Excerpt from Inequality and the 1% by Danny Dorling
Conclusion: Towards a Fairer Society
Revolutions break out on ships, and utopias are lived on islands.
Judith Schalansky, 20121
José Gonzalo Rodríguez Gacha, a Mexican drug lord, was reputed to be so rich that he had his four initials embossed in gold leaf on the toilet paper he used. But, despite all the advantages of money, his life came to a horrible conclusion. He killed himself in 1989 by detonating a grenade by the side of his face, just after watching his son being shot dead by police. We have a fascination with stories of great wealth, but clearly it is not always better to be rich.2
To counter our older concepts about rich men – and their despair at camels failing to fit through the eye of the needle – there exists a new, often subconscious, message that existence is only fully realised with the aid of great wealth. It is a message disseminated through the smiling faces on magazine covers and on primetime television. Contrast these with the miserable faces of the poor, or merely ‘normal’, that the media presents every day. Many well-known television dramas in both the UK and US have at their heart the implicit message ‘the rich only have your best interests at heart’. Think of Downton Abbey.3
Our grandparents’ generation created the National Health Service while ours came up with the National Lottery. That is a sad indictment of our times, but it does at least allow a natural experiment to be carried out to answer the question of what happens to people if they are simply given a large amount of money. The answer, most often, is that they become rapidly and sometimes rabidly more right-wing. In particular, lottery winners who live in poorer, more left-leaning areas appear most likely to shift towards the right in their political beliefs after having ‘come into’ some money. The relationship has been shown to be ‘of a “dose-response” kind: the larger the win, the more people tilt to the right’.4 Can it be so different for the very rich?
Some 1 per cent of the UK’s top 1 per cent are lottery winners. In October 2012 Camelot, the organisation that runs the UK National Lottery, published research claiming that, since 1994, the 3,000 lottery winners who had won over £1 million each – who had claimed a total of £8.5 billion between them – had contributed £750 million to GDP, because each millionaire winner generated roughly six jobs – servants, cleaners, gardeners and, in 5 per cent of cases, personal beauticians.5 At no point did this study mention the money taken out of the economy to buy lottery tickets – nearly £7 billion in the year 2012/13 alone. Furthermore, the list of jobs created is hardly edifying.
The Camelot-sponsored report made no mention of how often winning large sums of money ruins people’s lives, despite the often heard story of the family torn apart by its windfall. In November 2013 that story was of Adrian and Gillian Bayford, divorcing a year after winning £148 million in the Euro lottery – a win that, at the time, they said would bring their family closer together. They had celebrated ‘with a pizza with their daughter, eight, and son, six, before heading off on holiday to a Scottish caravan park’.6 Now their children see them separately. The Sun reported a neighbour commenting on Adrian and Gillian: ‘It’s such a shame because they are a lovely family with two young kids. And everyone around here was so happy for them when they won. They worked hard all of their lives and then came into this wonderful bit of good fortune. That’s why it’s so sad it’s ended like this.’7 But, of course, such stories are as old as the hills.
In 1961, Viv Nicholson and her then husband won a small fortune on the football pools, and vowed to ‘spend, spend, spend’. Since then, Viv has gone through both widowhood and her third, fourth and fifth marriages. In 2007, at the age of 71, having finally managed to conquer her alcoholism, she was living on a pension of £87 a week, had an overdraft, and was searching for work.8 Even more extreme stories are now routinely told in the US, where it sometimes seems as if people will do anything for the chance of a fortune and routinely have their lives ruined through the ill effects of gaining riches.9 For millennia, we have known that greed harms and having too much can be damaging; but we seem able to forget faster than we can remember.
In November 2013 Boris Johnson, Conservative mayor of London, made a speech in which he explained why he believed that greed was good:
Like it or not, the free market economy is the only show in town … No one can ignore the harshness of that competition, or the inequalities that it inevitably accentuates [but] the top 1 per cent contributes almost 30 per cent of income tax; and indeed the top 0.1 per cent – just 29,000 people – contributes fully 14 per cent of all taxation.10
The implication is that those who grab the most for themselves also somehow give the most back, even if unwillingly, through taxation.
