Tag: inequality

Hell of a state: What the tragic story of Don Lane tells us about Tory Britain

By Daniel Margrain

Don Lane

Don Lane, who suffered from diabetes, earned his living by delivering parcels to peoples’s homes and businesses throughout the country. Although Mr Lane was paid a salary by the giant courier company he worked for, according to the law, he was “self-employed”.

The amount he was paid depended on how many parcels he delivered. Mr Lane received no holiday or sick pay and was under constant pressure to meet targets. Drivers for the company get fined by them for rounds they miss. Mr Lane was recently fined for attending a medical appointment to treat his diabetes where tragically he collapsed and died.

The scandal that underlies the story is one which the bosses and shareholders of giant multinational companies like the one Don Lane worked “self-employed” for, have seen their dividends and pay go through the roof, while workers at the bottom, have experienced a real terms drop in their income over many years. The ideology that drives this “gushing up” of wealth towards the top, is called neoliberalism.

Before its onset four decades ago, the UK was a much more equal society than it is at present. The available data shows that the share of income going to the top 10 per cent of the population fell over the 40 years to 1979, from 34.6 per cent in 1938 to 21 per cent, while the share going to the bottom 10 per cent rose slightly.

As measured by the Gini Coefficient (see below), the redistribution of wealth from the poorest to the richest, rose sharply under the Thatcher government in 1979. The trend continued, albeit less drastically, under successive Tory and Labour governments where it reached a peak in 2009-10.

Figures show that GDP, adjusted for inflation, has grown over the last 60 years from £432bn in 1955 to £1,864bn in 2016. This increase in wealth, however, has become increasingly concentrated in fewer hands.

Inequality

SourceIFS 2016

Impact of inequality

report by Oxfam highlights the significant role neoliberalism plays in perpetuating inequality and suggests that the societies most affected are more prone to conflict or instability. The report also points out that extremes of inequality are bad for economic growth, as well as being related to a range of health and social problems including mental illness and violent crime.

Moreover, Richard Wilkinson and Kate Pickett, authors of the book, The Spirit Level. argue that other impacts of inequality include drug addiction, obesity, loss of community life, imprisonment, unequal opportunities and poorer well-being for children.

Left Foot Forward has cited studies that illustrate the close correlation between inequality and unhappiness. The tendency to equate outward wealth with inner worth means that inequality colours our social perceptions. It invokes feelings of superiority and inferiority, dominance and subordination – which affect the way we relate to, and treat, each other.

But rather than introducing socioeconomic policies that help reduce inequality, the Conservative government under Theresa May, has deliberately and consciously continued with the failed high borrowing-low investment/high debt economic neoliberal model that gives rise to it. Under the guise of austerity, the government have instead turned on workers, the sick and the disabled. The result has been increasing rates of depression, anxiety and suicides.

Fragmented

The existence of fragmented and atomised communities outside the confines of the workplace, the reduction in organised labour within it (illustrated by the long-term decline in trade union membership) and the lack of any safety net, means that ordinary people are increasingly vulnerable to the vagaries of “market forces”.

The ideology that underpins the neoliberal assault is the pseudo-science concept known as biological determinism, the legitimacy of which rests on the assertion that the social order is a consequence of unchanging human biology, as opposed to the result of inherited economic privilege or luck.

Thus, biological determinism reinforces the notion that inequality, injustice and the existence of entrenched hierarchical social structures of government, media and commerce are “natural”.

But it also highlights the artificial limits that a system driven by profit imposes. Any rejection of biological determinism and the rigged market system that reinforces it, is regarded by its promoters as being the fault of the individual, not the social institutions or the way society is structured.

Thus, according to evolutionary psychologists, sociobiologists and those within the elite political and media establishment, the solution to overcoming inequality and injustice is not to challenge existing social structures upon which “reality” is based, but rather to alter the chemical composition of the human brain to accommodate it to this reality.

In extreme circumstances it has been used to justify the elimination of individuals altogether who challenge the prevailing orthodoxy and/or whose values are perceived to be a “drain on the taxpayer”.

Social Darwinism

Years before moving towards explicit racial genocide, the Nazis developed the notion of ‘useless mouths’ or ‘life unworthy of life’ to justify its killing of ‘undesirables’ or ‘low hanging fruit’. These ideas are a variant of nineteenth century ‘Social Darwinism’ and eugenicist theories.

The said theories adapted Darwin’s notion of the survival of the fittest to describe relationships within society or between nations and races as a perpetual evolutionary struggle in which the supposedly weaker or defective elements were weeded out by the strongest and the ‘fittest’ by natural selection.

Intellectual challenges to neoliberalism and evolutionary psychology help undermine the notion that rigid social stratification, inequality and injustice used to justify them, are inevitable. Indeed, prominent economists such as Joseph Stiglitz, Paul Krugman, Dani Rodrik and Jeffrey Sachs have for a long time been raising their voices against the neoliberal experiment.

What is self-evidently clear is that the current rigged economic system in which power is increasingly concentrated at the top, is not sustainable. The only thing preventing our ability to tackle extreme inequality is political will.

At the next election voters will be faced with a clear choice – either to maintain the status quo by returning the Conservatives to power or, alternatively, to engender a paradigm shift by electing a Labour government. If future Don Lane’s are to be avoided, then we have no alternative other than to ensure a Corbyn victory.

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The scourge of inequality: Why we desperately need a change of government

By Daniel Margrain

Image result for pics of revolution

As measured by the Gini Coefficient (see below), the redistribution of wealth from the poorest to the richest, embodied in neoliberal ideology, rose sharply under the Thatcher government in 1979. The trend continued, albeit less drastically, under successive Tory and Labour governments where it reached a peak in 2009-10.

The UK was a much more equal society during the post-war years. The data available shows that the share of income going to the top 10 per cent of the population fell over the 40 years to 1979, from 34.6 per cent in 1938 to 21 per cent in 1979, while the share going to the bottom 10 per cent rose slightly.

SourceIFS 2016

Neoliberal ideology and inequality are emblematic of the symbiotic relationship between welfare retrenchment and the notion of the role of the state as facilitator of welfare handouts to the corporate sector. Farm subsidies, public sector asset stripping, corporate tax avoidance and evasion, government share giveaways and housing benefit subsidies, are just some of the ways in which neoliberalism continues to greatly enrich the wealthiest in society. Figures reported in the Guardian indicate that the richest one per cent in Britain have as much wealth as the poorest 57 per cent combined.

