ConDem con trick can't disguise inequality growth

The ConDems claim that pay for most rose faster than prices in the year to April 2013 is a con trick that cannot disguise a rapid growth in inequality of household incomes since 2008. And with another credit-fuelled frenzy under way, a second crash is much more likely than a “sustainable recovery”.   

First, while the figures rolled out by the government take account of tax cuts for those in work, they omit the benefit reductions suffered by millions of people as a result of austerity attacks on welfare. Secondly, since April last year, energy and transport costs have soared while incomes have remained static.

All in all, most people are much worse off than they were before the recession kicked in after the banks went belly up.

More potent and revealing figures are those relating to crime, which were published yesterday. Police records show a 4% rise in shoplifting and a 7% rise in “theft from the person”, such as snatching expensive mobile phones from passers-by. Nick Gargan, chief constable of Avon and Somerset Constabulary, told the Financial Times that police leaders were starting to talk about an “austerity bulge” in crime figures.

“We are seeing a ramping-up effect as the cuts take hold,” Gargan said. The rise in shoplifting came in more than two-thirds of the UK’s 43 police force areas, with the biggest increases in the West Midlands, Merseyside, and West Yorkshire. The British Retail Consortium said thefts from shops were 26% higher than the annual average.

The numbers arrested are overwhelming local forces. Chris Mould, executive chairman of the Trussell Trust, which last year handed out more than 700,000 food parcels from its network of foodbanks across the country, said that in Islington police had given vouchers to some shoplifters who were obviously not criminals, just in desperate need.  

In the last three months police in Byker, east Newcastle, stopped 26 first-time offenders, compared with five the previous year. Twenty of the first-time shoplifters were female and 11 of the 26 incidents were low-value, food-related thefts. Another indication of growing desperation was shown by scuffles this week between shoppers and police at a 99p store in North Wales when it scrapped its half-price sale

Lancashire chief constable, Steve Finnigan, said there was a rise in the theft of basic food items, such as bread, milk and cheese. "The offenders are first-time offenders and, when you talk to them, they are not stealing food to sell on; they say they are stealing to feed themselves" he says. "In my own force we have seen an increase in shoplifters who are first-time offenders and say they are doing it to put some food on the table."

“People are struggling for all sorts of reasons,” Mould said. “Hunger in Britain is a really serious problem and it’s affecting large numbers of people. Thirteen million people at least are in poverty, according to the government’s own statistics, which is defined as people on 60 per cent or less of the average income. And that average income is getting lower, so it’s 60 per cent of something that’s getting worse, while the cost of basics such as food, ­power and, increasingly, housing is rising.”

All sorts of people are warning about a coming social explosion. The police themselves are getting tooled up. This week they asked home secretary Theresa May to authorise the use of water cannon arising from “ongoing and potential future austerity measures”. The sinister Association of Chief Police Officers, as guardians of state power, are pressing their case. May has yet to respond.

Even in Davos, at the annual meeting of the transnational capitalist class, there was talk of the “wealth divide” as the elites acknowledged the fact that any “recovery” in output is founded on the vast quantities of money printed by the central banks since 2008. 

As the Observer’s Will Hutton, notes, the “inequality that drove the last crash is even greater now and, ominously, the same forces are abroad again”. While it’s not apparent to Hutton, creating a more equal Britain now patently requires a more equal, democratic society beyond capitalism, where resources are held socially and used for the common good.

Paul Feldman

Communications editor

A capitalism that lacks legitimacy

While Ed Miliband brings Labour into an ever-closer alignment with Tory arguments (and policies) on the economy, it falls to the Financial Times to ask whether capitalism can respond to an historic crisis of legitimacy.

As the FT notes: “The system, in all its different varieties, is widely perceived to be failing to deliver.” This is a genuinely serious question which in turn raises real issues about democracy (or the absence of it) and whether the system is capable of re-enlisting the support it once enjoyed.

Miliband, naturally, is incapable of addressing these matters because they strike at the heart of the system of political rule which acts as a proxy for corporate and financial power in every country (and which he is so desperate to be part of).

In fact, his acceptance today of spending cuts to reduce the deficit, attacks on welfare (even questioning the winter fuel allowance for older people) – in effect, setting out Labour’s very own austerity package – will only deepen the growing hostility to the system itself.

