1 00:00:02,114 --> 00:00:04,714 This programme contains some strong language. 2 00:00:04,714 --> 00:00:07,354 'The super-rich are taking over. 3 00:00:07,354 --> 00:00:11,794 '85 people now own the same as half the world's population.' 4 00:00:11,794 --> 00:00:14,634 You don't get this stuff at Ikea, do you?! 5 00:00:16,794 --> 00:00:19,754 'Never before has money been so polarised.' 6 00:00:21,474 --> 00:00:24,474 People are struggling to pay their mortgages, pay their rent, 7 00:00:24,474 --> 00:00:26,194 to eat, to pay utility bills. 8 00:00:26,194 --> 00:00:30,874 The 21st century will be the most unequal period in human history. 9 00:00:32,194 --> 00:00:34,514 'My name's Jacques Peretti and last time 10 00:00:34,514 --> 00:00:37,874 'I revealed how billionaires were wooed to this country.' 11 00:00:39,274 --> 00:00:42,794 Explain how important Britain is as a tax haven for the super-rich. 12 00:00:42,794 --> 00:00:44,234 It's very important, 13 00:00:44,234 --> 00:00:47,314 it's the most attractive location now on the planet. 14 00:00:47,314 --> 00:00:50,514 'But the plan to bring them here was flawed.' 15 00:00:50,514 --> 00:00:52,834 A model which is based on a top 1% 16 00:00:52,834 --> 00:00:57,714 generating and consuming all of the growth simply isn't sustainable. 17 00:00:57,714 --> 00:01:01,274 'This time we'll see how, far from happening by chance, 18 00:01:01,274 --> 00:01:04,554 'soaring inequality was a business opportunity 19 00:01:04,554 --> 00:01:08,354 'for the wealthy to make money out of us.' 20 00:01:08,354 --> 00:01:11,514 You would invest a lot in the super-rich 21 00:01:11,514 --> 00:01:14,754 and you would invest also in companies that serve the super-poor. 22 00:01:14,754 --> 00:01:17,714 What you see during that period is a series of... 23 00:01:17,714 --> 00:01:20,714 fairly intentional policies 24 00:01:20,714 --> 00:01:24,394 designed to guarantee that most people are in debt. 25 00:01:25,474 --> 00:01:29,074 Britain's inequality has risen every year this century. 26 00:01:29,074 --> 00:01:31,434 It's driving society apart 27 00:01:31,434 --> 00:01:34,754 and now even the super-rich could be in trouble. 28 00:01:34,754 --> 00:01:36,234 So are the pitchforks coming? 29 00:01:36,234 --> 00:01:39,474 If things keep going the way they are, for sure they're going to come. 30 00:01:39,474 --> 00:01:41,874 - ALL CHANT: - ..united will never be defeated! 31 00:01:50,154 --> 00:01:52,234 This is London Fashion Week - 32 00:01:52,234 --> 00:01:54,674 part of the super-rich social calendar. 33 00:01:57,194 --> 00:02:00,194 But this isn't simply an invite-only fashion event. 34 00:02:00,194 --> 00:02:02,954 It's a glimpse into a world that wouldn't exist without 35 00:02:02,954 --> 00:02:04,874 the new extremes of wealth. 36 00:02:09,594 --> 00:02:13,434 A dress can cost £100,000 at one of these shows. 37 00:02:15,874 --> 00:02:19,834 That's five years' worth of income for an average British household. 38 00:02:21,554 --> 00:02:22,834 Is that really right, 39 00:02:22,834 --> 00:02:26,314 that people should be spending £100,000 on a dress? 40 00:02:26,314 --> 00:02:29,674 If you can afford it, why not? 41 00:02:29,674 --> 00:02:31,474 They can only charge these prices 42 00:02:31,474 --> 00:02:34,114 because of the soaring wealth of their customers. 43 00:02:35,194 --> 00:02:38,194 The super-rich inhabit their own independent state. 44 00:02:38,194 --> 00:02:40,274 It's a bubble - an exclusive bubble. 45 00:02:45,474 --> 00:02:49,474 Nowhere is this exclusivity more apparent than on the polo circuit. 46 00:02:54,914 --> 00:02:58,234 This is Cirencester Park in Gloucestershire. 47 00:03:00,674 --> 00:03:03,994 You need to be a multimillionaire to be a member of this elite. 48 00:03:03,994 --> 00:03:06,034 You've got to have a certain amount of talent 49 00:03:06,034 --> 00:03:09,034 but the horse is a really important part of the job. 50 00:03:09,034 --> 00:03:12,394 The cost of the horses, they vary from, you know, 5,000 51 00:03:12,394 --> 00:03:14,594 up to 250,000. 52 00:03:14,594 --> 00:03:16,914 You need a lot, don't you? because they get knackered. 53 00:03:16,914 --> 00:03:19,194 Yeah, so today I've brought six horses. 54 00:03:20,794 --> 00:03:22,154 And that's a goal. 55 00:03:22,154 --> 00:03:25,234 Ladies and gentlemen, big round of applause for that. 56 00:03:26,234 --> 00:03:29,674 A full team of polo ponies can cost £10 million. 57 00:03:29,674 --> 00:03:32,434 And that's before you've flown the professional riders in 58 00:03:32,434 --> 00:03:33,754 from Argentina. 59 00:03:35,394 --> 00:03:39,714 It's this kind of exclusivity which reinforces the growing separation 60 00:03:39,714 --> 00:03:41,914 between the wealthy and the rest of us. 61 00:03:43,434 --> 00:03:45,754 I wanted to know what the people here thought 62 00:03:45,754 --> 00:03:49,154 about the growing inequality in Britain. 63 00:03:49,154 --> 00:03:50,714 This is Countess Bathurst, 64 00:03:50,714 --> 00:03:53,794 who owns the land on which this event is taking place. 65 00:03:54,994 --> 00:03:58,234 There's an increasing concern about the polarisation of wealth. 66 00:03:58,234 --> 00:04:00,514 - Yeah. - What do you feel about it? 67 00:04:00,514 --> 00:04:04,594 I think that human nature, 68 00:04:04,594 --> 00:04:06,554 BY human nature, 69 00:04:06,554 --> 00:04:08,754 will always be a little envious 70 00:04:08,754 --> 00:04:12,234 of those who have more than they do. 71 00:04:13,554 --> 00:04:16,514 And I think that there is an element of envy, 72 00:04:16,514 --> 00:04:20,074 and I think that there is also an element of, shall we say, 73 00:04:20,074 --> 00:04:25,194 not realising what it means to be somebody like us. 74 00:04:25,194 --> 00:04:28,354 You know, we do work incredibly hard. 75 00:04:28,354 --> 00:04:31,594 I think that people don't realise what a responsibility it is, 76 00:04:31,594 --> 00:04:34,594 they don't realise sometimes what a worry it can be. 77 00:04:37,994 --> 00:04:41,314 The people on this march also have worries. 78 00:04:41,314 --> 00:04:44,274 They're worrying about how to pay their bills. 79 00:04:45,714 --> 00:04:47,714 The phrase that comes up again and again 80 00:04:47,714 --> 00:04:51,634 when you talk to people here is the 1%. 81 00:04:51,634 --> 00:04:55,554 What have the 1% done to the rest of Britain, 82 00:04:55,554 --> 00:04:57,594 in terms of their wealth escalating 83 00:04:57,594 --> 00:05:01,354 and the lives and living conditions of everyone else stagnating? 84 00:05:03,594 --> 00:05:07,394 We're going backwards, very quickly. Back to Victorian times. 85 00:05:07,394 --> 00:05:10,754 I think really before long it'll be pulling your forelock 86 00:05:10,754 --> 00:05:12,954 and, "Please, sir, I want some more." 87 00:05:15,594 --> 00:05:17,194 People are incensed. 88 00:05:17,194 --> 00:05:18,954 But they'd be more incensed still 89 00:05:18,954 --> 00:05:22,634 if they realised that this inequality wasn't an accident. 90 00:05:27,354 --> 00:05:30,074 The inequality that's made so many people angry 91 00:05:30,074 --> 00:05:32,274 didn't happen by chance. 92 00:05:32,274 --> 00:05:34,034 It was a plan. 93 00:05:34,034 --> 00:05:38,554 The growing prosperity of the super-rich is directly linked 94 00:05:38,554 --> 00:05:42,354 to the austerity we've been suffering for the last five years. 95 00:05:45,754 --> 00:05:49,594 The plan began ten years ago here in New York, 96 00:05:49,594 --> 00:05:54,234 at what was then the biggest bank in the world - Citigroup. 97 00:05:54,234 --> 00:05:57,154 Years before we all started to become concerned 98 00:05:57,154 --> 00:05:59,954 and critical of growing inequality, 99 00:05:59,954 --> 00:06:02,554 the people in this building had worked out 100 00:06:02,554 --> 00:06:05,114 how to turn it into a business opportunity. 101 00:06:06,434 --> 00:06:09,074 It was set out in this document for investors. 102 00:06:11,074 --> 00:06:14,394 Tobias Levkovich was a key strategist at the bank. 103 00:06:15,914 --> 00:06:18,554 Could you tell me what the report said? 104 00:06:18,554 --> 00:06:21,394 Basically it suggested that wealth was concentrated 105 00:06:21,394 --> 00:06:24,834 amongst upper-income Americans, and particularly the top 1%, 106 00:06:24,834 --> 00:06:27,954 and, if you really want to get technical, the top 0.1%. 107 00:06:27,954 --> 00:06:30,434 There's always been the haves and the have-nots, 108 00:06:30,434 --> 00:06:33,234 but today you have the haves, the have-nots and the have-yachts. 109 00:06:33,234 --> 00:06:36,874 The report told investors that massive inequality 110 00:06:36,874 --> 00:06:39,674 was THE cash cow of the 21st century. 111 00:06:39,674 --> 00:06:43,434 At the top end they were to put their money into industries 112 00:06:43,434 --> 00:06:47,394 that serve the new global elite, like jewellery and yachts. 113 00:06:48,474 --> 00:06:51,474 It was unapologetic economic opportunism. 114 00:06:52,554 --> 00:06:55,794 Right at the beginning it says, "This imbalance in inequality..." 115 00:06:55,794 --> 00:06:59,514 talking about what's coming... "expresses itself to the public 116 00:06:59,514 --> 00:07:01,954 "in the standard scary global imbalances," 117 00:07:01,954 --> 00:07:05,634 you know, basically inequality, and it says, "We worry less." 118 00:07:05,634 --> 00:07:07,474 If you're telling people in 2005, 119 00:07:07,474 --> 00:07:09,834 "This trend is going to be continuing, 120 00:07:09,834 --> 00:07:13,434 "and we worry less about social unrest or backlash issues, 121 00:07:13,434 --> 00:07:15,474 "here you can buy these things 122 00:07:15,474 --> 00:07:18,474 "and be in pretty good shape for the next five to ten years," 123 00:07:18,474 --> 00:07:20,954 investors kind of like those long calls. 