Analysis by The Equality Trust found:

  • The richest 100 families in Britain have seen their combined wealth increase by at least £55.5bn* since 2010. An average increase in wealth of £653m each, or £2 million each per week.
  • Since the financial crash in 2008, the richest 100 families in Britain have seen their combined wealth increase by at least £12.57bn.** An average increase in wealth of £151m each, or £364,052 per week.
  • By contrast, median household income has increased by just £4 per week since 2010, and £10 per week since 2008***. Median wealth has increased by just £8,600 since 2010.****
  • £55.5bn is the same wealth as that held by the poorest 19% of the population. £12.57bn is the same wealth as that held by the poorest 12% of the population.

The vast majority are not sharing the nations wealth

The problem has been that while figures show GDP, adjusted for inflation, has grown over the last 60 years (from £432bn in 1955 to £1,864bn in 2016), this increase in wealth has become increasingly concentrated in fewer hands. In other words, since the era of neoliberalism, working people who have created the sustained increase in wealth in society, have had their slice of the pie reduced dramatically.

Wanda Wyporska, Executive Director of The Equality Trust, said:

“The cavernous gap between the richest and the rest of us should be a real source of worry, not just globally but here in the UK, where extreme inequality is ravaging society.”

Wyporska continued:

“While many people’s incomes have barely risen since the financial crash, a tiny elite has continued to pocket billions. If politicians are serious about building a genuinely shared society, then they urgently need to address this dangerous concentration of power and wealth and tackle our extreme inequality.”

Impact of inequality

A report by Oxfam highlights the significant role neoliberalism plays in the creation of unequal societies and suggests that the most affected are more prone to conflict or instability. The report also points out that extremes of inequality are bad for economic growth, as well as being related to a range of health and social problems including mental illness and violent crime.

Moreover, Richard Wilkinson and Kate Pickett, authors of the book, The Spirit Level. argue that other impacts of inequality include drug addiction, obesity, loss of community life, imprisonment, unequal opportunities and poorer well-being for children.

Left Foot Forward has cited studies that illustrate the close correlation between inequality and unhappiness. The tendency to equate outward wealth with inner worth means that inequality colours our social perceptions. It invokes feelings of superiority and inferiority, dominance and subordination – which affect the way we relate to and treat each other.

But instead of introducing socioeconomic policies that help reduce inequality, the Conservative government under Theresa May, have deliberately and consciously continued with the failed high borrowing-low investment/high debt neoliberal model that gives rise to it.

Deficit & debt

Public sector net borrowing, the widest measure of the deficit, was £48.7 billion last year (2016/17) and the gap is widening. In 2010, the coalition government said it would clear the deficit by 2015/16. Having missed the target, the stated aim is to clear it by 2026.

In their attempt to cover the deficit which adds to the total stock of national debt (ie the total money owed), the Tory strategy has been to borrow. Public sector borrowing is £1.9bn higher than last year. The government borrowed £6.9bn in June, 2017, £2bn more than at the same time last year.

In fact, the Tories have been the biggest borrowers over the last 70 years. This has culminated in an expected budget deficit from 2010 to 2020, of some £870 billion. This is well over the combined borrowing of Labour governments since 1945, around £490 billion.

Significantly, about 5 per cent of the government budget goes towards paying interest on the national debt which under the Tories has increased in real terms by 53 per cent between 2009/10 and 2016/17 to a huge £1.7 trillion. This represents 87.4 per cent of GDP and a 3.6 per cent rise year-on-year.

Relatively low tax rates for the rich, an inability to tackle evasion/avoidance, unemployment, the increase in poverty pay and zero hours contracts indicative of the rise in inequality, have all contributed to falling tax revenues and higher government debt. This has been used to justify more attacks on the poorest and weakest in society on the spurious basis that “the country can’t afford alternatives to austerity” and that “there is no magic money tree.”

Author of The Production of Money, Ann Pettifor, summarizes the austerity myth in 2 minutes 17 seconds. As she astutely puts it:

“Taxes are a consequence of investment and spending. They are not its cause.”

The cornerstone of Tory economic policy is not to invest to stimulate the economy in order to boost growth and generate tax revenues, but to attack the welfare state and public sector which has the reverse affect.

Work that the Tories claim lift the poor out of poverty, is in reality poorly paid and insecure underwritten by the tax payer which puts more strain on public finances. On the same day that the bedroom tax was announced in parliament (estimated to “save” the Treasury £480 million), the top rate of tax in the UK was cut from 50 percent to 45 percent, resulting in a loss of revenue of £1 billion.

Lowest growth in the G7

With a record level of household debt and reduced levels of household spending combined with a lack of infrastructural investment, the GDP growth rate for the first quarter of 2017 shrunk to 0.2 per cent. This is the lowest growth rate of all the G7 nations. It doesn’t leave much scope for a government apparently committed to “living within its means,” to fund anything more than the local village fete.

The Tories austerity strategy began to take hold in a significant way following Chancellor George Osborne’s June, 2015 budget in which he announced £12 billion of cuts. This included the abolition of working tax credits to the poorest and the top down reorganisation of the NHS brought about by the 2012 Health and Social Care Act which removes the duty of the Secretary of State for Health to provide a comprehensive health service.

The punitive attacks on the unemployed, working poor, sick and disabled have been increasingly stepped up resulting in over a million three-day emergency food supplies given to people in crisis in 2016/17. This in turn has led to increasing rates of depression, anxiety and incidences of suicides.

In social care, a combination of cuts of around 30 percent to local authority budgets since 2010, increasingly restrictive eligibility criteria for services, and inadequate personal budgets are leaving millions without the support they need.

Moreover, the lack of affordable housing, the reduction in housing and council tax benefits to the unemployed and sick and the imposition of the bedroom tax, has resulted in growing rates of homelessness and/or the social cleansing and displacement of entire communities, many of them long established.

Fragmented

The existence of fragmented and atomised communities outside the confines of the workplace, the reduction in organised labour within it (illustrated by the long-term decline in trade union membership) and the lack of any safety net, means that ordinary people are increasingly vulnerable to the vagaries of “market forces”.

