Misguided faith: The Guardian's economics editor slams neoclassical economic orthodoxy
My Fair London activist Tom McDonough writes:
Our leaders’ unquestioning faith in neoclassical economics is in dire need of a shake-up, according to the Guardian economics editor Larry Elliot.
Speaking last week to an audience of just under 100 MFL members at the UCLH Education Centre, Elliot claimed that despite its status as an ideologically bullet-proof model, neoclassical economics is in fact not fit for purpose, being unable to avert or even predict economic recessions.
This free market system, made famous in Britain by Margaret Thatcher and endorsed by all British political leaders since, crashed spectacularly in 2008 and is on course to suffer the same fate again, says Elliot. Add to this the model’s failure to factor in its impact on the natural world, its reliance on the provision of credit and its heavy weighting in favour of certain groups and we have a defunct and failing system.
Yet, argues Elliot, the neoclassical economic model has morphed into an ideology whose tenets are seen as so self-evidently correct that anyone who challenges them is considered a heretic or crackpot. Self-regulating markets, privatisation, the shrinkage of the state, free competition, the centrality of financial markets and huge income and wealth inequality are all seen as natural, beneficial and beyond reproach.
The references to faith, ideology and heresy in Elliot’s articles and talks on this topic are reflective of his contention that neoclassical economics has become as dogmatic and as removed from ordinary people as a medieval church.
“It’s become lost in its mathematical thickets and its processes have been mystified. It’s similar to the way the medieval church used Latin to talk in its own language and mystify the whole process,” he said.
In fact, Elliot, together with a group of like-minded economists and students, has likened the call for fundamental economic change to Martin Luther’s instigation of the Reformation of the Catholic church in the 16th century.
Led by economist Steve Keen, this group of economic reformers, Elliot among them, delivered a 33-point call for change to the London School of Economics in December last year. With Keen dressed as monk and carrying a giant inflatable hammer, the stunt was designed to be a humorous re-enactment of Luther’s alleged nailing of his 95 theses to the door of Castle Church in Wittenberg in 1517. The activists targeted a leading university to highlight the need for change not just in economic policy but also in economic thinking, research and teaching.
The 33 points read like a list of the shortcomings of neoclassical economics, with the areas covered ranging from the teaching of economics to the nature of decision making and the role of institutions in markets. Among the flaws highlighted are free markets’ tendency towards inequality. Point 17 acknowledges that people with the same abilities, preferences and talents do not end up with equal levels of wealth owing to differences in luck and circumstances. Meanwhile, point 18 states that unequal societies fare worse across a range of social indicators.
However, while Elliot believes that strong unions, a decent welfare state and lower levels of inequality are all crucial ingredients for a more successful economy, he is no far left egalitarian.
“People are not equal and you can only lean against the wind to a certain extent. In the 1970s the richest used to earn ten times more than the poorest; now the ratio is something like 150 to 1, which is dangerous. It should go back to what it was like in the 70s,” he said.
Where to from here?
If one reason why the badly needed backlash against the economic status quo has not happened is the neoclassical economists’ intellectual and ideological monopoly, a second, argued Elliot, is that it just hasn’t suited the country’s elite to reform it. By contrast, when Keynesian economics faltered in the mid-1970s, after having fostered a golden era of growth and falling inequality, the elite leaped at the chance to restructure the system.
A third reason would seem to be the lack of any viable, clearly defined alternative. The 33 theses do not point to one and while Corbyn’s Labour is seeking to neutralise the worst excesses of current system, it does not set out a vision for an alternative economic model.
Meanwhile, anger levels among the dispossessed are rising as evidenced by the Brexit vote in Britain and the election of Trump in the US. Change is imperative, and the 33 theses are make a decent point of departure, but bold, clearly defined alternatives are still lacking.
Larry Elliot speaking at My Fair London
We are pleased to publish our new pamphlet, on inequality and the economy. In a few pages we try to summarise just how our society, and London, became so unequal over the last forty years. We also set out some of the changes we think are needed to help make our city and our economy fairer for everyone.
We need London (and the UK) to change course, towards a fairer future, where we can all share in the wealth, culture and opportunities that our city can offer. Inequality tears at our social fabric and harms us all, but to change direction we need to change the way our economy is run, and in whose interests. We hope this pamphlet helps make those arguments.
