To Tackle Inequality, We Need To Start Talking About Where Wealth Comes From

| Strategize!

Above Photo: Mohamed Hassan from Pixabay, CC0 Public Domain

Do people in Britain resent the rich? According to two new studies published this week, the answer to this question is: not really.

The studies, one commissioned by Trust for London and another by Tax Justice UK, explore public attitudes towards wealth based on focus groups held across England. Both found that most people are relatively content with people getting rich, and that attacks on the wealthy are often viewed negatively.

This presents a dilemma for progressives. In recent years left-wing leaders on both sides of the Atlantic have taken a more confrontational approach towards the super-rich. In Britain, the Labour Party’s war cry under the leadership of Jeremy Corbyn has been ‘For the many, not the few’, while in the US Bernie Sanders has made no secret of his contempt for billionaires.

But what if it turns out that ordinary people don’t agree? One response to this dilemma, as outlined by Sonia Sodha in the Observer, is to accept that “the belief that Britain is a meritocracy is ingrained in our collective psyche”, and adjust policies and narratives accordingly. This would mean ditching the class-war rhetoric and instead putting forward solutions designed to appeal to a meritocratic worldview. This might include, for example, closing tax loopholes and increasing particular taxes on grounds of fairness and efficiency.

Sodha is right to point out that this strategy is more likely to chime with people’s existing attitudes towards wealth. As the authors of the Tax Justice UK report note: “The participants in our focus groups largely believe in meritocracy. Those with wealth were seen as having acquired it through hard work.” Participants in the Trust for London research expressed similar views.

But does this mean that progressives should accept the way things are and move on? Not necessarily. As a well-known philosopher once said: “The philosophers have only interpreted the world in various ways; the point, however, is to change it.”

People’s views aren’t formed in a vacuum: they are shaped by social and political forces that evolve over time. Margaret Thatcher’s neoliberal revolution wasn’t just successful because it reorganised the economy – it was successful because it embedded a particular narrative about how wealth is created and distributed in society. This is a world where, so long as there is sufficient competition and free markets, every individual will receive their just rewards in relation to their true contribution to society. There is, in Milton Friedman’s famous terms, “no such thing as a free lunch”. It’s a world where businesses are the “wealth creators” who create jobs and drive innovation, and business owners are entitled to the financial rewards of success – regardless of how enormous they are.

Tony Blair’s ‘Third Way’ largely accepted this narrative of wealth creation, and until relatively recently nobody in the mainstream of British politics challenged it. Is it really any wonder that most people believe it?

The problem, of course, is that it bears little resemblance to how the economy actually works. While it is true that working hard will generally help you earn more money, this causality doesn’t hold in reverse: not all wealth has been attained through hard work. In practice, the distribution of wealth has little to do with contribution, and everything to do with politics and power.

Someone that is born in the UK will earn more than someone born in Sub-Saharan Africa, even if they perform exactly the same labour. Why? Because one was lucky enough to be born in a powerful country with a legacy of imperialism that has rigged the rules of the global economy in its favour. The economist Branko Milanovic has estimated that 60% of someone’s income is determined by where they were born, and an additional 20% is determined by the income level of their parents. This means that place of birth and parental background accounts for around 80% of someone’s earning power on average.

In the age of the ‘self-made’ millionaire, the lottery of birth is more important than ever. As George Monbiot once said: “If wealth was the inevitable result of hard work and enterprise, every woman in Africa would be a millionaire.”

Within countries, extreme fortunes almost always derive from control over a scare resource – fossil fuels, minerals, land, monopoly networks, money etc. To the early classical economists, this kind of wealth – attained by simply being a gatekeeper to scarce resources – was deemed to be unearned, and referred to it as ‘economic rent’. But today the Sunday Times Rich List is dominated by rentiers – financiers, real estate tycoons, oil barons, monopolists and aristocrats – many of whom acquired their original fortune in somewhat questionable circumstances.

