I think he is right !!

From The Sunday Times
April 29, 2007

We used to have it all...
Sebastian Cresswell-Turner says he and his professional friends are the nouveau poor – a frighteningly downwardly mobile class

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'City bonuses at obscene levels” . . . “The rich getting richer and the poor getting poorer” . . . “Gap between rich and poor largest in 100 years”. Such headlines are only too familiar. But they mask a more complicated truth that few are inclined to recognise – namely that the poor aren’t the only ones who are getting poorer. Whole swathes of the professional classes are, too.

When I was a boy, almost everyone we knew lived in a large house in the country or in the better parts of London. I am not claiming for a moment that we were especially grand – just perfectly well-off. But back then Battersea and Clapham were entirely off our radar, Stockwell another country, and Brixton, Peckham and Streatham simply unheard of. Now, with a few exceptions among those who are notably rich or successful, the next generation of the same families I grew up with is living in just these areas.

Then take private education. The number of people in my parents’ circle who sent their children to state schools could be counted on the fingers of one hand, and were regarded as unfortunate, odd or even subversive. A generation later, however, a considerable proportion of my friends have opted for state schools for their children, in almost all cases for financial reasons.

If this is not downward mobility on a broad scale, then what is?

The daughter of a High Court judge who lives with a painter on a far-flung island in the Orkneys, the public-school-educated actor-manager leading an itinerant life in the Australian outback . . . these might be said to have chosen of their own free will to turn their backs on professional status and on the attempt to maintain it.

But the rest? The two brothers aged thirty-something, both educated at Eton like their father, one a restaurateur and the other working for Mo봠& Chandon, neither of whom can dream of educating their children privately? Or the two younger sons of an earl, again both Old Etonians, one in marketing and the other a teacher, and both stony broke? These are hardly natural-born losers.

“The phenomenon of the professional poor is definitely on the increase,” says Lady (Sally) Dowson, who has many years of experience as a social worker in central London. “People try to sweep it under the carpet, to put up a good front, but future generations won’t possibly be able to live as we do.”

“My son’s living in Kingston upon Thames,” a retired public-school-educated businessman told me. “It’s a perfectly decent place, but nothing like the surroundings I grew up in. My grandchildren aren’t attending private schools, either – there’s no way my son could afford it – and I’m most concerned that they will emerge from university with massive debts.”

What is the cause of all this? The main factor is without doubt property. In 1967 my father paid £17,000 for the old rectory where I spent much of my childhood, and in 2005 the same house changed hands for £1.45m. In the space of just over a generation, the price increased by a multiple of 85, while according to Knight Frank over the same period (1967-2005) the UK property market as a whole rose by a multiple of 47. In other words the price of a typical country house rose at twice the rate of the rest of the property market, which itself was booming.

The same is true for all “prime property”, as it is called, especially in London. The Knight Frank prime central London index rose 29% last year alone, roughly three times the rate of the UK property market as a whole.

The result of all this is that properties which reasonably well-off professionals might have bought without a second thought a generation ago are now entirely beyond their reach.

Then take school fees. Between 1996 and 2006 the boarding fees at Eton, which are admittedly at the high end, rose from £13,400 a year to £24,990 – up 86% in a decade. Who can afford to send three children to boarding school, as many of my parents’ generation did, when to do so now costs £40,000 of pretax income per child?

“Traditionally the magic of Eton has been the variety of boys you meet there,” Sir Eric Anderson, head master from 1980 to 1994 and now provost, told me. “But when I came back here as provost in 2000, I could foresee a danger that in the future the only parents able to send their children here would be City types and rich foreigners. That is why we are in the process of raising £50m for bursaries.”

My own family illustrates this whole process only too well.

My father, a respected country-based architect, somehow managed to put his four sons through private education. One is now a partner in a venture capital firm; another is co-founder of Lombok, a furniture retailer with a turnover of about £15m a year; another is a highly skilled Shropshire-based cabinet maker; and as for myself, the oldest son, “wordsmith” seems best to describe the translating, writing and language teaching that have occupied me in Paris, Rome and London over the past decade or so.

