Don’t blame rising inequality on technological change

We all know this to be true, but nobody is going to do anything about it so it will only get worse as time passes.  


Powered by Guardian.co.ukThis article titled “Don’t blame rising inequality on technological change” was written by Owen Jones, for The Guardian on Wednesday 8th April 2015 06.30 UTC

“There is no alternative.” It is the slogan, battle cry and sneer of our era. It is ever present in this general election, like a police sentinel guarding a sacred political consensus, batoning anyone who deviates from received wisdom. The fortunes of Britain’s richest 1,000 can double in a period of economic trauma while hundreds of thousands depend on charities to meet that most basic human need, food. A proposed mansion tax levied on a tiny fraction of the population is met with accusations of cruelty while predominantly poor disabled Britons are compelled to shell out money they don’t have because they are deemed to have a spare bedroom, all in order to balance the nation’s books. More than 400 people can be paid over £1m at one business alone, Barclays Bank, when the whole country of Japan has fewer than 300 executives paid that amount. Why? Because there is no alternative: either policies are pursued that guarantee the concentration of wealth and power in the bank accounts of a tiny elite, or the rich will flee and the economy will collapse.

Britain’s booming elite is soaked with triumphalism. It believes its traditional enemies – principally a trade union movement and political left with a coherent ideology and mass following – have been seen off. This elite is flattered, comforted and protected by an ideology that equates the perpetual enrichment of the wealthy with the wellbeing of the nation, promoted by a media owned by its own kind, an academy largely emptied of intellectual dissidents, and a network of thinktanks kept afloat by corporate and well-to-do private individuals. Any puncture, however small, to this suffocating triumphalism is welcome: to those of us who reject the status quo, it is like coming up for air.

Professor Anthony Atkinson is a pioneer of the study of the economics of poverty and inequality. His latest work, Inequality: What can be done?, is an uncomfortable affront to our reigning triumphalists. His premise is straightforward: inequality is not unavoidable, a fact of life like the weather, but the product of conscious human behaviour. The explosion of inequality as a result of intentional policy decisions has been rather spectacular. Take the US, which became steadily more equal from the end of the second world war to the late 1970s. By 2012, the top 1% had more than doubled the share of national income they enjoyed in 1979, and now receive a fifth of gross US income.

In our own country, the share of gross income belonging to the richest 1% after the first world war was 19%; it had fallen to 6% by 1979, and has since more than doubled. Inequality actually rose twice as much in Thatcher’s Britain as it did in the US, albeit from a significantly lower base.

Atkinson identifies the usual culprits: globalisation, in which the wealthy can easily pick and choose nations most favourable to their bank balances; rapid technological change, which has stripped away middle-income secure jobs; the explosion of a rapacious financial sector; a shift in attitude to high pay; the hobbling of trade unions, once a formidable counterweight to wealth being sucked to the top; and the erosion of redistribution based on progressive taxation.

It doesn’t have to be like this. Take the explosion in technology. In Britain, we’ve seen the rise of an “hourglass economy”, with professional middle-class jobs at the top (often reserved for the pampered through unpaid internships and expensive post-graduate qualifications) and insecure, low-paid service-sector jobs at the bottom. Many middle-income skilled jobs have been lost, often on the basis that machines can perform such labour more cheaply and efficiently. A recent study suggested that 10m jobs, or a third of all those in Britain, could be wiped out because of new technology and computers.

But Atkinson refutes the idea that technological change is “determined by the gods”: it is the result of decisions taken by scientists, investors, governments, consumers and others. Much of research and development happens in the public sector, as the economist Mariana Mazzucato has underlined in her book The Entrepreneurial State. If you’re reading this column on an iPhone, thank the state for its touchscreen technology, GPS and Siri. So why doesn’t the state take more of an active role in directing technological change so it benefits all? Look at Germany, which rather than opting for a hands-off approach promoted renewable energy industries, both confronting the climate change crisis and avoiding the rotting away of decent jobs seen in this country.

Some of Atkinson’s proposals are heresy in an era like our own. He suggests raising the top rate of tax to 65% – casting a cynical eye over studies that claim this is counterproductive when it comes to revenues – and calls wisely for proper crackdowns on tax avoidance. Partly it comes down to fairness for the professor: the government’s universal credit scheme aims to cut the marginal tax rate on the poor to 65%. If that’s good enough for those scraping by, why not for those richer than ever before?

In other European countries, it is taken as read that trade unions have a role in drafting social security legislation – why not here too? Another radical but attractive proposal is to grant all citizens an inheritance payment on reaching adulthood, funded by a 2% tax on personal wealth. With the return to precarious employment, the state could guarantee work, with a minimum wage that actually meets people’s living costs. A maximum pay ratio in businesses would stop shamelessly self-interested CEOs paying limitless salaries and bonuses while their cleaners languish on poverty wages.

These are the sort of proposals that are banished from the media-defined mainstream of the election debate. The parameters of acceptable political conversation are, after all, heavily policed: even a modest challenge to continually stuffing the mouths of the richest with gold is ignored, ridiculed or demonised.

We need a whole new way of thinking. The nation’s wealth is not the product of the genius of a few canny entrepreneurs. It is a collective endeavour, the product of the labour of millions and the support of the state. The hospital cleaner, the road-builder, the teacher training up both workers and the entrepreneurs of the future: all help generate wealth. The state builds and maintains the infrastructure, funds the research, educates the nation, protects property and tops up low wages. So much of our collectively produced wealth should not be locked away in a few bank accounts. The triumphalists will tell us that there is no other way. They are wrong, and it’s about time we called their bluff.

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