Thursday, 26 March 2015

The distribution of wealth: How the system makes us poor and them rich

Andrew Fisher's speech to the People’s Parliament on 24 March 2015

Maybe some time at Christmas you played Monopoly with your family. It gets to that point, usually about three hours in, when someone is clearly going to win. They have all the cash, and all the property - they have a slightly smug demeanour. Everyone else just wants it to end.

If that person is particularly vindictive, perhaps they force everyone to play til the bitter end, until everyone's property is mortgaged, anyone else's houses or hotels have been sold back to the bank, and every last pound from every other player has been given up.

But at the bitter end of a game of a Monopoly there is a winner. In a real economy, there would be only losers - everyone else is bankrupt. Even monopolists cannot profit if every penny has been squeezed out of their customers.

What Monopoly teaches us is not to buy all we can and be the monopolist, but that inequality kills the economy.

Inequality is now systematically built into our economy:

The burden of our taxation system has gone from taxing income to taxing consumption (see tables here)

And from taxing corporations to taxing individuals.

In the labour market, we have legislated against trade unions. In the UK and across all advanced economies over time there is a clear correlation between levels of trade union membership and inequality (see UK example here).

Wage deflation has been happening in UK since 1970s - relative to size of economy. But in recent years relative to inflation meaning real terms wage cuts. Labour market deregulation has enabled this with the proliferation of low paid self-employment, agency work, zero hours contracts, fake apprenticeships, internships, traineeships and workfare.

In the housing market - there is rapidly growing private rented sector because people are priced out of buying a home and council housing isn’t being built (in fact it’s still being sold off).

Inequality that means housing has increasingly become a speculative investment class rather than a home. Evictions are at record levels, so is housing benefit. Because rents are so high and wages so low, the welfare state is now compensating for the high rents of private landlords and the low pay of employers.

Privatisation has also increased inequality. Turning necessities like energy, water, transport and communications into means of paying extravagant salaries and dividends for a few, while hiking up prices for the many.

And then we have the financialisation of our economy. The only industrial strategy we have had for the last 35 years is 'whatever the finance sector wants': the deregulation of banking and consumer credit. After 10 years as a Labour Chancellor this is what Gordon Brown was boasting about in 2007:

"Now today over 40 per cent of the world foreign equities are traded here, more than in New York; over 30 per cent of the world's currencies exchanges take place here, more than in New York and Tokyo combined; while New York and Tokyo are reliant mainly on their large American and Asian domestic markets, 80 per cent of our business is international; and in a study last week of the top 50 financial cities, the City of London came first".

Private equity firms treating companies, corporation taxes and people's jobs as their personal whim.

And that sums up where we have got to - an economy in which the super-rich control the lives of the rest of us.

Not a trickle down economy - but an economy with a very strong vacuum effect: sucking money up to the already gratuitously wealthy.

We need to recognise that inequality is the problem – manifested in the housing market, the labour market, the tax system, in the ownership of public goods, and the lack of public regulation. We a democratic economy. An economy as if people mattered – and we need the policies to deliver that.

So we need to be talking about bold, system-changing solutions: taxing wealth (for example through land value tax), capping the number of homes someone can own, a statutory living wage and restoring trade union rights, a new industrial strategy and public ownership.

1 comment:

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