If you like it please share with friends, family, colleagues. If you can help us produce better leaflets, or simply have ideas about how we can make London a fairer city, get involved. Follow the link below to sign up as a supporter. You'll get emails from us about meetings, demonstrations, and collaborative projects we are working on.
Mayor of London Sadiq Khan published his draft London Plan for three months consultation in December 2017. The document was over 500 pages long. The London Plan sets strategic planning policy for London and is one of the areas where the Mayor of London has some real powers. When it's finally adopted, after various stages of consultation, the London Plan sets the framework against which all applications for planning permission are decided. That means either the Mayor or the London boroughs can use their powers to refuse planning permission for developments that don't comply with what's in the plan. Over time therefore the London Plan can have a real influence on the behaviour of property developers, on the decisions of London boroughs, on the value of land and property in London, and on what gets built in our city and where.
The draft plan contains lots of important but quite technical planning policies. For My Fair London we focussed our comments on Chapter One, Planning London's Future, along with a few comments on the housing and regeneration sections. We welcomed the Mayor's strong overall commitment to making London a fairer and more equitable city, indeed this is at the heart of the first policy statement in the document.Read more
London's Housing Crisis - inequality is at its heart
In our response to Mayor Sadiq Khan's draft housing strategy we suggest that he needs to do more to deal with the links between inequality and London's housing crisis. London's high levels of economic inequality exacerbate our housing problems, and our failing housing market itself makes inequality worse. While his powers are limited, we think the Mayor should use all the resources he does have to make sure everything he does to tackle the housing crisis also works to narrow the gap between rich and poor in our city.
Ever increasing house prices have made many lucky property owners rich, and left everyone else further and further behind. London's house prices increased by 518% between 1996 and 2016. During the same period the average Londoner's wages increased by just 47%. Any policies that rely on the false promise of ever rising property prices only make the situation worse and continue to increase the gaps between haves and have nots. The gulf between rich and poor is too wide, it causes immense harm to the social fabric of our city and housing is a key part of our inequality problem.
Our response to the Mayor notes that there is good evidence that London's housing crisis is underpinned not so much by an absolute shortage of homes, as by the fact that a market dominated approach to housing fails fairly to share out the space we have. There are more bedrooms in London today than there ever have been, and more than ever before are empty. They are spare rooms in the homes of wealthier Londoners, or they are the empty second or third homes of the rich and overseas investors. The homes of the top third of Londoners have been getting bigger and bigger over the last 30 years. When some people take more, others get less, or none at all.
My Fair London has published a short pamphlet that analyses the causes of London's housing problems and the disastrous consequences of seeing housing purely as an investment or a commodity. Everyone recognises that London's housing market is broken. It completely fails both to distribute the housing we have and to target investment into the more affordable housing that we need.
Our pamphlet 'Housing and Inequality in London' is available here and the text of our full response to the draft housing strategy is below.
We have submitted our formal response to the Mayor of London’s consultation on his draft health inequalities strategy. Several MFL activists have been reading through the Mayor’s strategy over the last few weeks and sharing our ideas.
In our response we welcome Sadiq Khan’s opening statement that, “cities that are more equal are happier, safer, and healthier.” However we go on to say that the strategy perhaps somewhat misses its mark. Economic inequalities are one of main factors that drive health inequalities, and while the strategy makes this connection we think it could go much further and set out a stronger call for action to make London a fairer city.
In many ways health inequalities are the most direct measure of wider social and economic inequalities. There is a huge body of knowledge that describes how the social determinants of health create health inequalities (things such as differential pay rates, the steepness of status hierarchies, poor working conditions, poor housing, degree of control, the distribution of social goods, poverty). This evidence challenges simple ‘lifestyle’ explanations: that poor diet or lack of exercise are merely the lack of will power or good sense in the individuals affected. This view dominates the media and much public health advice. In public health jargon this is the difference between focussing on the proximate (near) and distal (underlying) causes of health inequalities.
Mind the gap
The draft strategy falls somewhere between these two perspectives. It acknowledges how underlying circumstances create the environments in which people live their lives, and which set the context within which individual behaviours take place, but many of the actions it proposes default to individualising, personal level things, dealing more with the symptoms and not the causes. We believe the Mayor’s strategy would be stronger and make more difference to the lives of all Londoners if it engaged more fully with the deep, structural social determinants of health. We observe that the size of the gap between rich people and poor people in London is one of the primary causes of health inequalities, it makes us all less healthy. So while we strongly support actions aimed at helping people living in poverty (and the Mayor makes some important commitments for action on poverty), we also need strong actions that reduce the gap between rich and poor, and what drives and sustains that gap is the increasing wealth of the rich. We need to narrow the equity gap and this must mean action to reduce the wealth of the rich.