Actually naming its series of articles “Capitalism in Crisis”, the paper of choice for business executives, acknowledges that “democratic legitimacy has been largely lacking” in the measures taken by governments over the last four years.

“On both sides of the Atlantic there is now a risk that reasonable aspirations to equality of opportunity are being undermined, accompanied by a growing threat of political instability. Support for open trade and free markets is also being adversely affected.”

The significance of this lack of consent should not be underestimated. As a system based on private control of wealth and resources, capitalism actually depends on a measure of acceptance by the 99% which is mostly expressed through the political process.

When consent declines in any significance, the nature of capitalism itself stands revealed and becomes more reviled (which the article points out has happened several times over the last 200 years). “Greedy bankers, overpaid executives, anaemic growth, stubbornly high unemployment – these are just a few of the things that have lately driven protesters on to the streets and caused the wider public in the developed world to become disgruntled about capitalism,” the FT remarks.

In a recent survey about trust, under 50% of Americans and British asked said they had “faith in business to do what is right”. The US and the UK were only just ahead of Russia.

The FT believes that growing income inequality is at the root of the discontent rather than growing poverty. In this they are partly right. In 1975, the ratio of the pay of a CEO to an average worker was 35 times greater; by 2010 the ratio had soared to 325 times. Large sections of the middle-class also did very well in the halcyon days of globalisation.

There’s no doubt that perceptions of unfairness drive many protests. But demands that workers pay for a crisis they did not create through lower pensions, reduced wages and unemployment is about defending an often modest standard of living and brought millions out on strike.

For the FT, as for Miliband, the question is “how to improve the existing model of capitalism”. Here they both run into a major difficulty. The globalisation process created a hydra-headed beast that knows no borders, has more power than nation states and is very much immune to political processes.

The trust survey showed an even greater mistrust of government than of business, which must in part be due to the fact that politics is seen to do the bidding of and be in the pockets of the wealthy. Meanwhile, as the FT admits, “efforts to re-regulate the banking system…have failed to convince many experts that an even larger financial crisis can be avoided”.

In sum, capitalism has little room for manoeuvre and a negligible chance of restoring consent for its continued rule. Of course, it’s not giving up power voluntarily time soon either. But the opportunities to argue for and achieve a revolutionary democratic transformation of capitalist society are more favourable than for a very long time.

Paul Feldman
Communications editor

Miliband also in denial

If Colonel Gaddafi is said to be “delusional”, believing that all Libyans love him when clearly they do not, where does that leave Ed Miliband? At best he is in denial about 13 years of New Labour. At worst he takes no responsibility for his actions and ought to seek help.

In a somewhat astonishing – for the wrong reasons – speech yesterday, he reeled off statistics that confirmed the growth of inequality in the period 1997 to 2010. Can any of us forget that this was the period of massive Labour majorities under Blair and Brown, and where Miliband was in the cabinet?

Yet, ultimately, Miliband, apparently Labour’s present leader, could only tell his audience: “The task is to create a more prosperous capitalism but also one that is fairer than we had before the financial crisis.” Excuse me?

In the period we are talking about, capitalism was indeed “prosperous”. It was just that it was at the expense of working people’s wages and conditions. Bankers and CEOs of transnational corporations did not go hungry or homeless in this period, in which inequality grew apace.

As the power of globalised capital to dictate to governments and trade unions grew, so the share of wealth going to those actually working fell. The wage share of annual national income (GDP) rose to a high of 64.5% in 1975, falling to a record post-war low of 51.7% in 1996. From then it recovered slightly to reach 55.2% in 2001 before slipping back to 53.2 per cent in 2008 – close to where it was more than a decade before. In the United States, by the end of 2006, the share of national income going to wages and salaries in 2006 was at its lowest level on record, with data going back to 1929.

As the 2009 TUC report Unfair to Middling explained: “The declining wage share has been driven by the introduction of flexible labour markets since the 1980s (with the paring back of employment protection rules); economic liberalisation (including privatisation); the increasing constraints on collective bargaining; a reduction in the demand for unskilled labour resulting from technical change; and the global transfer of jobs triggered by globalisation.”

This is the new world order that New Labour embraced with enthusiasm. Instead of wages, workers could get easy credit in a modern version of living on tick. The whole growth system of capitalist production and finance became driven by debt until it went down in flames in 2008. Of this, Miliband had nothing to say. No apology for giving the financial sector carte blanche, for restricting union rights, for allowing inequality to grow. Just platitudes about how “our economy has become progressively less fair and the losers have been those on middle and low incomes”.

