The age of endless growth in prosperity for everyone is now a distant memory of a rather more hopeful era. Despite what the government tells us, inequality is growing. This is damaging to the economy and to ordinary citizens who are struggling to get by on ever-diminishing incomes and ever-rising living costs. It’s highly unlikely that Brexit will help matters, too.
Rising inequality coincided with a profound shift in economic policy throughout much of the developed nations of the world – from Keynesianism to neoliberalism. Political parties got elected from the end of the seventies by promising to cut tax rates, ‘free up’ markets, and reduce government intervention in the economy. The change was most pronounced in Britain and the United States, after Margaret Thatcher and Ronald Reagan took office. But it also occurred to varying degrees in Continental Europe, Canada, Australia, and Japan.
Those countries with largest tax cuts also experienced the biggest increases in inequality, losses in public welfare and social cohesion. However, the advocates of neoliberalism hold a prevailing view that inequality isn’t a bad thing because it ‘spurs’ people to work harder (‘competition’) and become more self-reliant and self-disciplined.
It’s worth noting that many people in poverty are increasingly likely to be in working families, which indicates that poverty isn’t caused by people being lazy, undisciplined and unmotivated. Yet neoliberal ideologues uphold the ‘scrounging’, ‘dependent’ , ‘entitled’ , ‘undeserving’ stereotype to justify growing inequality and increasing absolute poverty.
The myth of meritocracy is also used to justify inequality. Boris Johnson and Charles Murray, among others, have argued that wealth is linked with having a higher IQ. However, roughly a third of rich people inherit their wealth, so that cannot be linked to their own personal qualities, talents or achievements.
There is also the problem with defining ‘skills’ and ‘talent’ worthy of merit. One person’s idea of talent is another person’s idea of Simon Cowell.
The authors of a paper called Talent vs Luck: the role of randomness in success and failure, say: “The largely dominant meritocratic paradigm of highly competitive Western cultures is rooted on the belief that success is due mainly, if not exclusively, to personal qualities such as talent, intelligence, skills, efforts or risk taking. Sometimes, we are willing to admit that a certain degree of luck could also play a role in achieving significant material success.
But, as a matter of fact, it is rather common to underestimate the importance of external forces in individual successful stories.”
The authors conclude, rather depressingly that: “The maximum success never coincides with the maximum talent, and vice-versa.”
Although the researchers outline the role of luck and randomness in how some people become very wealthy, they have overlooked the role that neoliberal policies play in redistributing public wealth towards the already wealthy.
The team who undertook this study, led by Alessandro Pluchino, also concluded that an important factor in their model was an element of fortune and misfortune that can make or break the individuals’ success.
This is one good reason why we need a robust social security system. Because no-one is immune from periods of hardship and misfortune: an accident or illness, the loss of a job, and a range of other circumstances can leave us facing poverty. No-one ‘deserves’ to be hungry, homeless and poor.
The ‘Inequality Turn’ in the 1980s is one of the most distinctive aspects of contemporary political economy. It isn’t likely that people suddenly became less ‘deserving’ of a decent standard of living, given the radical change in economic ideology and subsequent shift in socio-economic organisation. It’s rather more likely that the political choices of neoliberal policy over that time have resulted in the growth of inequality.
The neoliberal shift has led to the world’s billionaires having more wealth than 4.6 billion people and the world’s richest 1% own more than double the wealth of 6.9 billion people. There are just 2,153 billionaires.
Those are the latest figures on global inequality from a report released on Monday ahead of an annual meeting of global elites in the mountain resort of Davos-Klosters, Switzerland. The report by the international aid organisation Oxfam states that the number of billionaires has doubled in the last decade.
As at least some of the world’s 2,153 billionaires attend the World Economic Forum this week, others will be working to communicate another message: the complicity of the global elite in wealth inequality.
“Our broken economies are lining the pockets of billionaires and big business at the expense of ordinary men and women. No wonder people are starting to question whether billionaires should even exist,” said Amitabh Behar, the CEO of Oxfam India who will be present at Davos.
“[Inequality is at the] heart of fractures and social conflicts all over the world, and no one is fooled,” said Pauline Leclère, Oxfam France’s senior campaigner for tax justice and inequalities.
“Inequality is not someone’s ‘fate’. It is the result of social and fiscal policy that reduces the participation of the wealthy [through taxes] and weakens funding for public services.”
Leclère said this is the message that Oxfam will be trying to deliver at Davos.
The charity has released its annual report ahead of the famous economic meeting to address mounting inequality since 2014.