124 00:07:20,954 --> 00:07:23,034 You can put it away, sleep at night 125 00:07:23,034 --> 00:07:25,434 and know that at the end of it you'll have money. 126 00:07:25,434 --> 00:07:28,914 Selling to the super-rich was no surprise. 127 00:07:28,914 --> 00:07:32,674 But their analysis went on to deliver a more shocking revelation. 128 00:07:33,754 --> 00:07:36,234 Citigroup realised that there was a huge opportunity 129 00:07:36,234 --> 00:07:38,154 at the bottom of society. 130 00:07:38,154 --> 00:07:41,114 A chance to make billions from poor people. 131 00:07:44,274 --> 00:07:49,114 Financial analyst Chrystia Freeland has followed the strategy closely. 132 00:07:49,114 --> 00:07:53,954 What the Citigroup analysts observed was that the economy 133 00:07:53,954 --> 00:07:56,554 was dividing into two sectors, 134 00:07:56,554 --> 00:07:58,954 and their investing thesis was, 135 00:07:58,954 --> 00:08:02,114 in the part of the economy that this 1% was active in, 136 00:08:02,114 --> 00:08:04,594 you were going to see tremendous growth. 137 00:08:04,594 --> 00:08:07,194 And you would also see growth in the part of the economy 138 00:08:07,194 --> 00:08:09,874 that caters to poor people, because, basically, 139 00:08:09,874 --> 00:08:14,754 they saw society being divided into the 1% and everybody else. 140 00:08:14,754 --> 00:08:18,434 And so, on this investing thesis, you would invest a lot 141 00:08:18,434 --> 00:08:22,234 in any sectors of the economy that served the super-rich, 142 00:08:22,234 --> 00:08:25,954 in luxury-goods companies, in super-high-end real estate, 143 00:08:25,954 --> 00:08:27,314 that kind of thing, 144 00:08:27,314 --> 00:08:29,434 and you would invest also in companies 145 00:08:29,434 --> 00:08:32,354 that served the super-poor, so maybe in a Walmart. 146 00:08:34,794 --> 00:08:38,554 In this new world, there was someone left out of the equation - 147 00:08:38,554 --> 00:08:42,154 the middle class, who'd be broke. 148 00:08:42,154 --> 00:08:45,274 You had a theory which was called the hourglass theory. 149 00:08:45,274 --> 00:08:47,394 Could you tell me what that theory is? 150 00:08:47,394 --> 00:08:49,594 That the middle class would get squeezed the most. 151 00:08:49,594 --> 00:08:52,754 In other words, the lower end of the income spectrum 152 00:08:52,754 --> 00:08:55,194 would still get opportunities. 153 00:08:55,194 --> 00:08:57,514 On the other side, you would have the wealthier ones 154 00:08:57,514 --> 00:09:00,354 continue to invest and be able to take advantage of opportunities 155 00:09:00,354 --> 00:09:02,674 because they had the capital to risk. 156 00:09:02,674 --> 00:09:04,154 Do you not feel, though, Tobias, 157 00:09:04,154 --> 00:09:07,154 any kind of responsibility or guilt for the fact 158 00:09:07,154 --> 00:09:11,834 that you identified not just rich people but poor people to make money 159 00:09:11,834 --> 00:09:15,074 out of inequality and then gave that advice to your clients? 160 00:09:15,074 --> 00:09:16,394 You can sit there and say, 161 00:09:16,394 --> 00:09:20,554 "Well, you know, this may not meet everybody's 162 00:09:20,554 --> 00:09:23,674 "social happiness criteria but I have to deliver results 163 00:09:23,674 --> 00:09:25,434 "or they're going to take that money 164 00:09:25,434 --> 00:09:27,674 "and give it to somebody else for the results." 165 00:09:27,674 --> 00:09:30,634 So it's not cynical, it's very practical. That is our job. 166 00:09:30,634 --> 00:09:33,274 We're supposed to try to help them make money. 167 00:09:33,274 --> 00:09:35,514 MUSIC: La Vie En Rose by Louis Armstrong 168 00:09:39,834 --> 00:09:42,754 The most extraordinary thing about the Citigroup report 169 00:09:42,754 --> 00:09:45,274 is just how accurate it proved to be. 170 00:09:45,274 --> 00:09:48,714 Ten years later, the hourglass society is here. 171 00:09:50,114 --> 00:09:53,354 And this is one of the best cities in the world to see it in action. 172 00:09:53,354 --> 00:09:54,754 London. 173 00:09:56,714 --> 00:09:58,794 This is Mount Street in Mayfair, 174 00:09:58,794 --> 00:10:01,554 the most exclusive high street in the country. 175 00:10:01,554 --> 00:10:05,114 And at the Christmas party they're celebrating a bumper year. 176 00:10:07,194 --> 00:10:09,514 You're like the modern family butcher, aren't you? 177 00:10:09,514 --> 00:10:11,994 Like, the old family butcher would be on a high street 178 00:10:11,994 --> 00:10:13,274 and you're on a high street 179 00:10:13,274 --> 00:10:15,474 but you're, like, Russian oligarchs and... 180 00:10:15,474 --> 00:10:17,314 You know, we do the stats every year, 181 00:10:17,314 --> 00:10:19,674 we look through the rich list, and we do... 182 00:10:19,674 --> 00:10:21,794 I think last year we did 50% 183 00:10:21,794 --> 00:10:24,074 of the top 100 of the rich list. 184 00:10:24,074 --> 00:10:26,714 - Really? - It's insane. - Wow. - It's absolutely insane. 185 00:10:26,714 --> 00:10:28,434 You know, Kensington Palace Gardens, 186 00:10:28,434 --> 00:10:30,754 which is the most expensive street in the world - 187 00:10:30,754 --> 00:10:32,354 residential street in the world - 188 00:10:32,354 --> 00:10:34,474 we supply half the houses down there. 189 00:10:36,354 --> 00:10:39,354 And the next stop - a cigar shop where rich clients 190 00:10:39,354 --> 00:10:42,914 are allowed to sample the wares INSIDE. 191 00:10:42,914 --> 00:10:46,554 A lot of people, especially at the high end of the luxury-goods market, 192 00:10:46,554 --> 00:10:49,354 have said things have actually really picked up. 193 00:10:49,354 --> 00:10:51,034 We've got some very select customers 194 00:10:51,034 --> 00:10:52,714 from all over the world - 195 00:10:52,714 --> 00:10:55,394 from the Americas, from Russia, from China - 196 00:10:55,394 --> 00:10:57,714 that haven't really been affected. 197 00:10:58,754 --> 00:11:01,714 So, gentlemen, when you're not smoking cigars, what do you do? 198 00:11:01,714 --> 00:11:05,314 Commodity trading and mining, and the brandy business. 199 00:11:05,314 --> 00:11:06,834 What about you, my friend? 200 00:11:06,834 --> 00:11:08,474 I own a telecoms company. 201 00:11:08,474 --> 00:11:10,354 - You own a telecoms company? - Yes. 202 00:11:20,034 --> 00:11:23,274 Just three miles away from the exclusivity of Mount Street 203 00:11:23,274 --> 00:11:25,314 is the other end of the hourglass. 204 00:11:25,314 --> 00:11:26,714 This is Brixton. 205 00:11:30,274 --> 00:11:32,434 The last ten years have been a bonanza 206 00:11:32,434 --> 00:11:35,194 for industries that target the poor. 207 00:11:35,194 --> 00:11:38,674 Gambling, discounters and payday loans. 208 00:11:38,674 --> 00:11:41,314 Money borrowed to make ends meet. 209 00:11:43,074 --> 00:11:45,394 Deborah Hargreaves from the High Pay Centre 210 00:11:45,394 --> 00:11:49,434 has examined how the hourglass has changed our landscape. 211 00:11:49,434 --> 00:11:52,994 The vast majority of people haven't had a pay rise for ten years, 212 00:11:52,994 --> 00:11:56,274 so their pay has not kept up with inflation. 213 00:11:56,274 --> 00:11:59,714 We've channelled all the rewards to those at the very top. 214 00:11:59,714 --> 00:12:03,674 And this has given us a whole range of different industries 215 00:12:03,674 --> 00:12:08,074 associated with... almost with poverty, really. 216 00:12:08,074 --> 00:12:11,754 But to find out how this unequal society was created, 217 00:12:11,754 --> 00:12:14,354 you need to go back to the 1970s. 218 00:12:14,354 --> 00:12:16,234 MUSIC: 20th Century Boy by T.Rex 219 00:12:19,354 --> 00:12:21,874 It was the high watermark of economic equality. 220 00:12:21,874 --> 00:12:24,594 The most egalitarian decade in history. 221 00:12:26,554 --> 00:12:30,714 The wealthiest 1% earned less than 6% of the national income - 222 00:12:30,714 --> 00:12:33,074 its lowest recorded level. 223 00:12:37,114 --> 00:12:40,754 Bankers' pay was on a par with teachers' and GPs'. 224 00:12:40,754 --> 00:12:43,714 Aspiration was shared across society. 225 00:12:44,994 --> 00:12:48,714 Power to the people! 226 00:12:48,714 --> 00:12:51,554 Utopianism was in the air. 227 00:12:51,554 --> 00:12:55,434 Citizen Smith believed revolution was just around the corner. 228 00:12:56,434 --> 00:12:58,794 You, the survivors of the Tooting Popular Front, 229 00:12:58,794 --> 00:13:01,754 shall inherit my fiery legacy. 230 00:13:01,754 --> 00:13:06,994 You will be lifted into the hearts of the proletariat! 231 00:13:06,994 --> 00:13:10,314 Eh, theirs will be the airy excesses of power! 232 00:13:12,434 --> 00:13:15,434 But there wasn't a utopia just around the corner. 233 00:13:17,434 --> 00:13:20,194 Cracks in society were already showing. 234 00:13:22,194 --> 00:13:25,274 The 1970s brought us strikes and inflation. 235 00:13:29,274 --> 00:13:32,674 It began with the oil crisis of 1973. 236 00:13:32,674 --> 00:13:36,034 As energy prices rose, Britain endured blackouts 237 00:13:36,034 --> 00:13:38,114 and the three-day week. 238 00:13:38,114 --> 00:13:39,194 The night before last 239 00:13:39,194 --> 00:13:41,474 I spent the evening with candles and a lovely fire. 240 00:13:41,474 --> 00:13:44,234 Really, it's the sort of evening I'd like to spend more often, 241 00:13:44,234 --> 00:13:46,594 I shall do it even when we have the electricity back. 242 00:13:46,594 --> 00:13:48,754 The post-war boom was over. 243 00:13:48,754 --> 00:13:51,674 Raw capitalism was on its way back. 244 00:13:51,674 --> 00:13:54,274 And it was to start with the asset strippers, 245 00:13:54,274 --> 00:13:56,474 dismantling companies for profit. 246 00:13:56,474 --> 00:13:58,154 Men like Sir James Goldsmith. 