We also shared Michael Marmot’s two parallel lists of ‘top tips for a healthy life’, and suggested that from a fairness perspective the Mayor should devote most of his efforts to tackling the kinds of issues in list number two, things that are hard to change by force of will alone or individual action.
List no 1 - ten top tips for a heathy life
Several My Fair London activists worked together over the summer to respond to the Mayor's call for evidence on a proposed 'Good Work' standard for London employers. Drawing on evidence that narrower gaps between high and low paid staff are good for staff motivation, and that greater pay equity is good for productivity and innovation, we suggested that any employer being commended by the Mayor as a good London employer should as a minimum be transparent on what is paid to all its employees and have a relatively narrow gap between the highest and lowest paid workers.
In our 2016 manifesto to the Mayor we called for him to work towards a maximum ten to one ratio between highest to lowest paid as a target to aim for for London. We copy below our response to the Mayor.
The consultation is still open and you can send in ideas and comments until 18 September. Visit https://www.london.gov.uk/what-we-do/business-and-economy/making-london-best-city-world-work?source=vanityurl for more information.
My Fair London Response to Call for Evidence on the Mayor of London’s Good Work Standards
We are pleased to respond to the Mayor of London’s ‘Good Work Standards’ consultation paper. We have broken down our response into two sections; a general commentary on the main content followed by specific answers to questions posed in the paper. We would be delighted to meet with members of the Mayor’s team to discuss our response more fully or to contribute in whatever way we can to help him develop this programme. The Mayor’s commitment to “exemplary standards in pay and employment rights for workers” is very welcome. Overall we welcome the proposal for a ‘Good Work’ standard for London. In order to become a real beacon of good employment practices and change business practice across London the Good Work standard will need ongoing political support, and sustained investment.
Overall we believe that the paper sets out an attractive and compelling vision of what a new compact for work might look like. We strongly support efforts to persuade London businesses to become better employers. There is good evidence that extreme disparities in pay rates within companies are harmful in a variety of ways. High levels of economic inequality, and unjustifiably large rewards at the top of the income distribution are unfair, unnecessary and harmful to society in general and to businesses individually. We would argue that any company that is rewarded with recognition as an ‘exemplary’ employer could not, by definition have wide pay ratios between its highest and lowest paid employees.
We believe that the planned Good Work Standards could be strengthened in the following ways:
- Page 2: There is mention of discrimination and disadvantage and the need to address a number of ways in which unfairness manifests itself. However wealth and income inequality is not explicitly mentioned and we believe that the case could be strengthened by making more explicit reference to the proven links between high levels of economic inequality and poor health, social and economic outcomes. (https://www.equalitytrust.org.uk/about-inequality/impacts)
- Page 3: In terms of the goals of a Good Work Standard, in addition to the London Living Wage, excellent working conditions and fair treatment (including appropriate use of zero hours contracts), we suggest that explicit mention should be made of the need for issues such as tax avoidance (ie how good companies pay their fair share), publication of pay rates, pay differentials and or wage ratios, and transparent management of executive remuneration to be included as accreditation criteria for the best employers. Also in the list of ‘development goals’ we believe that contractual arrangements should be explicitly addressed as a separate bullet point in order to ensure that employees are provided with appropriate levels of employment security and certainty.
(On the remuneration/reward issues see the joint High Pay Centre/CIPD response to Government from February 2017 http://highpaycentre.org/files/CIPD_and_HPC_response_to_BEIS_Green_Paper_on_Corporate_Governance_%281%29.pdf)
- Page 4: To this end we would suggest that the figure 1 model be amended to include two further bullets: ‘secure employment contracts’ and ‘published pay ratios’, in addition to the London Living Wage and Excellent Working Conditions bullets. We would also suggest that model could be broadened. Good Work results when the following conditions underpin it:
- Good job design – jobs that provide meaningful and fulfilling employment opportunities
- Engaged employees – employees who feel a sense of commitment and dedication towards the organization, their job and their colleagues
- Enlightened leadership and management – who understand that engaged employees are a critical factor in economic and business success and who demonstrate the appropriate leadership styles and behaviors
- An enabling culture – an organizational environment that encourages and stimulates everyone to give of their best
Further we would suggest that extremely high pay inequality in any company is incompatible with having ‘excellent working conditions’. Unfairness in terms of excessive rewards at the top will undermine other efforts to improve productivity, motivation and morale.