Those affected are not just the poor and traditional blue collar workers but also the lower ranks of the middle classes. This is illustrated by the fact that the cuts, which began to have political repercussions within David Cameron’s own Oxfordshire constituency, are now a factor in Tory seats up and down the country.

As Theresa May’s disastrous General Election campaign and manifesto proved, the Tories can also no longer count on the elderly demographic for their vote. In an increasingly aging society, the pressure on the social care system will become more acute as demand for its services increase.

But a service motivated by profit is necessarily compromised in terms of its ability to provide a universal service of care predicated on need. The electorates rejection of the Tories “dementia tax” manifesto pledge seemed to suggest that there is a limit to which an aging population are willing to vote against its own interests.

 

As far as the political establishment is concerned, however, maximizing profits for the corporations they represent is given priority over the concept of a properly functioning and accountable social democratic state. Profit has become the guiding principle for the organisation of society from which everything is judged, including perceptions of success and happiness. This is reinforced daily on television programmes and in the lifestyle sections of magazines and newspapers.

Biological determinism

What underlies these contrasting perceptions is the concept biological determinism The proponents of this concept posit that the social order is a consequence of unchanging human biology, rather than the result of inherited economic privilege or luck. Thus, biological determinism reinforces the notion that inequality and injustice and the existence of entrenched hierarchical social structures of government, media and commerce are “natural”.

But it also highlights the artificial limits that a system driven by profit imposes. Any rejection of biological determinism and the capitalist system that reinforces it, is regarded by apologists as being the fault of the individual and not the social institutions or the way society is structured.

Thus, the trend among evolutionary psychologists in their attempts to tackle, for example, the current anxiety and depression crisis in society, is not to challenge existing social structures upon which “reality” is based, but rather to alter the chemical composition of the human brain to accommodate it to this reality, or even in extreme circumstances to eliminate individuals altogether whose values are perceived to impact negatively on the ‘taxpayer’.

Useless mouths/Social Darwinism

Years before moving towards explicit racial genocide, the Nazis developed the notion of ‘useless mouths’ or ‘life unworthy of life’ to justify its killing of ‘undesirables’ who, like the Tories, they regarded as a ‘drain on society’. These ideas are a variant of nineteenth century ‘Social Darwinism’ and eugenicist theories, which adapted Darwin’s notion of the survival of the fittest to describe relationships within society or between nations and races as a perpetual evolutionary struggle in which the supposedly weaker or defective elements were weeded out by the strongest and the ‘fittest’ by natural selection.

Intellectual challenges to market fundamentalism (neoliberalism) and evolutionary psychology that is its ideological cousin, help undermine the notion that rigid social stratification, inequality, injustice and neoliberal economics used to justify them, are inevitable. Indeed, prominent economists such as Joseph Stiglitz, Paul Krugman, Dani Rodrik and Jeffrey Sachs have for a long time been raising their voices against the neoliberal experiment.

They are not alone. Venture capitalist, Nick Hanauer has said:

“If capitalism doesn’t change fundamentally, it will destroy itself. If you allow wealth to concentrate in fewer and fewer hands over time, in the end it cannot be good for anybody, particularly people like me. You show me a highly unequal society and I’ll show you a police state or a revolution.”

Hanauer continued:

“If we don’t get inequality under control then it’s likely to lead to war – a similar pattern that followed the last period of massive inequality between 1925 and 1940….. From a capitalists perspective, although it may seem a good idea in the short-term to impoverish the typical family, in the long-term it’s a catastrophe.”

Whereas progressive venture capitalists like Hanaeur, economists like Stiglitz and Krugman and politicians like Jeremy Corbyn, understand that the functioning of a modern forward-looking society is dependent upon the reduction in inequality to save capitalism from itself, the Tories want to take us back to the vast inequalities of the time of Charles Dickens and a return to a period before the Factory Acts of the 1830s and 1840s which set down a maximum length for the working day.

Alternative

For the first time in generations, there exists a major alternative credible political force in Britain, that is prepared to challenge the prevailing neoliberal orthodoxy. The Labour party under Jeremy Corbyn, has shown it is serious about tackling head-on the dangerous concentration of power, wealth and extreme inequality that has been deliberately fostered by successive UK governments over the last 40 years.

Neoliberalism is a political and ideological construct that can, and must, be reversed. The transformation to a more just, humane and democratically responsive system is what Corbyn will usher in if elected next time around. It’s imperative for the sake of our children and grandchildren, that we don’t let the opportunity slip.

NOTES:

*Figures were obtained by comparing Sunday Times Rich Lists in 2010 and 2016. This £55.5bn represents a conservative figure, as 15 of the 100 richest people in 2010 fell out of the list of richest 1,000 (the full list) by 2016, and so their wealth could not be counted. The £55.5bn figure therefore reflects the wealth of the 85 Rich List figures who have remained in the Rich List from 2010-2016. Wealth was adjusted for inflation to 2016 prices.

**Figures were obtained by comparing Sunday Times Rich Lists in 2008 and 2016. This £12.57bn represents a conservative figure, as 17 of the 100 richest people in 2008 fell out of the list of richest 1,000 (the full list) by 2016, and so their wealth could not be counted. The £12.57bn figure therefore reflects the wealth of the 83 Rich List figures who have remained in the Rich List from 2008-2016. Wealth was adjusted for inflation to 2016 prices.

***Figures were obtained from the median household income in the ONS’ Households Below Average Income release, 1994/95 to 2014/15 statistical release – https://www.gov.uk/government/statistics/households-below-average-income-199495-to-201415  Looking at difference between 2007/08 (£463), 2009/2010 (£469) and 2014/15 (£473) figures.

****Figures were obtained from the ONS’s Wealth and Assets Survey, this shows the median wealth increase from 2010/12 – 2012-14, the first and last releases since 2008. https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/compendium/wealthingreatbritainwave4/2012to2014  

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Why the travails of Apple are symptomatic of a much wider problem

By Daniel Margrain

In the wake of the democratic decision of the British people to exit from the EU, it would paradoxically appear to be highly probable that the UK government will give away the kind of sovereignty the ‘Brexiteers’ claim to covet by signing an unadulterated TTIP deal with the United States government. At a point in time in which the UK government appears set to extricate itself from the ‘bureaucratic and unaccountable’ EU, the multinational conglomerate Apple is availing itself of Ireland’s tax system, the most favourable national tax regime in Europe.