As Grace Blakeley puts it: “You do not become a billionaire through labour. You become a billionaire through inheritance, corruption or economic rents – or, in most cases, some mixture of all three.”

But it’s not just billionaires that accumulate wealth without working. Over a third of all the income in Britain is paid out as capital income (dividends, rents and interest) rather than labour income (wages and salaries). Capital income is inherently passive: it doesn’t correspond to work or skill, but ownership. And while capital ownership is distributed extremely unequally, in recent decades changes to pensions and the housing market have enabled many middle class households to join the capital income gravy train and accumulate wealth without lifting a finger.

As I’ve written about before, since 1995 three quarters of all wealth accumulated in the UK – totalling £5 trillion – has come from rising house prices. The driving force behind rising house prices has been rising land prices. But land is not a source of wealth but of economic rent. The truth is that most wealth made through the housing market has been gained at the expense of others who are now seeing more of their incomes eaten up by higher rents and larger mortgage payments. The housing boom is not an example of wealth creation, but wealth redistribution on an unprecedented scale.

And then there is inheritance: around £100 billion of wealth is passed on to new owners every year without any corresponding productive activity, much of it escaping any tax.

Overall, the proportion of wealth in Britain that can truly be ascribed to “hard work”, however loosely defined, is infinitesimally small. The idea that Britain is a meritocracy, however appealing, is objectively false – and we shouldn’t be afraid to say so. But it’s hardly surprising that many people believe Britain is a meritocracy when the Thatcherite narrative has gone unchallenged for decades.

If the left is to achieve its historic aim of achieving distributive justice, it can’t do so by parroting a narrative on wealth that was designed to promote the cause of Thatcherism. Instead, we must develop a distinct and compelling narrative about how wealth is really created and distributed in society.

This means recognising that wealth creation is a collective process involving many different interdependent stakeholders – workers, the government, the natural environment, civil society, and, yes, entrepreneurs. It means highlighting how the mechanism linking contribution and reward for each of these stakeholders is fundamentally broken: workers are being paid less than the value they create, owners are appropriating wealth they didn’t create, vast profits are being made by destroying our ecosystems, and the role of the state in wealth creation is undervalued. And it means proposing new mechanisms for distributing financial rewards that more accurately reflect the collective nature of wealth creation, and rebalance power between capital and labour.

Crucially, it also means challenging the idea that rising asset prices – Britain’s favourite form of wealth – constitutes wealth creation. As John Stuart Mill wrote back in 1848:

“If some of us grow rich in our sleep, where do we think this wealth is coming from? It doesn’t materialise out of thin air. It doesn’t come without costing someone, another human being. It comes from the fruits of others’ labours, which they don’t receive.”

This isn’t just about winning a technical argument – it’s also about winning at the ballot box. Both pieces of research published this week found that although most people view wealth accumulation in a positive light, they hold a much more negative view of wealth that has not been earned through hard work or skill. As the Trust for London report notes:

“Those who were thought to have achieved their status and financial position through hard work were deemed to be deserving of it… By comparison, those deemed not to have had to work hard were viewed less favourably.”

Where people’s wealth comes from matters. If people can be persuaded that Britain isn’t quite as meritocratic as it’s made out to be, public attitudes towards wealth can be shifted in a more progressive direction. Indeed, the authors of the Trust for London report conclude that “if policy makers wish to address inequality, they may do better to think in terms of narratives of how riches are acquired”.

These narratives won’t change overnight. But they won’t change at all unless progressives fight to change them – just as Margaret Thatcher did in the 1980s.

This doesn’t mean criticising people’s natural desire to earn more money, or attacking successful business owners who treat their employees and the environment well. But it does mean drawing attention to the fossil fuel executives who are enriching themselves by destroying the planet; the bankers who cashed-in on the crisis they caused; the aristocrats who live off their ancestors’ ill-gotten gains; and the exploitative bosses who underpay their staff.

In politics you can either shape the world, or be shaped by it. On this issue, there’s no middle ground.

  • voza0db

    More talk is the way to go!