- We don't know whether the Chartered Institute of Personnel Development (CIPD), IPA -Involve or the Engage for Success (E4S) movement are involved in the consultation process but we recommend that their views and expertise is sought in this regard. We can effect introductions if necessary.
- There is no reference to the way in which technology will impact on job design and work – perhaps the Mayor of London could instigate a working group to study the effects of changes in technology in different sectors and identify what support is required in order to balance employment, business needs and social consequences.
Answers to Specific Questions
Q1: we would add goals regarding leadership / management quality and employee engagement measures. Also the negative links between bonus/ financial reward based business cultures and innovation and productivity. (See for example Kahneman, D., ‘Thinking Fast and Slow”, 2011 for exploration of the negative impacts of simplistic rewards on human behaviour and team functioning.)
Q2: public exposure / reputational risk for those organizations that do not meet the Good Work Standards, economic risk through failure to secure contracts. A ‘good work’ standard alone will have little impact on the major structural social and economic factors that have undermined social mobility – increased economic inequality being the most powerful factor.
Q3: Fair treatment would include transparency on pay rates within an organization, with pay rates published and pay ratios calculated and reported.
Q4: zero hours and short-term contracts, highly geared remuneration packages (ie low base pay, high variable pay by results), excessive, unjustified rewards for senior managers.
Q5: Professor Bruce Raynton’s research for the Engage for Success movement provides an excellent business case http://engageforsuccess.org/wp-content/uploads/2015/09/The-Evidence.pdf
Q6: recommend consulting CIPD or E4S for further evidence
Q7: short term financial targets, intransigent mind sets, lack of awareness of business benefits / risks, lack of knowledge and support about how to design and implement (particularly around management capability), for SMEs lack of capacity to commit and monitor against standards that are too onerous.
Q8: pay transparency, adoption of living wage, publication of pay ratios, adoption of engaging management practices, focusing on positive work cultures. It maybe difficult to create a single standard that all businesses, large and small, can meet.
Q9: demonstrate business case and competitive advantage that will result, greater access to labour market / talent ie ability to recruit the best people, potential financial ROI, raise the Standard’s profile, summarise the personal and wider negative social and economic costs of inequality (See for example ‘The enemy between us: The psychological and social costs of inequality’, European Journal of Social Psychology, 2017 (http://onlinelibrary.wiley.com/doi/10.1002/ejsp.2275/full).
Q10: public awards, ‘Kite mark’, London league tables, celebrate the best employers .
Q11: meeting GWS standards as criteria for public sector tenders, persuade other large public sector employers to adopt (NHS, education etc)
Q12: My Fair London would welcome the opportunity to participate in judging leading employers, and in celebrating the achievements of those employers creating fairer employment practices. We hope that this scheme develops into a widely recognized and sought after ‘fairness’ kite mark, similar to some of the most successful environment quality standards (FSC for example).
Kensington and Chelsea has the largest gap between rich and poor of any local authority district in the country. MFL activist Tom McDonough visited the Lancaster West estate and talked to some of the people trying to help. Here he writes about the fire, the response to the fire, and inequality.
Bonfire of the voiceless
The blaze that killed at least 79 people in Grenfell Tower has drawn national attention to the evils of extreme inequality. Maybe it will also come to be seen as an era-defining moment when politicians and press were forced to reconsider their anti-poor policies and attitudes.
The immediate cause of the fire is reportedly a faulty Hot Point fridge on the fourth floor of the 24-storey tower block, but former residents of the building are in no doubt that the cause of the disaster was the hostility of K&C council and its contractors to them as low-income people. One resident even told a Guardian journalist that she thought the fire had been started deliberately ‘to get rid of us all.’ Gentrification, austerity, neo-liberalism and official indifference have been blamed by residents and commentators alike, in the aftermath of a disaster seen as political since the day it unfolded.