However, the European Commission ordered Apple to pay the Irish government £11bn of back-dated tax that it has avoided. The Irish Cabinet agreed to appeal the European Commission diktat. Irish PM, Enda Kenny, ordered his ministers back from their summer holidays after the European Commission accused Ireland of breaching state aid rules.

But Independent minister John Halligan initially said that the Irish government should take the cash owed by Apple in order to fund hospital services in his constituency before eventually agreeing to the decision to appeal the ruling. The European Commission alleges that Apple’s effective tax rate in 2014 was a mere 0.005 per cent which means that someone earning £30,000 a year at an equivalent rate would pay just £1 a year in tax.

Meanwhile, the reaction of the British government to the impasse, was not to support the EU in its noble endeavor, but rather to remain on the sidelines in the hope that the situation would play out to their advantage, thus providing them with a potential opportunity to entice Apple with a ‘sweetheart’ ‘investment’ deal. Meanwhile, as Alex Callinicos  pointed out “Apple is playing the EU and the US off against each other over which gets the taxes it hasn’t been paying.”

It’s precisely the logic that overrides these kinds of shenanigans that explains one of the reasons why wealth inequality continues to rise to stratospheric levels, and why governments are witnessing a backlash against globalization. Over the past 40 years, the productive capacity that capitalism has engendered, allied to the ability of successive governments to transfer assets and capital from the public to the private sphere, has created an enormous concentration of wealth at the very top of society.

Britain is a country where armies of lawyers and accountants sift through mountains of legal paper work in order to justify on a legal basis those at the very top paying as little tax as possible. This has happened as a result of the restructuring of rules and regulations which provide corporations with legal loopholes with which to jump through.

In the case of Apple, profits are funneled into a ‘stateless company’ with a head office which, according to EU Commissioner, Margrethe Vestager, “has no employees, premises or real activities.” In other words, Apple’s resident European office for tax purposes doesn’t exist. It has no staff and no location so it doesn’t pay any tax on most of the money it earns outside the United States.

Ireland has been told that it must claw back the £11 bn of back taxes from Apple even though Ireland’s ruling politicians say they don’t want it. This is money which could be spent for the benefit of an electorate who these politicians supposedly represent. Irish finance minister Michael Noonan intimated that individual states, not the EU, are responsible for individual taxation policies. “It’s an approach through the back door to try to influence tax policy through competition law.”, he said.

But what use is a tax policy if it is not intended to benefit human kind? If tax havens like Ireland behave in a way that negatively affects the well being of humans by reducing the resources available to fund services and infrastructure of which the functioning of civil society depends, then such a tax policy is not worth the paper it is written on. Does Ireland look like a country that doesn’t need £11 bn?

Apple’s billions worth of profits generated in Europe and the Middle East are transferred to Ireland where the company pays tax on just 50m euros worth. The rest is sent to their non-existent ‘virtual’ head office. As of 2015, the company’s lightly-taxed foreign cash off-shore mountain of $187bn is the biggest of any U.S multinational.

 

How can Apple defend this state of affairs whilst simultaneously maintaining the moral high ground by claiming that any attempt to prevent such an immoral situation will be bad for the societies in which they operate?

The activities of a virtually non-existent tax-paying company like Apple is already bad for these societies. The reason the masses, as opposed to companies like Apple, are subject to tax at a fixed rate, is because the former, unlike the latter, are not in the financial position to be able to avoid it. Those who are least able to pay taxes are the ones who have it deducted from their wages in full at source.

It’s not the overreaching arm of the EU ‘interfering’ with the tax laws of individual member states that’s the problem, but the fact that multinationals pit one country against another to avoid paying as much tax as possible while availing themselves of everything the rest of us pay for. The ‘race to the bottom’ is one in which corporations are constantly on the look-out to ‘up-sticks’ in the search for ever cheaper tax havens.

The end goal is a scenario in which the corporations pay no tax at all, while the masses pay for civil society because corporations like Apple, Google and Starbucks don’t have to. The upward spiral of money from the many to the few is increasing at a rate of knots due to a form of state-managed capitalism that perpetuates it. Moreover, it is happening to the detriment of the whole of the human race.

Widespread public anger towards this kind of systemic corruption is stymied daily as a result of the distractions associated with TV light entertainment and sports programmes. All this is aided by a largely uncritical corporate-based journalism. The ability of the rich and powerful to lobby governments in support of their own economic narrow interests, often to the detriment of the environment and society at large, exacerbates the problem.

Shortly before becoming the UKs unelected PM, Theresa May, intimated that the Tory government she would go on to lead would instigate greater transparency between government and big business and that she would no longer tolerate the undue influence of corporate power on domestic UK politics and the corruption through the power of lobbying that this implies. However, less than two months later, the Guardian revealed that a £3,150 payment to the government will buy business executives strategic marketplace influence.

The privileging of a tiny minority of the wealthy and corporations in this way, can be regarded as nothing less than the usurping of democracy. The mass of the working poor whose exploited labour creates the wealth from which the rich benefit and who often vote for corporate-funded politicians diametrically opposed to their own interests, is indicative of the propaganda power of a corporate and media-dominated political and economic system.

With a corporate tax rate levied at just 12.5 per cent, Ireland is effectively prostituting itself to Apple who can legally say that legally they are doing nothing legally wrong. The conventional argument goes that if Ireland failed to attract corporations like Apple, then it would be places like Belize, Bahamas or any of the British tax avoidance dependencies who would. But this zero-sum game means that while this situation is great for the CEOs of the corporations and their shareholders, it’s terrible for everybody else.

Because of the unfair competitive advantage the multinationals are able to lever, shops close, factories shut down and local businesses go under. Companies like Apple not only have governments on their side and can buy and manufacture on a vast scale, but they are not subject to the relatively higher rates of tax small businesses are forced to pay.

This situation is compounded by the fact that the typical consumer will tend to look for the cheapest goods and services available which, as a result of economies of scale, the big corporations will be most likely to provide. In such an eventuality, the role that corporations play in society becomes more prevalent at the expense of the small business.

The logical corollary to this is that eventually everything will be sold by a few giant multinational corporations who will come to dominate the marketplace resulting in less choice for the consumer, as well as its monopolization by private capital. This process was predicted by Marx who understood that capitalism was an inherently contradictory system.

