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Capitalism breeds inequality

A recent report shows that the reformist actions of the Labour government have not been able to reverse the inequalities that capitalism generates.

Minister for Women and Equality Harriet Harman, who won the Labour Party deputy leadership by talking up left wing and egalitarian credentials, set up a National Equality Panel to look into inequality in UK society, and report back. That the report, An Anatomy of Economic Equality in the UK (summary at www.equalities.gov.uk/pdf/NEP Summary.pdf), has come out in the period of the run up to a general election, at which Labour are desperately trying to cling onto their heartland support and produce clear red water between themselves and the Tories, is surely purely coincidental.

Some of the information this panel has produced is extremely useful and well worth reading. Although it mostly contains data that has been made available elsewhere, its focus on equality is thoroughly worthwhile and it does draw all of the current knowledge on the state of equality in the UK into one place. This graph, for example, tells a sorry tale:

Graph 1: Full-time weekly earnings at 2008 prices, 1968 to 2008, men

Source: NEP, based on 1968-1996 New Earnings Survey (NES) (GB),1997-2008 ASHE (UK).


Not only, as the headline writers all noticed, has the gap between the top and bottom earners widened over the last forty years (quite radically) but also it has risen quite markedly as compared to median earnings. What is most startling of all is that the lowest paid workers have barely gained any substantial increased over all that period. So much for the idea propounded by Tories of the ‘trickle down effect’ of gains for the rich becoming gains for the poor. Likewise, so much for the social democrat notion that growth of the economy overall will abolish poverty. Through most of that period, the British economy has grown, and clearly only grown to the benefit of those at the top.

To be fair to Labour – and this has been noted for much of their time in office – what they have achieved is a slight slow-down in the growth in the gap between rich and poor. Much of the reason they can do no more than that is down to the changes in the economy since the 1970s, with the transfer of productive industry to the power houses of east Asia. Further, structural unemployment has persistently remained since the late 1970s effectively preventing any remedy through the labour market. As the BBC’s Mark Easton notes: “The problem for the politicians is that measures to reduce social or income inequality will always be controversial because they mean neutralising the advantages of wealth – a prospect that those with money and influence will fight hard against.” (www.bbc.co.uk/blogs/thereporters/markeaston/2010/01/is_inequality_iniquitous.html)

Labour has struggled to try and create conditions of social equality, but cannot and will not act against the very structures and systems that create it. It is like someone campaigning to mitigate the effects of slavery without trying to abolish slavery itself. What the report shows, but does not foreground, is that the top 1 percent of earners earn over £2,000 per week. Indeed, it is notable on the graph of incomes, that there is a sudden and noticeable spike at the top end of the graph, reflecting the small number of people who have astronomical incomes.

Graph 2: Half of the population has income below and half above £393 per week


The chart below demonstrates this further – the top 1 percent have more than double the income of those at the start of the top 10 percent of earners.

Graph 3: People at the cut-off for the top tenth those at the cut-off for the bottom tenth. The top times the median.



Source: DWP, based on HBAI dataset. Incomes are adjusted no children. For a single person, divide actual net income 1.2; for a couple with 2 children under 14, by 1.4 etc (allowing and 0.33 for children aged 14 or over, or additional adults

This of course is income; the statistics on total wealth are worth noting as well:

“Median total wealth (including personal possessions, net financial assets, housing and private pension rights) is £205,000. The 90:10 ratio is almost 100, with the top tenth of households having wealth above £853,000, and the bottom tenth having less than £8,800. The 90:10 ratio is so high because the poorest households have such little wealth. However, even looking more narrowly at the top half of the wealth distribution, those in the top tenth have more than 4.2 times as much wealth as those in the middle, twice the corresponding ratios for earnings or household income. 1 per cent of households has total wealth of more than £2.6 million.”

The authors of the report clearly advocate reducing inequality. They address the various philosophies that claim that social inequality is necessary or even just. They maintain, though, that international comparisons of economic output do not correlate to great inequality, and that some much more equal societies than Britain are more productive and succesful.

Further, it’s clear that the inequalities they discover do not relate to life choices, but in fact reflect the cumulative effects of various advantages and disadvantages produced by background, and yes, class. Although most of the differences they highlight are between different parts of what we would understand as the working class (anyone whose main economic asset is their ability to work) the conclusion that inequality at birth stays through life remains a stark and significant fact.

Most tellingly of all is their revelation that the share of wealth for the top two thousandth of the population (the very, very, very, rich) is back to where it was in the 1930s. Thos gap narrowed towards the 1960s, but since 1969 their share of ‘post tax’ income has trebled from 0.5 percent to 2.5 percent. For the top 1 percent they have gone from 4.7 percent in 1979 to 10 percent by 2000. Put another way, a century of Labour and Labour governments has not dented the power and wealth of those at the top of society. That, as opposed to any specific failure of the current Labour administration, is the lesson that socialists need to draw from this report’s findings.

For those who would deny that inequality is a problem, it must be sufficient to show that inequality in wealth and social status translates into a shorter, iller life, with less knowledge and personal development. The findings of this report must not be allowed to lie gathering dust on political correspondents and professional politicians’ book cases, but must be made a spur to show the rotten truth of our present system of society, and become a weapon in the arsenal of overturning it in its entirety.

PIK SMEET