Attitudes that inequality creates
Inequality fosters a culture in which low income people are regarded as being of less value than other, wealthier people. This sets the context in which the concerns of the Grenfell Action Group were so steadfastly ignored in the months and years before the fire. The association repeatedly told the council that the tower block was a fire hazard but no remedial actions were taken. There is no indication that their concerns were taken seriously. In one of the Group’s blogs before the fire they wrote: “Unfortunately, the Grenfell Action Group have reached the conclusion that only an incident that results in serious loss of life of KCTMO residents will allow the external scrutiny to occur that will shine a light on the practices that characterise the malign governance of this non-functioning organisation.”
In ‘The Equality Effect’ Professor Danny Dorling argues that the dehumanisation of low-income groups is one of the consequences of inequality. “In the UK the poor are a different class, definitely ‘not like us’,” he writes, “economic inequality creates disdain for others and creates labels where people define themselves as not being part of the other groups.”
It may seem extreme to suggest that just for being poor people might be demonised and denigrated in a supposedly civilised nation like the UK, but our newspapers, television programmes and politicians regularly spew out bile against our least affluent fellow citizens. The Tory party declared open season on out-of-work people in 2010: poor people had made ‘a lifestyle choice’ to be dependent on benefits, they were ‘feckless’ and deserved to be economically punished. George Osborne described jobless people as ‘idlers’ who preferred to stay at home with the blinds drawn, while ‘grafters’ set off for work in the early morning. One of the cruellest of all was Iain Duncan Smith’s claim, in his letter of resignation, that by taking away people’s benefits he was helping them to better themselves and find the motivation to climb out of poverty. TV programmes like ‘Benefits Street’ and ‘Dogs on the Dole’ seek out people frittering away their benefit payments and refusing to turn up to job interviews.
This cultural denigration of poor people sets some of the context within which individual decisions about social housing, fire regulations, the price of cladding, welfare payments and council budgets are made. The less that people are seen as equals the easier it is to ignore them and make decisions that hurt them.
Nathalie Hickson, a Lambeth resident who had travelled to Grenfell to show solidarity with the victims, told me: “From what I’ve seen they (Grenfell residents) were raising awareness about fire but they weren’t listened to. They knew there was a risk. It was the same with the Kerrin Point gas explosion. And then there’s Lakanal House in Southwark, where people lost their lives in a fire. How many lives have to be lost before they listen?”
Inequality also affects levels of trust in society. In ‘The Spirit Level’, Wilkinson and Pickett showed that the proportion of people who believe ‘most people can be trusted’ is six times higher in the most equal rich countries compared to the least equal ones. They point out that a devastating lack of trust seemed to underpin the American response to Hurricane Katrina. After that disaster the New Orleans police focussed more on punishing local poor people, especially black people, than on trying to help them.
In Kensington the feeling of distrust between the Grenfell residents, K&C council and government in general is palpable. Residents say that the council never listened to them before the fire and left them to fend for themselves after it. Perhaps the starkest illustration of the disconnect between low-income residents of North Kensington and people in leading positions of authority were Theresa May’s two visits to the area in the days following the deadly blaze. In her first visit, May decided to not meet any local people at all, citing security concerns. Stung by subsequent criticism, the Prime Minister returned some days later, but made a hasty exit after angry locals vocalised their rage.
There is also chronic distrust of the media and the information being disseminated about the fire. Visitors to the various pop-up Grenfell shrines say they feel the authorities aren’t being honest about the numbers of people killed in the fire. At the main shrine on Bramley road, next to the Latymer Christian Church, one local man in a wheel-chair asked: “Where are all the survivors at? Just look at the flowers and cards here, there’s no way that’s for 79 people, more like 200 at least.” Another man, visiting from a different part of West London, suggested the fire was started on purpose. “One man had his bags all packed when they came to tell him about the fire. What does that tell you?” he said.
Since 1979 Britain and America have followed the path of neoliberalism: a robust private sector, populated with plucky entrepreneurs, fuels the economy while the state is pared back to the minimum. Low-income people, driven by the fear of poverty, either claw their way up or face deserved economic punishment. People get what their talent or hard work merits and the state should not intervene to level the playing field or run vital services. It can only be your own fault if you don’t do so well. For nearly 40 years this baseless ideology has encouraged attacks on regulation, cuts to spending on social protection, privatised services and generally undermined the state.
The links between these policies and the Grenfell tragedy are clear. At the most basic level when a building as large as Grenfell Tower burns out of control, plainly it is not the inhabitants fault. Cuts to the emergency services may have meant fewer fire fighters were available to battle the blaze. Cuts will have meant fewer housing officers and safety inspectors doing their jobs prior to the fire. It seems plausible that the austerity mindset will have played a role in the decision to save a bit of money by cladding the building with cheaper and, as far as we know, more flammable material.