247 00:13:58,154 --> 00:13:59,994 ..Sir James, you've made your reputation 248 00:13:59,994 --> 00:14:02,554 - as a buyer and seller of companies. - That is your impression. 249 00:14:02,554 --> 00:14:05,114 - Not only is it your impression... - Within the food industry. 250 00:14:05,114 --> 00:14:07,314 ..no-one, not even you, not even our worst enemies, 251 00:14:07,314 --> 00:14:08,874 could suggest we're unsuccessful. 252 00:14:11,394 --> 00:14:14,074 What had been a stable and egalitarian society 253 00:14:14,074 --> 00:14:18,074 at the start of the decade was unravelling fast. 254 00:14:18,074 --> 00:14:20,194 The post-war certainties of full employment 255 00:14:20,194 --> 00:14:22,874 and rising prosperity were gone. 256 00:14:22,874 --> 00:14:27,634 This insecurity was about to be harnessed into a new ideology. 257 00:14:33,994 --> 00:14:37,074 New York - the money capital of the planet. 258 00:14:38,394 --> 00:14:43,114 In the 1970s, a new kind of capitalism was about to emerge here. 259 00:14:43,114 --> 00:14:45,714 One which would exploit this volatile world. 260 00:14:47,714 --> 00:14:50,714 It was formulated by two economists, 261 00:14:50,714 --> 00:14:54,394 Fischer Black and Myron Scholes. 262 00:14:56,834 --> 00:14:59,554 It was known as the Black-Scholes equation. 263 00:15:07,274 --> 00:15:09,994 Not many things that we say change the world 264 00:15:09,994 --> 00:15:11,994 actually do change the world. 265 00:15:11,994 --> 00:15:13,674 But this formula did. 266 00:15:15,914 --> 00:15:18,354 It created that over there - that city. 267 00:15:18,354 --> 00:15:21,394 Created the financial world that we live in today. 268 00:15:25,314 --> 00:15:28,194 What the Black-Scholes equation did was to give traders 269 00:15:28,194 --> 00:15:31,954 a formula for predicting what a stock would be worth in the future. 270 00:15:33,194 --> 00:15:35,674 It was gambling - with a system. 271 00:15:38,514 --> 00:15:40,914 But to win big, you needed to bet big. 272 00:15:43,194 --> 00:15:47,114 They said that you need not to be afraid of risk, 273 00:15:47,114 --> 00:15:48,474 but to embrace it. 274 00:15:49,634 --> 00:15:52,514 They said the more you risk, the more you win. 275 00:15:53,754 --> 00:15:57,594 The equation gave Wall Street a new model for trading. 276 00:15:57,594 --> 00:15:58,954 With this information, 277 00:15:58,954 --> 00:16:03,114 traders could bet billions of dollars on what were called options, 278 00:16:03,114 --> 00:16:05,234 the right to buy an item in the future. 279 00:16:06,434 --> 00:16:08,954 These were very brilliant mathematicians, 280 00:16:08,954 --> 00:16:11,834 maths professors, who were able to build this structure. 281 00:16:11,834 --> 00:16:16,034 It assumes certain things about the cost of capital, 282 00:16:16,034 --> 00:16:19,394 the changes in price of the product that you've optioned to buy. 283 00:16:20,674 --> 00:16:23,954 Within a few years, new financial markets for options 284 00:16:23,954 --> 00:16:28,834 and derivatives boomed, powered by the algebra of Black and Scholes. 285 00:16:30,034 --> 00:16:32,394 Today the market for derivatives alone 286 00:16:32,394 --> 00:16:34,514 is worth one quadrillion dollars, 287 00:16:34,514 --> 00:16:37,954 equivalent to ten times the value of all the goods 288 00:16:37,954 --> 00:16:40,034 produced across the planet. 289 00:16:40,034 --> 00:16:42,794 The higher the risk, the higher the reward. 290 00:16:42,794 --> 00:16:44,714 But you have to be able to take the risk. 291 00:16:44,714 --> 00:16:46,714 You have to be able to take the chance 292 00:16:46,714 --> 00:16:48,354 that you might lose the money. 293 00:16:48,354 --> 00:16:50,554 Getting to greater and greater wealth, 294 00:16:50,554 --> 00:16:52,994 you have the ability to take on more risk. 295 00:16:52,994 --> 00:16:57,074 The Black-Scholes equation had triggered an economic revolution. 296 00:16:57,074 --> 00:17:01,114 And it was all based on the idea that risk was good. 297 00:17:02,994 --> 00:17:05,914 But Black and Scholes was only the beginning. 298 00:17:05,914 --> 00:17:09,794 Risk was about to be rolled out beyond the financial markets 299 00:17:09,794 --> 00:17:11,514 and into our lives, 300 00:17:11,514 --> 00:17:14,794 affecting the future of everyone in the world. 301 00:17:16,634 --> 00:17:21,354 It was down to one man, rooted in the Wall Street of his time. 302 00:17:21,354 --> 00:17:25,114 I was the guy that drank hard and smoked hard 303 00:17:25,114 --> 00:17:28,434 and...did everything hard, you know? 304 00:17:28,434 --> 00:17:31,674 Robert Dall was a trader at Salomon Brothers - 305 00:17:31,674 --> 00:17:34,554 one of the largest brokers in New York. 306 00:17:34,554 --> 00:17:37,194 He was an expert in the mortgage market, 307 00:17:37,194 --> 00:17:40,514 which in the 1970s was expanding hugely. 308 00:17:40,514 --> 00:17:43,434 The politicians in this country at this time 309 00:17:43,434 --> 00:17:49,154 were screaming to everybody, "A house for every American". 310 00:17:49,154 --> 00:17:52,474 It's not true, it's not right, 311 00:17:52,474 --> 00:17:56,194 but it was a great thing for politicians to say. 312 00:17:58,074 --> 00:18:02,114 Traders were looking for a way to exploit the burgeoning market. 313 00:18:02,114 --> 00:18:04,194 And mortgages were attractive to them 314 00:18:04,194 --> 00:18:06,954 because they brought in a regular monthly payment. 315 00:18:10,394 --> 00:18:15,554 In 1977, Dall had the idea to bundle 100 million worth 316 00:18:15,554 --> 00:18:17,994 of these mortgages together, 317 00:18:17,994 --> 00:18:22,034 to make a huge income stream, which could be traded on the market. 318 00:18:26,474 --> 00:18:28,594 - When you bundled it all up... - That's right. 319 00:18:28,594 --> 00:18:31,074 ..it suddenly has huge potential. 320 00:18:31,074 --> 00:18:32,954 At the time it was... 321 00:18:34,754 --> 00:18:39,514 ..pretty much beyond comprehension that it grew so fast. 322 00:18:39,514 --> 00:18:44,194 The rate of growth was pretty incredible. 323 00:18:44,194 --> 00:18:46,554 They were known as securities, 324 00:18:46,554 --> 00:18:51,154 and what Dall had invented was something called securitisation. 325 00:18:51,154 --> 00:18:55,674 I actually have had people come up to me in restaurants 326 00:18:55,674 --> 00:18:59,354 and things like that and say, "Thank you for the idea." 327 00:18:59,354 --> 00:19:00,634 JACQUES LAUGHS 328 00:19:02,354 --> 00:19:05,714 Robert Dall's invention was to have profound consequences 329 00:19:05,714 --> 00:19:07,754 that would affect all our lives. 330 00:19:09,394 --> 00:19:12,434 The Black and Scholes formula and securitisation 331 00:19:12,434 --> 00:19:14,874 were the building blocks of a new world - 332 00:19:14,874 --> 00:19:18,194 one in which taking risks drove profit. 333 00:19:18,194 --> 00:19:19,914 But what few of us realised 334 00:19:19,914 --> 00:19:23,754 was that the risks being taken were with OUR debts. 335 00:19:23,754 --> 00:19:26,514 MUSIC: Stand And Deliver by Adam & The Ants 336 00:19:33,314 --> 00:19:36,914 By the mid-'80s, Britain was ready to join the party. 337 00:19:36,914 --> 00:19:40,194 American banks arrived in London, bringing the mantra 338 00:19:40,194 --> 00:19:44,074 that had transformed Wall Street - risk was good. 339 00:19:47,514 --> 00:19:50,954 The rules of Wall Street apply in London - 340 00:19:50,954 --> 00:19:53,474 if you're good you get very, very high rewards, 341 00:19:53,474 --> 00:19:55,714 if you're not, get on your bike. 342 00:20:01,154 --> 00:20:04,594 In 1986, the City was transformed by the Big Bang, 343 00:20:04,594 --> 00:20:06,954 which deregulated its activities. 344 00:20:09,074 --> 00:20:12,394 Nicola Horlick was one of the new breed of City superstars, 345 00:20:12,394 --> 00:20:14,634 earning £1 million a year. 346 00:20:15,794 --> 00:20:18,234 Big Bang was very, very significant, 347 00:20:18,234 --> 00:20:21,354 but it was significant in the sense that it moved everything 348 00:20:21,354 --> 00:20:26,914 away from being partnerships and family enterprises to being...huge. 349 00:20:26,914 --> 00:20:32,074 You book me a client, I will sell you half a million at 673. 350 00:20:32,074 --> 00:20:35,234 Small firms built on trust and tradition 351 00:20:35,234 --> 00:20:37,834 gave way to international banking groups 352 00:20:37,834 --> 00:20:41,634 ruthlessly using risk to maximise profits. 353 00:20:41,634 --> 00:20:43,994 Things changed, and all these clever people 354 00:20:43,994 --> 00:20:47,954 started going and working at banks and doing rinky-dink wild things. 355 00:20:47,954 --> 00:20:50,274 The multiples changed and started to zoom up, 356 00:20:50,274 --> 00:20:52,594 and suddenly everybody wanted to be in banks 357 00:20:52,594 --> 00:20:55,274 and they were suddenly the best thing since sliced bread 358 00:20:55,274 --> 00:20:58,714 and they were on 18-times earnings, not three-times earnings. 359 00:20:58,714 --> 00:21:00,434 Just as in America, 360 00:21:00,434 --> 00:21:05,034 securitisation was a big part of the new financial machine. 361 00:21:05,034 --> 00:21:10,154 What that machine needed were debts, and we were about to oblige. 362 00:21:10,154 --> 00:21:13,354 The British were about to get hooked on debt. 363 00:21:20,394 --> 00:21:22,354 To afford the '80s lifestyle, 364 00:21:22,354 --> 00:21:25,394 you needed credit cards and newly available bank loans. 365 00:21:26,554 --> 00:21:28,434 The way you made people feel better 366 00:21:28,434 --> 00:21:31,034 is allowing them to borrow a lot of money, 367 00:21:31,034 --> 00:21:32,474 take on consumer debt. 368 00:21:32,474 --> 00:21:34,554 And that worked for a while, 369 00:21:34,554 --> 00:21:38,994 and I think that was part of the reason why people felt so good. 370 00:21:38,994 --> 00:21:43,594 Britain was experiencing the illusion of unprecedented prosperity 371 00:21:43,594 --> 00:21:45,314 and we paid a price. 