Much alarm has greeted the High Pay Commission’s revelation that income inequality in the UK is set to reach ‘Victorian levels’.
British incomes are already as unequal as they were in 1940. Decades of slow, but perceptible, redistribution since the end of World War Two have been wiped out. That trend is set to continue and worsen.
The top 0.1 per cent of the population - just 47,000 people - now earn an average of £538,600 a year. That’s more than 20 times average earnings. A typical FTSE100 chief executive earns £3.4m a year - or 145 times what his or her workers would typically be paid.
The top 1 per cent of the country own 25 per cent of all the wealth. The bottom 50 per cent, meanwhile, own 7 per cent.
Some of the commentary has attempted to pin the blame on New Labour. Ian Duncan Smith has, disgracefully, tried to justify his assault on welfare by claiming Labour’s limited spending increases were wasted.
Clearly, Blair and Brown did little to restrain the rise of the super-rich. But the real rot set in under the Tories. The steepest rises in inequality occurred in the 1980s, as relatively secure jobs were destroyed and financial markets liberalised. The result was an effective transfer of resources from the lower - to the higher-paid.
The decades since have not changed that pattern. Free markets follow their own logic: to those that have, more shall be given. Wealth tends to concentrate. Liberalising the market - letting market forces loose - has made societies everywhere more unequal.
Reversing this great transfer of resources to the richest requires a transformation of the economy - a fundamental shift in how it operates. New Labour’s feeble - if real - reforms did little. We need instead to tax the very wealthiest, clamping down on the £80bn tax avoided every year and closing the non-dom loophole.
A new wealth tax can help pay for public services. And the great gambling den of the City of London has to be ruthlessly squeezed. Public investment can create new, green jobs for hundreds of thousands where private speculation enriched a handful.
Radical economist James Meadway has been an important critic of austerity economics and at the forefront of efforts to promulgate an alternative. James is co-author of Crisis in the Eurozone (2012) and Marx for Today (2014).