For decades Government has encouraged local councils to seek private investment in house building while cutting state spending on housing. The shortage of social housing in London is now so acute it that only a fortunate few get a council house. Others, unable to afford private rents or qualify for social housing, stay with family, squat in empty buildings, live like students in shared houses or abandon London altogether. Meanwhile, multimillion pound apartments, well beyond the means of average or low income earners, are springing up all over central London. Varying percentages (13% in 2014/15) of the new apartment blocks are ‘affordable’ housing, but in reality these homes are not affordable for people on low incomes, with rents set at up to 80% of the market rents. And shared ownership flats require deposits way above average salaries. In a sign of the times, some new apartment buildings even have separate ‘poor doors’ so rich residents don’t have to actually meet people on lower incomes. The Grenfell Action Group has said that it believes cladding was added to the Tower merely to ‘pimp it up’ so it didn’t scar the landscape in its newly redeveloped neighbourhood. With housing then, as with welfare and council services, lower income people have been pushed to the margins under the regime of neoliberalism as Government has cut spending and courted big business.
Only the most extreme free market ideologues would deny the state has any role at all to protect its citizens. But the pervasive culture of contempt for regulations and ‘red tape’ (‘health and safety gone mad’) must surely also have helped create to conditions for the Grenfell blaze? Ronnie King, secretary of the All Party Parliamentary Group on fire safety, said that urgent requests for action to tighten fire rules were stonewalled in the years prior to the disaster. Prime Minister Cameron called for a ‘bonfire of regulations.’ Inspectors trying to enforce standards in this environment will feel undermined, even where they haven’t themselves been privatized or the task ‘contracted out’.
The last of the ingredients of neoliberalism that looks likely to have contributed to the disaster is privatisation. Rather than liaising with elected councillors over their concerns about Grenfell Tower, residents had to deal with a private management company: Kensington and Chelsea Tenants Management Organisation (KCTMO). Residents have described with fury how this profit-seeking organisation didn’t listen to their concerns and could not be held to account in the same way council officials could.
The Grenfell Tower fire is a tragedy of such magnitude that we must all hope that major changes will follow. It will be difficult from this moment on for anyone in authority to adopt a glib attitude to protecting the lives of the poor. The fire lays bare the many, connected failings of unfettered capitalism and marketised public services. The Grenfell community’s strength and unity in the aftermath of the tragedy and its willingness to challenge the authorities also offers hope that we may have reached a turning point. Maybe the response from the community shows us that people are deciding that ‘enough is enough’; that extreme inequality can be challenged and that ordinary people can be powerful advocates for change.
My Fair London activist Tom McDonough reports on a recent lecture at the London School of Economics
Public opinion in Britain has turned against extreme inequality, marking the start of a period of change that will see us become a more equal and fairer country within a generation, Danny Dorling has said.
Speaking at the London School of Economics on May 18th, Dorling, the Oxford Professor of Human Geography argued that the negative effects of inequality in Britain were now so evident that the public and politicians alike were turning their backs on the ‘greed is good’ mantra of the 1980s and 90s.
“You can’t argue any more that if you just create the conditions for the rich to get richer, their wealth will trickle down and we’ll all be better off. We’ve been trying that for the last 30 years in this country and the results have been disastrous,” said Dorling.
Even the Tories, argues Dorling, have acknowledged the public’s appetite for greater fairness by aping the language of the centre and left in their 2017 manifesto and election campaign, using words such as ‘mainstream’ and ‘working people’ in between renditions of ‘strong and stable’.
“There’s been a real shift in moral attitudes. When people see someone now with a number plate that says ‘Rich1’ they pity him, they don’t think he’s done well like they used to. You don’t hear stories about bankers not far from here drinking £10,000 bottles of champagne anymore either,” he said.