372 00:21:45,314 --> 00:21:51,554 Household debt was running at nearly £350 billion by the late '80s. 373 00:21:55,114 --> 00:21:58,434 David Graeber is an economist at the London School of Economics 374 00:21:58,434 --> 00:22:01,914 who takes a critical view of our growing debt during the '80s. 375 00:22:03,754 --> 00:22:06,154 What you see during that period is a series of... 376 00:22:06,154 --> 00:22:10,474 fairly intentional government policies 377 00:22:10,474 --> 00:22:12,754 which are designed to guarantee 378 00:22:12,754 --> 00:22:15,514 that most people are in debt. 379 00:22:15,514 --> 00:22:18,834 If you have a mortgage, you can't go on strike. 380 00:22:18,834 --> 00:22:21,954 So it was quite intentional policy - get people in debt, 381 00:22:21,954 --> 00:22:24,474 it'll reduce the amount of industrial action, 382 00:22:24,474 --> 00:22:27,034 it'll hold down wages, it'll control inflation. 383 00:22:27,034 --> 00:22:28,554 How important is debt 384 00:22:28,554 --> 00:22:32,394 to the extraction of wealth from us, the 99%, to the 1%? 385 00:22:32,394 --> 00:22:34,594 I think it's the key to the whole thing. 386 00:22:34,594 --> 00:22:37,594 The finance industry and the debt industry are really the same thing. 387 00:22:37,594 --> 00:22:41,274 To a large degree, finance just means other people's debts. 388 00:22:41,274 --> 00:22:44,074 They're trading our debts with each other. 389 00:22:45,554 --> 00:22:48,314 The growing addiction of consumers to debt 390 00:22:48,314 --> 00:22:50,954 helped fund the growing wealth of the financial centres 391 00:22:50,954 --> 00:22:53,114 of London and New York. 392 00:22:53,114 --> 00:22:56,754 And a new attitude appeared to celebrate this. 393 00:22:56,754 --> 00:23:00,114 But evolution in corporate America seems to be... 394 00:23:00,114 --> 00:23:01,754 survival of the unfittest. 395 00:23:03,314 --> 00:23:06,074 Well, in my book, you either do it right... 396 00:23:06,074 --> 00:23:07,394 or you get eliminated. 397 00:23:08,394 --> 00:23:10,314 In Oliver Stone's Wall Street, 398 00:23:10,314 --> 00:23:14,674 these aren't economic choices, but a Darwinist imperative. 399 00:23:14,674 --> 00:23:17,314 The point is, ladies and gentlemen, 400 00:23:17,314 --> 00:23:20,954 that greed, for lack of a better word, 401 00:23:20,954 --> 00:23:22,634 is good. 402 00:23:22,634 --> 00:23:24,554 Greed is right. 403 00:23:24,554 --> 00:23:26,314 Greed works. 404 00:23:26,314 --> 00:23:29,954 Greed clarifies, cuts through and captures 405 00:23:29,954 --> 00:23:33,194 the essence of evolutionary spirit. 406 00:23:35,554 --> 00:23:38,714 Wall Street introduced us to a new species, 407 00:23:38,714 --> 00:23:41,754 an alpha elite who were going to change our lives. 408 00:23:41,754 --> 00:23:44,554 They were called the Masters of the Universe. 409 00:23:44,554 --> 00:23:46,754 And they were coming here, to Britain. 410 00:23:49,594 --> 00:23:51,994 These were the superstars of the business world - 411 00:23:51,994 --> 00:23:53,314 the CEOs. 412 00:23:57,274 --> 00:24:01,794 Parachuted in to cut costs, and paid handsomely for doing it. 413 00:24:03,594 --> 00:24:05,914 Richard Giordano was the first. 414 00:24:05,914 --> 00:24:08,714 Throughout the 1980s he was the boss of BOC, 415 00:24:08,714 --> 00:24:11,674 one of Britain's largest companies. 416 00:24:11,674 --> 00:24:13,474 I came to work at a pay level 417 00:24:13,474 --> 00:24:17,034 that was equal to what I was earning in the United States. 418 00:24:17,034 --> 00:24:20,954 Might have been the equivalent of £250,000 per annum. 419 00:24:22,314 --> 00:24:28,474 That was an...enormously large sum in the landscape of that time. 420 00:24:28,474 --> 00:24:31,754 You were referred to as Britain's highest-paid businessman. 421 00:24:31,754 --> 00:24:33,714 That was probably true at the time, 422 00:24:33,714 --> 00:24:35,794 although I was soon eclipsed by many others. 423 00:24:35,794 --> 00:24:40,034 And do you think that the amount of money you were being paid 424 00:24:40,034 --> 00:24:42,394 was seen as very un-British in a way? 425 00:24:42,394 --> 00:24:45,874 I think it was regarded as coming from another planet. 426 00:24:45,874 --> 00:24:47,754 This was a business revolution, wasn't it? 427 00:24:47,754 --> 00:24:51,074 It was a revolution that... 428 00:24:52,314 --> 00:24:55,834 ..enshrined the idea of...business success, 429 00:24:55,834 --> 00:25:00,034 entrepreneurship, which had not been true in the 1970s. 430 00:25:01,314 --> 00:25:04,554 It was thought wonderful to be an entrepreneur, 431 00:25:04,554 --> 00:25:07,114 wonderful to be successful... 432 00:25:07,114 --> 00:25:09,994 I guess, wonderful to make more money. 433 00:25:09,994 --> 00:25:13,834 And that was something that I think was a big change. 434 00:25:16,514 --> 00:25:20,554 In the 1980s, we faced a ruthless business culture. 435 00:25:20,554 --> 00:25:25,234 The winners were the top 1%, who saw their incomes rise steeply. 436 00:25:25,234 --> 00:25:27,434 But what about the rest of us? 437 00:25:27,434 --> 00:25:31,474 We were about to undergo our own workplace revolution. 438 00:25:31,474 --> 00:25:34,434 And, once again, it came from America. 439 00:25:37,314 --> 00:25:39,874 It was driven by the thinking of these two men, 440 00:25:39,874 --> 00:25:42,194 Tom Peters and Robert Waterman, 441 00:25:42,194 --> 00:25:46,034 analysts whose book In Search Of Excellence from 1982 442 00:25:46,034 --> 00:25:47,994 extolled a stripped-down workplace 443 00:25:47,994 --> 00:25:50,554 in which only the fittest would survive. 444 00:25:53,074 --> 00:25:54,834 'Nikil Saval is a historian 445 00:25:54,834 --> 00:25:57,954 'who's studied how this new theory of management 446 00:25:57,954 --> 00:26:01,354 'was designed to create fierce competition for jobs.' 447 00:26:01,354 --> 00:26:03,514 The move was to make people... 448 00:26:03,514 --> 00:26:06,634 put them on their toes, in a way. That was the idea. 449 00:26:06,634 --> 00:26:08,794 And so there was an atmosphere 450 00:26:08,794 --> 00:26:13,474 and a mood in which precariousness was seen as the path to prosperity. 451 00:26:14,874 --> 00:26:17,554 This new cut-throat workplace was satirised 452 00:26:17,554 --> 00:26:19,394 in the '80s film Working Girl. 453 00:26:21,074 --> 00:26:25,074 One of the early scenes, you see Melanie Griffith, the main actress, 454 00:26:25,074 --> 00:26:28,234 showing up at her new job with a box of her stuff. 455 00:26:31,754 --> 00:26:33,554 Griffith's character even has the book 456 00:26:33,554 --> 00:26:35,874 by Peters and Waterman in her box 457 00:26:35,874 --> 00:26:38,114 when she arrives at the office. 458 00:26:40,154 --> 00:26:43,354 You know that she's somehow going to succeed in this new workplace, 459 00:26:43,354 --> 00:26:45,674 despite all the obstacles, because she knows... 460 00:26:45,674 --> 00:26:49,554 she knows the model, she knows the business, she knows how to act. 461 00:26:50,834 --> 00:26:54,394 The fictional working girl faced a new kind of insecurity 462 00:26:54,394 --> 00:26:57,194 that was about to confront us all. 463 00:26:57,194 --> 00:26:59,914 Work was being destabilised. 464 00:27:01,514 --> 00:27:05,354 By the time of the second recession at the end of the 1980s, 465 00:27:05,354 --> 00:27:08,194 an even harsher economic reality was emerging. 466 00:27:10,114 --> 00:27:14,074 - Gaz, who's going to buy a rusty girder? - Come on. 467 00:27:14,074 --> 00:27:17,634 And it was a change reflected in films like The Full Monty. 468 00:27:17,634 --> 00:27:19,514 Gaz, hang on! 469 00:27:21,594 --> 00:27:24,714 Ten years we worked in here. Now look. 470 00:27:24,714 --> 00:27:28,274 Anyone not part of the 1% was expendable. 471 00:27:28,274 --> 00:27:31,354 Even middle management were out in the cold. 472 00:27:31,354 --> 00:27:33,954 Button it, you lot. Some of us are trying to get a job. 473 00:27:33,954 --> 00:27:36,034 Hey, and it says no smoking in here. 474 00:27:36,034 --> 00:27:37,554 Aye, and it says job club up there, 475 00:27:37,554 --> 00:27:41,314 and when were the last time you saw one of them fucking walk in? 476 00:27:41,314 --> 00:27:44,314 You forget, Gerald, you're not our foreman any more. 477 00:27:44,314 --> 00:27:46,434 You're just like the rest of us. 478 00:27:46,434 --> 00:27:47,874 Scrap. 479 00:27:47,874 --> 00:27:49,394 Shut it, right? 480 00:27:49,394 --> 00:27:51,474 MUSIC: Parklife by Blur 481 00:27:55,074 --> 00:27:58,994 By the mid 1990s, Britain was a changed society. 482 00:28:02,274 --> 00:28:05,794 The top 1% now earned a tenth of national income - 483 00:28:05,794 --> 00:28:09,234 nearly double its level in the 1970s. 484 00:28:09,234 --> 00:28:13,034 Bankers were no longer paid the same as GPs or teachers. 485 00:28:13,034 --> 00:28:16,794 A two-tier society was just beginning to take off. 486 00:28:18,394 --> 00:28:20,274 Right across the developed world, 487 00:28:20,274 --> 00:28:23,674 the old paternalistic company with a duty to its workers 488 00:28:23,674 --> 00:28:25,394 was disappearing. 489 00:28:25,394 --> 00:28:28,994 You invested in a business and this business is dead. 490 00:28:28,994 --> 00:28:32,594 Let's have the intelligence, let's have the decency, 491 00:28:32,594 --> 00:28:35,754 to sign the death certificate, collect the insurance 492 00:28:35,754 --> 00:28:38,074 and invest in something with a future! 493 00:28:38,074 --> 00:28:41,034 Ahh, but we can't. 494 00:28:41,034 --> 00:28:44,434 We can't, because we have a responsibility. 