a Policy Press blog post (14 September 2017) by Roger Brown, author of
The inequality crisis, who explains how economic inequality in Britain and other advanced Western countries has got so bad, and highlights the measures we need to undertake that will start to reverse this devastating trend.
Almost every day now the media carries stories about inequality and its effects.
In the past few weeks, the Department for Health has confirmed that the health gap between rich and poor in England is growing.
Reports by Lloyds Bank and the Social Market Foundation have drawn attention to our disparities in wealth, with a tenth of adults owning half of the country’s wealth while 15% own nothing or have negative wealth.
Respected independent ‘thinktanks’ like the Institute for Fiscal Studies and the Resolution Foundation have repeated their warnings that, at a time when wages generally are only growing slowly, the combination of tax cuts and cuts in welfare benefits means that income inequality will increase further over the next few years.
“Economic inequality has increased in nearly every advanced Western country…”
This is not just an English or British issue. In March, International Monetary Fund (IMF) researchers estimated that the US economy had lost a year of consumption growth because of increased income polarisation. And of course inequality was a major factor in the Brexit vote and in the election of President Trump.
My interest in the subject was first aroused by my work on the introduction of markets into higher education. I found that the associated increase in competition through mechanisms like tuition fees had exacerbated the inequalities between universities and the constituencies they serve, without any significant compensating benefits. This led me to wonder if there might be parallels in the economy and society more generally.
What I established was that economic inequality has increased in nearly every advanced Western country over the past thirty or so years, and that this has led to a huge range of costs and detriments. Moreover, these costs and detriments are not only social. As the IMF research confirms, increased economic inequality has an economic cost as well. Above all, growing inequality is disabling democratic politics as the concentration of economic power is increasingly reflected in a concentration of political power (as can be seen most clearly in the US).
“Growing inequality is disabling democratic politics…”
But whilst nearly everyone agrees that – to paraphrase Dunning’s famous 1780 Parliamentary motion, economic inequality has increased, is increasing, and ought to be reduced – there is no agreement on how this should be done.
Broadly speaking, there are two schools of thought:
One – the ‘market’ view – is that increased inequality is the inevitable outcome of underlying structural developments such as globalisation, skill-biased technological change, and financialisation (the growing economic role of such processes as banking and securities trading) over which individual countries and governments have little control. These changes are leading to what have been termed ‘winner-take-all’ markets where those at the top gain rewards out of all proportion to their contribution to society.
The alternative, ‘institutional’, theory is that it is due to the political choices made in individual countries, and especially the neoliberal policies of deregulation, privatisation, tax reductions, welfare cutbacks and deflation pursued in most Western countries since the mid- to late-70s, but particularly associated with Margaret Thatcher and Ronald Reagan.
I believe that it is the combination of these underlying structural developments with those neoliberal policies that has driven the post-80s rise in inequality, with the US and Britain well above the other wealthy Western countries in the extent to which inequality has grown there over that period.
So the key to reversing, halting or slowing inequality lies in the first place in reversing these neoliberal policies, but without losing the benefits of properly regulated market competition in sectors where it is appropriate.
The following is a short list of measures that would start to reverse inequality in Britain:
- Require the potential impact on inequality to be a major test of every other policy or programme introduced by the Government.
- Show that we are serious about tax avoidance by reversing the long-term decline in the number of professional HMRC officials.
- Progressively adjust the balance between direct and indirect taxation (VAT), increasing the former and reducing the latter.
- Increase the income tax rates for higher earners (say, above £60,000).
- Introduce some form of wealth tax.
- Begin the rehabilitation of the trade unions by repealing most of the 2016 Trade Union Act.
- Reverse the cuts in welfare benefits made by the Coalition and Cameron Governments.
- Introduce measures that really will force companies to take account of interests wider than those of top management.
- Begin to end segregation in education by removing the charitable status of the private schools.
- Focus macroeconomic policy on demand and wage growth rather than inflation and corporate profits.
The Labour election manifesto has some proposals on these lines, but no political party has yet really got its mind round the full range of measures that are needed to combat inequality.
Until they do, inequality will continue to increase.
So says Mr Brown who is, obviously, speaking from a specific political viewpoint with which you may not agree. However, I hope that we can agree than widening inequality between those who have and those who have not can, and, in many instances, does, lead to disruption and violence. H
