In response to the cost of living crisisthe British government has announced a number of measures – including a non-refundable rebate on energy bills for certain households – to ease the pressure of rising prices. While these are welcome, they do nothing to address a much deeper social and livelihood crisis that has been building for decades.
Income disparities have widened sharply since the 1970s. The share of national income taken by the richest 1% has doublefrom 6% in 1977 to 13% in 2018. Because this increase has taken a toll on the incomes of the rest of the population, especially those at the bottom, the level of child poverty (based on a relative measure) has also risen sharply, from 14% in 1977 to 27% in 2021.
The level of personal wealth, meanwhile, has grown twice as fast as income, while becoming increasingly focused at the top. Private holdings now stand nearly seven times the size of the UK economy compared to three times in the 1970s.
It has not always been so. In the late 1970s Britain reached a peak of equality and a low point of poverty. As my latest book shows, The richest, the poorest, it was the culmination of egalitarianism that led to transformative and progressive change after World War II. The current living standards crisis is due in large part to a steady weakening of post-war pro-equality reforms.
1977, the year of the Queen’s Silver Jubilee, marks a high point in the history of economic equality in the United Kingdom. ed_needs_a_bicycle | flickr, CC BY-NC-SA
How Maximum Equality Was Achieved
In 1945, the new Labor government, directed by Clement Attlee, launched a wave of social reforms. Attlee, influenced by leading thinkers including the eminent historian and Christian Socialist RH Tawney saw its central objective as reach “more equality, fewer big differences, more opportunities and more social justice”.
These reforms built a stronger welfare state. They included a more complete list national insurance system to cover unemployment, sickness and old age. Moreover, with the creation of the NHS in 1948, all had direct access to free health care. And there was a new system of family allowances to support children, a measure extended by the introduction of family allowances in the late 1970s.
These reforms were financed by more progressive taxation which weighed more heavily on the highest earners. They were underpinned by a broad, if shallow, cross-party consensus on the need for social change. A new informal pact has been made with companies to accept greater social responsibility. Full employment – unemployment was less than 3% for men throughout the 1950s – and an increase in the share of production going to wages were the two key factors in the steady improvement in living standards in the society.
Health Minister Anenurin Bevan visits Park Hospital Davyhulme near Manchester on the first day of the NHS, July 5, 1948. liverpoolhls | flickr, CC BY-SA
The counter-revolution against egalitarianism
The current crisis in living standards is, as I said, largely due to the breakdown of the egalitarian consensus and its replacement by an anti-equality, pro-market ideology.
The New right architects of this counter-revolution, of which the Conservative MP was a part, Keith Joseph, one of Thatcher’s most trusted advisers, argued that egalitarianism had gone too far. Britain, they argued, now needed a heavy dose of inequality to drive a more vibrant economy.
Far from the economic resurgence they envisioned, the effect of this change brought a new golden age for the wealthy. This has come at the cost of a reversal of social gains, a deterioration in the life chances of many ordinary citizens and a more crisis-ridden economy.
Many of the huge personal fortunes at the top — amassed since the 1980s — have largely been unearned. As I have shown, they are less a reward for new wealth and value creation than the proceeds of the upward extraction of existing wealth and corporate assets. Mining, which was commonplace in Victorianback from the 1980s.
Contemporary examples of wealth extraction include manipulate corporate balance sheets, skimming returns from financial transactions (a process known asdealer’s take”) and the growth of monopolistic and anti-competitive behavior by powerful corporations.
Extraction has been used to deliver excessive rates of return, increasing executive and investor rewards, rather than increasing business investment, long-term sustainability, and productivity. From 2014 to 2018, FTSE 100 companies net profits generated of £551bn, but returned £442bn to shareholders, leaving a much smaller proportion for wages and private investment. This resulted in the steady decline in the share of the economy going to wages, down from the higher levels reached after the war.
A influential study by the International Monetary Fund concluded that high levels of inequality are associated with fragile economies and low growth. One of the main reasons for this is a perverse system of incentives that makes it more attractive for leaders to line their pockets than to build for the future. As Economist Andrew Smithers notedthis contributes to the low-wage, low-skilled and low-productivity UK economy.
Rising inequality has also been shown to have significant negative social consequences. The voting gap between rich and poor groups narrowed from four percentage points in the 1987 general election to 22% in 2010. This has been fostered by political alienation and what political scientist Colin Crouch has called “post-democracy”.
In the decade before COVID, the hole in mortality rates between those living in the most and least deprived areas has widened. It is now 9.7 years younger for men and 7.9 years for women.
Rebuilding Britain’s fractured society depends on a return to post-war egalitarianism. This means a set of pro-equality measures for modern times that increase income and wealth, but also lower the ceiling. These measures should include a more generous benefit system financed by a more progressive tax system. They should also include the constant reconstruction of the social state.
Tackling widespread corporate extraction would do more to strengthen the economy for all. Some of Britain’s towering mountain of private wealth should also be harnessed for the common good, with all having a stake in economic progress through a citizen-owned society. wealth fund.