495 00:28:44,434 --> 00:28:48,954 A responsibility to our employees, to our community. 496 00:28:48,954 --> 00:28:51,554 I got two words for that. 497 00:28:51,554 --> 00:28:53,194 Who cares? 498 00:28:54,274 --> 00:28:57,514 In the '90s film Other People's Money, the would-be boss 499 00:28:57,514 --> 00:29:01,194 takes for granted that the company is just there to be bled for profit. 500 00:29:02,234 --> 00:29:03,674 I'm not your best friend. 501 00:29:05,314 --> 00:29:06,874 I'm your only friend. 502 00:29:08,914 --> 00:29:13,234 I don't make anything... I'm making you money. 503 00:29:13,234 --> 00:29:15,794 And lest you forget, that's the only reason 504 00:29:15,794 --> 00:29:18,914 any of you became stockholders in the first place. 505 00:29:18,914 --> 00:29:20,514 You want to make money. 506 00:29:23,714 --> 00:29:29,074 In 1994, Cedric Brown, the boss of the recently privatised British Gas, 507 00:29:29,074 --> 00:29:31,474 became, briefly, public enemy one. 508 00:29:33,594 --> 00:29:39,274 His salary more than doubled overnight to £475,000. 509 00:29:40,994 --> 00:29:45,034 The country was outraged, driven by the then leader of the opposition. 510 00:29:46,154 --> 00:29:48,994 Yesterday the president of the board of trade 511 00:29:48,994 --> 00:29:52,354 justified the grotesque increase of £200,000 512 00:29:52,354 --> 00:29:53,794 to the chief of British Gas. 513 00:29:53,794 --> 00:29:57,434 Sir, you do have a responsibility to explain to us 514 00:29:57,434 --> 00:30:01,114 why you're worth 25 times what your staff are. 515 00:30:01,114 --> 00:30:04,674 CEOs were reported to have their "snouts in the trough" 516 00:30:04,674 --> 00:30:07,914 and government needed to be seen to be doing something. 517 00:30:09,874 --> 00:30:12,754 Sir Richard Greenbury, the head of Marks & Spencer, 518 00:30:12,754 --> 00:30:14,794 was given the job of heading a committee 519 00:30:14,794 --> 00:30:16,594 to look into executive salaries. 520 00:30:16,594 --> 00:30:21,194 A committee of 11, of whom 8 were chairmen or chief executives. 521 00:30:22,674 --> 00:30:24,554 Do you think it was OK what he was getting? 522 00:30:24,554 --> 00:30:25,794 Well... 523 00:30:25,794 --> 00:30:27,714 Yes, of course it was. 524 00:30:27,714 --> 00:30:31,114 But we had to come up with a formula 525 00:30:31,114 --> 00:30:32,954 of best practice. 526 00:30:32,954 --> 00:30:35,674 What best practice meant 527 00:30:35,674 --> 00:30:38,554 was creating a new publicly acceptable formula 528 00:30:38,554 --> 00:30:39,914 for executive pay. 529 00:30:41,234 --> 00:30:45,754 And Greenbury was adamant that his committee of CEOs was up to the job. 530 00:30:47,274 --> 00:30:53,714 Nobody was earning more than about £500,000 to £700,000 a year. 531 00:30:53,714 --> 00:30:57,994 I don't think anybody could have fairly described us 532 00:30:57,994 --> 00:30:59,954 as being biased. 533 00:31:03,114 --> 00:31:07,594 £500,000 a year was 30 times the average salary 534 00:31:07,594 --> 00:31:09,714 in Britain at the time. 535 00:31:09,714 --> 00:31:11,714 Greenbury's committee said the solution 536 00:31:11,714 --> 00:31:14,354 to big rewards for executives was to tie bonuses 537 00:31:14,354 --> 00:31:16,354 to performance and shares. 538 00:31:17,394 --> 00:31:19,634 It was a fateful decision - 539 00:31:19,634 --> 00:31:21,154 executive pay soared. 540 00:31:22,594 --> 00:31:24,954 The proof of the pudding is in the eating, 541 00:31:24,954 --> 00:31:28,954 and between '95 and 2010, 542 00:31:28,954 --> 00:31:35,074 the whole issue of wages and salaries went off the Richter scale. 543 00:31:37,034 --> 00:31:40,914 If you're a chief executive of a big company, 544 00:31:40,914 --> 00:31:45,194 your remuneration will be tied to the share price of your company. 545 00:31:45,194 --> 00:31:47,994 So you will have a very strong interest 546 00:31:47,994 --> 00:31:49,994 in getting that share price up. 547 00:31:49,994 --> 00:31:52,354 And one of the ways to do that, of course, 548 00:31:52,354 --> 00:31:53,634 is to cut costs. 549 00:31:53,634 --> 00:31:55,914 One of the biggest costs is wage cost. 550 00:31:55,914 --> 00:31:59,074 You could have a direct interest in holding wages down. 551 00:32:02,074 --> 00:32:06,154 The report did the complete opposite of what was intended. 552 00:32:06,154 --> 00:32:08,554 While the lid was kept on our wages, 553 00:32:08,554 --> 00:32:12,434 in the 15 years following Greenbury, executive pay quadrupled. 554 00:32:17,954 --> 00:32:21,514 But what do chief executives themselves think about this? 555 00:32:22,674 --> 00:32:25,194 Sir Martin Sorrell was one of the CEO titans 556 00:32:25,194 --> 00:32:28,514 who came to the fore in the 1990s, as the chief executive 557 00:32:28,514 --> 00:32:32,354 of the world's biggest advertising group, WPP. 558 00:32:32,354 --> 00:32:35,154 He is now one of Britain's highest paid executives, 559 00:32:35,154 --> 00:32:38,754 on £29.8 million last year - 560 00:32:38,754 --> 00:32:42,474 the majority as part of a long-term incentive scheme. 561 00:32:42,474 --> 00:32:45,754 Martin, do you think your wealth separates you from ordinary people? 562 00:32:47,154 --> 00:32:51,074 - Well, when you say my wealth... - Mm. - ..my wealth is tied up. 563 00:32:51,074 --> 00:32:52,594 All my net worth, 564 00:32:52,594 --> 00:32:56,194 bar a little bit, is tied up in the success of WPP. 565 00:32:56,194 --> 00:32:57,954 How much are you worth? 566 00:32:57,954 --> 00:32:59,274 Well, according to... 567 00:32:59,274 --> 00:33:01,714 Well, look at the Sunday Times Rich List - 568 00:33:01,714 --> 00:33:05,074 I think it puts it at around £250 million. 569 00:33:05,074 --> 00:33:09,594 There's no doubt that the debate around the pay to CEOs, 570 00:33:09,594 --> 00:33:12,714 pay however you term it, is the issue of the time. 571 00:33:12,714 --> 00:33:16,714 You yourself are paid 780 times your average employee. 572 00:33:16,714 --> 00:33:17,994 780 times. 573 00:33:17,994 --> 00:33:20,514 No, that's not true, actually. That's not true. 574 00:33:20,514 --> 00:33:22,914 Is it significantly greater than the average? 575 00:33:22,914 --> 00:33:23,954 The answer is yes. 576 00:33:23,954 --> 00:33:27,474 - Do you think that that's right for a CEO to be paid that? - But again... 577 00:33:27,474 --> 00:33:30,594 But again, you're looking at compensation... 578 00:33:30,594 --> 00:33:32,994 - JACQUES LAUGHS - It's a handy get-out clause, Martin. 579 00:33:32,994 --> 00:33:35,314 - No, no, it is not a handy get-out clause. - Well, it is! 580 00:33:35,314 --> 00:33:38,034 Do you think people are right to be upset about CEO pay? 581 00:33:38,034 --> 00:33:41,674 Well, it depends on whether it's pay for performance or not. 582 00:33:41,674 --> 00:33:47,754 If it's pay just for being there and then failing, 583 00:33:47,754 --> 00:33:49,234 I would agree with you. 584 00:33:49,234 --> 00:33:51,834 As long as it's based on success and it is pay for performance, 585 00:33:51,834 --> 00:33:54,274 I don't see anything wrong in that. 586 00:33:54,274 --> 00:33:58,474 By the 2000s, our society was unrecognisable 587 00:33:58,474 --> 00:34:01,434 from the relatively equal one of the 1970s. 588 00:34:08,474 --> 00:34:11,194 Our debt had been used to turn the markets 589 00:34:11,194 --> 00:34:13,234 into a huge money-making machine. 590 00:34:14,874 --> 00:34:19,234 And the machine depended on sucking ever more debt from new sources. 591 00:34:24,474 --> 00:34:29,234 In the 1970s, securities had been sold on solid mortgages. 592 00:34:29,234 --> 00:34:31,674 But by the early 2000s, 593 00:34:31,674 --> 00:34:35,394 the debt machine required bundling safe mortgages 594 00:34:35,394 --> 00:34:37,114 with risky ones. 595 00:34:39,794 --> 00:34:44,394 The problem was, those people did not know 596 00:34:44,394 --> 00:34:47,874 that those mortgages were different. 597 00:34:47,874 --> 00:34:54,154 They didn't understand that there are certain mortgages 598 00:34:54,154 --> 00:34:56,834 that are real mortgages, 599 00:34:56,834 --> 00:35:00,314 there are others that are phoney. 600 00:35:01,634 --> 00:35:05,194 After the millennium, millions of ordinary mortgages 601 00:35:05,194 --> 00:35:08,714 were bundled with those that would never be paid back. 602 00:35:08,714 --> 00:35:10,674 They were called sub-prime. 603 00:35:10,674 --> 00:35:14,594 It was the fatal outcome of Robert Dall's invention. 604 00:35:14,594 --> 00:35:19,194 The logic of what you created would lead inevitably to sub-prime, 605 00:35:19,194 --> 00:35:23,594 to bundled loans, to an inability for the financial system 606 00:35:23,594 --> 00:35:25,114 to deal with this level of debt. 607 00:35:25,114 --> 00:35:27,234 You yourself didn't bring about the crash, 608 00:35:27,234 --> 00:35:30,434 but you created the mechanics for it to happen. 609 00:35:30,434 --> 00:35:32,194 Now, that's true. 610 00:35:32,194 --> 00:35:34,754 That I am the first to admit to. 611 00:35:35,794 --> 00:35:40,714 In 2007, as sub-prime homeowners in America defaulted on their loans, 612 00:35:40,714 --> 00:35:43,314 the whole edifice began to collapse. 613 00:35:43,314 --> 00:35:46,954 First in America then in the UK. 614 00:35:46,954 --> 00:35:49,514 Thousands of customers have been queuing up outside 615 00:35:49,514 --> 00:35:52,594 branches of the troubled mortgage lender Northern Rock. 616 00:35:52,594 --> 00:35:56,754 Nobody's given an absolute guarantee that the money is safe in this bank. 617 00:35:58,194 --> 00:36:01,354 Share prices have continued to tumble around the world 618 00:36:01,354 --> 00:36:03,714 following the collapse of Lehman Brothers. 619 00:36:03,714 --> 00:36:06,754 The system built on risk had come crashing down. 620 00:36:07,874 --> 00:36:11,114 The markets had failed and the state needed to step in 621 00:36:11,114 --> 00:36:12,954 to bail out the banks. 