Even the high priests of capitalism are now inveighing against inequality

The IMF is the last place that one would expect to hear the argument being made that inequality has gone far too far.   So the recent detailed research from the citadel of capitalism has to be taken seriously.   What they found was that raising the income share of the poorest fifth of the population increases growth by as much as 0.38% over 5 years, whilst increasing the income share of the richest fifth by 1% actually reduces growth by 0.08%.   On that basis the argument that enriching the rich yet further benefits everyone collapses.   Trickle-down which both Thatcher and Blair devoutly believed in is therefore seen for what it is – merely a rationalisation to justify their hold on power and wealth.

The IMF also seeks to justify its unexpected conclusion.   The poor tend to spend more of their income rather than save it like the very rich, and thus increase demand within the economy and therefore growth.   If on the other hand their income stagnates or falls, they are likely to borrow more, leading to a dangerous build-up of debt, which is exactly the situation in Britain today where household debt is now tipping £2 trillions – a likely cause of the next financial crisis.   And with lower taxes and lower public expenditure in a rich-dominated world, it is likely there will be under-investment in education, health and infrastructure – all the elements which boost productivity and growth.

Another study just published also tells a similar story.   Called (sardonically) ‘In it together: Why Less inequality Benefits All’, the OECD authors point out that the rise in income inequality between 1985-2005 knocked 4.75 % off cumulative economic growth between 1990-2010.   They conclude that “if the bottom is losing ground, everyone is losing ground”, and they even assert that “redistribution via taxes and transfers………contributes to more equality and more growth”.

Even the high priests of British capitalism take a similar view.   Simon Walker, director-general of the IOD, has recently argued that “routine excessive pay has become too common in Britain” and that “there is a strong case for wholesale reform”.   David Pitt-Watson, an executive fellow at the London Business School, is more precise: “It is a very big problem that we can observe little correlation between company success and high pay”.

The only part of the political class keeping mum on inequality is the Labour Party.   That needs to change, and fast.   Talking about a banker’s bonus tax, raising the top income tax rate to 50%, and putting a shop-floor representative into the remuneration committees in the boardroom is not enough.   Time for the Labour leadership contestants, not just to talk about fairness, but telling us exactly how they would bring it about.

4 thoughts on “Even the high priests of capitalism are now inveighing against inequality

  1. Hold on household debt I bet that ninety nine percent who aint rich dont owe that its a national disgrace that thatcher through to blair has made us poorer in jobs in housing in privitising all before them now we have yanky companies running our prisons yanky company’s running council and yes even in our nhs privitised through the back door leaving us jobless potlesss and some homeless yet the only ones to make monies are the real culprits banksters ministers who have or had payments from these private companies yes fraud on a massive scale yet that ninety nine percent who aint rich paid for it through austerity and some with their lives yet on it goes fraudulent trading fraudulent ministers and civil servants who even now dont have a moral compass even our arch bishop is quiet on cams jr you are lossing your flock yet in the lords you quiet about the cull of the stock jeff3

  2. Capitalism relies upon consumers. You don’t need to be an economist to know that if people can’t spend then the economy will shrink. When you give tax breaks to the rich they just syphon it off to their off-shore accounts, benefiting no-one but themselves.

  3. Cameron and his welfare reforms have a financial purpose.

    He is making people so ill when he finally sells off the NHS to the yanks, there will be no shortage of patients suffering mental illness, malnutrition, rickets and it’s happening right now under our very noses.

    The private health care will be inundated with patients, DC job well done, huge back hander.

  4. Andy Burnham thinks that if he raises his voice a few decibels higher that will improve his integrity, he still forgets it’s the quality of the language he uses that is important, telling everyone that he has come from a working class background doesn’t cut the ice, if you then say we need to pay down the deficit.

    I do have to mention that dishonesty is not the sole preserve of the Tories, Ed Miliband lost the last election because he appeared timid and his lacklustre policies didn’t ring true, the right think that all you have to do is call the Tories names and everyone will jump on board, but of course repeating the same message as the Tories only strengthens their support and adds credibility.

    Left futures has today released the voting pattern breakdown of all the parties with some interesting reading, if Labour are to regain power, what is certain is that it has to change the narrative and explain in detail why the deficit is a lie, that of course means those on the right have already lost all credibility and are therefore unable to do a plausible U-turn to win support, which is why they lack any sort of conviction.

Leave a Reply

Your email address will not be published. Required fields are marked *