The rich do not, in fact, pay tax very willingly, and certainly take far more than they pay in tax. It is also very hard to argue that they have really earned what they pay tax on through hard work, rather than guile. Income tax is only 26 per cent of total government revenue – national insurance contributions raise 18 per cent, and VAT raises 17 per cent.11 The rich pay such a large proportion of income tax because their incomes are now so extraordinarily large, because they have worked so hard to raise their take and swallow up so much of what is available. Owing to VAT and other regressive levies, the 20 per cent least well-off of all households pay 36.6 per cent of their income in tax, while the wealthiest 20 per cent pay 35.5 per cent.12 Boris Johnson’s figure of 30 per cent of all income tax revenue equates to under 8 per cent of all government revenues, so there is no way that the top 0.1 per cent can be contributing 14 per cent of all taxation. Boris was wrong. When it comes to numerical rather than verbal dexterity, he is not a ‘top cornflake’.
Boris went on to say that he wanted more social mobility: ‘to get back to my cornflake packet, I worry that there are too many cornflakes who aren’t being given a good enough chance to rustle and hustle their way to the top’. His analogy is more apt than he realised. As with people, there is not that much difference between one cornflake and another. To go on to suggest that only the ones at the top are really worth very much would be absurd. You can try to dismiss Boris Johnson as a buffoon, but he has many supporters and a realistic hope of becoming the next Conservative leader. His words were carefully chosen to appeal to the beliefs of his core supporters, although we cannot know whether he believes them himself or is being consciously deceptive. He may just crave power, and choose his words and shape his demeanour as a way of winning votes.
The day after Johnson’s speech, the European Banking Authority issued figures showing that 2,714 bankers in the UK in 2012 had each earned more than €1 million (£833,000) – 11 per cent more people than in 2011, by far the highest number of any country in Europe, and ten times the number in Germany, which came second on the list. Average total pay – including salaries, pensions and bonuses – for London’s top-earning bankers surged by 35 per cent to €1.95 million (£1.6 million) in 2012.13 In Sweden, only eleven ‘investment’ bankers earned more than €1 million that year; in Spain, thirty-seven; in France, 117; in Germany, just one hundred – and in the United Kingdom, 2,188.14 Of the 526 non-investment bankers in Europe earning this amount, all were in the UK. The UK is not normal.
Similar trends were found among UK FTSE 100 chief executives, whose total annual remuneration increased fivefold between 2000 and 2012 to hit an average of £4.2 million. The pay of the next-best-off 150 UK CEOs also rose quickly, but not quite as quickly, to average £1.1 million by 2012. Reporting these statistics, and in contrast to Boris, Conservative MP Jesse Norman explained that ‘no reputable study has found a significant correlation between senior executive pay and long-term corporate performance’.15 The UK has a very expensive problem that the rest of Europe has managed largely to avoid: an overpaid and underachieving 1 per cent. They are expensive not just in direct financial terms, but in terms of the damage they go on to cause. Pay the most and you are likely to get the greediest, who in turn are unlikely to curb the greed of those around them (lest their own greed be exposed). These exceptionally highly paid bankers are the people who caused the financial crisis in the UK. The subsequent Libor scandal dwarfed all previous financial scams in the history of markets, and now there is a possibility that the Forex scandal could be just as serious. And the UK’s banks are still by far the most indebted in Europe.16 So much for paying the most to get the best.
In the UK, unlike anywhere else in Europe, bankers are protected by law through the Corporation of the City of London, which is governed by a plethora of unelected bodies including the Worshipful Company of International Bankers.17 The only place in the world where similar if even more bizarrely named bodies can be found is the US, where organisations such as Kappa Beta Phi operate. This is a semi-secret fraternity that was founded at the start of the Great Depression, around 1929, and which includes among its members ‘both incredibly successful financiers (New York City’s Mayor Michael Bloomberg, former Goldman Sachs chairman John Whitehead, hedge-fund billionaire Paul Tudor Jones) and incredibly unsuccessful ones (Lehman Brothers CEO Dick Fuld, Bear Stearns CEO Jimmy Cayne, former New Jersey governor and MF Global flameout Jon Corzine)’.18 In early 2014 the fraternity was exposed in the British newspapers, one of which reported that ‘the upper ranks of finance are composed of people who have completely divorced themselves from reality’.19 The journalist did not make the obvious connection to financiers in London. He was writing in the Daily Mail.
