Wednesday 7 April 2010

Wealth and (social) mobility

My brother Marek kept hold of the Guardian for 27 January this year, which published key findings from a survey on wealth, earnings and inequality in the UK - the Hills Report. This formed a double-page spread - fascinating read for those interested in society and economics. The graphs also offer a useful yardstick for UK readers to find their place in the socio-economic hierarchy.

The first part, on wealth, is here.

The second part, on earnings, is here.

An article about rising inequality is here.

Moving from the UK to Poland in the 1990s was a smart thing to do in socio-economic terms. I don't know what our joint family income would have been had we stayed in London to this day; I can only guess. Housing and school fees would probably have eaten up 75% of what we earned. On the basis of that guess, I estimate that we'd have found ourselves somewhere between the 60th and 65th centile in terms of earns and wealth. Here in Poland, we fall into the top rate tax bracket, along with 0.7% of taxpayers.

Poland is socially much more fluid than the UK, where rigid class distinction still prevents those 'with the wrong accent' from becoming too rich or too powerful. Exceptions, as always, prove the rule. If communism did Poland one service, it was to ensure that today the sons and daughters of lowly peasants can rise through education, good fortune and sheer hard work to run banks, universities, media empires or manufacturing industry. Simply being a scion of an old magnat family by itself gets you nowhere in today's Poland - you have to compete against very determined and talented young people; there's none of the infrastructure of privilege that effortlessly propels Britain's equivalents of the Radziwiłłowie, Czartoryscy, Potoccy or Sapiehowie to the very top and keeps them there. Poland is classless. There is no accent barrier (vocabulary yes; accent no). Meeting someone called Ziutosław Krowa* who turns out to be the go-getting 39 year-old president of a group of IT companies listed on the Warsaw and New York stock exchanges comes as no surprise. Pan prezes Krowa is neither patronised nor marginalised by the old aristocracy or descendents of Poland's pre-war upper-middle classes.

But like Britain after the Thatcher revolution that turned around the post-war trend of egalitarianism (a revolution wholeheartedly continued by Blair and Brown), Poland has become less equal. In 1976, the richest 1% of Brits enjoyed 4.2% of the nation's total income. By 2000 it had shot up to 10%. In 1989, Poland, along with Japan, was the most equal country on earth in terms of disparity of wealth between highest and lowest quintiles of society. Today (please guide me to any stats!) I'd say that Marxist egalitarianism has all but vanished. Lecturers and doctors are still relatively poor compared to their British counterparts though.

In Russia and the rest of the former USSR, the rich-poor gulf is an order of magnitude greater than in Poland. Russia has 37 billionaires in the Forbes list of the world's 1,000 wealthiest people, Poland (population four times smaller) has only four. The UK (stability, inherited wealth, population two and half times smaller than Russia's) has 29.

The Hills Report also makes a stark correlation between religion and wealth in Britain (something the Guardian's online article only alludes to in a politically-correct way). Sikhs and Hindus, for example, are several times wealthier than Muslims. Britain's richest religious group are the Jews: white Christians being twice as wealthy than those without religious affiliation.

It will be interesting to repeat the Hills report in 2054, half a century after the beginning of the greatest migration that the UK has ever experienced. Will Poles repeat the success of their Jewish and Indian predecessors? Or languish like the descendents of Caribbean or Bangladeshi migrants? Will they make the most of the opportunities that the UK's entrepreneur-friendly business environment offers them, or will they rue missing out on the economic boom that Poland experienced in the 2010s and '20s?

Economics is a complex science. Three laws of physics can describe 99% of all physical phenomena while 99 laws of economics manage to describe just 3% of all economic phenomena. This is because each one of the 6.8 billion humans on this planet is not entirely rational when it comes to his or her behaviour in the market place. One thing that is (almost) certain is that most people will trade money for social status. Would you rather be earning $1,000,000 a year in a country where the average salary was $1,500,000, or $100,000 a year where the average salary was a mere $10,000? I'll let you be the judge.

* A fictitious name; the equivalent of a Fred Snutt, son of a retired phlegm-collector from Bermondsey.

5 comments:

student SGH said...

A great post Michael, I told you you should write more stuff like this.

I think ineuquality itself in unnatrual, but the state should provide young people equal opportunities to develop. The reason I cannot condemn PRL is that my both parents come from very poor family. All of my grandparents completed only seven-year primary schools. Only one of my grandfather had a chance to continue education, but the WW2 broke out that year. Thanks to "unpaid" education and health service my parents could finish high schools and then study at universities. At this studia wieczorowe unlike today were tuition-free, but my father had to work and attend classes in teh evening so that his family could make ends meet. But after all they received education and it paid off.

check the newest report in yesterday's issue of Polityka (not available online yet) about inequality in Poland. The good gauge is Gini coefficient. In Poland it is 32 now, in 1989 it was around 22, so quite naturally in market economy income dispersion rose.

Lecturers and doctors are still relatively poor compared to their British counterparts though.

Do Polish scholars deserve higher salaries? And many professors who moonlight on five universities don't get paid peanuts, exactly like doctors who work in a few hospitals and private heatlh cenres and gripe about their low earnings.

I am grateful our country didn't end up like Russia. There inequality and rule of oligarchs and mob are real problems, in Poland everythign looks alright, better than in Britain I suppose.

I'd earn $100,000 where the average salary is $10,000. People tend to comapre against themselves other people, so relaityve wealth is what matters.

Michael Dembinski said...

Inequality is part and parcel of what it is to be a mammal. Civilisation is about keeping those alpha males in check!

student SGH said...

I think ineuquality itself in unnatrual

Sorry once again for writing in haste. What I wanted to write was:

I think inequality itself is natural.

To cite one of Polish poets:
Żeby zapanowała równość, trzeba wszystkich wdeptać w g*wno

Unknown said...

Hi,

I think Poland moves towards the UK, as graduates of SGH, AGH, are really forming cliques and then running the country.

Add to that the fact that free higher education is running to an and and younger generation is having student debts forced on them - and you'll see the repeat of UK's case, as only the privileged and rich could afford good or great education - the rest could only afford an "adequate" one.

But it's still true, even being raised in an underprivileged family you can still achieve much in Poland, if you're talented enough and work hard.

Marcin

student SGH said...

about mending ways: rather to quote one of Polish poets, I don't remember who, google doesn't help me as well

What a distinction, I'm going to become a member of a clique ruling this country, whose representatives are in charge of biggest institutions.

Marcin, the fact is that graduates of Foreign Exchange Faculty (in Poland populars called HaZet) took many of executive positions in corporations after 1989. But it was just because this very faculty provided them with knowlegde essential to hold those positions effectively. They have learnt two foreign languages on decent level, they often went on scholarships abroad and on this faculty the could hear the truth about capitalist economy, or in other words the undistorted economics was taught. And indeed the tie-ups between the former FT students remain very close, they have their own club, meetings, maybe even membership cards. And believe me, many people from extremely poor families who experienced social advancement in PRL got in and didn't waste their chance to stand out. At least they don't owe their career their parents, but their accomplishment are mostly a result of their sheer hard work. (not a secret that there plenty of secret service agents among "Red Fortress" students).