearly $40 million above the reserve price and a record for any work of art at auction. Whenever these new benchmarks are set, they are hailed as signalling the top of the market. There has been no shortage of such commentary this time around; all puffed up by central bank money printing and ultra-low interest rates, the world is widely said to have gone mad, with some kind of a biblical reckoning just around the corner.
But though this may or may not be true in the short term, it is almost certainly incorrect on any kind of longer term view. The fact is that the world is getting richer, all the time – and at a scarcely imaginable rate, making more and more people into multi-millionaires, and even billionaires. Those for whom money is literally no object are no longer the tiny minority of humanity they once were. They are all over the place. The same also holds true further down the feeding chain. According to estimates in the latest Credit Suisse Global Wealth report, some 4.2 per cent of British adults are now worth more than $1 million (£635,000) and a further 53.3 per cent between $100,000 and $1 million. Lifestyles that were once confined to kings are now enjoyed by millions.
Part of the effect is that worth is progressively defined not by utility, but by scarcity. When luxury is common-or-garden, the truly wealthy have to seek solace in ever more exotic and outrageous forms of exclusivity, whether it be food, drink, property, travel or art.
Even by the standards of Nineteenth Century Britain, when the nouveau riche of the industrial revolution would publicly flaunt their wealth as a way of validating their successes and announcing their arrival on the social stage, the current age of “conspicuous consumption” is unprecedented. And this time around, it’s global. Many of today’s wealthiest hail from the emerging markets of Asia, Latin America, and, increasingly, Africa.
Private jets ferry them to the world’s most desirable places; hot spots such as London and New York become magnets for the super rich, spawning a whole new infrastructure of businesses that specialise in delivering luxury and exclusivity. A programme on the television this week, The World’s Most Expensive Food, detailed a bizarrely frivoluous industry of £500 desserts served at 30,000ft, £5,000 shots of Napoleonic era cognac and £325 cups of coffee.
Many readers will no doubt find these trends vulgar, distasteful, even morally repugnant, not to say dangerously irresponsible. Yet though most ordinary mortals may recoil at such ostentatious spending habits, it is also just the extreme end of a much wider process of enrichment which is progressively raising great swathes of society into levels of wealth their forefathers could barely dream of. The ever expanding ranks of the super rich are symptomatic not so much of growing inequality – though this sub-trend is indeed undeniable – as a wealthier world in the round. This must surely be a good thing.
One of the big lessons for Labour in its election defeat is precisely that. When Ed Miliband depressingly warned voters that this may be the first generation in history that would be poorer than its parents, it was not a message the electorate believed, still less was it one they wanted to hear. In the end, even the mansion tax proved a turn-off, though it would only have affected a tiny minority of people and therefore seemed to play perfectly to the disaffected envious.
The underlying Labour proposition – which was basically that it is better to be poorer and more equal than richer and less equal – was rejected. Pretty much everyone, when it comes down to it, wants to be richer, or at least wealthy enough to be financially secure.
And virtually all aspirational people understand instinctively that this is not an outcome likely to be achieved via social levelling, or crude redistributional engineering. Nearly all human advancement comes from clever, talented people striving for betterment and supremacy. It is frequently a ruthless, Darwinian process. We may not like it very much, but it is part of the human condition.
Much forecasting turns out to be wrong, especially the type which simply extrapolates from the past. Yet there is one such forecast, subsequently dubbed “Moore’s Law”, which has proved spectacularly correct. In 1975, Gordon Moore, then head of research at Fairchild Semiconductor, predicted that the number of semi-conductors that could fit on to a single computer chip would roughly double every year. Fifty years later, his prediction still holds true. Computing power doubles annually. This extraordinary, wealth-enhancing advance was driven not by starry eyed utopianism, but by the profit motive, the desire for improvement, and by viciously competitive commercial endeavour.
Mr Moore was interviewed recently by the New York Times. In all respects he sounded a wise and decent man. Yet his most perceptive observation was perhaps a social one. There are two societies, he said, divided by education. The worry about the modern world is not the rise of the super rich, or its manifestation in the extraordinary prices being paid for art. Inequality doesn’t matter if most people are getting richer. What matters is that the world is fast dividing into those with skills, and those without them. Attacking and undermining wealth creation won’t address this problem, but likely only make it even worse.