Why does the UK appear determined to continue to be such an exception? It is not just that the UK is home to almost all of Europe’s most greedy bankers and highest-paid chief executives. The UK, and especially southern England, is also the European exception when it comes to private education. As we saw in Chapter 2, simply by segregating rich children from poor children, private education encourages a sense of personal superiority.20
The sense of superiority engendered by private education is closely related to that fostered in a segregated society – not least because the most expensive schools could not continue to function as they do without a small number of very highly paid individuals to pay the huge fees. Exclusive private education, of which the UK has by far the most in Europe, often instils the belief that others – educated by state or lesser private schools – are inferior to your classmates, and that self-interest and the exploitation of those others is good business. It is hard to see how it could avoid fostering a ridiculous level of conceit. Why else would it be worthwhile for the parents spending so much on their children if they did not believe that their children were, or should be, worth far more than other children?
Private education is basically a financial investment expected to generate a financial return. The existence of such a large private sector compared to the rest of Europe makes other unusual divisions within UK schooling appear normal. A number of Christian sects and Jewish state-funded schools have existed for years. The new UK free schools policy allows any religion or educational ethos to establish state-funded schools. All private schools could apply to become free schools with government backing, unless of course they want far more spent on their children than on others’. Variety is not bad, except where the purpose is to push others down and your little group up. We should not condone many times more being spent on the education of a select few. By the same token, when there is less to go round, why do the poor have to suffer the greatest cuts (see Figure 6.1)?
The UK is an oddity compared to the rest of Europe. The Coalition government now plans tougher benefit cuts for the poor, having already reduced the top rate of tax to 45 per cent for the very richest. It plans to reward the top 1 per cent, giving a few of the rest of the top fifth slight increases in their take-home pay in the years up to 2016 while everyone else is impoverished. This conclusion is based on the Office for Budget Responsibility’s own assessments of government policy.21 In the UK the elite is unashamed of its selfishness. Elsewhere in Europe, where austerity has been better shared out, the result has been that overall suffering has been far less.22
Figure 6.1 Planned UK tax and benefit changes 2012 to 2015/2017
In the long term it is children who will suffer most from spending cuts, rather than working adults or pensioners. The effects of the tax, benefit and other spending measures now under way are far greater for households with children, which make up only a third of all households in England, but which will suffer around two-thirds of the cuts. On average, couples with no children will lose 4 per cent, couples with children 9 per cent, and lone parents 14 per cent of their net income. The spending cuts alone are equivalent to 2 per cent of net income for couples with children in the top income decile, but 9 per cent of net income in the bottom decile; for lone parents, these figures are 2 per cent and 11 per cent, respectively.23 Because of this, the children’s commissioner for England remarked in June 2013: ‘We consider that the overall impact of the tax-benefit reforms is likely to be in breach of Article 2 of the UNCRC – non-discrimination.’24 A tiny number of government measures will help a few children through early years and increase some school spending, but the vast majority of measures will harm many more, especially the children of the poorest and second-poorest tenths, and lone parents’ children will suffer far more than those with two parents (see Figure 6.2).
There is a group that is even worse hit than those with children in the UK: the youngest of adults. Already,since the recession, it is no surprise to see that the household incomes of adults in their 20s have been falling faster than those of any other age group since 2007–08. This is despite the fact that about 40 per cent of the group live with their parents, and that this has tended to cushion the impacts on their household incomes.25
In real terms, the median income of households containing those young adults fell by 12 per cent over the following four years, after no growth in the previous six years.26 But when it comes to suffering through poor health, it is those over sixty-five, and especially poorer elderly women, who have seen their life expectancy falling despite pensions being maintained. As documented above, cuts to home visits have coincided closely with the deteriorating health of the very elderly. Increased suffering can be identified in almost every group – excluding the 1 per cent.
Figure 6.2 Relative effects of spending reduction of £29 billion by 2016 on families in England
When a society becomes as unequal as the UK now is, avarice rises. As inequalities increase, people already at the top become ever more motivated solely by greed. The source of inequality is a failure to control the greedy. Often they feel that they need more money despite all their wealth. They are made to feel that way because status and respect are increasingly measured in purely financial terms. Just over thirty years ago, Neil Kinnock, then Labour Party leader, remarked: ‘If Margaret Thatcher wins on Thursday, I warn you not to be ordinary. I warn you not to be young. I warn you not to fall ill. I warn you not to get old.’ What he did not add, which would have been most prescient, was: ‘I warn you not to reach adulthood alongside Thatcher’s grandchildren. I warn you not to be young then, not to want to study then, not to want a rewarding job then, or to grow old then.’ Years after Thatcher’s policies have made the rich so much richer and stripped so much power from the poor, Kinnock’s words are no longer a warning but a description. Had he known, he could have explained that in more equal societies there is much less need to be mercenary. When inequality rises, more people become less concerned about how their behaviour impacts on others.