622 00:36:12,954 --> 00:36:16,034 Every country in the world, around the globe, 623 00:36:16,034 --> 00:36:18,874 are facing the same problems at the same time. 624 00:36:18,874 --> 00:36:23,434 What had seemed like science was now in tatters. 625 00:36:23,434 --> 00:36:26,474 CLAMOURING 626 00:36:26,474 --> 00:36:29,434 It's just very difficult. All the markets are all over the place. 627 00:36:29,434 --> 00:36:33,074 Nobody knows exactly what they're doing, so it's a bit panicky. 628 00:36:35,234 --> 00:36:39,074 The Government eventually spent £375 billion 629 00:36:39,074 --> 00:36:41,434 to prop up the banking system. 630 00:36:41,434 --> 00:36:44,234 The same money given to British households 631 00:36:44,234 --> 00:36:49,194 would have meant a cheque for £24,000 on every doorstep. 632 00:36:50,834 --> 00:36:52,874 But it didn't happen. 633 00:36:52,874 --> 00:36:56,874 Instead of putting money in our pockets to fuel a consumer recovery, 634 00:36:56,874 --> 00:37:00,314 the profit from the bailout went to the super-rich. 635 00:37:00,314 --> 00:37:02,634 MUSIC: Sing, Sing, Sing by Benny Goodman 636 00:37:05,754 --> 00:37:07,794 This is an auction of classic cars - 637 00:37:07,794 --> 00:37:11,154 an occasion for the wealthy to splash out on luxury assets. 638 00:37:13,274 --> 00:37:17,514 Straight in, at lower estimate, at £90,000. 639 00:37:20,394 --> 00:37:23,994 £1,550,000, yes. 640 00:37:26,074 --> 00:37:30,794 The classic car market is booming thanks to taxpayer money. 641 00:37:30,794 --> 00:37:36,914 The hammer is up for £1,650,000. 642 00:37:36,914 --> 00:37:39,074 All done? 643 00:37:39,074 --> 00:37:41,114 Congratulations. 644 00:37:42,674 --> 00:37:44,954 So why did the bailout help these people 645 00:37:44,954 --> 00:37:47,114 more than the rest of us? 646 00:37:47,114 --> 00:37:49,514 The answer is embarrassingly simple - 647 00:37:49,514 --> 00:37:51,994 the public money used to bail out the banks 648 00:37:51,994 --> 00:37:55,394 actually fuelled a boom for those with financial assets. 649 00:37:57,034 --> 00:37:59,034 And who would they be? 650 00:37:59,034 --> 00:38:01,594 Yep, the super-rich. 651 00:38:01,594 --> 00:38:04,394 The classic car market has exploded in the last five years. 652 00:38:04,394 --> 00:38:07,194 Really since central banks have been printing money. 653 00:38:07,194 --> 00:38:10,594 It's really as a consequence of the financial crisis, 654 00:38:10,594 --> 00:38:13,674 of the credit crunch, that our market has done so well. 655 00:38:13,674 --> 00:38:16,114 I thought they printed money to help everyone 656 00:38:16,114 --> 00:38:17,674 try and get back on their feet, 657 00:38:17,674 --> 00:38:19,474 but it seems that the printing of money 658 00:38:19,474 --> 00:38:22,194 has actually really exacerbated the divide in Britain. 659 00:38:22,194 --> 00:38:25,634 the money has poured into the super-rich market 660 00:38:25,634 --> 00:38:28,674 and that's really where it's gone - because that's exploded, hasn't it? 661 00:38:28,674 --> 00:38:31,114 There is certainly some truth to the statement 662 00:38:31,114 --> 00:38:33,274 that the rich have become richer. 663 00:38:33,274 --> 00:38:37,034 The irony is that 95% of the gains from the bailout 664 00:38:37,034 --> 00:38:38,914 ended up with the super-rich, 665 00:38:38,914 --> 00:38:41,914 taking them even further away from the rest of us. 666 00:38:41,914 --> 00:38:45,314 £1.95 million. All done? 667 00:38:47,034 --> 00:38:49,994 Among the celebrity quota, Chris Evans, 668 00:38:49,994 --> 00:38:52,474 with big money for a 1971 Ferrari. 669 00:38:52,474 --> 00:38:56,674 At £1.98 million... 670 00:38:58,554 --> 00:39:00,474 - GAVEL SOUNDS - Congratulations. 671 00:39:04,754 --> 00:39:07,514 The bailout created this. 672 00:39:07,514 --> 00:39:11,154 Cars being sold for £1.9 million 673 00:39:11,154 --> 00:39:13,474 to a room full of the super-rich. 674 00:39:18,074 --> 00:39:20,554 So the crash worked for the super-rich. 675 00:39:20,554 --> 00:39:23,754 While the vast majority are still struggling to make ends meet, 676 00:39:23,754 --> 00:39:26,594 the very wealthy have come out of the global downturn, 677 00:39:26,594 --> 00:39:28,754 not just unscathed, but smiling. 678 00:39:30,874 --> 00:39:32,434 I have a thing for portraiture. 679 00:39:32,434 --> 00:39:35,714 I find it far more interesting than seascapes or landscapes. 680 00:39:35,714 --> 00:39:37,994 'David Leppan is a multimillionaire 681 00:39:37,994 --> 00:39:42,634 'who analyses the luxury spending patterns of the global elite'. 682 00:39:42,634 --> 00:39:45,834 I'm told that this is only the third building in London 683 00:39:45,834 --> 00:39:48,914 that has two full-length van Dyck portraits on the same wall. 684 00:39:48,914 --> 00:39:50,954 - Van Dyck? - Yes. - Are you serious? 685 00:39:50,954 --> 00:39:52,754 Yes, absolutely. 686 00:39:52,754 --> 00:39:55,474 Old masters are underappreciated, 687 00:39:55,474 --> 00:39:58,594 which in my mind makes them a great investment. 688 00:40:01,794 --> 00:40:04,714 'David holds to the established super-rich view 689 00:40:04,714 --> 00:40:07,474 'that their wealth benefits us all.' 690 00:40:07,474 --> 00:40:10,394 We've gone about creating wealth within our society. 691 00:40:10,394 --> 00:40:14,954 Wealth has been attributed to shares, to products, 692 00:40:14,954 --> 00:40:17,274 to art for example. 693 00:40:17,274 --> 00:40:20,874 This is not money that's been taken from somebody else. 694 00:40:20,874 --> 00:40:24,554 So, our economies are growing - wealth is not finite. 695 00:40:24,554 --> 00:40:26,794 There is more and more of it. 696 00:40:30,514 --> 00:40:32,554 This is Wakefield. 697 00:40:32,554 --> 00:40:35,754 While the super-rich have seen their share of wealth increase 698 00:40:35,754 --> 00:40:38,474 since the crash, in places like this, 699 00:40:38,474 --> 00:40:41,314 there have been six years of stagnation, 700 00:40:41,314 --> 00:40:44,954 with living standards still below pre-crisis levels. 701 00:40:46,474 --> 00:40:48,634 I've come to meet Louis Kasatkin, 702 00:40:48,634 --> 00:40:51,914 who used to have a full-time job at a distribution centre. 703 00:40:56,474 --> 00:40:58,754 - Louis, I'm Jacques. - Hi. Good to see you. 704 00:40:58,754 --> 00:40:59,994 Thanks for your time. 705 00:41:01,594 --> 00:41:03,874 So what did the crash do to your life? 706 00:41:05,994 --> 00:41:08,794 It was just like an earthquake. 707 00:41:08,794 --> 00:41:12,234 It opened up this great hole and everything fell in. 708 00:41:13,354 --> 00:41:16,114 'Louis has been trying to find a full-time job, 709 00:41:16,114 --> 00:41:19,674 'but the little work he gets are zero hours contracts, 710 00:41:19,674 --> 00:41:21,874 'with no guaranteed income.' 711 00:41:21,874 --> 00:41:24,834 So how does it work? You sign up with an agency... 712 00:41:24,834 --> 00:41:28,274 That's right. You get a text on a morning saying, 713 00:41:28,274 --> 00:41:31,194 "This is to confirm that you will be working tonight," 714 00:41:31,194 --> 00:41:34,874 or "This is to let you know that due to low..." 715 00:41:34,874 --> 00:41:37,074 They always say "low business volumes." 716 00:41:37,074 --> 00:41:38,874 "..your shift has been cancelled." 717 00:41:38,874 --> 00:41:40,994 Louis, that sounds very hand to mouth. 718 00:41:40,994 --> 00:41:42,914 It sounds very precarious, your existence. 719 00:41:42,914 --> 00:41:44,954 Hand to mouth would actually be an improvement 720 00:41:44,954 --> 00:41:46,634 on my current circumstances. 721 00:41:46,634 --> 00:41:49,714 I mean, it is brutal. 722 00:41:49,714 --> 00:41:52,714 Is there any money left at the end of the week? 723 00:41:52,714 --> 00:41:54,314 No, not really. 724 00:41:54,314 --> 00:41:56,594 These zero hour agencies that you talk about, 725 00:41:56,594 --> 00:41:58,954 this seems like an incredible growth industry. 726 00:41:58,954 --> 00:42:00,434 Oh, it is. It's like cancer. 727 00:42:00,434 --> 00:42:03,434 It starts off as one little dark spot 728 00:42:03,434 --> 00:42:07,034 and the next thing you know, you've tumours all over the place. 729 00:42:08,634 --> 00:42:12,034 Since the crisis, the job insecurity prefigured 730 00:42:12,034 --> 00:42:15,674 by Peters and Waterman in the 1980s has become a reality. 731 00:42:16,714 --> 00:42:19,114 It's early morning in the heart of the City of London 732 00:42:19,114 --> 00:42:20,794 and it's freezing. 733 00:42:20,794 --> 00:42:24,634 And I'm standing here with some men 734 00:42:24,634 --> 00:42:29,474 who are sitting on a wall and hoping that a van will drive by 735 00:42:29,474 --> 00:42:31,874 and offer them some work in construction. 736 00:42:36,434 --> 00:42:39,914 The government parades improving job statistics. 737 00:42:39,914 --> 00:42:44,074 In reality, two thirds of the new jobs created since the crash 738 00:42:44,074 --> 00:42:47,954 are self-employed, meaning that pay levels stay low. 739 00:42:52,234 --> 00:42:54,874 Whatever they get, they'll take because they've got nothing. 740 00:42:54,874 --> 00:42:56,754 Obviously they can't sign on or anything. 741 00:42:56,754 --> 00:42:58,834 So whatever they get, they'll take. 742 00:42:58,834 --> 00:43:01,234 If they're given 30 or 40 a day, they'll probably take it. 743 00:43:01,234 --> 00:43:03,434 If we go in there now, we could be sent home. 744 00:43:03,434 --> 00:43:04,874 And that's it, we're finished. 745 00:43:04,874 --> 00:43:07,394 We got to go somewhere else and look elsewhere. 