In order to gain a competitive advantage over their rivals, capitalists either need to introduce mechanization to speed up the production process, reduce wages or replace their existing workforce with a cheaper one. Here’s where the contradiction comes in: If all capitalists are engaged in this process, their workers will have less and less money so they won’t be able to buy what the capitalists are producing to sell.

The capitalists, therefore, are effectively ‘creating their own gravediggers’ as a consequence of there being less demand in the economy. How has the system managed to have kept going when people don’t have money to buy things? The answer is the emergence and widespread availability of credit. However, the problems of capitalism are now so severe, so systemic, so global, that many people are wondering whether the system is coming to an end.

The rot at the heart of British society runs deeper than the travails of Philip Green

By Daniel Margrain

The news that serial tax dodger Philip Green bought his third luxury super-yacht for £100 million, a sum similar to the amount that was effectively sequestered from the BHS pension fund, and which was subsequently hid in tax havens wrecking the lives of thousands of his employees in the process, is symptomatic of the kind of rot that has spread throughout the high echelons of the ruling class. Like rising damp in an old building that spreads throughout the foundations before working its way through the brickwork until it eventually subsumes the entire edifice, Britain is currently suffering from another kind of infestation that of the ruling class “elite” whose unprecedented actions and decisions are undermining the rules and laws on which the proper functioning of a civilized society depend.

The biggest scandal isn’t about the corruption surrounding the Panama Papers, bankers and the revelations about Philip Green (as bad as they are), but about wealth inequality. Currently, the top 1 per cent own as much as 99 per cent of the rest of the world combined. What the Panama Papers revelations highlighted was just how unequal the world is. In his book, ‘The Hidden Wealth of Nations’, economist Gabriel Zucman estimates that worldwide, more than $7.5 trillion is stashed away in offshore accounts. As an indication of just how much that is, the sum amounts to some 8 per cent of the entire financial wealth of the world. About 80 per cent of that has not, and will not, be taxed at all, ever.

This level of tax avoidance increases the wealth gap between the rich and poor. Hiding vast sums of wealth from the prying eye of governments makes it easier for the super rich, represented by the 1 per cent, to remain rich and avoid tax policies which are meant to help the 99 per cent. Off-shore accounts also make it more difficult for everybody else to get rich because of the uneven playing field that results from these tax havens. The 99 per cent among the mainly middle income earners are paying higher taxes to make up for the taxes that the 1 per cent don’t pay.

Although on average slightly less than 8 per cent of all the financial wealth of the world is off-shore, Europe fares worse at 10 per cent. By contrast, off-shore financial wealth in Latin America stands at 20 per cent, in Africa the figure is 30 per cent and in Russia an incredible 50 per cent of all its financial wealth remains hidden off-shore. What all this indicates is the sheer scale of a problem that hits the developing world the hardest where the results for the very poorest who have no access to any form of social protection, can literally be death.

As far as Europe is concerned, the massive use of tax havens began in the 1920s in Switzerland. In Britain this trend became a feature of society around the mid-to-late 1970s. Numerous tax havens had began to spring up during this time which is when the great wealth disparity really started to make its mark. This was no accident. During this period, the function of the state began to change from that of ‘welfare provider’ to more ‘pro-business facilitator’. The ideology that came to embody this change was neoliberalism.

Instead of the direct provision of services administered democratically at the local level, the trend has increasingly been for the state to act as a purchaser of these services which have then been provided privately and indirectly. As each separate financial intermediary takes their slice of the financial pie, the temptation for corrupt practices becomes greater and the concentration of capital and deregulation of labour markets more acute.

With the balance of economic power tilted increasingly towards the rich who are able to buy the influence of politician’s, the impact on democracy has been devastating for millions of ordinary people. This hollowed out system of democracy is one in which the 99 per cent increasingly seem to find it difficult to find some personal and meaningful pattern in a social world dominated by huge and distant monoliths whose power over the livelihood of millions seems absolute.

This explains the growing popularity of ‘unorthodox’ politician’s like Jeremy Corbyn, Bernie Sander’s and even to an extent, Donald Trump, who offer the electorate an alternative to the ‘business as usual’ politics of the corporate controlled political machine. However, until a distinct break with the current system occurs, the masses are faced with the prospect of more of the same neoliberal ideology predicated on austerity.

Contrary to popular mythology, it wasn’t the Conservative government of Margaret Thatcher which came to power in 1979 that invented neoliberalism, rather that distinction is reserved for the preceding Labour administration under James Callaghan. It was the Labour government, not the Tories, who accepted the terms of the austerity package proposed by the IMF in 1976. The main condition of the IMF loan, insisted on by the US Treasury, was that the government deficit must be reduced by cutting demand.

Interest rates were raised and government spending reduced. Wage, job and welfare cuts were the hallmark of the ‘social contract’ between wage labour and capital agreed by the unions to bail out the government. As Colin Leys notes:

“From 1976 onwards, Labour accordingly became ‘monetarist’. Its leaders accepted that full employment could no longer be achieved by government spending but must be sought through private sector growth. For the necessary investment to take place, prices must reflect real values, and this in turn required ‘squeezing’ inflation out of the system and permitting the free movement of capital. In 1978 Treasury officials began preparing to abolish capital controls.”

Spearheaded by the deregulation of the movement of capital, the breaking of the unions and the centralization of state power that favoured the corporations in the running of state enterprises, rates of inequality that had been reduced from the previous highs of the depression years of the late 1920s began to grow again. During the 1920s wealth disparity was huge. Then, as people at the top paid more taxes, and people in the middle began to earn more, the gap became increasingly smaller.

As the consensus between capital and wage labour started to go in reverse from about 1980, inequality began to increase steadily to 1920s levels which is roughly the point they are today. By the mid 1980s tax havens started to emerge in places like the Caymen Islands, Singapore, Hong Kong, Panama, Bermuda the British Virgin Islands and increasingly, London. All of the wealth located in these havens isn’t actually invested their. This means that the vast majority of people who live in, say, London, don’t benefit from foreign money that’s invested in, for example, property due to the massive rise in property prices that result from these investments.

So why do the 99 per cent put up with all this?

Many people tend to get distracted, whether that’s through working all the hours under the sun merely to survive, or through sports or other forms of leisure activities. Many others are angry but feel disconnected from the political process. The politicians, by contrast, benefit from the current situation so they are not motivated to change it, largely because they are immune from any effective political pressure from below.

