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Tackling inequality means challenging fundamentals of capitalist system

uk-moneyThe ‘cost of living crisis’, powerful though the idea is, is a campaigning theme, not a policy. A Living Wage at the base of the income pyramid and a tax on bankers’ bonuses (as well as the EU bonus cap) would certainly help to mitigate some of the extremes, but by themselves don’t even begin to tackle the extent and depth of grotesque inequality in Britain today.

The poorest third of the population own just 4% of UK wealth, while the richest tenth own nearly half (45%). Each of the latter on average owns wealth exceeding £1m. while the top 1% on average own more than £2.8m. The inequality in income is even more stark. The average income of the poorest nine-tenths of the population across Britain as a whole is now £250 a week.

By contrast the average income of the top tenth is £1,520 a week, six times more. Above this point the explosion in pay and other forms of remuneration occurs. The average income of the richest 1% is now £5,229 a week, 21 times that of the lowest-paid nine-tenths. The average income of the top 0.1% (some 30,000 persons) has now reached £19,250 a week, 77 times that of the poorest tenth. And near the pinnacle, the average income of FTSE-100 chief executives (plus quite a few bankers) has now reached the obscene level of £86,000 a week, no less than 345 times that of the lowest-paid nine-tenths.

Two questions immediately arise: how did this happen, and how can it be reversed?

It would be simple to say that this grotesque inequality has arisen because of the sheer greed of the ruling economic elite, and while there is some truth in that, they have only been able to activate their instinctive greed because of some fundamental changes deep within the capitalist system. Thatcher managed to eviscerate trade union power in the name of promoting labour market flexibility. That has markedly shifted the share of national income in favour of profits as opposed to the wage share by reducing the latter from 65% to 52% over the last twenty years. That has had the further advantage for capital in hugely reduced taxation on companies (in the name of competitiveness) and the super-rich (in the name of promoting incentives and ‘wealth generation’) together with – ironically – facilitating also a massive surge in industrial-scale tax avoidance.

This has had other perverse consequences. The ‘squeezed middle’ have pursued the only route open to them to try to keep up with the high-flying super-rich, by borrowing at absurd multiples of their income (up to 20:1 in London) to capture in the housing market what they cannot in employment. Housing equity withdrawal is now reckoned to have reached £1.8 trillion in total. Poorer workers who can’t afford this are forced to rent in the private sector as the public rented sector steadily shrinks and hardly any social housing is being built, and this has created an inflated class of private landlords whose total equity is estimated at a staggering £800bn.

The British economy is profoundly dysfunctional, but until these toxic excesses deep within the structure of the underlying capitalist framework are identified, addressed and radically reformed, the forces which have promoted the share of the richest 1% from 4.2% of total UK income in 1976 to nearly 14% now will continue to exert their baneful influence.

4 Comments

  1. Iain gillespie says:

    Thank goodness for Michael meacher who consistentlely promotes a socialist agenda in the face of overwhelming odds, I like him was disgusted at the outcome of the recent debate for a public enquiry into poverty, what has happened to so called democracy when a totally unrepresentative government can ignore a positive vote in favour of such a measure.

  2. eric clyne says:

    We consume too much and invest too little, or we can also say, we spend too much and save too little.

    In order to tackle inequality we need to create well-paying jobs. To do that we need to grow the manufacturing base. To do that we need to consume less and invest more.

    If you want to address inequality, then you must focus upon investment in manufacturing so that we produce more goods which means more wealth.

    By focussing solely upon processes of redistribution you appear to rely upon the capitalists to create the wealth and socialists to redistribute it.

    Trusting capitalists is not a good idea. They always UNDER-INVEST. We need a Labour government to increase direct investment in industry in order to create jobs with decent pay. That in turn will lead to a reduction in inequality as the country becomes wealthier.

    Redistribution alone can helps our problems but it does not cure them.

    This country badly needs government-directed investment in industry.
    .

  3. Rod says:

    @ Iain

    But why on earth does Michael remain in the Labour Party where his views will never gain any traction.

    His main purpose appears to be to provide desperate Lefties with the faint hope that Labour is going to one day become an alternative to the Tories. This keeps them campaigning for Blairite/Progress/Tory-lite policies at election after election.

  4. Robert says:

    True the labour party or One Nation party or Blue labour or Purple labour everything but pink or red have now became a third Tory party behind the old Whigs or Liberals as they are now known.
    Ball’s to day we would tax the rich more… 5p more because they would up the tax proving labour is the party , well proving what they brought in that tax band a month before the 2010 election.

    We will also bring back the 10p tax for the poor great, when Brown brought removed , Balls came onto TV to argue Brown was right it was the right thing to do, bloody hell mate make up your mind

    labour would hold down benefits with caps and the wages of the public sector many of those who are on the min wage, then thank god for the Tories then because I’ve had some decent benefits rises under the Tories compered to New Labour, and the min wage under the Tories will go up by a £1.

    labour reason for being is the 50p tax band and the cap on the poorest.

    New labour is alive and well .

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