Europe needs to be more relaxed about entrepreneurs getting filthy rich

Paul Ormerod
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PETER Mandelson famously said that he was “intensely relaxed about people getting filthy rich”. As with many aspects of New Labour, he was working firmly in the Leninist intellectual tradition. Some 20 years earlier, the then leader of the Chinese Communist Party Deng Xiaoping stated that “to get rich is glorious”.

The Chinese have certainly put the philosophy into practice. At the end of last year, an intriguing article in the Wall Street Journal described the deep intermingling of China’s richest men with the Communist Party. Liang Wengen, for example, who owns a major construction equipment firm, and whose personal wealth is estimated at $7.3bn (£4.6bn), is a member of the key political body, the Communist Party Congress. Overall, China’s elite political institutions have no fewer than 160 individual billionaires as members.

The super-rich are not shy about lobbying. They routinely negotiate their companies’ tax bills with the authorities. Zhou Haijiang, head of a massive clothing business, boasts that every time he meets the Party leadership, he exhorts them to reduce taxes.
American politicians are frequently accused of being rich elitists – out of touch with ordinary people. But compared to the Chinese, they are paupers. Estimates of the total personal wealth of all 535 members of Congress vary. But it is at the very most no more than the $7.3bn fortune of Liang Wengen alone.

They may castigate their politicians, but Americans remain intensely relaxed about individuals acquiring stupendous amounts of money through legitimate business activity. Eric Schmidt, executive chairman of Google, has just announced a plan to sell off less than half his shares for some $1.6bn. The wealth of Facebook founder Mark Zuckerberg varies from day to day, but is of the order of $10bn. And Bill Gates’s charitable donations alone dwarf this figure.

It is no accident, as the Soviets used to say, that massive personal fortunes can be built from start-up businesses in both America and China. These are the two dynamic drivers of the world economy. Both their cultures, in their different ways, admire and reward entrepreneurship.

The contrast with Europe is stark, and events in France have brought this into focus. Francois Hollande’s proposed 75 per cent tax rate admittedly only applies to incomes of more than €1m a year, but it is symbolic. The very French pop star Johnny Hallyday has castigated his own country, claiming that it “breeds mediocrity”.

As in many things, we in the UK sit uneasily between America and the rest of Europe. We have, for example, a fantastic example of innovation in Silicon Roundabout. But we need a culture that encourages these entrepreneurs to build vast fortunes, without the risk of being hauled before the tricoteuse of the Public Accounts Committee, Margaret Hodge, and castigated for their efforts.

Paul Ormerod is an economist at Volterra Partners, a director of the think-tank Synthesis and author of Positive Linking: How Networks Can Revolutionise the World.