HOW did it come to this? “In 1971 Britain was among the most equal societies on earth in terms of both household income and wealth. Today we are one of the most unequal.” So writes Robert Verkaik in Why You Won’t Get Rich. For him it is largely the result of government decisions. For, as Philip Alston, UN rapporteur on extreme poverty and human rights, wrote – the UK government had inflicted ‘great misery’ on its people with ‘punitive, mean-spirited and often callous austerity driven by social engineering rather than economic necessity’. Needless to say that in some quarters he was vilified for his observations.
How did this happen and why do we allow it to persist? Well part of the reason must be that the machinations of the super-rich and their wealth extracting activities are cloaked in secrecy. It takes a dedicated academic at York University to inform us that more than £150 billion is handed to out in ‘corporate welfare’ every year directly or indirectly. Dr Kevin Farnsworth, of the university’s department of social policy and social work estimates that subsidies, capital grants, tax benefits, insurance and advocacy as well as transport, energy and procurement subsidies to be worth about £93 billion a year. He suggests that indirect benefits, including wage subsidies, education and public health care are worth £52 billion while the annual legacy of the 2008 bank bailouts and other crisis measures add a further £35 billion.
In contrast every penny is accounted for in welfare payments and according to the government’s own statistics the net rate of loss from overpayments in 2019 to 2020 was 1.9%, or £3.6 billion. This has increased from the 2018 to 2019 rate of 1.5% (£2.8 billion). But it is the obscurity of the source of wealth for the super-rich, combined with the political apathy, or wilful ignorance, that is encouraged in certain corners of the establishment that helps to explain why the process of impoverishment continues. In our consumer society many people are content to be spectators in our government processes rather than engage with it.
Throughout the last decade or so there has also been the apparent paradox of high employment and high poverty. Verkaik argues that the reason for this is twofold – 1) a ‘decade of cuts in benefits directed by policies of austerity’. And 2) the ‘insecure nature of new kinds of low paid work’. This phenomenon was explained in detail by the late David Graeber in his Bullshit Jobs.
Meanwhile, one of the most astonishing aspects of modern life is the complete misrepresentation of the City as the paradigm of wealth creation, competence and probity, which somehow gets conflated with the view that the City enriches us all. The main problem with this view is that it is almost completely untrue. As Verkaik points out the ‘only people getting rich in the City are the people working there’. And as one client wryly observes of one institution: “It took my three years to realise why the partners were the only ones driving the expensive cars.”
Casino Capitalism is an apt description because most people who make money in the City are just, well, lucky. Verkaik writes: “There are plenty of studies to show that a portfolio of randomly stocks can perform as well as a carefully assembled one.” And because the City doesn’t actually produce anything, apart from more money, it has to keep finding ways of creating – or increasingly extracting – wealth from the rest of us. “Every penny the City makes is paid for by people working outside the financial sector,” writes Verkaik and, amazingly, the ‘value of trade in foreign exchange alone is 100 times the value of world trade in stocks and services’. And so it goes on: “The stock market is no longer a means of putting money into companies but a means of getting it out.” All this is regarded as wealth creation because of a shift from the objective definition of value as expressed in terms of land or labour to a subjective definition in which ‘price is a direct measure of value’ as Mariana Mazzucato explains in The Value of Everything.
So, what is Verkaik ‘s answer to all this? Well, he has a three-pronged approach. The first is to have a ‘more efficient and progressive tax system’. The second is our old friend a Universal Basic Income. And the third is a ‘New Green Deal to create more sustainable jobs while also contributing the the arrest of climate change’.
Interestingly, Verkaik tackles the criticism of the ruling political clique that poor people need to be made to work or else they will just get drunk and laze about, while the rich, of course, just need more incentives to work.
“When Canada paid a community in Manitoba a free wage in the 1970s everybody benefited,” writes Verkaik – and other evidence suggests that most people who have received a UBI have continued to contribute to society in one way or another. And: “A Universal Basic Income allows everybody to choose how they want to get rich, whether through the capitalist system or other less directly profitable activity.”
Of course, Verkaik is not alone in prescribing these solutions to the problem of wealth and power inequality. The problem comes when you try to create a groundswell of support among citizens when they are already turned off from politics and democratic decision-making processes. This why Salisbury Democracy Alliance is so keen to establish a Citizens’ Jury in the city as a small step towards engaging more citizens. But these on their own are not enough and a future blog will look at ways of engaging people and encouraging them to run their own campaigns for change.