The 2008 financial crisis saw the rich get richer. In 2012, the top 10% of earners took home 50% of all income. That’s the highest percentage in the last 100 years, according to a studyby economists Emmanuel Saez and Thomas Piketty.
If you want to know how that happened, you need to simply compare and contrast Conservative neoliberal policies: those aimed at wealthy people have tended to reward them with money, simply for having money, while the poorest citizens have been ‘incentivised’ to be less poor by being financially sanctioned.
This language of ‘incentives’ has been used to engineer a massive shift of public wealth from the poorest to the wealthiest. For example, the social security cuts to disabled people’s support happened at the same time as a generous tax cut to the UK’s wealthiest citizens. While the government imposed austerity on everyone else, they handed out £170,000 each per year to the millionaires in the form of a generous tax cut.
According to government opinion and rationale, wealthy people require wealth to ‘incentivise’ them to be wealthy, whereas poor people require less money to somehow punish them out of their poverty.
I don’t think the current government are in a position of power because of their coherence, honesty, talent and intelligence.
I think they are in government because of their ruthless pursuit of insulting the intelligence of others. And succeeding in doing so.
Boris Johnson making a tenuous and tedious link between IQ, talent, competition and the inevitability and essential nature of inequality.
Gender inequality
This year, Oxfam examined the gender divide as well, highlighting that men worldwide own 50% more wealth than women due to a “sexist and unfair economic system”.
The 22 richest men in the world have more wealth than all the women in Africa, according to the report.
Women are much more likely to work in sectors that are more insecure and less valued economically, Oxfam said.
They do more than 75% of unpaid care work and make up two-thirds of the “care workforce” in nursery and domestic jobs.
“Women and girls are among those who benefit least from today’s economic system,” said Behar.
Overall, their conclusions on inequality remain unchanged.
“Unfortunately, the organisation’s conclusion is the same. Inequality continues to rise in extreme proportions,” Leclère told Euronews, adding that inequality is bad for economies.
The director of the International Monetary Fund said at a conference in Washington DC last week that although inequality between countries was decreasing, inside many high-income countries, inequality is growing.
“The gap between rich and poor can’t be resolved without deliberate inequality-busting policies, and too few governments are committed to these,” said Behar.
Though members of civil society say they’re looking to receive concrete results from Davos, they know it’s an uphill battle.
Leclère says NGO members aren’t “fooled” by the events’ big, lofty political speeches. “We’re waiting for them to follow up with action.”
I can’t see that happening any time soon.
The remedy for an inclusive economy and society
77 years ago, the Beveridge Report identified five social evils: squalor, ignorance, want, idleness, and disease. We had thought we had eradicated these injustices from society for virtually everyone in the advanced economies with the development of social security, education, housing and health services combined with a growing and inclusive economy offering full employment.
What’s the point of a government of a wealthy nation if it cannot ensure citizens have food, fuel and shelter – fundamental survival requirements? And even worse, one that thinks it is somehow acceptable to punish citizens who need welfare support by withdrawing the means of meeting survival needs by sanctioning them for ‘non-compliance’.
How did we regress to become a state where absolute poverty is once again visible and widespread, and where inequality is everywhere? Absolute poverty is when people cannot meet the costs of basic survival needs, such as for food, shelter and heating. Inequality causes lower economic growth and reduces efficiency, as a lack of opportunity means that the most valuable asset in the economy – citizens – cannot reach their full potential, and so cannot fully contribute and benefit.
Maslow’s hierarchy of human needs
Breaking with the Keynesian model in Western Europe and North America in the early postwar decades, the UK and US returned to an earlier, ‘classical’ presumption that, left alone, markets arrive at ‘optimal’ economic equilibria and the state should therefore withdraw from ‘social steering’. The neoliberal era has not only seen the soaring away of top incomes at the expense of those in the lower reaches of the income hierarchy but has also itself been thrown into question by the financial crash of 2008, which no neoclassical economist anticipated.
What would help to reduce inequality?
A good starting point for the UK government would be ensuring:
- quality, long term employment jobs and fair wages
- housing everyone can afford
- health care and support when people need it
- education for the future
- a progressive and redistributive tax and transfer system that promotes fairness
- reversing the legislation that disempowered trade unions, leading to the decline of trade-union membership and collective-bargaining rights
- secure income in retirement.
These measures would reverse some of the damage that successive neoliberal governments have done to the UK’s social safety nets, resulting in a shift away from democratic norms, citizen rights and the balance of power and wealth.
