As the international super-rich devour London, and as they turn their greedy eyes to the rest of our country, some economists insist that we should celebrate. Pissed-off Toff marvels at this delusion.
Economists are the witch-doctors of our age. Most of us struggle to understand the mumbo-jumbo that issues from their lips, and perhaps we also hope that if what they say is on the whole nonsense, it is fairly harmless nonsense, paid for by someone else. However, I recently came across an essay about London by the celebrated witch-doctor Roger Bootle, the central thesis of which is so blinkered in outlook, so misguided in spirit, and so fundamentally wrong, that it deserves to be refuted line by line. (1)
“We live in the global capital,” states Bootle in his opening sentence. “What’s more, with every passing year, London seems to get better,” he enthuses in the next. Compared to the “distinctly dowdy” place it was back in the 1970s, “the city is now vibrant and dynamic.” And to what do we owe this happy state of affairs? It is not just down to the marvellous work being done by the financial services sector. Oh no! It is also due to the fact that “London is the world centre for business services” and that what with one thing and another the city is a magnet for “wealthy people from abroad” … people who, Bootle warns, must be treated well, or else others like them “will not be attracted” and those already here “may leave.”
If the opening reference to London as “global capital” might merely induce a yawn of boredom, Bootle’s assertion that with every passing year the place seems to get better is so patently absurd that one feels compelled to carry on reading, simply to find out what on earth he means; which turns out to be that the restaurants have improved, and … um … that London is home to all those lovely “financial services” and “business services” and is thus a magnet for lots of lovely “wealthy people” from abroad.
As Bootle boasts in this same article, he spends much of his life on high-speed trains, gliding from one European capital to another. In other words, he lives the coccooned expense-account existence which is no doubt his due as economics guru, international soothsayer and founder of Capital Economics. But even so, one wonders how he can be quite so deluded about the reality of modern London.
Because leaving aside the fact that the whole city has become a permanent building site, shaken to its foundations every day by heavy-duty drills; leaving aside the fact that compared to how it was in the dowdy 1970s, London is now intolerably crowded, its streets jammed full of traffic and the Underground as often as not a scene from some vision of hell; leaving aside the fact that general levels of stress in this marvellous “global capital” have risen to stratospheric levels; forgetting, for the moment, the fact that the vibrant “financial services” sector (aka banks) so lavishly praised by Bootle brought this country to the brink of ruin and had to be bailed out at unimaginable cost … just assuming, for the sake of argument, that we are able to leave aside all this, there is still a huge great elephant in the room that Bootle somehow manages to ignore.
I refer to the single most important fact about modern London, which is that the only people who can afford to live there now are either the very rich, for whom money does not matter, or the underclass, who are housed there at the expense of the rest of us. Furthermore, this state of affairs is the direct result of the forces of globalisation which so excite Bootle, and also of the disproportionate growth of his beloved financial and business services sectors. Indeed, the very things that Bootle praises as being the fount of all our happiness and good fortune have, in fact, made London quite unlivable and out of the question for the vast majority of ordinary British citizens.
It would not matter so much if Bootle were the only witch-doctor giving voice to this cant about the glories of London as global capital and home to the international super-rich. Unfortunately, his fellow witch-doctors are all doing so too, and they have a large and attentive audience. But as I learnt during the several years when I worked in the City, most economists are wrong about most things most of the time; so I feel quite entitled to explain why what Bootle praises as a blessing is in fact a curse.
The crux of the matter is there, in his very first line. London, as he rightly says, is “the global capital” … in other words, the pre-eminent city in a newly globalised world. And globalisation is the problem, because what, back in the innocent early 1990s, was meant to be such a good thing in theory, turned out to be rather less positive in practice.
The theory, so loudly trumpeted by scores of economists, stated that the free movement of labour, goods and capital throughout the world would make us all richer, with each country playing to its strengths and thus adding to the general wellbeing of humanity. The reality, quite unforeseen by these free-market theorisers and ideologues, was that in a world in which people and money can go wherever they want, they will all tend to go to the most desirable place … and that this place will be overwhelmed by the sheer force of it.
Here in Britain, and in London in particular, we saw it first and most obviously with mass immigration in the form of the arrival of a net 3.6 million mainly low-skilled people under the thirteen years of Labour rule between 1997 and 2010 – a staggering and unprecedented influx which we are still trying to comprehend and which shows no signs of slowing down.
Less immediately obvious, but every bit as important in terms of its effect on all of us, has been the tsunami of foreign money that has swept over the capital; and it is this, perhaps more than anything else, that has turned London into a victim of its own desirability.