746 00:43:07,394 --> 00:43:09,034 So we've got no rights at all. 747 00:43:16,354 --> 00:43:18,954 Since the crash, inequality has worked for the rich 748 00:43:18,954 --> 00:43:21,754 and produced more insecurity for the rest of us. 749 00:43:24,074 --> 00:43:27,034 Britain is becoming a nation of freelancers. 750 00:43:27,034 --> 00:43:29,394 There's nearly two million of us, 751 00:43:29,394 --> 00:43:32,514 and the epitome of this new world is micro-jobbing - 752 00:43:32,514 --> 00:43:36,794 finding websites that offer jobs for a day or an even just an hour, 753 00:43:36,794 --> 00:43:39,754 and with as little as £5 at the end of it. 754 00:43:39,754 --> 00:43:42,474 You bid for the privilege of the odd job 755 00:43:42,474 --> 00:43:45,594 without any guarantee of security or hours. 756 00:43:45,594 --> 00:43:47,994 This is a new and highly precarious world. 757 00:43:50,634 --> 00:43:53,954 These websites link skilled people - graphic designers, 758 00:43:53,954 --> 00:43:55,754 animators, writers - 759 00:43:55,754 --> 00:44:00,274 with any job that needs doing at a price that has no lower limit. 760 00:44:00,274 --> 00:44:02,914 There's a couple of different ways you can hire a freelancer, 761 00:44:02,914 --> 00:44:05,154 but the most common way is you post a job. 762 00:44:05,154 --> 00:44:06,194 It's free to post. 763 00:44:07,194 --> 00:44:10,274 'Xenios Thrasyvoulou is the founder of the website 764 00:44:10,274 --> 00:44:16,034 'PeoplePerHour, which has nearly 300,000 active users signed up.' 765 00:44:16,034 --> 00:44:17,794 Basically, this is how the site works. 766 00:44:17,794 --> 00:44:20,354 You start very quickly by saying what you need to do. 767 00:44:20,354 --> 00:44:25,474 Typically, within minutes you'll start getting the first proposals. 768 00:44:25,474 --> 00:44:29,754 This has sold 204 times. It's an amazing impersonation. 769 00:44:29,754 --> 00:44:30,914 Look at this. 770 00:44:30,914 --> 00:44:33,074 Hi, thanks for stopping by. 771 00:44:33,074 --> 00:44:36,794 As you can see, I look and sound a lot like Mr T. 772 00:44:36,794 --> 00:44:39,114 If you would like a personalised message... 773 00:44:39,114 --> 00:44:41,954 'He launched the site in 2007 774 00:44:41,954 --> 00:44:45,874 'and has become a cheerleader for this entirely new way of working.' 775 00:44:47,474 --> 00:44:49,514 Employment, as we know it traditionally, 776 00:44:49,514 --> 00:44:53,114 has made people, unfortunately, quite lazy in many ways. 777 00:44:53,114 --> 00:44:56,714 You have stable income and you have a pension 778 00:44:56,714 --> 00:44:58,154 and so on and so forth. 779 00:44:58,154 --> 00:44:59,834 You don't have to fight for anything. 780 00:44:59,834 --> 00:45:02,754 In my dad's generation, people were in lifetime employment, 781 00:45:02,754 --> 00:45:04,274 and they were miserable. 782 00:45:04,274 --> 00:45:08,274 The world we are moving towards, which I think is a better world, 783 00:45:08,274 --> 00:45:10,714 keeps people on their toes, accountable, 784 00:45:10,714 --> 00:45:12,514 they need to fight for it, 785 00:45:12,514 --> 00:45:15,874 and the ones that do are essentially much better off 786 00:45:15,874 --> 00:45:17,434 than they were before. 787 00:45:17,434 --> 00:45:20,754 A lot of American billionaires and economists 788 00:45:20,754 --> 00:45:23,234 have said there should be no lower limit, 789 00:45:23,234 --> 00:45:26,194 we shouldn't be thinking about minimum wages. 790 00:45:26,194 --> 00:45:28,074 I would support that, personally. 791 00:45:28,074 --> 00:45:31,594 People are just not incentivised to go and find a job, 792 00:45:31,594 --> 00:45:35,794 because they are just living an OK life 793 00:45:35,794 --> 00:45:37,394 on unemployment benefits. 794 00:45:37,394 --> 00:45:39,674 What you're talking about is Darwinism. 795 00:45:39,674 --> 00:45:41,834 You're just talking about survival of the fittest 796 00:45:41,834 --> 00:45:44,194 and no safety net for the people who can't be 797 00:45:44,194 --> 00:45:45,954 entrepreneurs and go-getters. 798 00:45:45,954 --> 00:45:48,554 Well, actually Darwinism is survival of the most adaptable. 799 00:45:48,554 --> 00:45:50,154 And I think that is the key here. 800 00:45:50,154 --> 00:45:53,434 We're moving to a different kind of world 801 00:45:53,434 --> 00:45:57,234 where the ones that do really, really well are more adaptable, 802 00:45:57,234 --> 00:46:00,274 are fighters, and the upside is definitely worth it. 803 00:46:03,674 --> 00:46:06,434 What Xenios seems to be saying is we live and work 804 00:46:06,434 --> 00:46:08,874 in a world of survival of the fittest. 805 00:46:08,874 --> 00:46:11,594 No minimum wage, no safety net. 806 00:46:11,594 --> 00:46:13,274 This is what it should be. 807 00:46:16,794 --> 00:46:20,394 I want to see how I would get on in this new insecure world. 808 00:46:20,394 --> 00:46:22,194 How much can I earn in a day? 809 00:46:25,634 --> 00:46:26,674 Haircut, madam? 810 00:46:28,234 --> 00:46:29,514 Haircut, sir? 811 00:46:29,514 --> 00:46:30,994 Haircut, sir? 812 00:46:30,994 --> 00:46:32,034 Haircut, sir? 813 00:46:32,034 --> 00:46:33,714 Haircut, madam? 814 00:46:33,714 --> 00:46:35,634 Look interesting to you? 815 00:46:37,194 --> 00:46:38,954 Haircut, sir? 816 00:46:38,954 --> 00:46:40,314 HE GROANS 817 00:46:41,394 --> 00:46:42,874 Haircut, madam? 818 00:46:46,794 --> 00:46:48,754 How much are you getting for this? 819 00:46:48,754 --> 00:46:50,274 I'm getting £5 an hour. 820 00:46:50,274 --> 00:46:52,274 - Can you get by with what you are earning? - Um... 821 00:46:52,274 --> 00:46:53,474 Not really. 822 00:46:53,474 --> 00:46:55,754 Haircut, sir? 823 00:46:55,754 --> 00:46:57,354 Haircut, madam? 824 00:46:57,354 --> 00:47:00,554 'There are nearly 2 million freelance workers in Britain. 825 00:47:00,554 --> 00:47:03,354 'Not all like this, but at the most insecure end, 826 00:47:03,354 --> 00:47:05,354 'they share a sense of desperation.' 827 00:47:07,634 --> 00:47:10,394 Please, God. Please, someone take one. 828 00:47:16,194 --> 00:47:17,234 Thank you very much. 829 00:47:17,234 --> 00:47:19,034 - Here you go, my friend. - Thank you, Sanjay. 830 00:47:19,034 --> 00:47:21,394 - Thanks so much. - See you soon again. - I appreciate that. 831 00:47:22,874 --> 00:47:26,154 'I've done two hours' work and earned £20. 832 00:47:26,154 --> 00:47:30,114 'Not bad - but they only want somebody for the lunchtime rush. 833 00:47:31,634 --> 00:47:34,554 'It takes time to find work and when I spot a job, 834 00:47:34,554 --> 00:47:36,834 'it's not exactly merchant banking.' 835 00:47:41,954 --> 00:47:44,394 What do you think? Do you think a fiver for that? 836 00:47:44,394 --> 00:47:46,634 - A fiver, yeah. - Yeah? - Yeah, cheers. 837 00:47:46,634 --> 00:47:49,514 - There you go, thanks very much. Well done. - Cheers. 838 00:47:51,474 --> 00:47:54,034 'There's still a few hours left in the day. 839 00:47:54,034 --> 00:47:55,594 'Next - gardening. 840 00:47:55,594 --> 00:47:57,954 'I've agreed £15 for a big clear-up.' 841 00:48:08,794 --> 00:48:10,994 OK, no problem. 842 00:48:10,994 --> 00:48:12,754 I think I'm done. 843 00:48:13,874 --> 00:48:19,274 So at the end of the day, I have made £45 pounds. 844 00:48:19,274 --> 00:48:22,634 45 quid and I'm knackered. 845 00:48:22,634 --> 00:48:25,314 I've had enough. I want to go home. 846 00:48:25,314 --> 00:48:28,074 People do this every single day. 847 00:48:28,074 --> 00:48:32,954 With these micro-jobs, there's no guarantee of work, 848 00:48:32,954 --> 00:48:35,474 there's no guarantee that I could make that tomorrow. 849 00:48:35,474 --> 00:48:36,994 I could make nothing tomorrow. 850 00:48:36,994 --> 00:48:39,474 I could sit there all day waiting for a job to come through, 851 00:48:39,474 --> 00:48:41,354 be lucky to make 20 quid. 852 00:48:41,354 --> 00:48:44,354 It's so precarious, it's frightening. 853 00:48:46,514 --> 00:48:49,794 Over the last five years, the insecure nature of our lives 854 00:48:49,794 --> 00:48:52,234 and the growing inequality it's created 855 00:48:52,234 --> 00:48:54,874 have become the subject of intense debate. 856 00:48:58,754 --> 00:49:01,954 In Paris, one of the world's most influential economists, 857 00:49:01,954 --> 00:49:06,834 Thomas Piketty, believes inequality is fundamentally changing society. 858 00:49:09,554 --> 00:49:11,714 Inequality is not a problem in itself, 859 00:49:11,714 --> 00:49:15,394 up to a point it can actually be useful for incentives for growth, 860 00:49:15,394 --> 00:49:20,474 but when inequality gets too extreme, what historical evidence suggests 861 00:49:20,474 --> 00:49:23,074 is that this is not useful any more for growth. 862 00:49:24,114 --> 00:49:26,874 Piketty thinks the extreme wealth of the super-rich 863 00:49:26,874 --> 00:49:28,954 will profoundly alter our future. 864 00:49:30,314 --> 00:49:33,914 We can say is that the share of national wealth 865 00:49:33,914 --> 00:49:38,474 going to the top is of the order of 60% to 70%. 866 00:49:38,474 --> 00:49:42,834 The bottom half of society has very little net wealth, you know, 867 00:49:42,834 --> 00:49:48,554 less than 5%. The very fact that we don't know how far this can go 868 00:49:48,554 --> 00:49:51,234 is in itself a problem. 869 00:49:51,234 --> 00:49:54,114 You know, if we don't do coordination 870 00:49:54,114 --> 00:49:58,474 in favour of fiscal transparency and fiscal justice, 871 00:49:58,474 --> 00:50:02,594 I think the long run looks a bit frightening. 872 00:50:09,074 --> 00:50:13,394 The growing sense of injustice is being felt by more and more of us. 873 00:50:16,914 --> 00:50:21,634 And with no end in sight to rampant inequality... 874 00:50:21,634 --> 00:50:25,314 tension within the 99% is rising. 875 00:50:25,314 --> 00:50:27,394 This is a peaceful camp. 876 00:50:27,394 --> 00:50:29,714 It is the City of London that is violent, 877 00:50:29,714 --> 00:50:31,994 it is capitalism that is violent. 