Following the financial crash in the rich world, only six out of thirty OECD countries saw a reduction in market (pre-tax and benefit) income inequalities. Of all OECD countries, it was in Spain that disposable income inequality rose fastest in the first three years after the financial crash.27 Ireland saw the highest increase in market income inequality, but state action resulted in the increase in disposable income inequality being modest (see Figure 6.3). The greedy used the crash to become richer, to buy assets cheaply, and to make new profits out of others’ impoverishment. But it doesn’t have to be this way. State action resulted in disposable income inequality falling in another dozen countries, most dramatically in Iceland, reversing the changes in market income inequality. Around the rich world the same shock is being handled very differently from one country to another. The crash tended to increase inequality, but there were large differences in how well various countries succeeded in tempering that increase.
Source: European Centre for Disease and prevention Control, ‘Health, Inequalities and the Financial Crisis’, 2013
Figure 6.3 Change in income inequalities in rich countries between 2007 and 2010
What is to be done? One option is simply to let things carry on as they are, wait until the average price of property in London doubles to £1 million a house, step back, and eventually watch the greatest bubble in history burst, along with what is left of the credibility of London’s banks and finance sector, which did nothing to stop the new bubble growing – and then hope that a chastened and poorer country becomes more equal again. But that is a giant gamble that might result in a poorer and even more unequal future.
What will it take for those towards the top of the 99 per cent who are losing out, as well as those who are falling out of the 1 per cent, to realise that even many people with healthy lifestyles and relatively well-paid jobs are heading for a fall? Currently they just blame it on bad luck when someone like themselves goes under, but eventually they will realise that it is due to an unsustainable system – especially when they look at the dramatically varying economic fortunes of their children and wider family.
In the world’s most affluent and unequal of countries, those at the top often say that people are poor because there are too many of them, either too many being born or too many immigrating. This is a common refrain of the elite. David Attenborough recently put it more subtly: ‘We are such a densely populated country … The world is only so big. You simply can’t go on increasing forever, so something’s going to stop it. Either we can stop it or the natural world will stop it for us.’28 David is wealthy enough to be a member of the 1 per cent, and he was quoted on the BBC website having said this on the Today programme. When he says ‘we can stop it’, he may not have a very wide conception of ‘we’. I think we can stop inequality rising, and I know population growth is rapidly slowing; but part of stopping the crises to come will involve confronting the views of many people in David’s economic position.
Research published in Behavioural Ecology finds that elites like the 1 per cent can emerge when a lack of free-flowing information gives a few a growing advantage. The effect of such rising elitism on the group as a whole is doubly harmful. It is not only that less good gets done as the gaps between us are widened, but that ignorance is fostered. Those with power simply know very little about the lives of the majority. They can come to see ‘the masses’ as a seething sea of out-of-control bodies; but, looking up from below, the powerful appear to have very poor vision.
Technically speaking, rising elitism has harmed us all in the past because ‘the loss of efficiency of stratification is due to the lengthened information channels, whereas the additional loss of efficiency in the elite network is due to the information bottleneck emerging between the elite clique and the rest of the group’.29 The result is a rising culture of entitlement that is damaging to all. Increasingly, the rich feel that they are entitled to as much as they can possibly get away with – that they are entitled to say outrageous things and that no one else is entitled to anything much.
In the US and UK, the culture of entitlement among the richest has arisen that is not found to be as strong in other rich nations. Elitist views and behaviour are now seeping into the mainstream, so that even the poor are heard to call for lower taxes. That is how deep the confusion goes. A 2011 study of eighteen OECD countries found that the optimal top tax rate for the marginal earnings of the very rich might be over 80 per cent. With that, a country could increase productivity (which could be green productivity), while ‘no one but the mega rich would lose out’.30 The authors of the study show top tax rates to have fallen since the 1970s, and the income share of the richest 1 per cent to have grown in almost perfect correlation (see Figure 6.4).
