The justifications for extreme inequality have collapsed. But only the Green Party is prepared to take the obvious step
By George Monbiot, published in the Guardian 30th July 2014
When inequality reaches extreme and destructive levels, most governments seek not to confront it but to accommodate it. Wherever wealth is absurdly concentrated, new laws arise to protect it.
In Britain, for example, successive governments have privatised any public asset which excites corporate greed. They have cut taxes on capital and high incomes. They have legalised new forms of tax avoidance(1). They have delivered exotic gifts like subsidised shotgun licences and the doubling of state support for grouse moors(2). And they have dug a legal moat around the charmed circle, criminalising, for example, the squatting of empty buildings(3) and most forms of peaceful protest(4). However grotesque inequality becomes, however closely the accumulation of inordinate wealth resembles legalised theft, political norms shift to defend it.
None of this should surprise you. The richer the elite becomes, and the more it has to lose, the greater the effort it makes to capture public discourse and the political system. It scarcely bothers to disguise its wholesale purchase of political parties, by means of an utterly corrupt and corrupting funding system(5,6). You can feel its grip not only on policy but also on the choice of parliamentary candidates and appointments to the cabinet. The very rich want people like themselves in power, which is why we have a government of millionaires(7).
But that describes only one corner of their influence. They fund lobby groups, thinktanks and economists to devise ever more elaborate justifications for their seizure of the nation’s wealth(8). These justifications are then amplified by the newspapers and broadcasters owned by the same elite.
Among the many good points Thomas Piketty makes in Capital in the 21st Century – his world-changing but surprisingly mild book – is that extreme inequality can be sustained politically only through an “apparatus of justification.”(9) If voters can be persuaded that insane levels of inequality are sane, reasonable and even necessary, then the concentration of income can keep growing. If they can’t, then either states are forced to act, or revolutions happen.
For the notion that inequalities must be justified sits at the heart of democracy. It is possible to accept that some can have much more than others if one of two conditions are met: either that they reached this position through the exercise of their unique and remarkable talent; or that this inequality is good for everyone. So the network of think tanks, economists and tame journalists must make these justifications plausible.
It’s a tough job. If wages reflect merit, why do they seem so arbitrary? Are the richest executives 50 or 100 times better at their jobs than their predecessors were in 1980? Are they 20 times more skilled and educated than the people immediately below them, even though they went to the same business schools? Are US executives several times as creative and dynamic as those in Germany? If so, why are their results so unremarkable?
It is, of course, all rubbish. What we see is not meritocracy at work at all, but a wealth grab by a nepotistic executive class which sets its own salaries, tests credulity with its ridiculous demands and discovers that credulity is an amenable customer. They must marvel at how they get away with it.
Moreover, as education and even (in the age of the intern) work becomes more expensive, the opportunities to enter the grabbers’ class diminish. The nations which pay the highest top salaries, such as the US and Britain, are also among the least socially mobile(10). Here, you inherit not only wealth but opportunity.
Aha, they say, but extreme wealth is good for all of us. All will be uplifted by their god’s invisible hand. Their creed is based on the Kuznet’s curve, the graph which appears to show that inequality automatically declines as capitalism advances, spreading wealth from the elite to the rest.
When Piketty took the trouble to update the curve, which was first proposed in 1955, he discovered that the redistribution it documented was an artefact of the peculiar circumstances of its time. Since then the concentration of wealth has reasserted itself with a vengeance(11). The reduction in inequality by 1955 was not an automatic and inherent feature of capitalism, but the result of two world wars, a great depression and the fierce response of governments to these disruptions.
For example, the top federal income tax rate in the US rose from 25% in 1932 to 94% in 1944. The average top rate throughout the years 1932 to 1980 was 81%. In the 1940s, the British government imposed a top income tax of 98%(12). The invisible hand? Hahaha. As these taxes were slashed by Reagan and Thatcher and the rest, inequality boomed once more, and is exploding today. This is why the neoliberals hate Piketty with such passion and poison: he has destroyed with data the two great arguments with which the apparatus of justification seeks to excuse the inexcusable.
So here we have a perfect opportunity for progressive parties: the moral and ideological collapse of the system of thought to which they were previously in thrall. What do they do? Avoid the opportunity like diphtheria. Cowed by the infrastructure of purchased argument, Labour fiddles and dithers(13).
But there is another party, which seems to have discovered the fire and passion that moved Labour so long ago: the Greens. Last week they revealed that their manifesto for the general election will propose a living wage, the renationalisation of the railways, a maximum pay ratio (no executive should receive more than 10 times the salary of the lowest paid worker), and, at the heart of their reforms, a wealth tax of the kind Piketty recommends(14).
Yes, it raises plenty of questions, but none of them are unanswerable, especially if this is seen as one step towards the ideal position: a global wealth tax, that treats capital equally, wherever it might lodge. Rough as this proposal is, it will start to challenge the political consensus and draw people who thought they had nowhere to turn. Expect the billionaires’ boot boys to start screaming, once they absorb the implications. And take their boos and jeers as confirmation that it’s onto something. You wanted a progressive alternative? You’ve got it.
3. Clause 144, Legal Aid, Sentencing and Punishment of Offenders Act 2012.
9. Thomas Piketty, 2014. Capital in the Twenty-First Century. Harvard University Press.
10. Thomas Piketty, as above.
11. Thomas Piketty, as above.
12. Thomas Piketty, as above.