Next Wednesday 13 September Bristol University Press, in association with the Equality Trust and the Fairness Foundation, will be hosting an online discussion on the burning question of wealth inequality in Britain. In this article Stewart Lansley, author, visiting fellow in the School of Policy Studies at the University of Bristol and one of the panellists, outlines the key issues.
Register for this free event, which will take place 1pm–2.15pm Wednesday 13 September.
It is an acute paradox of contemporary capitalism that as societies get more prosperous, rising numbers are unable to afford the most basic of material and social needs. In Britain, the risk of child poverty has doubled in 40 years. Yet the limits to the lifestyle choices of the super-rich are constantly being raised. Few modern tycoons go without the private jet, the luxury yacht, even the private island.
A key source of this paradox is Britain’s growing wealth divide. Despite its weakly performing economy, Britain is asset rich. National wealth (of close to £15 trillion) is nearly seven times the size of the economy, up from three times half a century ago. Nine-tenths of this towering asset mountain is privately owned, and much of it has been captured by the already rich. The wealthiest tenth owns close to half of these assets while the share held by the bottom half has never exceeded nine per cent. Much of this bonanza has been unearned, the product of forces such as state-driven asset inflation and widespread corporate extraction.
‘We can have democracy in this country’, declared Justice of the American Supreme Court Louis Brandeis a century ago, ‘or we can have great wealth concentrated in the hands of a few, but we can’t have both’.
What the influential economist Roy Harrod called ‘the unbridgeable gulf’ between ‘oligarchic and democratic wealth` is not just the source of many of today’s deep-seated social crises. The mechanisms used to secure ever-rising personal fortunes at the top also impose immense economic harm. Today’s tearaway fortunes are less the product of a dynamic leap-forward, than of the accretion of economic power, monopolisation and elite control over scarce resources.
Modern business practice is too often associated with unproductive activity geared towards personal enrichment. Many large companies have been turned into cash cows for a financial elite through anticompetitive devices and the rigging of financial and product markets. This is all a far cry from the value-creating model of entrepreneurialism promoted by Margaret Thatcher and Tony Blair.
The question of who owns the economy should be a dominant issue in political economy. For the last 40 years the question has been settled by an adherence to a private ‘property-owning democracy`. Margaret Thatcher favoured a shift from collectively to individually owned wealth. This goal became a blueprint for government with a string of policies from the discounted sale of council homes to the public offering of cut-price shares through rolling privatisation.
The gradual erosion of Britain’s common wealth base has proved one of the most socially damaging state-driven trends of recent times. Here there are parallels with the historic removal of traditional rights to common land through centuries of ‘enclosure’ by the landed classes up to the end of the industrial revolution.
Mass exclusion from the asset base – private and public – is endemic. The number of first-time home buyers is less than half its mid-1990s rate. Individual shareholding has shrunk and is largely confined to the rich and affluent. More than a half of shares in the nation’s quoted companies are owned overseas (up from eight per cent 60 years ago), mostly by giant US asset management companies and sovereign wealth funds. Today’s strategy of ‘private good, public bad’ – largely endorsed across the political spectrum – has driven the ‘marketisation of everyday life’, the colonisation of wealth at the top, and the exclusion of swathes of society from access to basic services and needs.
It’s time to rethink the politics of asset holdings by embracing a new principle of wealth sharing through a more egalitarian distribution of property rights. The aim: to ensure that all citizens have a minimum stake in and access to the gains from economic activity through new forms of social and community ownership.
Such a shift in governing philosophy would have a profound and progressive effect on the pattern of life chances. It would require some big policy shifts, including a new focus on ‘asset redistribution` to parallel the system of ‘income redistribution’ that has been one of the main, if much weakened, pro-equality and anti-poverty policies of the post-war era. This transfer requires higher taxes on wealth. Capital taxes account for less than two per cent of GDP.
New forms of regulation are also needed to prevent the misappropriation of the national asset base though corporate extraction. A higher proportion of national wealth also needs to be socialised. Only a tenth of Britain’s wealth pool is currently publicly or socially owned, down from closer to 30 per cent in the 1970s. This should be achieved through new forms of state and social and employee ownership – through co-operative and mutual enterprises – and the introduction of new models of ‘people’s capital’.
One route to a ‘wealth-sharing democracy’ would be through a collectively owned citizen’s wealth fund owned by all on an equal basis. Such a fund could be financed from a mix of sources: new long-term government bonds; the transfer of several highly commercial state-owned enterprises, such as the Land Registry; part of the proceeds from higher wealth taxes; and new equity stakes in large corporations. Such equity stakes would recognise the quasi-social status of companies, and that society is as much a stakeholder as are shareholders.
A wealth-sharing society would take time to build. But it would reverse the over-emphasis of the private over the public realm, and make a big dent in the heavy bias to inequality built into the present economic system.
Stewart Lansley is the author of The Richer, The Poorer: How Britain Enriched the Few and Failed the Poor, a 200-year History, 2021, Bristol University Press. He is a visiting fellow at the University of Bristol, a Council member of the Progressive Economy Forum and an Elected Fellow of the Academy of Social Sciences.
The Richer, The Poorer by Stewart Lansley is available on the Bristol University Press website. Order here for £19.99.
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