Professor Alston, an independent expert in human rights law, spent nearly two weeks travelling around Britain and Northern Ireland and received more than 300 written submissions for his report about inequality and poverty in the UK.
He concluded: “The bottom line is that much of the glue that has held British society together since the Second World War has been deliberately removed and replaced with a harsh and uncaring ethos.”
Alston is absolutely right. The Conservatives, from Thatcher onwards, have steadily dismantled the social gains of our post war democratic settlement: the NHS, social security, legal aid, social housing and trade unions have been under a vicious onslaught of oppressive Conservative policies for many decades. Our public services are being sold off. Privatisation is about a few people making a big profit, which invariably comes at the expense of the quality of services delivered. Companies making ‘efficiency savings’ by cutting costs, restricting services and hiring fewer and less qualified, less expensive staff. The public ends up paying private contractors rather more than public providers, too.
The Australian professor, who is based at New York University, said government policies had led to the “systematic immiseration [economic impoverishment]” of a significant part of the UK population, meaning they had continually put people further into poverty.
“Some observers might conclude that the DWP had been tasked with “designing a digital and sanitised version of the 19th Century workhouse, made infamous by Charles Dickens”, he said.
The UN report cites independent experts saying that 14 million people in the UK – a fifth of the population – live in poverty, according to a new measure that takes into account costs such as housing and childcare.
Alston said the cause was the government’s “ideological” decision to dismantle the social safety net and focus on work as the solution to poverty. This is something that many of us have also observed over the past decade.
“UK standards of well-being have descended precipitately in a remarkably short period of time, as a result of deliberate policy choices made when many other options were available,” he said.
Alston raises a fundamental question – is the government, and the country, comfortable with the society that we’ve become?
He outlines the normalisation of food banks, rising levels of homelessness and child poverty, steep cuts to social security, healthcare and policing, and severe restrictions on legal aid. All of these political decisions make life considerably more difficult for millions of people.
In Professor Alston’s view, these are the unequivocal consequences of deliberate, calculated political decisions. I agree.
Despite the government’s focus on work and ‘record levels of employment’, and their glib promise of ‘making work pay’, about 60% of people in poverty are in families where someone works.
Alston notes that this, along with welfare cuts, has created a “highly combustible situation that will have dire consequences” in an extended economic downturn.
Neoliberalism isn’t some mysterious ‘karmic’ economic system that rewards the clever, talented and just. It is a system that was designed by the ruthless and greedy to reward only the ruthless and greedy. It is incompatible with democracy, human rights and any notion of equality.
Read more: Davos 2020: everything you need to know about the World Economic Forum
Related
Welfare sanctions can’t possibly “incentivise” people to work
Work as a health outcome, making work pay and other Conservative myths and magical thinking
The poverty of responsibility and the politics of blame (Part one)
A brief history of social security and the reintroduction of eugenics by stealth
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Politics and Insights 
Reblogged this on Declaration Of Opinion.
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Reblogged this on Tory Britain!.
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It’s not the money these billionaires hold that matters, it’s whether the money actually makes the poor poorer because it is invested in enterprises that disadvantage the poor. In principle, it’s whether their actions represent contempt for the poor and and should therefore be universally condemned.
Andrew
Sent from my iPhone
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Put link on Twitter. Totally agree, it’s the rich wot gets the pleasure, and the poor wot gets the blame, to quote the music hall song!
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Reblogged this on Nathan Lee Davies.
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I think what many people who are not a part of the program are missing is that the billionaire class intends to create a global futures market in human capital data – like asset-backed securities for mortgages, but this time it will be securitized debt on privatized public services. There will be outcomes-based contracts (social impact bonds / pay for success, etc.) used to force behavioral compliance to the neoliberal corporate state. These programs will be global in scope. The global poor will become investable commodities for hedge funds. Through “smart” technologies and internet of things sensors, fin-tech interests plan to make “life” an augmented reality game ala Pokemon-Go, the rules set by Harvard Kennedy School (and pals), the proceeds benefitting complicit NGO service providers and investors, with rules enforced via digital identity tracking and militarized policing. I can’t understand why more people are not discussing this yet. The UN SDGs (most of which are supposedly “anti-poverty”) have created the infrastructure for this global gambling scheme. The Davos plan for “stakeholder capitalism” is exactly this.
https://wrenchinthegears.com/2019/06/26/pay-for-success-finance-preys-upon-the-poor-presentation-at-left-forum-6-29-19/
https://wrenchinthegears.com/2019/09/22/sustainability-for-financiers-what-climate-marchers-need-to-know-about-the-un-sustainable-development-goals/
https://wrenchinthegears.com/2017/11/26/gambling-with-our-futures-big-data-global-finance-and-digital-life/
https://wrenchinthegears.com/2018/07/15/blockchain-self-sovereign-identity-and-selling-off-humanity/
In the UK it’s Sir Ronald Cohen of Social Finance who is the puppet master, though he works hand in hand with Harvard and US venture capital interests.