He warned, however, of an impending cost-of-living crisis as a result of rising food and fuel prices. These will further erode the wage share of GDP, which accelerated in the last two years of the previous government. This is how capitalism “solves” its crisis. It destroys jobs and living standards because that’s all it knows. With the global debt crisis still reverberating, the attack on living standards will intensify because that’s how the system functions.

Miliband did not contemplate how the soaring cost of living in Britain, alongside mass unemployment and short-time working, could easily turn into a movement for social change, much as it did in Tunisia and Egypt. Just as well, because Labour is a party of big business, making the cuts at town hall level, and will be just as much in the firing line as the ConDem coalition when the working people of Britain decide that enough is enough.

Paul Feldman

Communications editor

Cream for the rich, cake for the rest

While the media assault on the RMT union continues– even though Tube maintenance workers have suspended their strike– news comes of how well some people are doing when it comes to pensions. Tube and other workers affected by bankrupt companies are rightly concerned whether they will actually get a pension but top directors are sitting pretty. Directors of the UK's top companies have amassed pensions worth nearly £1 billion, according to the annual TUC PensionsWatch survey published today.

The TUC's analysis shows that the average executive can retire at 60 on a final salary pension worth over £3 million, up £300,000 in a year. This is enough to provide a pension of £193,000 a year - more than 25 times the average occupational pension of £7,500 a year and an increase of 15% on the findings of last year's survey. Looking just at the director with the biggest pension in each company, their average pension is worth £5.3 million, up £400,000 in a year. This is enough to pay out a pension of £320,000 - over 42 times more than most staff pensions - and an increase of 10% since last year. The biggest final salary pension pot in the survey tops £21 million - £2 million more than the biggest last year - and would pay the director over £1 million a year. Five directors have a pension pot worth over £12 million.

Key findings show that:

• the proportion of directors with final salary pensions is 79%
• 59% of companies have closed final salary schemes to new staff in recent years
• 38 out of the 49 companies where information is available allow directors to retire on a full pension at 60
• directors' pensions grow twice as fast as the most common rate for employees
• employer contributions to directors' schemes was, on average, the equivalent of around 20% cent of salary, compared to the average of just 5.8% for all employees
• the highest annual employer contribution to a director's defined contribution pension was £988,732.

TUC general secretary Brendan Barber rightly says: “Top executive pay has already created a new group of the super-rich who float free from the rest of society. This report shows that this does not stop with their retirement.” What is he and other union leaders going to do about it? Where is the support for the RMT’s fight for pensions and job security following the collapse of Metronet? All the signs are that the TUC leaders will continue to prostrate themselves before a government that has created the conditions for the super-rich in Britain to flourish like never before.

The gap between the rich and poor has reached levels not seen for more than 40 years. Government statistics show that the richest 10% of the population control more than half the wealth of the country, with the top 1% controlling no less than 21%. In the City, fat-cat pay awards mean that top executives earn 100 times more than their employees. Meanwhile, private equity and hedge funds pay "less tax than a cleaner", according to Nicholas Ferguson, chairman of private-equity and fund management group SVG Capital. Soaring house prices have left hundreds of thousands of households unable to afford decent housing while properties in London regularly change hands for more than a million pounds. The level of social mobility in the UK is among the lowest of any developed nation. For New Labour, the rich are simply reaping the just rewards for enterprise, initiative and investment in the market economy. As for the rest, in another century the slogan might be “Let them eat cake”.

Paul Feldman
AWTW communications editor

Conscience and global poverty

If conscience alone could abolish world poverty, it would have happened many times over by now. Countless millions, especially in countries like Britain, have a sense of what is right and wrong. They are deeply concerned about disease, ill health, starvation and low wages in developing countries. They donate, they do voluntary work, they sign petitions, they go on marches, join vigils and pray for the poor of the world. And still the world is one of gross inequalities, at home and abroad. So Gordon Brown’s appeal to the conscience of the world in his “moral alliance” United Nations speech will make not a jot of difference because, unsurprisingly, it ignores the fundamental questions at stake which revolve around corporate power and profit.