Subtle changes in economic data are also hinting that our wealthiest people are starting to feel a little coyer about their riches. The share of income of Britain’s richest one per cent dropped from 15.4% in 2007 to 12.7% by 2012, with the most likely explanation being that this elite group found new ways to hide their earnings. (Dorling, 2017, p35) This squirrelling away of funds may not represent any great change of heart among members of this group, but Dorling views it as evidence that our richest citizens are at least aware that their incomes are coming under new and vigorous scrutiny. Dorling points out that pay ratios are now published annually for civil servants by government department in the UK and that so far they have fallen as the pay of the person at the top of each UK ministry has been frozen while the median pay continues to rise very slightly. (Dorling, 2017, p256)
Meanwhile in the US the average pay gap between bosses and workers fell between 2014 and 2015, while during the same period the average pay of CEOs in the US’s top 500 companies fell from being 373 to 335 times higher than the average worker. (Dorling, 2017, p43)
There are signs of a shift elsewhere as well. The richest one per cent in China and India have also recorded drops in their incomes, most probably for the same reasons as Britain’s top one per cent. On a global level too, there have been improvements. Branko Milanovic, the lead economist in the World Bank’s research department, showed that inequality fell between 1988 and 2008 as people in the second poorest and middle fifths of the global income distribution recorded increases in their income of between 20% and 75%. (Dorling, 2017, p31)
The improvements must of course be viewed in context. Many countries, including Britain and America, have been growing more and more unequal for the last 30 years or so. The best off fifth of the population in Britain earns 7.6 times more than the poorest fifth, while the equivalent figure for the US is 9.8 and for Israel it is 10.3. Less unequal countries like Sweden and Norway have a ratio of around 4:1. (Dorling, 2017, p23) Meanwhile the most affluent one per cent of people in the US take a 17.85% share of the country’s income while in Britain the figure is 12.7%. In more equal countries such as Sweden and Holland the richest one per cent receive 7.34% and 6.33%, respectively, of earnings in their countries. (Dorling, 2017, p34)
Why it matters
If Dorling is positive about the future he is scathing about the state we are in at present. His new book, The Equality Effect, describes the devastating impact of inequality on social and health outcomes and includes a slew of new data on the links between inequality and the environment. But it is Dorling’s forthright and sometimes quirky examples of the effects of inequality on people’s psyche and behaviour that are arguably more attention-grabbing.
Britain, the most unequal country in Europe, is held up by Dorling as a particularly good example of the damage done by inequality. Income differentials in the UK have been at such high levels for so long now that we have become an ‘abnormal’ nation, he says, in which people don’t regard the poorest as even being human.
“It’s hard to get through a day a very unequal country like ours if you see people at the bottom as human because you might begin to worry about how people are being treated,” he says.
This dehumanising effect of inequality reduces our sympathy levels and causes us to take tough stances towards minority groups such as immigrants, including refugees. Right wing parties, argues Dorling, generally gain more ground in more unequal countries, though France has bucked this trend to some degree. The logic appears to be that people who are treated with contempt, who have no hope of being socially mobile or enjoying job security or affordable housing, will feel a certain reluctance to share resources with others, especially outsiders.
Furthermore, people become used to being dominated and cease to expect positive changes, their energies focussing instead on feelings of resentment and rage. In such a climate, simple, dumbed down messages, like those delivered by the Brexit campaign and Trump, can find fertile breeding grounds.
In competitive, unequal countries like Britain and the US where the ‘winner’ versus ‘loser’ paradigm shapes our view of ourselves and others, people’s hunger for status makes them stressed and narcissistic, says Dorling.
“In a country like Britain we comfort-eat more because of stress and we’re easily duped into buying due to status anxiety,” he says.
The range of areas Dorling says are affected by inequality is long and sometimes surprising. We score poorly in tests on maths ability among young adults in Britain because our status-obsessed parents and teachers are more concerned with teaching children strategies for passing their SATS tests than with genuinely improving children’s ability in maths. Our tendency to hunker down in our own personal spaces and block out others also means British and American people are more likely to drive to work than to cycle or walk there, the social and environmental benefits of the latter modes of transport being far from uppermost in our minds. British are also, says Dorling, less likely to know or interact with our neighbours.
The examples Dorling gives may in some cases be quirky and interesting but the consequences of our inequality are dire. Data on life expectancy show that we are paying for it with our lives. Britain is the only country in Europe that has not recorded an increase in life expectancy since 2010 while the US has, incredibly, recorded a fall in life expectancy over the same period. Meanwhile Finland, Norway and Japan, among the most equal of nations, saw increases in life expectancy of one year between 2010 and 2015. (Dorling, 2017)
Could Dorling’s optimistic outlook be right? Are we really becoming less tolerant of extremes in wealth and inequality? At first glance, the optimism seems hopelessly out-of-touch. The British people have offered little resistance over the last seven years to a Tory Government that has acted with zeal to widen the gap the between the haves and have nots. Since 2010 two Conservative Governments have launched attack after attack on our welfare state and social care system while simultaneously cutting tax rates for corporations and the rich and turning a blind eye to tax evasion by multinationals. In some instances the disregard for equality and fairness has been breathtaking. In 2012, fresh from culling the numbers of people who qualify for benefits, Osborne travelled to Brussels to argue that the EU should not pass a law placing a cap on bankers’ bonuses.