Of these four brothers, all of equal talent but of quite different character, two are or soon will be rich or very rich. The other two are penniless.

As an unmarried and badly paid knowledge worker, I live in a rented room in Hammersmith and have no hope of ever buying a home anywhere. Indeed, when I return to the agreeable parts of central London that I know so well from earlier periods of my life, I realise that I am looking at the attractive stucco houses in just the same way that a tramp looks through a restaurant window at a group of people enjoying a carefree meal. I am effectively an exile in the city where I was born.

Consider a successful journalist friend of mine who went to St Paul’s girls’ school and then to Cambridge. At the same time as putting her and various others through private schools, her father, a surgeon, was able to provide a house in Chiswick and a weekend cottage in Wiltshire with ponies and all the trimmings. Every winter they went skiing and summers saw them in France or Italy.

But a generation on, even though my friend and her husband – both professionals like their parents – earn the considerable joint salary of £140,000 a year, the bourgeois ease of their youth seems unthinkable. In spite of their undisputed professional status and more-than-respectable earnings, they are downwardly mobile.

Or take another family that I know with three children, all educated privately and all now roughly 40 years old. One, a merchant banker, is flourishing; another, an architect, is doing all right; and another is living in a council house.

I could go on. But what emerges is the remarkable divergence in fortunes, nowadays, within the same generation of the same families, and with dramatic upward or downward mobility occurring almost overnight; all largely thanks to another remarkable new divergence – that between the increasingly stratospheric salaries of City types and the increasingly insufficient salaries of almost everyone else.

We are not looking, here, at the widening gap between rich and poor, but between financial operators and ordinary professionals.

Many simply deny the reality that we all see around us every day. “Don’t be so silly,” said one old friend, a charismatic entrepreneur with little time to waste on speculating about socio-economic turbulence in modern Britain. It is perhaps no coincidence that one of his grandfathers – a glorious mousta-chioed scion of the British Empire, descended from ancient Viking stock – was the first man to fly over Mount Everest.

Various City men I spoke to also dismissed my concerns out of hand, trotting out the tired argument that financial services are Britain’s most successful industry, that bankers pay taxes and National Insurance too, and that the earnings of the super-rich trickle down the economy.

But as MoneyWeek recently pointed out, most of the money of the super-rich ignores gravity and flows upwards into prime property or sideways into the Caribbean, with the odd thousand pounds trickling into five-star restaurants in London and a few stray pennies dripping into the pockets of Polish nannies who promptly siphon them back home.

An old headhunter friend I contacted also toed the City PR line for a while (“dynamic place . . . engine of the economy . . . challenges of globalisation”) and then gave up. “You’re opening a can of worms here, old boy,” he said eventually.

The last word must be a comment made by my father as he and I were watching Excess in the City, a recent TV documentary about the phenomenal changes in fortunes that recent years have brought about. “There must be so many people who are practically committing suicide over this,” he said as we filled up our glasses and tried to forget.

So how much does a married couple with three children need to live the sort of life that reasonably well-off professionals of my parents’ generation took for granted? The property alone – a house in the country and perhaps a flat in London – will cost a minimum of £3m. Then the school fees will be £75,000 a year plus extras; after which food, clothes, cars, the odd holiday and all the rest will add another £50,000 at the very least.

Even if you own the bricks and mortar outright, as everyone in my parents’ generation did, that implies a pretax income of at least £200,000. Throw in a mortgage and a margin for error, and you’d better be on . . . what, a third of a million a year? And this, mind you, to live comfortably, no more.

A civil servant on £60,000; a partner in a country law firm on £75,000; even a successful GP on £100,000 . . . for all of these highly trained professionals, to send one – let alone two – children to a public school is either impossible or a severe strain (though independent day schools are far less expensive). A headhunter who is often asked by his friends how they are meant to get by on, say, an MP’s salary of £60,000 a year, has no answer. “I just don’t want to think about it,” he told me.