What I am talking about, of course, is the price of property. It’s simple enough when you think about it; and don’t take it from me, but from a friend of mine who has spent his whole working life at the top of the property market. As he explained, in a globalised world where anyone can buy anything so long as they have enough money, the one asset that every single “ultra-high-net-worth individual” wants (to use my friend’s rather unattractive expression) is a prime London property. And when virtually every super-rich person everywhere in the world wants to buy a slice of a strictly limited space on the banks of the River Thames, we see a predictable result: soaring property prices. Nor is this theory. It is verifiable reality, backed up not just by hard statistics, but also by equally convincing anecdotal evidence.
Statistically, it is a fact that rich foreigners are buying up the best parts of London, and that they will pay any sum to acquire the properties they want. This has been going on for some time, too. Back in 2010-2011, for example, the estate agents Savills found that six out of ten property sales in what it calls Prime Central London were made to foreign buyers; and the trend continues apace, with prices rising to hallucination-inducing levels, so that properties that a reasonably successful professional might have bought without a second thought a generation ago are now entirely out of reach.
One example will do. In late 2012, the broadcaster Nick Ross sold his Notting Hill house to Khaled Said, son of Wafic, for an eye-watering £35 million – almost forty times the £950,000 he had paid for it in 1993, less than a decade before. Such statistics, common enough, just don’t bear thinking about.
Anecdotally, where does one start? Well, take one of my better-off friends, a chap who by most normal standards is pretty successful. He was recently looking to buy a house in London, but at every stage he found himself being outbid by foreigners, even for non-central properties. He just couldn’t compete with the wall of money from abroad.
In a similar vein, I know of a man who sells ultra-high-end London properties to Russians, aka oligarchs, and who says that there are just not enough large houses for these people to buy. The demand, from Russia alone, is absolutely limitless; the supply strictly limited. And what does that mean for property prices? Um, let me think … hang on while I work it out …
In my imagination Bootle now reappears, wagging a donnish finger. Don’t worry, I hear him say. All this is a sign of that London is “vibrant and dynamic” … plus, these “wealthy foreigners” (including, presumably, Russian thugs, Columbian drug barons and Ukranian arms dealers) are good for us … or that, at any rate is the implication.
Wrong! Because if these lovely foreigners moved here lock, stock and barrel, and if they started up businesses here (which Bootle implies they do) and spent an awful lot of money all the year round, there would be some benefit to the rest of us. On the other hand, they come here in their tens or hundreds of thousands solely in order to buy properties which for much of the year are left empty. In other words, they come as predators, not as wealth creators; and like a plague of locusts, they consume everything in sight before moving on and leaving a desert behind them.
Not long ago, some time mid-week on a dark winter evening, I walked round Chester Square, bang in the middle of London, and counted the number of residences with lights on. Of the approximately eighty houses in the square, fewer than half a dozen had lights on in the main part; and most of the rest had one or two lights on in the basement or on the top floor, and that was all. In other words, the owners were not there, but their servants were, guarding the absent master’s investment. The same was largely true of the far larger Eaton Square nearby, and is also true of whole swathes of central London.
Again in an anecdotal vein, the other day a plumber came round to the flat in central London which by some fluke I occupy for the time being. He’s as busy as could be, he told me; but he almost never sees the owners of the flats and houses he services, because they are almost all absentee foreigners. He collects the keys from the estate agents, does the work, hands back the keys, and moves on to the next empty foreign-owned property.
When, therefore, Bootle tells us that London is so “vibrant” and “dynamic” and that it is a “world centre for business services” which attracts all those lovely “wealthy people from abroad,” what he actually means is that London is turning into a lifeless commodity that the super-rich of the globalised economy buy up and place in their diversified portfolios. So London is no longer a city for the British to live in. It is an asset class to be divvied up between footloose foreigners who have no faith in their own less civilised countries and who owe no allegiance to anyone or anything – except, of course, to money.
Nor have we seen the end of this process. Here, for example, is what Liam Bailey, the head of residential research at the estate agents Knight Frank, has to say. “The competition for the best properties [in England] is more intense than ever,” he told me several years ago. “Those with money concentrate on the best locations. They’ll spend as much as it takes.” In other words, when the foreigners have bought up the whole of London, they will devour the rest of the country too, and price you out of the market there as well. Indeed, it is happening already, as any top-end estate agent will tell you. Or, to quote the Rich List 2015, published by The Sunday Times, “Britain is more attractive to the global super-rich than any country except America.”
But if you are unhappy about seeing your country gobbled up before your very eyes, and if you are worried about being pushed to the fringes of your own homeland by the greedy hordes of the international super-rich, fear not, because the nice Mr Bootle will be at hand to explain to you that this mass invasion of foreign vultures is a splendid thing, and all in your own very best interests … if only you could see it.
(1) Boisdale Life magazine, spring 2015 edition.