Inequality: Standing’s Eight Giants

In this series Luke explores the Eight Modern Giants introduced by Economist Guy Standing in his recent report Basic Income as Common Dividends. This first article sees Luke analyse Inequality, focussing on how existing disparities haven’t come into existence accidentally, but are the consequence of ideology and conscious government policy. He then goes on to explore how a Basic Income can be a pivotal tool in tackling the giant of inequality.

Luke Brotherdale Smith, Citizen’s Basic Income Network Scotland Volunteer

To commence our series on Standing’s Eight Giants, we are looking at inequality. Now inequality is an issue frequently mentioned in mainstream political discourse, but it often seems pretty abstract and intangible. It appears alongside complex and unfounded claims that create confusion. So to avoid brain overload induced apathy toward such an important issue, I’m going to avoid bombarding you with (too many) statistics and overly-economiccy concepts like capital gains tax or the Lorenz Curve. 

To put it simply, Britain is incredibly unequal. In his report Standing comments on how our Neoliberal economic system has proactively seen an increase in inequality, with workers’ wages stagnating or declining as business owners and executives have seen their wealth soar. I know I promised to avoid too much economic jargon, but I think its important people know we live in a Neoliberal era, one that is not set in stone, a system that hasn’t always existed and an epoch which will eventually come to an end. Put shortly, Neoliberalism is a belief in economic markets and the idea that wealth with ‘trickle-down’ from the rich to the poor. When the government cuts the wealthy’s taxes or privatises parts of our health service, know what is driving these choices: the Neoliberal ideology.

Now I’m sure you’ll be surprised to hear that the whole ‘trickle-down’ thing hasn’t worked too well. Governments have cut taxes on profits, subsidised the wealthy and done almost everything in their power to help corporations and businesses increase their profits, but alas, there doesn’t seem to be much trickling down. Instead the rich have become wealthier, whilst the rest of us have seen earnings fall lower than they were before 2008. And the reality is this hasn’t occurred accidentally or naturally, the government have financed these tax cuts and subsidies to the wealthy. Let’s explore this a bit, if annual government spending is say £100 (stay with me) and they receive £100 through taxes then everything is hunky-dory (not really but it’s a very simplified example). Then imagine the government chooses to cut taxes on big business’ profits to keep them happy. So now the amount the government receives from tax has fallen to £80 due to the cuts but wait, spending has remained at £100. We’re told there is a problem, a deficit, and that we all need to tighten our belts to finance it (heard this before?). The government cuts benefits, reduces funding to schools and the NHS, scraps free school meals and then shuts some libraries for good measure (but we’re all in it together, so it’s all good right?). Austerity then sees spending fall to £80, and behold we have balanced tax and spending, surely everything is thriving! We’ve just seen the services we all rely on decimated to fund the ultra-rich’s tax cuts – but the wealth is going to trickle down, right? Not quite. In 2018 four million children were in households deemed too poor to enable them to have a healthy diet – even though many of their parents had jobs. At the same time the recorded UK offshore wealth has been totalled at almost 20% of GDP. That’s over $500 billion.

Growing poverty in the UK is directly related to the rich getting richer. Due to Universal Credit and other welfare cuts, 5.2 million children are estimated to be living in poverty by 2020. Just read that again, 5.2 million children. That will be over a quarter of all children living in poverty. This is a consequence of Neoliberal ideology and the choice to make the wealthy wealthier. ‘Reduce spending on services, welfare and schools to fund tax cuts for the rich, and we will all prosper’. I don’t think most people in Britain are prospering or bathing in all this wealth that’s supposed to be trickling down. It is important to see huge inequality for what it is rather than an abstract concept or something we accept as natural. Growing inequality is the consequence of choices, but that also means we can choose to do things differently and change the direction we are travelling. 