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As a matter of fact I have written about elements of this visible here in the UK. Nudge – behavioural economics – is an arm of the state that is used to manage the perceptions and behaviours of poor citizens. We had the Cambridge Analytica scandal, indicating clearly that our democracy is being subverted. There are psyop programmes that also manage perceptions, for example, on tolerating policies like austerity.
Thank you for the posts and info.
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Human capital futures markets? Blockchain identity?
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Sorry. On digital nudging here: https://wrenchinthegears.com/2018/07/08/digital-nudging-data-devices-social-control/
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I’ve written on the behaviourism used, too. It’s all about a government and corporate sector who are ‘managing’ perceptions and behaviours, to align them with politically defined/neoliberal outcomes. Basically, it’s coercive
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Nudging is embedded in policy, education, news media, political rhetoric – it’s all-pervasive. It’s on every level of society. It’s used to win elections. It’s used to raise your interest rate on loans or credit without justification. It’s used to manage the population. It’s used as a justification and as a method for and of authoritarian ever-deepening and extending surveillance capitalism. It makes a few people very very wealthy and powerful, creating an ever-deepening vicious cycle of authoritarianism
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This was one of three I wrote about the cambridge analytica scandal. Someone published it here, too – https://williambowles.info/2019/12/17/the-revelations-about-cambridge-analytica-indicate-clearly-that-western-governments-are-subverting-democracy/?fbclid=IwAR3KLYOb54dDLIuBGLj07x7rYlSpjMpW-Yr7Pg7HXZhJRGf55eLBIJrB7no
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https://politicsandinsights.org/2018/03/23/the-government-hired-several-murky-companies-plying-the-same-methods-as-cambridge-analytica-in-their-election-campaign/
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https://politicsandinsights.org/2018/06/24/nudge-and-neoliberalism/
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Yes, and beyond that the “nudge” is about turning people into human data commodities to be managed on dashboards in service of pay for success impact investments. When the numbers “improve” the investors get paid. It is barbaric. These new forms of predatory social finance turn poverty and trauma into a profitable commodity for global hedge funds, sovereign wealth funds, faith based endowments, insurance companies and pension funds. The next “big short” is the poor. https://wrenchinthegears.com/2019/12/06/poverty-wont-be-solved-by-committee-education-for-liberation-less-data-more-freire/
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Agree.
I’m a big fan of P. Freire’s work, which in turn influenced the liberation psychologists. He’s staple reading for training youth and community & social workers, or at least he was up to a decade ago.
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Reblogged this on Fear and Loathing in Great Britain and commented:
What’s the point of a government of a wealthy nation if it cannot ensure citizens have food, fuel and shelter – fundamental survival requirements? And even worse, one that thinks it is somehow acceptable to punish citizens who need welfare support by withdrawing the means of meeting survival needs by sanctioning them for ‘non-compliance’.
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Reblogged this on paulh121.
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No person has any right to the wealth that was created by another person.
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And workers make the wealth, and see only a small proportion of the reward for their labor.
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Kitty S. Jones, what are your thoughts on the estate tax?
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I think those that have taken the most from society should put the most back into it. Quid pro quo.
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Valid points.
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Kitty S. Jones, the only people who should have any right to a person’s hard-earned money are the person who earned it and that person’s family. Nobody else has any right to it, period.
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And my point is some exploit others, they are living off the labor of the population while paying them dismally low wages and offering them little job security and decent working conditions. Meanwhile, they cream the profit from that labor.
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Kitty S. Jones, what are your thoughts about people who feel like they are entitled to free stuff at our expense?
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There is no such thing as ‘free stuff’. Everyone pays into the system, most people claiming welfare have worked,including disabled people. It’s civilised to support people when they face difficulties in supporting themselves. Because they have paid into the system and already contributed. Most unemployed people move in and out of work – there is little job security these days. They have worked and will work again. As I said, welfare is not ‘free stuff’. It’s public money to pay for provision for the public….
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Kitty S. Jones, what about this free college idea?