Source: Figure 4 in: Alvaredo, Atkinson, Piketty and Saez (2013) ‘The Top 1 Percent in International and Historical Perspective’, Journal of Economic Perspectives, 27: 3 (Summer 2013), pp. 3–20
Figure 6.4 The effect of top tax rates on pre-tax incomes of the top 1 per cent since 1960
Countries that have not reduced top income tax rates since the 1960s have also prevented their elites from taking too much. It is clear that higher taxation can reduce greed at the top more effectively than any other mechanism. Put simply, if taking more for yourself gains you very little (because of what the government takes), it pays to let that money go to people paying much lower tax rates. High taxes at high incomes help the greedy to be less greedy. The alternative is to see the 1 per cent become richer and richer, pollute more, and lecture the rest of us on our behaviour, while they plot ever more elaborate ways of behaving badly. This might include taking personal trips into space – which makes flying private jets to Necker Island look like environmental awareness. But a new mood is developing. The Wall Street Journal asks: ‘Why do Leonardo DiCaprio and Richard Branson lecture us about carbon consumption while plotting trips to space?’31
There are many positive signs that people are coming to realise that the rich must be helped to take less. But we face a major problem that often hinders progress: self-congratulation. In order to achieve long-term improvement, it is necessary to retain a sense of anger. Stop to celebrate one small victory (the locksmiths in Spain, the peoples’ parliament in Iceland, the land tax in Ireland, new forms of protest in the US) and, before you know it, the greedy have snatched back that little part of the wealth you had liberated, and found another tax loophole. The left, greens and anarchists can appear a dour bunch, because of their fear of being complacent and compliant. All of us need to believe more strongly that better outcomes can be achieved – just as feminists, anti-racists and democrats have done in the past.
A Slow Revolution
[The 1 per cent] have been able to divide everyone else by geography and by identity. They have produced an unequal market system, and have privatised public resources, pushing the costs on the rest of society … People need to be citizens again, not consumers. They need to have more choices and they need to demand more.
Elvin Wyley, speaking at Occupy Vancouver, 201132
What we need is a slow revolution. The 1 per cent cannot control itself. It is easy to blame its members, but blaming them may exonerate others who, while not having been so greedy themselves, could have acted and could still act to curtail the greed of others. To gain entry into the 1 per cent often requires a certain lack of self-restraint. It is up to the rest of us to control these people – for their own good as well as ours. We can document their greed, the size of their yachts, the frequency with which they fly and the pollution caused by all the expensive vehicles they use to move around as fast as they can; but documentation is not enough.33 This stupidity needs to be halted. In the past it has not been revolution, in most cases, but war that has quickly relieved the 1 per cent of much of its assets. Today a non-violent war of attrition on concentrated wealth is needed, and it is beginning.
In the US in 2013, the president finally acted. Top tax rates for the richest 1 per cent were increased from 35 per cent to 39.6 per cent of income received over a high threshold, and capital gains tax was increased from 15 to 20 per cent in that same year.34 There are now many calls to increase these rates even more, raising capital gains taxes up to a maximum rate of 50 per cent for the very richest Americans. Many of these calls are coming from much nearer the mainstream than has been the case for decades. Celebrate ever so slightly, have a beer, smile a bit more – but above all else do something to help build the momentum.
Why did the US president act in 2013? One answer is that in the US it became clear by the summer of 2012 just how enormous the fallout from the financial crash was:
median wealth plummeted over the years 2007 to 2010, and by 2010 was at its lowest level since 1969. The inequality of net worth, after almost two decades of little movement, was up sharply during the late 2000s. Relative indebtedness continued to expand [from 2007 to 2010], particularly for the middle class, though the proximate causes were declining net worth and income rather than an increase in absolute indebtedness. In fact, the average [new] debt of the middle class (in real terms) plunged by 25 percent.35
In other words, the middle were becoming poorer through no fault of their own – and falling into ever greater debt to the richest despite not having asked to borrow more.
The calls to curtail the excesses of the 1 per cent in the US are not made now in obscure outlets, but – at the extreme – in Forbes, the favoured journal of the rich.36 Even Forbes writers who have been hedge-fund managers, and have headed the Fortunes and Options Division of Lloyds TSB bank, can see what is coming and say: ‘We can’t afford another Dust Bowl.’37 It is not hard now to collect hundreds of calls for change coming from all directions, but will they be enough? A slow revolution is hard to sustain, and it has many enemies.