But how are we going to change this direction? Well, as the report highlights, the concentration of wealth and property in the hands of very few is central to our current state of stark inequality. Standing talks about ‘rentier capitalism’, a rentier is someone who lives off an income made from property or investments. To you and me this means the people that own a lot (have a large stock of wealth), gain a lot from renting their stuff out. Unlike most of us they also benefit from rising house prices and rent. In contrast, labour (people working for an income) has seen stagnant wages that have not followed the upward trajectory of returns gained from financial (shares, bonds etc) or physical (land, housing etc) property. Ultimately this inequality in wealth, or if you like stuff owned, is far greater than income inequality. To throw just a few figures at you, in 1970 net private wealth was 300% of the size of the national economy, now it is 600%. At the same time, the poorest fifth of households have seen their wealth decrease (so much for trickle down, eh?). The amount people earn for their labour on an hourly or yearly basis is significant, and there is disparity there too, but if you don’t take wealth into account then you’re missing half the picture.

So, with only a light dusting of jargon and statistics that takes us to the good bit where I tell you how we can change this (spoiler, it includes a Basic Income). But first, it’s worth reiterating the point: inequality is huge and it hasn’t occurred by accident. The wealthy have gained more wealth, whilst the poorest have seen theirs decline, we have cut the rich’s taxes at the expense of the rest of the population’s public services. Here, in one of the richest countries on earth, people sleep on the street while others inherit houses they don’t sleep in at all, some work their entire life on poverty wages while others live off the rent generated by their multiple properties. Doesn’t seem quite right, does it?

But let’s talk hope and how we can start moving in a fairer and more just direction. Guy Standing suggests we stop facilitating the trickling up of money into Cayman Island bank accounts (and buying another flat in Mayfair) in favour of policy making that uses these funds for good. This, he suggests, should be done through a Basic Income in the form of a common dividends. So what does that mean? A dividend is money paid to a bunch of people who own stocks in a company (shareholders). Standing effectively argues that we as citizens are all shareholders in the country and are entitled to benefit from its land and resources. Great masses of land and other property have been seized by the mega wealthy and then used to make a profit. The argument is, the profit from land should be shared with everyone in the country, because it’s our land. A Basic Income in the form of a common dividends would redistribute our common wealth to all of the entitled shareholders, the population. 

Financing a Basic Income through progressive taxation on wealth would be a start to overcoming the giant of inequality. But there are further ways in which a Basic Income allows for more equal opportunities for our citizens. The Basic Income provides what has been eloquently labelled by some as a ‘fuck-off fund’. This means that when an employer offers you inadequate pay, or a job without guaranteed hours, you can tell them to fuck off, knowing you will still be able put food on the table. In essence, employers will have to pay a decent wage to get people to do certain jobs, rather than the most vulnerable being forced to accept any conditions or wage out of desperation. It also opens up opportunities that are currently reserved for people with passive income such as private wealth. Careers in the arts, ongoing education and unpaid internships (putting the ethics of these to one side for a sec) would be more equally accessible with the support of a Basic Income. This alone isn’t going to radically reverse income inequality, but working in conjunction with an effective and progressive taxation system, we will see movement towards greater equality. More than this, a universal Basic Income will strengthen the social solidarity which, after thriving post-war, has been eroded by relentlessly growing inequality. 

Inequality has been manufactured by choices that have been shown to be morally and economically unjustifiable. It’s time to make different choices. A Basic Income is a tool and a part of the wider movement that can and will defeat the giant that is inequality. 

This blog is one of a series looking at Guy Standing’s recently published report, written for the Shadow Chancellor, ‘Basic Income as a Common Dividends’. Influenced of course by Beveridge, Standing reflects on the eight modern giants he sees as stalking modern Britain. He comments on how these giants are having a protracted negative effect on society as well as the economy, and how a Basic Income can be a key tool in combatting the growing challenges these giants pose. In the next few weeks, we will be releasing a series of articles analysing Standing’s eight giants and delving further into how the Basic Income can (and will) combat them.

The giants are inequality, insecurity, debt, stress, precarity, automation, ecological crises and the rise of neo-fascism and the far right

Leave a Reply