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If we want a skilled workforce, progress in science and culture, then education needs to be accessible to everyone, not just those who have money. The last generation enjoyed free education, and a free education is key to equal opportunity and an open, democratic and fair social mobility in society
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Kitty S. Jones, a “free” education for people has to be paid somehow. Why can these people who want to go to college just pay for that themselves?
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Kitty S. Jones, who is being exploited when a person builds his or her own business with that person’s hands and brain?
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No-one can build a business alone. Without others, businesses wouldn’t come into being. A fair wage for a fair days’ work is a reasonable expectation from employees, as is fair treatment from those they give their labor to.
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Kitty S. Jones, what if someone built a business with his or her own hands? Is that person undeserving of any credit for that endavor?
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I didn’t say that they weren’t. They generally take the credit themselves! However, no-one builds a business without the support and work of others. Even if it is only financial backing, and using the infrastructure of the country, not to mention the opportunities to do so – those opportunities are not shared equally among the population. Most businesses rely on a workforce for their success.
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Can you explain the bestselling authors who made millions by providing information and/or entertaining material to the rest of us?
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Kitty S. Jones, what about the idea of free college?
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Kitty S Jones, you make valid points. Having said that, I would make the argument that people who have built up their businesses with their own ideas should be given credit where it is due.
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Kitty S. Jones, points are stipulated. Having said that, what if it is a family business, where one generation started it and the following generations want to keep it going?
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I’d say they must also recognise and acknowledge the input /labor of anyone else involved. That’s only fair. No-one builds anything in a vacuum. Businesses rely on our infrastructure, services and most often the labor of others.
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Kitty S. Jones, you are correct.
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Kitty S Jones, maybe you can explain to me how Henry Ford got the idea for the Ford motor company? Was that because people demanded that Henry Ford create the company or was that solely of his own volition?
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Ford got his idea from the continuous-flow production methods used by mills, flour mills, breweries, canneries and industrial bakeries, along with the disassembly of animal carcasses in Chicago’s meat-packing plants, Ford installed moving lines for bits and pieces of the manufacturing process: For instance, workers built motors and transmissions on rope-and-pulley–powered conveyor belts. In 1913, he unveiled the moving-chassis assembly line. He was motivated by efficiency, as much as mass production and affordable goods for everyone. He also believed that workers should have decent wages.
In 1914, he added a mechanised belt that moved along at a speed of six feet per minute. As the pace accelerated, Ford produced more and more cars, and in 1924, the 10-millionth Model T rolled off the Highland Park assembly line. Though the Model T did not last much longer–by the middle of the 1920s, customers wanted a car that was inexpensive and had all the bells and whistles that the Model T scorned – Ford ushered in the era of the automobile for everyone. The downside of course is the impact on the environment, which, at that time, wouldn’t have been considered generally.
As the owner of the Ford Motor Company, he became one of the richest and best-known people in the world. “Fordism was the mass production of inexpensive goods coupled with high wages for workers. Ford had a global vision, with consumerism as the key to world peace. His commitment to systematically lowering costs resulted in many technical and business innovations, including a franchise system that put dealerships throughout most of North America and in major cities on other continents.
First, as an industrial paradigm, Fordism involves mass production of standardised goods on a moving assembly line using dedicated machinery and semiskilled labour. Second, as a post war national accumulation (or growth) regime, it involves a virtuous cycle of mass production and mass consumption. Third, as a mode of regulation, Fordism comprises (1) an institutionalised compromise between organised labour and big business whereby workers accept management prerogatives in return for rising wages, (2) monopolistic competition between large firms based on cost-plus pricing and advertising, (3) centralized financial capital, deficit finance, and credit-based mass consumption, (4) state intervention to secure full employment and establish a welfare state, and (5) the embedding of national economies in a liberal international economic order. Fourth, as a form of social life, Fordism is characterised by mass media, mass transport, mass politics and a form of stabilising democracy.
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Kitty S. Jones, this makes sense.
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Kitty S. Jones, you make excellent points.
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Kitty S. Jones, what are your thoughts on a flat tax? Sales tax? The estate tax? The wealth tax?
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Kitty S. Jones, even though I have a somewhat different perspective than you do, I am enjoying your blog.
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I’m always glad to find someone who doesn’t agree with my perspective, but who is into discussing differences in perspective, adding thought provoking evidence for consideration, in a mature and courteous manner, as you have. Glad you’re enjoying my blog.
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Kitty S. Jones, I do invite you to look at my blog and leave any comments. They can be lengthy or short.
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Will do
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Kitty S. Jones, be sure to start with the first official post and then you can read the other posts I currently have. You can post short comments or lengthy comments. It does not matter to me either way.
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