How are the very richest in the US reacting to the threat to their wealth? Some are playing the markets and try to move their money abroad;38 others are writing directly to their employees recommending that they do not vote Democrat. Until 2010 it was illegal for companies to act in this way, but corporate executives lobbied to change the law so that they could spend part of their profits on trying to entice their employees to vote to keep company profits high and their employer’s wage and tax bills low. A slow revolution requires repeatedly exposing such bullying attempts to persuade people to act against their own interests.
Major US companies now send their employees letters recommending that they vote Republican. Before the last US presidential election, ‘some letters warn[ed] that if President Obama [was] re-elected, the company could be harmed, potentially jeopardizing jobs’.39 Simply expressing slightly progressive views in the office will mark you out as a threat not only to your bosses, but also to your peers. One lawyer who commented on the story noted, ‘By hinting at the possible loss of employees’ jobs, [it] appeared to cross the line into improper coercion.’
In the US Obama may be no saint, but he ‘enrages the 1 per cent’40 because he explains to the wider population that it has been their business strategies which have enriched the elite and impoverished the middle of American society. He is also finally starting to act because his policy advisors can now show him so easily how far countries like the US and the UK are out of step. Information about the 1 per cent has entered the public domain, touching off a ferocious response, and a level of vitriol not seen for decades. Between 1981 and 2002 the attitudes of the majority of Americans had no significant impact on public policy.41 Now that is changing.
The UK is different. In the UK the prime minister was a member of the 1 per cent by dint of his wealth long before he entered parliament. He presides over a cabinet containing more members of the 1 per cent than has been the case for decades, and has appointed a series of close advisors not just from the 1 per cent, but often from his own school; and, hardly surprisingly – and unlike Mr Obama – he does not explain to his electorate how the business strategies of his friends have impoverished the middle of British society. As even Cameron’s secretary of state for education, Michael Gove, complains: ‘Mr Cameron, who went to Eton, numbers four Old Etonians among his inner circle: Oliver Letwin, minister for government policy; Jo Johnson, head of his policy unit; Ed Llewellyn, chief of staff; and Rupert Harrison, George Osborne’s chief economic adviser.’42 Is it any wonder inequalities in the UK continue to rise?
In the UK the leader of the opposition, Ed Miliband, although to the left of Obama, takes conspicuous care not to enrage the 1 per cent. Instead, he speaks very tentatively: ‘The early signs, Miliband claims, are that the greatest beneficiaries of a recovering economy will also be a privileged few. Rewards in the banking sector in London grew nearly five times faster than the wages of the average worker last year. He argues this is not an accident, but a function of how the coalition views growth can be achieved.’43 Such carefully worded statements are more than a generation away from Denis Healey’s promise of February 1974 to ‘squeeze property speculators until the pips squeak’ – and Healey was to the right of Labour at the time.44
When you hear of slow progress in the UK and US, it may surprise you to learn that income inequality may not be rising everywhere. Globally, according to the World Bank, inequality has been falling since 2000. In Brazil income inequality peaked in the 1980s. In the US it is currently at a peak, but in Sweden it appears to have been falling again just as it has fallen worldwide (see Figure 6.5).45 Such claims for falling worldwide inequality are, of course, disputed; and measures of inequality that are more sensitive to the 1 per cent taking an ever greater share may not be as forgiving of extreme greed as the Gini coefficient; but inequalities within the middle of the distribution can nonetheless fall.
Source: Branko Milanovic, 2012
Figure 6.5 Global and selected countries’ income inequality Gini coefficients 1966–2006
Shortly after the release of the 2012 World Bank report suggesting that global income inequality was falling, another organisation published its major findings, stating: ‘Poverty has not declined to the extent claimed and inequity has risen.’46 It may be that, between the mildly rich and the relatively poor, some equalisation is occurring. Whatever the precise global trend is, it remains the case that inequality has risen more in the US and the UK than elsewhere, and that, because other places have had more success in preventing this trend, it is not inevitable that it should continue. Increasingly, inhabitants of the US and the UK are learning from the example of other countries, coming to conclude, as Uffe Elbaek and Neal Lawson recently did: ‘For the first time in a long time, radical egalitarian democrats face a future in which there is hope, real hope.’47
Less than one hundred years ago we had very little idea just how unequal our society was. Hugh Dalton, a boy from Eton, was awarded a PhD in 1920 from the University of London, and wrote an academic paper on income inequality in the UK.48 He concluded his study with a declaration that ‘the chief practical necessity is the improvement of existing statistical information, especially as regards smaller incomes’. He described measures of variance and distribution that were only just being discovered. In 1945 he became chancellor of the exchequer, where he helped the UK to become more equal, and helped the 1 per cent to contribute more and to become less of a drain on the nation, continuing a tradition that had begun in 1918 and would run through to 1978.