And these eye-wateringly unjust and damaging policies have met with little resistance. Bar the 2011 riots and a few marches, some of which have admittedly become a bit unruly, the British public has hardly reacted, on a street level, to the miseries being piled upon us. We have certainly not seen a repeat in recent years of the kind of robust fight-backs that were launched against mine closures in the 1980s and the poll tax in 1990.
Nor either have we used our votes to protest against our Government’s neo-liberal policies. We had an opportunity in 2015 to show our disapproval of inequality by electing a new Government but we chose instead to vote the Conservatives back in. In their post-election assessments, high ranking members of the Labour party lamented that their great mistake had been to shift ever so slightly to the left under Ed Miliband and that by doing so they had failed to promote aspiration. Harriet Harmen, in an interview with the Independent, said that Labour had shown too much concern for those on benefits and not enough for those who work hard and own nice cars. (Independent, 8th June 2015) With Labour pedalling the myth of meritocracy in this way, the future looked bleak indeed for anyone with concerns about inequality.
But then, completely against the run of play, pro-equality politician Jeremy Corbyn was voted in as Labour leader by rank and file members of the party in 2015. Since his victory Corbyn has been constantly derided by the media and ridiculed in Westminster, including by his own party. In 2016 he was forced to take part in another leadership contest, which he again won by a wide margin. It’s clear that the right wing press doesn’t like Corbyn, but it’s become equally clear that large numbers of ordinary people do. Even if the recent pre-general election polls turn out to be only partially correct, they none-the-less show that Corbyn has significant backing among the electorate. Perhaps this support for Corbyn suggests that Dorling’s optimism is not be misplaced? Maybe, just maybe, the seeds of change have been planted and Britain is on course to become a fairer and more equal society within a generation.
Danny Dorling’s new book is called ‘The Equality Effect: improving life for everyone’. It was published in May 2017 by New Internationalist Books. https://newint.org/books/
My Fair London activist Andrew Roberts reports on a lecture by anthropologist Dr Dena Freeman at LSE on 21 March 2017
The dynamics of Democracy and Inequality in the context of Globalisation
In this lecture Dr Freeman examined the relationship between democracy and inequality, adding to a number of other explanations which have been given for the rise of inequality since the 1970s.
The work of Thomas Piketty has shown how inequality declined in the 20th century until the 1970s and then rose again. Some academics argue that the decline was in fact anomalous and that rising inequality is part of the normal run of things in capitalism. But others cite economic and technological changes since the 1970s: for example, in the former category, globalisation and, in the latter, technological advancements that create inequalities between the skilled and unskilled.
Dr Freeman focused on the relationship between democracy and inequality. She highlighted a puzzle: the idea that greater democracy should lead to greater equality, a venerable idea for which there is a solid theoretical foundation, doesn’t seem to have held good since the 1970s.
Her explanation for this is that there has in fact been a process of de-democratisation at play. Examples include the handing over monetary policy to a central bank, the role of undemocratic organisations like the World Bank in constraining states’ economic policy, the power wielded by credit rating agencies; all these bodies have enforced a neoliberal economic agenda which, says Dr Freeman, operates in the interests of capital and not society as a whole.
Londoners should be concerned by the issues of de-democratisation as they relate to inequality that are raised by Dr Freeman. The gap between rich and poor is at its widest in the capital, and The Spirit Level has explained how damaging high levels of inequality are for society, with a high social cost. If there is room for any optimism, it may be that Londoners’ ability to elect a mayor represents a countervailing force, as long as he is able to stand up to the anti-democratic interests of big business and global capital. My Fair London campaigns for the mayor to use his powers to act to reduce inequality and to speak out about the harm that inequality does to society.
There is a podcast of Dr Freeman's lecture on the link below:
My Fair London member Tom McDonough reports on a recent public lecture by Professor Christian Hilber from the London School of Economics.Read more