The consequences for civil society that emanate from the combination of public apathy and apoplexy are potentially extreme. The lack of proper investment in public services like the NHS, social care, libraries and schools will end up with them collapsing. This is a process that to a large extent is already happening. The fact that the super rich have their money stashed away off-shore, while many among the poor don’t earn enough to pay tax in the first place, has resulted in an insufficient tax yield.

The reason why many people can’t get a prompt appointment with their GP, paving stones in the streets are cracked, their libraries are staffed by volunteers and there are pot holes on the roads that never get attended to, is directly linked to these factors. So while public services are being slashed on the one hand, people are increasingly having to pay for the ones that remain with money, in many cases, they haven’t got. If they are fortunate enough to have a job, it’s likely that their disposable income in real terms wouldn’t of increased in the last four decades.

Particularly for the young, the prospects of finding secure, fulfilling and well paid work is as remote now than it has been for at least 70 years and the situation is likely to get even worse as robots begin to replace many traditional blue collar and even white collar jobs. Leaving aside the threats posed by climate change, the underlying root cause of the problems society faces both now and in the coming period, is the inability of governments’ to take a long term approach to tackling levels of inequality that are so extreme that violent disorder on the streets may be the only language the politician’s will take note of.

‘No man is an Island’

By Daniel Margrain

This year the Dutch government intend to introduce a universal basic income (UBI) paid to the residents of Utrecht and 19 other Dutch municipalities. Each person will receive the equivalent of about £150 a week whether working or not. The unemployed won’t be penalized for finding work because they will receive their employment income in addition to the universal income payment.

The hope is that this will prevent the government having to spend extra money on the vast array of related services connected to the bureaucratic elements of the state that are dependent on the unemployed for their existence. This covers everything from unemployed benefit snoopers to the administering of homeless shelters. Then there are the knock-on affects that stem from inequality such as health, poverty and crime. Writing in the Guardian, John O’Farrell astutely points out:

“Since the decline of the unions, workers have been increasingly powerless to refuse longer hours and less money with only the food bank to fall back on if they walk away from an exploitative job. With a guaranteed state income to keep the wolf from the door, employees would be given the bargaining power to demand civilized working conditions and reasonable rates of pay….Our labyrinthine system of benefits and tax credits would disappear and all the stigma of signing on with its degrading culture of blame and humiliation for those at the bottom of the pile.”

The system in the UK is predicated on blaming those at the bottom of the pile and casting humiliation on them, thus enabling the majority in the middle, to feel better about themselves. O’Farrell  concludes:

“For all the apparent expense of the UBI, we would save the small fortune that the state currently spends mopping up the mess of social problems caused overwhelmingly by chronic poverty. Of course, there are complex reasons for increasing homelessness, for bulging prisons, for growing mental health problems – but desperate financial pressure is a major factor in all of them. Every decade sees us spending increasing billions trying to tighten the lid of the boiling cauldron. It might be so much cheaper just to turn down the temperature a bit.”

The long-term socioeconomic and health benefits related to the kind of progressive and enlightened policy adopted by the Dutch is palpable, not only to the poorest in society but it also has some benefits to those at the top. As Richard Wilkinson put it: There seems to be some truth in John Donne’s “No man is an island.”

Rather than the punitive strategy of coercion adopted by the British and other governments by which the ‘stick’ is preferred to the ‘carrot’, the introduction of the UBI – predicated on economic pragmatism rather than state vindictiveness – will almost certainly result in the nurturing of talents and creativity that otherwise wouldn’t necessarily be encouraged.

It’s almost certainly no coincidence that what was arguably the peak of working class creativity in the arts occurred during the 1960s when, underpinned by a universal system of welfare provision, the class in question was at its most confident – a confidence that has been in decline from the mid 1970s onward marked by the ending of the post-war settlement between capital and labour.

Over the last 40 years, ordinary people have found it increasingly difficult to focus on doing things they really like because they tend to spend most of the productive part of their lives working at something they hate often for no other a reason than to maintain the necessities of life – namely securing a roof over their head and ensuring they have access to enough food.

Since the Callaghan government, punishment has been the overriding factor that has guided the social policy of successive UK administrations’ – both Conservative and Labour. The purpose has been to foster a lack of any sense of entitlement. This has involved the gradual removal of a social security safety net that a universal system implies, so as to maintain the level of social stratification to meet the demands set by unfettered capital.

The Dutch model, intended as a corrective to the lack of universal provision, is in principle similar to that adopted by the Green Party as outlined in their last General Election Manifesto. The rationale underpinning the introduction of such a model is that it would not only end the kinds of state bureaucracy and inefficiencies described, but would also be cheaper to administer and hence save the tax payer money. Third, it would boost local economies because poor people would have greater income at their disposal with which to spend on goods and services.

But arguably the greatest benefit is that such a policy would lead to a reduction in inequality whose affects, as Richard Wilkinson has shown, are divisive, harmful and socially corrosive. Research indicates that the world’s richest 1 percent of people this coming year are expected to own the same amount of wealth as the rest.

The more equitable and egalitarian the society, the greater the control people have over their lives. Two years ago, Oxfam research demonstrated how extreme wealth confers political power that can be used to influence rules and systems in favour of an elite at the expense of everyone else.

In addition, more equal and fair societies’ provide the conditions by which a system of equality of opportunity can be put into place. Workers, as participants in a scheme of cooperation that contribute toward national income, would then have a claim to a fair share of what they have helped to produce.

Richard Wilkinson shows that a correlation exists between income inequality within countries (not between them) and social gradients in terms of a multitude of indicators. These include health, life expectancy, literacy/numeracy, infant mortality rates, homicide rates, proportion of the population in prison, teenage birthrates, levels of trust, obesity, mental illness – which in standard diagnostic classification includes drug and alcohol addiction – and social mobility.

What the data shows is that in the more equal countries – Japan, Finland, Norway, Sweden – the top 20 percent are about three and a half to four times as rich as the bottom 20 percent. But on the more unequal end – U.K., Portugal, USA, Singapore – the differences are twice as big. On that measure, the UK is twice as unequal as some of the other successful market democracies.

According to research measured by the Gini coefficient, which is widely regarded as the best measurement of income inequality, Holland is the fourth most equal society within the EU while the UK is ranked way down at twenty-one. What impacts on society does this level of inequality point to?