Brown said: "I want to summon the greatest coalition of conscience in pursuit of the greatest of causes ... " He said he wanted to mobilise "people power", urging citizens to be "responsible consumers" and "active citizens". The fact that his “wake-up call” immediately won the backing of such progressive figures as George W. Bush and the bosses of 20 global corporations, including Microsoft chairman Bill Gates, tells its own story. They know a good thing when they see one and understand completely that having a conscience will not disturb the bottom line at all. In fact, it might do it some good.

The campaign, to be run through the UN, will be based on a new partnership between governments, the private sector and faith and pressure groups. The corporations and the UN have been travelling this road for some time. At the turn of the century the UN under Kofi Annan created a “global compact” with the major corporations. The UN website devoted to the compact explains: “Through the power of collective action, the Global Compact seeks to promote responsible corporate citizenship so that business can be part of the solution to the challenges of globalisation. In this way, the private sector – in partnership with other social actors – can help realise the secretary-general’s vision: a more sustainable and inclusive global economy.”

Annan may have had a dream in 2000 – in 2007 it resembles a nightmare. The UN’s millennium goals, as Brown had to admit, are as far from realisation as when they were set. The goal of halving infant mortality by 2015 won’t be met, if at all, until 2050, while the target of ensuring primary education for every child by 2015 would at best be achieved by 2100. Brown is clearly concerned lest people around the world for some unknown reason identify the corporations and the UN with broken promises and wants an “emergency” response. But his are just more empty words and semi-religious rhetoric at the expense of the world’s poor.

The fact remains that no amount of conscience will alter the fundamental nature of the causes of global inequalities. They are the outcome of a corporate-driven globalisation process, where the transnationals are in what they might describe as a “win-win situation going forward”. They can wring their hands, adopt a “corporate social responsibility” agenda and even give large sums of money, knowing that their profit-driven power is secure and given cover by the UN and its agencies. Overturning this power in order to allocate and use resources in the service of humanity as a whole is what we have a responsibility to place on the agenda throughout the world.

Paul Feldman, AWTW communications editor

The inequality indictment

If you wanted evidence to draw up an indictment of corporate power and the global market economy, you need look no further than the reports on inequality in Britain published today by the Joseph Rowntree Foundation (JRF). While you’re about it, there is plenty of material for a charge sheet against successive governments as well. In the dog-eat-dog globalised market economy, the story is a simple one: the rich have obviously got a lot richer and the average worker has got relatively poorer. Another group – they used to be called the “poor” but are now officially known as “socially excluded” – have grown in numbers. The JRF findings do not delve into socio-economic causes. But their conclusions speak for themselves because the period studied – 1968 to 2005 – coincides with the contemporary globalisation period. During these decades, successive Tory and New Labour governments have facilitated the accumulation of private wealth on a grand scale. The deregulation of capital and finance has enabled City traders, merchant bankers, industrial and financial capitalists to amass wealth on an unprecedented scale at the expense of ordinary working people.

The JRF research , which uses new ways of comparing poverty and wealth trends across Britain, reveals inequality to be at a 40-year high. Researchers discovered that households in already-wealthy areas have tended to become disproportionately wealthier and that many rich people live in areas segregated from the rest of society. At the same time, more households have become poor over the last 15 years. The widening gap between rich and poor has meant that “average” households (neither poor nor wealthy) have been decreasing in number. Danny Dorling, who led the research, said: “Most interesting and certainly unexpected when this work began is the geography of those households who are neither rich nor poor. Over time it has become clear that there is less and less room in the south for them; they have either moved elsewhere, or become poor.” A second report studies people’s attitudes to inequality. It found that over the last 20 years, a large and enduring majority of people have considered the gap between high and low incomes too large.

Britain over the last few decades has become a low-wage, long hours, exploitative, debt-ridden society as far as the majority is concerned. New Labour has speeded this process along, as did the Tories before them. In place of decent wages, there are tax credits so that the employers are not put under any pressure. In place of strong trade unions, there are organisations enfeebled by anti-union laws and weak leaders who are frightened by globalisation and corporate power. While most people reject gross inequalities, there is no one in parliament to represent their views. The state has abandoned its mediating role between class interests and in the period covered by the JRF research has become partisans of big business interests. Overturning inequality will require a comprehensive remaking of the state and a democratisation of ownership of economic and financial resources. That takes us way beyond the wretched New Labour outfit and what passes for democracy in Britain today.

Paul Feldman, communications editor