Aditya Chakrabortty is an economics leader writer on the Guardian. He's very good at his job. He is not just a good economist, he is a good writer too.
This comes from his article in today's Guardian entitled 'How Bob Crow is saving the economy':
[M]any of the ministers who talk about tackling inequality are this week laying into the teachers, jobcentre clerks and other public servants preparing to strike to protect their wages and pensions.
As Aditya points out, ministers who have made it their mission to suppress the wages of the ordinary working people of this country are doing us a great disservice. As recent research from the IMF has shown, and as he notes that research:
looks at what happens when a thin slice of people at the top of society see big rises in their income while everyone else is left behind — exactly what happened in the US both before the Wall Street crash of 1929 and before the great banking meltdown of 2008. The end result, conclude researchers Michael Kumhof and Romain Ranciere, is an almighty crisis.
To keep making healthy returns on their cash, well-off people have to lend to poor and middle-income households so they can keep buying stuff. "The inevitable result is that loans keep growing, and therefore so does . . . the probability of a major crisis that . . . also has severe implications for the real economy." The credit bubble pops and the resulting mess lands all over the economy.
This is one of the first full-blown studies of the link between inequality and financial crises, and it is explicit that there is one. What's more, Kumhof and Ranciere argue that the "restoration of the lower income group's bargaining power is more effective"
The conclusion is inescapable: inequality is causing a crisis in our economy and strong unions can help put matters right.
Would Mr Cameron like to comment because right now it's the inequality he supports that is causing the harm in our economy, and the demands of unions that would set things right.
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Read the column first things this morning, Richard. Yes, a good piece of debunking of the blatantly contradictory views of Cameron and co (Milliband and Balls included, I have to say). Mind you, it’s not just on that is it. They are quick to support the protests of the citizens of Libya, Syria and so on, but not so keen to support the democratic rights of their own citizens (or indeed those in Greece) to show our anger in what is increasingly the only effective way open to us.
Richard,
I can concur with this article from my own experience.
Twenty years ago I worked for the AA when it was owned by its members and operated on a non-profit basis before the asset strippers tookover. They had unions and a staff association who negotiated on behalf of the staff each payround. Every year we would get a ‘cost of living’ (inflation) rise plus extra for improved productivity. It was the best job I ever had and many people stayed there years as they were treated well.
My current employer is a large foreign-owned company which has no union recognition at all. They have just announced a zero rise for this year which has been met with a collective shrug from the workforce. I’ve been in this job for eight years so recetly I decided to look for a move. I was shocked to see the pay rates were exactly (i.e. not adjusted for inflation) what they were when I last changed jobs eight years ago.
It seems to me that the ‘squeezed middle’ – those lucky to have a job but not lucky enough to set their own remuneration – are being sacrificed in the quest for (illusory) increased growth and continually rising profits which benefits only the rich.
Anyone not inhabiting the top 1% of earners who doesn’t realise they are being exploited needs to wake up. Before long the Tories will look to abolish the minimum wage and deplete other rights (Osbourne is already wanting to tear up TUPE) which have been long fought for. Once they are gone they will be gone forever.
“UK households have seen the biggest fall in disposable income for more than 30 years, official figures have shown”
http://www.bbc.co.uk/news/business-13948326
Actually I have checked on the IMF website and this was a IMF research paper published in November 2010 and what I find astonishing is that it has not been highlighted previously by any politician in the UK. Unfortunately they are too timid to point out that the real problem is indeed stagnant wages and salaries. As I have said before on this site where the US leads the UK follows. During the past 30 neoliberal years the majority of people were seduced by cheap consumer goods from the Far East but still had to incur debt to pay for them. I am witing in hope that the Opposition will make this argument but I have my doubts.
Of course the opposition won’t do anything… they are, after all, the other side of the same coin… and it’s a two-headed coin at that. Or do I mean two-faced? The growth in inequality has been going on for decades, irrespective of the alleged colour of the party in power. Labour spent their time in power explicitly and implicitly driving up personal debt.. one of the most brutally efficient means of sucking money out of the pockets of the 99% into the pockets of the 1%.
There are, of course lots of reasons for this.. but let’s think about tax. Most of the criticisms of the tax system I read here are focussed on those taxes which affect income (personal or corporate). That’s fine, but even fair and unavoidable progressive income taxes serve only to slow down the growth of inequality… the rich still get disproportionately richer every year. If we really want to halt and reverse the problem then we need to tax wealth.. because that’s the only time we start to be truly progressive.
I’m still pondering the details, but 100% inheritance tax sounds like a plan.