Wilkinson collected internationally comparable data on problems with social gradients – the kind of problems that are more common at the bottom of the social ladder of the kind outlined above – and weighted them equally by putting them all in one index. The data showed an extraordinarily close correlation between inequality and the kinds of social problems described. The same correlation equally applies to children who also perform worse in the more unequal societies.

What the data in its totality indicates is that the average well-being of our societies is not dependent any longer on national income and economic growth. Wilkinson elaborates further:

“That’s very important in poorer countries, but not in the rich developed world. But the differences between us and where we are in relation to each other now matter very much. I’m going to show you some of the separate bits of our index. Here, for instance, is trust. It’s simply the proportion of the population who agree most people can be trusted. It comes from the World Values Survey. You see, at the more unequal end, it’s about 15 percent of the population who feel they can trust others. But in the more equal societies, it rises to 60 or 65 percent. And if you look at measures of involvement in community life or social capital, very similar relationships closely related to inequality.”

In terms of mental illness:

WHO put together figures using the same diagnostic interviews on random samples of the population to allow us to compare rates of mental illness in each society. This is the percent of the population with any mental illness in the preceding year. And it goes from about eight percent up to three times that — whole societies with three times the level of mental illness of others. And again, closely related to inequality.”

The overriding factor that emerges from Wilkinson’s research into inequality are it’s psycho-social effects and how this relates to the kinds of values inherent to a capitalist system in which society is driven by consumerism and competition that leads to status insecurity. The potential for the onset of chronic stress and depression from social sources in turn:

“affect the immune system, the cardiovascular system. Or for instance, the reason why violence becomes more common in more unequal societies is because people are sensitive to being looked down on….I should say that to deal with this we’ve got to…constrain income, the bonus culture incomes at the top. I think we must make our bosses accountable to their employees in any way we can. I think the take-home message though is that we can improve the real quality of human life by reducing the differences in incomes between us.”

With regards to social mobility, Wilkinson states bluntly that if Americans want to live the American dream, they should go to Denmark.”

Price of everything, value of nothing.

By Daniel Margrain

Ever since the Red-Tory government of Tony Blair stepped up the Thatcherite ethos of the British state as purchaser rather than direct provider of services, the outsourcing of these services has continued apace. This neoliberal ideology has, in turn, increased the proletarianization of not just traditional blue collar roles but white collar middle class professions as well.

The intensification of work and the insecurity of working life, short-term and part-time contracts, flexible shift patterns, mushrooming ranks of middle managers and supervisory staff, constant testing and assessments, punitive disciplinary codes, long working hours, short holidays and relentless ‘downsizing’ have materially and dramatically worsened the experience of going to work for many people.

Whereas forty years ago working as teacher or health professional was widely regarded as a stimulating and well paid job that offered a great deal of autonomy, they are now roles that provide a diminishing social and economic status in which the workers concerned have little or no control in their day to day activities.

As the experience of work has become increasingly harsh and coarse for the vast majority, life for the minority of the ruling class and upper ranks of the middle class has taken a completely different trajectory. Just as we entered the 21st century, government figures revealed that Britain’s biggest earners were enjoying their largest share of national income since the Thatcher years.

Within the space of about ten years, the multiple of chief executive pay to average pay for FTSE companies, has moved from 69 times, to 149 times. And that’s just a comparison with average pay, not those paid at the very bottom of the scale which also does not reflect company performance. The New Economics Foundation (NEF) has argued that unless the pay discrepancies are tackled, “by 2030 the UK will have returned to Victorian levels of inequality.”

With Victorian levels of inequality comes a Victorian paternalistic ideology that dominates the governing classes in which the ‘socially excluded’ must be helped to help themselves. Those who refuse to ‘modernise’ must be swept aside. But the maligned are not just the poorest but increasingly extend to enemies of ‘reform’ among the less well off sections of the middle classes.

These are the kinds of people who cannot rely wholly or mainly on private provision for such essentials as health care, pensions, education, care of the environment and transport. They too depend on the welfare state. The scientific work measurement practices of Taylorism traditionally associated with blue collar occupations are becoming a feature of white collar jobs too.

Although some heads of department and heads in schools, lecturers, middle ranking civil servants, managers in local councils and health professionals regret the passing of the public sector ethos even as they preside over its destruction, others like Dr Rob Galloway are beginning to make a political stand against the top down reorganization of the National Health Service (NHS) and the kinds of changes to working conditions that Taylorism implies.

This feeds into the attitudes of the wider public who recognize the connection between the deteriorating working conditions of health professionals, the downward spiral of the NHS in general (both of which are politically and ideologically driven) and their own working conditions and experiences.

The deliberate running down of the NHS is predicated on its eventual privatization related to the fact that 70 MPs have financial links to private healthcare firms. The carving open of the NHS for exploitation by private interests undermines the longstanding obligation of the UK government to provide universal health care free at the point of delivery. The creeping implementation of the former will ensure the ditching of the latter.

On March 20, 2012, MPs passed the Health and Social Care Bill despite the fact that it was not mentioned anywhere in the 2010 Conservative election manifesto, or that nearly every professional medical body fought against it. It was clear that the reason why the Tories were silent on the issue was because to highlight it would have been electoral suicide.

The coalition agreement between the Tories and the Lib Dems of May 2010 had promised: “We will stop the top-down reorganisation of the NHS.” That promise has been well and truly smashed. The NHS bill was opposed by 27 professional medical bodies, including the Royal College of GPs, the BMA and the Royal College of Nurses: that’s all but one of the relevant medical bodies.

Researcher Éoin Clarke has produced a map of England showing the areas affected so far by the NHS carve-up. One of the major corporate players is Virgin Care who won a £500 million contract to provide community services across Surrey and began running these services, as well as the county’s prison healthcare. Hundreds of donations from private healthcare firms to Tory coffers can be viewed here.

Moreover, the website Social Investigations has compiled an extensive list of the financial and vested interests of MPs and Lords in private healthcare. This list, says the site, “represents the dire state of our democracy”. Andrew Robertson, the blog’s founder observes that more than one in four Conservative peers – 62 out of the total of 216 – and many other members of the House of Lords “have a direct financial interest in the radical re-shaping of the NHS in England.” 