In the face of this, some make considerable sacrifices, often getting into debt. But many others give up the struggle with London and move to the country, with any luck near a good state school like Dr Challoner’s in Buckinghamshire or Gillingham in Dor-set, now nicknamed “the toffs’ grammar school”. In the words of one insider: “You often come across this at dinner parties in the country, with people saying that London’s so awful that they never go there any more; protesting too much, of course; then you realise they just can’t afford it.”

A popular member of White’s, the St James’s club to which many of the old landowners belong, knows plenty of well-edu-cated professionals who have fallen by the wayside. “First, they can’t afford to eat out,” he told me, “then they pull their children out of [fee-paying] school, and you just stop seeing them.” Brian Gill, a London-based debt counsellor, told me: “The poverty line is definitely creeping upwards.”

As a result, socio-economic classes that used to be entirely immune from hardship are no longer safe; and if they do not have to contend with actual poverty, they are nevertheless plagued by a constant sense of precar-iousness. “Everyone we saw was utterly stressed-out over work and school fees,” said the wife of a bestselling British author now based in Italy, after a brief visit to England last summer.

And as a City banker told me, many of his friends are so hopelessly overstretched that they are never more than one pay cheque away from disaster. Throw in a divorce, and . . . well, let’s not go there.

As for what’s behind this, it’s simple: glo-balisation. At the same time as we are exporting vast numbers of perfectly worthwhile jobs we are importing huge quantities of cheap labour, creating severe downward pressure on wages all the way up the socio-economic scale . . . and while we are doing this, tidal waves of money from the City and from newly rich countries like Russia and India are washing over us, lifting the price of property and all other assets to absurd levels; with the effects being most severely felt in the old stamping grounds of the professional classes.

According to Ajay Kapur and Niall Macleod, strategists at Citicorp, our whole economy has been hijacked by the international super-rich. And largely thanks to tax breaks introduced by a Labour government Britain in general and London in particular are the favoured destinations for this new and voracious breed.

It seems, therefore, that we are witnessing a return to the rough-and-tumble of 18th century England as portrayed in picaresque novels like Tom Jones by Fielding or Roderick Random by Smollett; or perhaps to the raw capitalism of the early 19th century as described in Dickens’s Nicholas Nickleby, in which the landscape is littered with fallen members of the gentry.

The moral of the story? Career choice is now all-important: go into the City, where they encourage and feed off the very process that is putting such pressure on the rest of us. As my host at an Oxfordshire dinner party said the other day: “A generation ago it didn’t make much difference what one’s chums did, whether they went into the army or the City or publishing or whatever; but now it’s a make-or-break decision.”

For professionals as much as for anyone else, Tony Blair’s brave new Britain is an unforgiving place, characterised by a brutal commercialism. So fail to become a top City lawyer or accountant, fail to make it as a highflying entrepreneur, businessman or investment banker, fail to play the property market successfully – fail, in other words, to become a fully fledged homo economicus, and you will soon know the meaning of downward mobility . . . and perhaps even poverty.

A few good points in the article.

According to Jean-Jacques Rousseau, the origins of poverty lay in private property itself:

“... from the moment one man began to stand in need of the help of another; from the moment it appeared advantageous to any one man to have enough provisions for two, equality disappeared, property was introduced, work became indispensable, and vast forests became smiling fields, which man had to water with the sweat of his brow, and where slavery and misery were soon seen to germinate and grow up with the crops. ...

“... there arose rivalry and competition on the one hand, and conflicting interests on the other, together with a secret desire on both of profiting at the expense of others. All these evils were the first effects of property, and the inseparable attendants of growing inequality.

“Before the invention of signs to represent riches, wealth could hardly consist in anything but lands and cattle, the only real possessions men can have. But, when inheritances so increased in number and extent as to occupy the whole of the land, and to border on one another, one man could aggrandise himself only at the expense of another; ... Usurpations by the rich, robbery by the poor, and the unbridled passions of both, suppressed the cries of natural compassion and the still feeble voice of justice, and filled men with avarice, ambition and vice. [Rousseau, On the Origin of Inequality of Mankind,]

Rousseau also wrote:

"Laisse, mon ami, ces vains moralistes et rentre au fond de ton ame".

Advice you would be well advised to follow young man!