Unnoticed in the austerity-driven travails following the financial crash lies another tectonic shift. According to research by the US bank Morgan Stanley, since the start of the ‘recovery’ in 2009-10 total real wages have risen by £105bn, but profits have soared by £330bn. This is the first time that profits have outperformed wages in absolute terms in 50 years. In Germany employee pay has risen by £31bn while profits have accelerated to £99bn. Things are even worse in Britain. Here profits are up £14bn, but aggregate real wages are actually down £2bn. This will get a lot worse still when low-middle income families are now officially expected to take an unprecedented 4-7% real terms cut in their living standards in this next year.
Why is this happening? The share of labour has been in decline across the OECD since 1980, largely caused by the imposition of neoliberalism and the triumphalism of the market most notably promoted by Reagan and Thatcher. The polarisation to the detriment of labour has been growing ever since in the UK, but has been even more marked in the US. There productivity ros 83% during 1973-2007, but male average real wages only rose slightly by 5%.
Even so, the decisive shift in favour of capital is breathtaking. The weakening of the trade unions by using the law to tilt the balance of power strongly towards employers plus an across-the-board programme of privatisation almost halved union membership and extensively diminished their influence, particularly when Blair continued the same Right-wing pro-market policies even when Labour regained office. But probably the biggest driver has been the systematic de-regulation of the economy, particularly of the financial sector. It is that removal of almost all constraints that has propelled the ballooning of the City and its ancillary functions and made it the most powerful force in Britain today. And where there is excessive power, there will also be the abuse of power in terms of insatiable greed, recklessness, arrogance, and self-aggrandizement in income and wealth – exactly what we have seen over the last several years.
The banks have shamelessly used their power to consolidate their profits, wealth and influence even further. Central banks have regularly cut or held down interest rates over the last quarter century in order to boost bank profits and raise asset prices. With this in-built subsidy rigging the market, it’s hardly surprising that bankers’ fancy incomes and even fancier bonuses far outpace pay in jobs of comparable technical skill.