Orthodox economics suggests that, in the long run, prices and incomes will come back into alignment. It also provides a bizarre justification as to why some nations are rich and others are not.49 Marxists say that price and value are a product of underlying social relations, not free-floating market forces. Keynesians say that in the long run we are all dead, and thus need to do something about the short run. All should know that the rich are currently being let off the hook, all those from the bottom of the 1 per cent up to those in control of the largest corporations. In 2012 Barclays ‘secured a non-prosecution agreement and agreed to pay a penalty of more than $450 million, a comparatively paltry sum for a bank that had more than £32 billion ($50 billion) in revenue in 2011’.50 But in 2013 Barclays was forced to begin to reveal more of its activities in order to avoid paying part of a $4.3 billion EU antitrust penalty.51 The 1 per cent is finding it progressively harder to hide its money and its corruption.
Many people argue that concerted political action, including much more effective banking regulation, is needed to address the problem of increasing inequality. A global tax on capital was seriously proposed in 2014 by Thomas Piketty, one of the world’s leading economists, and a best-selling author in the US and UK that year.52 But successful social movements in the past, rather like the victors in wars, wrote their own history, and may have overstated the importance of overt politics. Campaigners want to say why they mattered; academics want to try to influence policy, and so look for evidence of their personal impact. But much change consists of gradual, almost imperceptible, transformation – a slow revolution of the wheel, a change in the mood, a subtle shift in what becomes morally acceptable, one that is almost never due to any great leaders or great speeches. Gradual transformations in societal motivations are not easily monitored. It is often not obvious how they occurred, and usually difficult to quantify their extent.
Today, another such transformation may be under way – a slow revolution in attitudes to greed. The highest-ever level of concern about rising inequality in Britain was recorded by Ipsos MORI in their winter polling of 2013.53 Trends can form without the necessity of a lobby group or an organisation trying to profit from them. ‘Societal motivation’ and ‘changing fashion’ are almost synonyms. By December 2013, further polling evidence revealed that most UK voters believed any recovery was likely to favour the wealthy few rather than ‘families like them’, and that a majority favoured taxing the rich more rather than further cuts, especially to protect key services like health and education.54 By that year we were no longer surprised that the majority thought this way – only that the rich still did not get it.
As pointed out earlier in this book, but well worth considering again in conclusion, in 2009 the ailing commentator and journalist Clive James predicted: ‘Getting rich quick – and having much more money than you ever need – will look as pointless as taking bodybuilding too seriously.’55 He helped begin the slow revolution. He explained how this kind of change has happened before, using the example from long ago of when the codpiece went out of fashion. That item of clothing, designed to create the illusion of a large penis, went from being normal in one era to the object of ridicule in the next.56 James mocked the greediest of bankers: they were not just bad, they were embarrassments.
But it may not be us, or any activism at all, or any great change in mood or huge social transformation that changes things, and it may be that a slow revolution is not enough. But the rise in the income and wealth of the 1 per cent will come to an end, because it always does.
Just before he died, another veteran commentator, Alexander Cockburn, wrote: ‘Is it possible to reform the banking system? There are the usual nostrums – tighter regulations, savage penalties for misbehaviour, a ban from financial markets for life. But I have to say I’m dubious. I think the system will collapse, but not through our agency.’57 Alexander was certainly correct that, if the greed of the 1 per cent is not controlled, then the system will collapse. But just as the Elizabethan age did not end with men wearing larger and larger codpieces until they could no longer stand, so our current world may not come to an abrupt halt when – one day – a company realises that the severance pay it has promised a departing chief executive equals all of its turnover, and it has to close, triggering a cascade of more closures until all the pay-outs are worthless.58
These two points of view, both offered by people towards the end of their lives, are widely varying in prescription. One says that salvation is already upon us – it is just that we have not yet noticed that getting rich quick has lost its lustre. The other says that the end is nigh because of greed, and all will not end peacefully. Both agree that in the UK and US we cannot continue to allow the 1 per cent to take ever more, and drive inequality up ever higher (see Figure 6.6). Both predictions agree that it will end. The only question is how.
Source: Equality Trust, 2012
Figure 6.6 The price of inequality, four countries, 2012