878 00:50:34,874 --> 00:50:38,514 Many believe that the seeds of future violence are being sown. 879 00:50:41,274 --> 00:50:44,474 This is the historian Yuval Harari. 880 00:50:44,474 --> 00:50:46,834 He believes our attitudes to inequality 881 00:50:46,834 --> 00:50:49,074 have fundamentally changed. 882 00:50:49,074 --> 00:50:53,394 In the Middle Ages, as far as we know, inequality did not cause people 883 00:50:53,394 --> 00:50:56,074 to be very dissatisfied with their condition. 884 00:50:56,074 --> 00:51:01,274 You're brought up from birth expecting the world to be unequal. 885 00:51:01,274 --> 00:51:04,074 Because you knew from birth - "I'm a peasant, he's a king, 886 00:51:04,074 --> 00:51:05,594 "that's the way the world works." 887 00:51:05,594 --> 00:51:10,194 But when you live in a modern capitalist culture, 888 00:51:10,194 --> 00:51:13,114 which encourages everybody, all the time, 889 00:51:13,114 --> 00:51:17,714 to want more and to believe that you can be as good as everybody else, 890 00:51:17,714 --> 00:51:21,034 then inequality becomes a much bigger problem, 891 00:51:21,034 --> 00:51:25,274 because then you always look at what other people have 892 00:51:25,274 --> 00:51:26,714 and you want that. 893 00:51:26,714 --> 00:51:29,914 And this is a great cause for dissatisfaction. 894 00:51:32,514 --> 00:51:36,914 In America, a country with higher inequality even than Britain, 895 00:51:36,914 --> 00:51:39,914 these concerns are being taken very seriously. 896 00:51:41,514 --> 00:51:44,674 Since Occupy Wall Street in 2011, 897 00:51:44,674 --> 00:51:46,954 inequality has become a call to action... 898 00:51:50,514 --> 00:51:54,554 ..and the super-rich are the focus of anger. 899 00:51:54,554 --> 00:51:58,434 The police are actually protecting the wrong people. 900 00:51:58,434 --> 00:52:01,794 They're arresting the wrong people, they're all wrong. 901 00:52:01,794 --> 00:52:04,714 What is clear is that some of the 99% 902 00:52:04,714 --> 00:52:07,914 believe that it's time to confront inequality. 903 00:52:09,034 --> 00:52:12,274 There is now a political tide for change. 904 00:52:12,274 --> 00:52:15,474 Powerful Americans, from President Obama downwards, 905 00:52:15,474 --> 00:52:17,994 are talking about the threat to society 906 00:52:17,994 --> 00:52:23,074 if they do not address what he calls the "Great Divergence." 907 00:52:23,074 --> 00:52:25,794 That is a dangerous and growing inequality 908 00:52:25,794 --> 00:52:27,514 and lack of upward mobility 909 00:52:27,514 --> 00:52:32,594 that has jeopardised middle class America's basic bargain - 910 00:52:32,594 --> 00:52:35,274 that if you work hard, you have a chance to get ahead. 911 00:52:36,994 --> 00:52:40,034 I believe this is the defining challenge of our time. 912 00:52:41,714 --> 00:52:46,434 And even the super-rich themselves are taking it seriously. 913 00:52:46,434 --> 00:52:49,514 - THEY CHANT: - The people united will never be defeated! 914 00:52:50,954 --> 00:52:53,274 You show me a highly unequal society, 915 00:52:53,274 --> 00:52:56,314 I will show you either a revolution or a police state. 916 00:52:56,314 --> 00:52:59,994 Nick Hanauer was one of the first investors in Amazon, 917 00:52:59,994 --> 00:53:04,034 and sold his company to Microsoft for 6 billion. 918 00:53:05,914 --> 00:53:08,194 'Somebody like me 919 00:53:08,194 --> 00:53:11,594 earns 10,000, 20,000 an hour. 920 00:53:13,794 --> 00:53:17,034 That creates a very different life 921 00:53:17,034 --> 00:53:20,674 from the life that ordinary people have to live. 922 00:53:20,674 --> 00:53:25,994 That gap isn't just an economic gap, it's a social gap. 923 00:53:25,994 --> 00:53:28,514 That gap is very, very corrosive 924 00:53:28,514 --> 00:53:30,994 because it decreases the amount of empathy 925 00:53:30,994 --> 00:53:33,794 that the people at the top have for everyone else. 926 00:53:35,074 --> 00:53:38,794 A sentiment that was echoed at a fair pay demo in Boston last year. 927 00:53:42,914 --> 00:53:46,514 The pay protestors have formed a national movement in the US. 928 00:53:46,514 --> 00:53:51,634 In city after city, demonstrations have sprung up attacking inequality. 929 00:53:53,954 --> 00:53:56,154 I think we have to flip around the idea. 930 00:53:56,154 --> 00:53:58,234 We generate the money for them. 931 00:53:58,234 --> 00:53:59,874 They don't give us jobs. 932 00:53:59,874 --> 00:54:02,954 We're generating the richness of the wealthy people. 933 00:54:06,594 --> 00:54:09,474 The norm in this country today is for CEOs 934 00:54:09,474 --> 00:54:14,514 to make massive amounts of money in an immoral level. 935 00:54:14,514 --> 00:54:16,954 We need to bring money back to the workers. 936 00:54:20,194 --> 00:54:22,634 We're not going to get the 1% to change their mind, 937 00:54:22,634 --> 00:54:24,554 we're going to get the 99% to realise 938 00:54:24,554 --> 00:54:26,794 that if they all stand up collectively, 939 00:54:26,794 --> 00:54:28,394 this is over with tomorrow. 940 00:54:31,754 --> 00:54:35,474 HANAUER: History shows us that if you make a society unequal enough, 941 00:54:35,474 --> 00:54:39,794 it is going to turn bad for everybody. 942 00:54:39,794 --> 00:54:41,514 Particularly people like me. 943 00:54:47,634 --> 00:54:49,874 So are the pitchforks coming? 944 00:54:49,874 --> 00:54:51,834 Well, maybe not tomorrow. 945 00:54:51,834 --> 00:54:53,794 But if things keep going the way they are, 946 00:54:53,794 --> 00:54:55,594 for sure they are going to come. 947 00:54:57,314 --> 00:55:01,154 And these predictions are as true for the UK as they are for America. 948 00:55:04,674 --> 00:55:08,154 The cracks are already showing in our own hourglass society. 949 00:55:09,154 --> 00:55:12,474 When rioting broke out four years ago across the UK, 950 00:55:12,474 --> 00:55:15,154 for some it was an illegal shopping trip. 951 00:55:15,154 --> 00:55:18,234 But for others it was about inequality and injustice. 952 00:55:30,314 --> 00:55:32,874 And the establishment are taking note. 953 00:55:36,434 --> 00:55:39,634 Remarkably, riots had been predicted in a strategic report 954 00:55:39,634 --> 00:55:43,594 written by a secretive think-tank at the Ministry of Defence. 955 00:55:46,154 --> 00:55:49,714 It stated that inequality could lead to violence, 956 00:55:49,714 --> 00:55:53,074 if the excluded began to take the law into their own hands. 957 00:55:55,114 --> 00:55:58,874 Rear Admiral Chris Parry commissioned the report. 958 00:55:58,874 --> 00:56:01,154 I think in modern complex societies, 959 00:56:01,154 --> 00:56:04,194 if you don't address the issues of economic inequality 960 00:56:04,194 --> 00:56:06,834 and social cohesion, you are going to get unrest. 961 00:56:06,834 --> 00:56:09,474 You're going to get people who reject the capitalist system, 962 00:56:09,474 --> 00:56:11,754 they reject the market. They'll reject democracy. 963 00:56:11,754 --> 00:56:15,194 They'll take action outside our democratic institutions. 964 00:56:15,194 --> 00:56:16,514 And we won't like that. 965 00:56:17,754 --> 00:56:19,634 'This is not a politician talking 966 00:56:19,634 --> 00:56:22,474 'but a high ranking member of the armed services. 967 00:56:22,474 --> 00:56:24,354 'His warning is stark - 968 00:56:24,354 --> 00:56:26,994 'the potential danger is clear and present.' 969 00:56:26,994 --> 00:56:29,954 I think there comes a point where people say, 970 00:56:29,954 --> 00:56:31,994 "Look, I don't enough out of this society. 971 00:56:31,994 --> 00:56:34,114 "I don't have a stake in this society," 972 00:56:34,114 --> 00:56:35,634 and suddenly, they burst out. 973 00:56:40,114 --> 00:56:43,314 A fact not lost on those who might be in the firing line. 974 00:56:44,554 --> 00:56:47,514 They will conclude that we are not playing a fair game, 975 00:56:47,514 --> 00:56:49,714 that we are not playing a game at all, 976 00:56:49,714 --> 00:56:53,474 we're engaging in an activity where I get everything 977 00:56:53,474 --> 00:56:55,274 and they get nothing. 978 00:56:55,274 --> 00:56:59,354 And if it's just a game, they will simply cease to play. 979 00:56:59,354 --> 00:57:03,754 If it's an economy, they're likely, eventually, to get really angry 980 00:57:03,754 --> 00:57:07,074 and come and kill me and take all my stuff, 981 00:57:07,074 --> 00:57:10,594 because that will be their only option at that point. 982 00:57:10,594 --> 00:57:12,794 And this is just obvious. 983 00:57:16,514 --> 00:57:19,434 40 years of widening inequality 984 00:57:19,434 --> 00:57:22,194 has left Britain with a fractured society. 985 00:57:22,194 --> 00:57:27,914 The richest 1% now earn over 14% of our total national income - 986 00:57:27,914 --> 00:57:31,834 a figure which has nearly tripled in the last 40 years. 987 00:57:31,834 --> 00:57:35,674 And the rest of society have become a business opportunity 988 00:57:35,674 --> 00:57:37,394 for the very few. 989 00:57:40,754 --> 00:57:44,634 This is the Shard, the tallest building in Europe, 990 00:57:44,634 --> 00:57:48,514 and a fitting metaphor for the inequality in society. 991 00:57:48,514 --> 00:57:52,994 The 1% live are on the top floor and the rest of us live down here. 992 00:57:55,194 --> 00:57:58,954 Britain is being transformed by a polarisation of wealth 993 00:57:58,954 --> 00:58:01,154 unlike any seen before. 994 00:58:01,154 --> 00:58:04,594 The super-rich can seal themselves off from this inequality 995 00:58:04,594 --> 00:58:07,074 but only for so long. 996 00:58:07,074 --> 00:58:08,914 When it becomes unsustainable, 997 00:58:08,914 --> 00:58:08,914 the view from the top floor could suddenly be very different.