Give them reform or they’ll give you revolt

published 16 July 2014

Nick Hanauer was one of the first people to back Amazon and is a billionaire angel investor. He's been involved with more than 30 businesses over the last 20 years and is a "proud and unapologetic capitalist".

However, he's worried about the levels of inequality in America. Because of this he's making waves with his prediction, which appears in the American magazine Politico, that "unless our policies change dramatically, the middle class will disappear, and we will be back to late 18th-century France".

His choice of date isn't just accidental, as he warns that "there is no example in human history where wealth accumulated like this and the pitchforks didn't eventually come out".

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This isn't a popular view among his fellow "zillionaires", many of whom think he's "bonkers". But Hanauer thinks that they're "living in a dream world". While they might think they're going to know about any looming trouble ahead of time, he points out that "revolutions, like bankruptcies, come gradually, and then suddenly".

One day, "somebody sets himself on fire, then thousands of people are in the streets, and before you know it, the country is burning". When this happens there will be "no time for us to get to the airport and jump on our Gulfstream Vs and fly to New Zealand".

Of course, it's not just fears of a backlash that should be on the zillionaires' minds. Hanauer argues that a smaller gap between rich and poor could be good for business. The "rich guys" should copy Henry Ford, who realised that if he raised workers' wages to $5 a day, his employees would then be able to afford Ford's Model Ts.

Ironically, higher wages could also end up cutting the size of the government. After all, "if the consumer middle class is back, buying and shopping, then it stands to reason you won't need as large a welfare state".

Tim Worstall is unimpressed by these arguments. Writing in Forbes, he notes that Henry Ford didn't use the five-dollar day to boost demand for his cars, but to "reduce the turnover of staff and thus to reduce his training and recruitment bill".

In any case, if you drive up the cost of labour, basic economics suggests that firms will try to adapt by "using it more sparingly". This means fewer people in work and more unemployed. Instead of lobbying for a $15 minimum wage, Hanauer should"create some jobs and thus force everyone else to pay higher wages".

Even though Hanauer's concerns about revolution are clearly overblown, it's easy to feel sympathy for his arguments. According to the latest data, household incomes and wagesin both America and the UKare still stagnating.

The currentAmerican minimum wage of $7.25 iswell below the inflation-adjusted peakof nearly $11 in 1968. On the otherhand, it's easy for things to go too far in the other direction. Until last week, French employers weren't able toprevent their workers from drinkingcider or wine in the workplace.

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Of course, the manufacturers know this, so "they plan obsolescence by installing smart-chips that predetermine the life of your printer, your ink cartridge, your washing-machine, etc".

Meanwhile, they "constantly release new formats, so our current costly phones/computers become obsolete by the time you've... fathomed out how to work them".

Thanks to the internet, "just about every notable public thing we do or say, good or bad, is logged by someone", notes The Sun's Trevor Kavanagh. But now, due to the new "right to be forgotten", those with "guilty consciences" can "erase their record as criminals, child molesters or financial cheats".

Some argue that "everyone is entitled to a private life and that some internet data is unacceptably mischievous, spiteful, inaccurate and damaging". However, "there is an arguably greater right to free speech and our right to know". The internet may be "far from perfect", but it is "a tool for shedding brilliant light, rather than casting shadows".

"Statistics should be banned," says Nigel Nelson in the Mirror. Look at how politicians "use but mostly abuse" them. Recently, Ed Miliband and David Cameron have been "spraying health service figures at each other like... disinfectant". The trouble is, each has "figures to hand to prove the polar opposite of the other's claims and to add to the confusion, both [sets] were accurate".

This may seem odd, but it merely reflects the fact that "politicians use statistics selectively to support whatever point they're making". Meanwhile "the experience of those who use the NHS, and those who work in it, is that it's buckling at the knees".