By Stewart Lansley
The history of Britain in recent times has been one of growing economic divisions and an increasingly fractured society. It has the second highest rate of income inequality (behind the US) amongst the world’s richest nations, while child poverty rates have more than doubled in the last 40 years.
Today, the top tenth hold ten times the wealth of the bottom 40 per cent. That the poorest half own a mere 8 per cent of wealth, less than they did four decades ago, is hardly a sign of a mature and inclusive democracy. There are more food banks than branches of Greggs. The harsh and coercive philosophy of the Victorian ‘poor law’, more anti-poor than anti-poverty, remains a more important driver of modern social policy than the principles of entitlement and universalism underpinning the post-war social reforms of William Beveridge and Clement Attlee.
Britain’s economic and social system has long operated a deep-seated inequality bias, with the poorest and most vulnerable citizens bearing the brunt of policy shifts and economic shocks. Barring the short post-war period egalitarian social democracy, Britain has been a high inequality, high poverty nation for most of the last 200 years.
The great private wealth boom in Britain in the 19th century came largely at the expense of the livelihoods and opportunities of the weakest sections of the labour force. A small group of landowners, merchants and financiers used their political and economic muscle to seize an excessive share of the undoubted gains from industrialisation. Vast wealth for view sat over crushing poverty, while help for the destitute through the provisions of the 1834 Poor Law Act came with state coercion and the harshest of conditions. The Austrian-Hungarian political economist Karl Polanyi later described the enforced process of change as “an economic earthquake that transformed… vast masses of the English countryside from settled folk into shiftless migrants.”
The Victorian economy resembled a model of extractive capitalism, whereby a small elite of capital owners used their collective monopoly power to secure a disproportionate slice of the economic cake. They did so by using business practices that hit wages, working conditions, and community resilience, a pattern repeated through much of the last 100 years. The Great Crash of 1929 and the state deflation which followed – including a 10 per cent cut in already low unemployment benefits – wrought years of havoc across industrial Britain. Help for the unemployed involved an intrusive and harshly administered means-test. There were regular protests against what became one of the most hated institutions in Britain. In 1932, an estimated one million people signed a petition against the means-test.
In the 1980s, state-imposed austerity and accelerated industrialisation were paid for by large sections of the industrial working class and brought the return of mass joblessness and a steady transfer of risk from the state and companies to individuals. Many older skilled workers were exiled into workless lives and a descent into permanent poverty.
In 1986, the number of unemployed for over a year stood at 1.3 million. Compare the way top bankers were granted immunity for their role in the 2008 Crash with rolling benefit cuts of £40bn for working-age claimants under austerity. In an apparent revival of poor law thinking, sanctions against claimants were greatly tightened, leading to 5 million sanctions against benefit claimants in the mid-2010s.
Far from tackling Britain’s pro-inequality bias, the state has too often been an agent of inequality. Britain’s tax system is regressive. It takes a bigger slice of low than of high incomes. The Bank of England’s programme of quantitative easing that began after the 2008 Crash was aimed at raising liquidity. The previously untried policy, with its injection of close to £900 billion into the economy, had limited impact on re-firing the economy, but by boosting property prices and share values, has benefitted the already wealthy. Some three-quarters of the growth in UK private wealth holdings since 2008 have been the product of asset inflation, or what the 19th-century philosopher, John Stuart Mill, called “getting rich while asleep”.
Throughout history, the divided impact of change has often been justified by spurious doctrines. In the 19th century, gaping inequalities were defended by the ruling plutocracy as the price of progress, while mass poverty was dismissed by leading thinkers as self-inflicted.
In the 1980s, it was claimed that a greater inequality was necessary to build a more entrepreneurial society, or as Mrs Thatcher told the BBC in 1980, “Let the children grow tall”. It created a more divided society, but without the promised economic pay-off. From 2010, despite the constantly reiterated claim that “We are all in this together”, it was the poorest who paid the highest price of austerity.
Today the cry is of a better post-Covid society and of “levelling up”. As in the past, these are hollow promises, a form of double speak, slogans looking for a policy. Without a comprehensive attack on Britain’s inequality-driving economy, the post-pandemic society will look much like its pre-pandemic version.
Stewart Lansley is the author of The Richer, The Poorer, How Britain Enriched the Few and Failed the Poor. (Bristol University Press) and a Council member of the Progressive Economy Forum.
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