These unelected peers – with personal interests in insurance companies, private healthcare and private equity groups – were able to help push through a bill from which they will now profit. If they had been elected local councillors, such personal interests would have debarred them from voting. The Tory top down reorganization of the service while spun as a necessary precondition for its survival as a free at the point of delivery service, is in reality the precursor to its demise.

The Tories’ privatization objectives will be made smoother following the introduction of the proposed Transatlantic Trade and Investment Partnership (TTIP) agreement, the purpose of which, if finalized, will be to grant big business the right to sue governments which try to defend their citizens. It would allow a secret panel of corporate lawyers to overrule the will of parliament and destroy our legal protections.

The mechanism through which this is achieved is known as investor-state dispute settlement. It’s already being used in many parts of the world to kill regulations protecting people and the living planet. It could also be used to smash any attempt to re-regulate the banks, to renationalize the railways, to leave fossil fuels in the ground and to save the NHS from the kind of corporate control envisaged by the Tories.

Just as the government attempted to hide from the public their intentions for the NHS prior to the 2010 general election and then subsequently spin their way out of the reality faced by junior NHS doctors, they are also maintaining their silence over the proposed undemocratic TTIP agreement which will be used to further their privatization agenda.

Muesli and the Mob

By Daniel Margrain
Alan and Gary Keery

There appears to be an existential crisis at the heart of society epitomized by seemingly never ending periodic economic bubbles that come around roughly every five to ten years. Miss the opportunity to surf the wave, and its unlikely you will ever be in the position to ride it again. The backdrop to this story relates to a ‘mob’ who attacked the well publicised Cereal Killer Cafe run by a group of privileged hipsters in a former run down working class district in east London.

Passing the White Collar Factory in nearby Old Street Station, a group of about 200 demonstrators made their way east to their intended target in this now fashionable part of town. As a symbolic extension to the bubble economy of the 1980s exemplified by job insecurity, deregulation and financial speculation, the White Collar Factory that produces Apps as opposed to tangible products is regarded by many disenfranchised locals as being symptomatic of the societal malaise that’s sweeping the post industrial city in which increasing wealth is becoming consolidated in fewer and fewer hands. A tweet from Cereal Killer Cafe said:

“Tonight we were attacked with paint and fire by an angry mob of 200. Riot police are on the scene.”

The vandalism of the cafe by the mob appears to be a direct reaction to the process of gentrification and growing inequality that the Cereal Killer Cafe is emblematic of. I can recall something similar happening shortly after I arrived in London in the late 1980s where class warriors would regularly smash up symbols of the City elite like Jaguar’s and Porches. So this is nothing new, rather it’s currently being played out at a cafe in east London frequented by well to do kids who pay over the odds for cereal and a splash of milk. According to the BBC website:

“The demonstration was organised by a group called Class War, which was protesting against unaffordable London housing. A statement on their website reads: “We don’t want luxury flats that no one can afford, we want genuinely affordable housing… we want community.Working class people are being forced out of our homes but we won’t go out without a fight.”

The backdrop to the demonstration is Margaret Thatchers famous phrase, “There’s no such thing as society. There are individual men and women and there are families.” The implication is that community impedes the ability to maximize profits of the individual. Central to this philosophy is the lack of any notion of collective social responsibility and community. According to Thatcher, people are inherently individualistic and driven purely by selfish desires personified by greed.

Under Thatcher, working class people were given the opportunity to buy council owned properties at discounted rates subsidized by the tax payer. But those who typically bought them were the people who made and built things. Consequently these were the people who were made redundant in the new service-based abstract economy. The people who took advantage of the growth in blue collar unemployment were the white collar rich who bought up the homes the poor could no longer afford to keep.

The sons and daughters of the people who bought them are the main beneficiaries of this process. These include the hipster generation who own businesses like Cereal Killer Cafe in Shoreditch. So the younger generation of the poorest families who missed out on the Thatcher/Blair ponzi scheme bubble are the mob who vandalised the property of the hipster generation owned by the richest.

Naturally, all this has been exacerbated by the exponential rise in land values and the regeneration of former economically depressed city pockets like Shoreditch aided by the increased investment in the built infrastructure of these areas and the improved rail and road links into them.

In an article written shortly before the mob attack on the Cereal Killer Cafe, author Charles Hugh Smith predicts more ‘Days of Rage’ to come. “The resistance will take the form of subverting the signifiers of wealth that exemplify the few who have benefited so greatly while everyone else lost ground”, he says.

He continues, “The rage of the masses who have been losing ground while the Financier Oligarchs, the New Nobility and the technocrat class reap immense gains for decades has been suppressed by the dream that they too could join the Upper Caste. But once the realistic odds of that happening (low) sink in, the Days of Rage will begin.”

People can’t attack the banks directly because of the nature of the surveillance state outlined by Edward Snowden who has uncovered the facts determining how tracking phones and wireless devices (your laptop) from a plane works. Snowden also explains that the same technology is used by our own government to monitor us at home.

So the targets on the future days of rage will likely be businesses, cars, houses and other displays of material wealth. As Smith points out, levels of rising inequality outlined in the graphs below are likely to give rise to more days of rage in the coming months and years:

The top 1% skim 23% of all income:

While the top 5% has enjoyed substantial income gains over the past 45 years, adjusted for inflation, the bottom 90% have lost ground:

The contempt many of the new Thatcherite hipster generation have for the poor, as demonstrated by their tasteless ‘in your face’ gimmickry which the Cereal Killer Cafe exemplifies, was bound to have the kind of knock on effect that resulted from it. Just as the initiation process of the Bullingdon elite is to fuck the head of a dead pig and burn £50 notes in front of the homeless, so it was the case during the bubble period of the 1980s that the wealth and lifestyles of the rich were celebrated with gratuitous excess.

The common theme here is the notion of the importance of the individual over that of collective responsibility of the many. This is what the rich and establishment promote on a daily basis and is symptomatic of an embedded non empathetic culture that displays utter contempt for those less fortunate. If you have empathy you might actually care that your actions have consequences.

But conversely, if you don’t, then you will be able to sleep easily at night knowing, for instance, that your decisions resulted in the deaths of thousands or, in the case of Blair, hundreds of thousands of innocent people. This might explain why leading establishment politicians, bankers and lawyers attend elite public schools where empathy is drummed out of them.