THE PRICE OF INEQUALITY IS TOO HIGH
Britain is now one of the most unequal countries in the world. The report on boardroom pay recently published reveals that the average pay of chief executives of the top FTSE 100 companies is now a staggering £46,154 a week. That is 115 times the average wage in Britain today, 249 times the national minimum wage, and 519 times the basic State pension.
The latest Government figures, entombed within their publication ‘Households Below Average Incomes’, shows that the rich have made quite a killing out of the last decade and that inequality rose sharply between 1997-2002. It has however fallen back somewhat since then, but it remains above the level of 1997. This reflects the fact that though child credits, working family tax credits, and pensioner benefits have given some modest and very welcome lift for the poor, the rich have done hugely better. Official statistics now show that 1,500,000 people now earn more than £1,100 a week.
The super-rich, the top 1%, have done better still. Their share of national income fell from 13% in 1937 to just over 4% in 1974, but then in the Thatcher-Major years rose rapidly back to nearly 11% in 1997. The latest figures now suggest their share is back to pre-Second World War levels. Their share of national wealth has ballooned even more. It shot up from 17% in 1990 to 23% in 2002. So less than half a million adults now control nearly a quarter of the nation’s entire wealth, while half the population (over 20 million adults) have seen their share fall to just 6% in 2002 – a case of ‘gushing up’ rather than ‘trickling down’.
The mega-rich, the top 0.1%, have done best of all. Some 75,000 individuals now own almost half the liquid assets in Britain, and they are on average 66% richer than they were 5 years ago. Those at the very top, the 1,000 richest person in Britain, have seen their wealth triple from £99bn to £301bn in the nine years since 1997. In the past year alone the overall wealth of this tiny group has soared by 21% or by more than £50bn, and the number of billionaires has tripled from 14 to 54.
This matters for at least three key reasons. First, the corollary to this extreme maldistribution in income and wealth is the persistence of poverty and deprivation. If all the gains made by the top 1% since 1997 were transferred to the poor, poverty would be abolished overnight.
Second, such excessive widening of inequality cannot conceivably be justified. It reflects, not in any way a comparable improvement in business performance (indeed rewarding failure has become routine), but rather greed on a mega scale. In 1980 a chief executive of a top company might have earned some 25 times more than the average worker; today it is around 120 times.
But there is a third, more profound reason why such drastically widening inequality matters. There is now abundant international data which shows that the greater the degree of inequality at the top, the higher the level of ill-health, crime and social breakdown throughout the rest of the population. The price of extraordinary material success is often social failure and higher dysfunction within society.
In his painstaking and methodical analysis of the evidence in his book ‘The Impact of Inequality’, Richard Wilkinson, Professor of Social Epidemiology at Nottingham, has demonstrated, in a constant gradient between different nations, that in those where income differentials between rich and poor are smaller, there is less violence, including substantially lower homicide rates, and prison populations are smaller. Community life is stronger, and people are more likely to trust each other. Health is better, life expectancy is several years longer, and teenage birth rates are lower. There is also more social mobility, and educational attainment at schools tends to be higher.
It might be said that putting this all down to inequality is going too far. But all these relationships are statistically highly significant, and there are now 170 studies showing health is better in more equal societies and 40 showing that violence is worse in more unequal societies. The implication is that further rises in absolute living standards no longer reduce social tensions – indeed, in the absence of a drive to limit inequality, they may well aggravate them.
Thus for example the US, which has extreme wealth but also extreme inequality, is beset by the highest homicide rates, the highest teenage pregnancy rates, the highest rates of imprisonment and comes 26th in the international league table for life expectancy – not a model that we should follow, though our rising inequality is pushing us in that direction. By contrast, Japan, Sweden and Norway, also very rich but not nearly so unequal, do well on all these measures.
Nor should this be surprising. What really matters to people about income is where it puts them relative to others in status and self-evaluation. Increased social hierarchy and inequality significantly raises the stakes and anxieties about personal worth, and for those who lose out the feelings of inferiority, resentment and inability to compete inevitably generate anti-social reactions to the structures that demean them.
There are lessons here for the Government. Peter Mandelson told us charmingly that ‘New Labour is relaxed about people getting filthy rich’, and indeed the Government’s ideological commitment to unfettered market forces, neo-liberalism and globalisation has certainly let inequality rip. At the same time New Labour has commendably tried hard to limit social dysfunction by a relentless array of targets to deal with inefficiency, misdemeanours, crime, poor performance and inadequate effort. What is not perceived is that these policies are incompatible – that the pursuit of inequality persistently undermines the very real efforts of New Labour to improve health and educational outcomes, cut crime rates, improve social mobility, build sustainable communities, as well as obviously reduce poverty.