  • irategrandmother

    Wealth inequality in the U.S. is much worse than in Britain. The thinking in the U.S. with regard to wealth inequality appears to be ahead of the views of the Brits.

  • ANTONIO

    PROFIT BY LABOR POWER. This is a simple matter in which the capitalist acquires the necessary merchandise and then sells it at a greater price. Merchandise – money – merchandise. The acquisition of merchandise not to satisfy a need, but for sale, is another matter: Money – merchandise – money. Buying for sale to make a profit. Capital is a value that grows by itself (the merchandise is the same) .It starts with money. It starts with the acquisition of the means of production (raw materials, machinery, capital goods) and of the labor force. It becomes productive capital. The merchandise is sold at market and is transformed into monetary capital, not merchandise. Now the capitalist has more money than when he started. How is it possible that the capitalist is able to gain a higher value for the same merchandise? The answer is labor power. What value does labor power have? The value of each merchandise is determined by the amount of labor necessary to produce. Labor power is exercised by real people, who have needs for themselves and their families. The time that is necessary for the production of such resources is what determines the value of labor power. Suppose there is a six hour day. When the capitalist hires the worker, he will pay a full day that expresses six hours of work. The worker works his six hours and is paid for six hours. But this does not make capital out of money, because there is no profit. He who buys the labor power of the worker sees it differently. . The worker works 12 hours instead. The value of the labor force, and the value created by the labor force are two different things. The value that the worker gains for the capitalist is for 6 hours, while the value that the worker gives to the capitalist is the product of 12 hours. The owner of the money pockets the difference . Six hours are not paid for, 6 hours are. There has been a sleight of hand that transforms money into capital. The work that is not paid for is exactly what creates capital. This unpaid labor supports all who do not work in the society, and is used for taxes, the cost of the land, machinery, etc. The salaried worker creates the money necessary for his maintenance during part of the day. This is called necessary work time. The other half is complementary time. The worker with complementary labor creates profit, which is unpaid labor appropriated by the owner, who is not interested in the means of production (raw materials, machinery, capital goods), consumer goods, anything useful for society, but is only interested in the greatest profit possible. There is no end to their greed.

  • This will likely be the final heads-up/warning I provide readers here. First and foremost – we All must start thinking for ourselves. Question what you hear, question what you read, question your own world views, question your own biases.
    This warning is not meant to cause extreme fear or panic – People Do Not Behave Rationally when they are Petrified or Panicked. I only wish to provide you with some information that I Do Not Want You to Take as Fact – I want to cause you enough concern that you will ask questions, do your own research, draw your own conclusions and take responsible actions that you believe to be best for yourself and those you care about.

    I don’t have time to give you a lot of details. You don’t have time for me to soft pedal this. If you listen and do your own rapid due diligence and then act swiftly, you will be far more prepared for what is coming than the vast majority of the masses.

    You need to know two things –
    One: The economy is collapsing – the real economy was already in bad shape – now the hyper inflated bankster created fake financial economy is cratering and it Will decimate what’s left of the real economy – We are headed for, not a recession, a depression. You will witness asset classes collapse in price – stocks, bonds, housing, luxury goods, new cars, etc. and you will see further inflation of everyday goods as they become more scarce and therefore more precious. Thanks to this covid19 nightmare, it has severely damaged global supply chains. What does that mean? It means the shipments from overseas that are docking at ports now will constitute the last resupply for an unknown period of time of things you buy that you typically don’t even think about not having – pharmaceuticals, vitamin supplements, toilet paper, paper towels, electronics, etc. – long list.

    This virus, thanks to an inadequate response in way too many countries, is spreading worldwide. When it comes to a neighborhood near you, and it will have a negative impact on domestic supply chains as well as the international ones. If you do not do some prudent preparing for shortages right now, you will be left hanging in the wind. My best guess is that you have no more than a month before this hits most of our stores that rely on imports like a 2×4 in the face.

    So, do your homework, make your own decisions about what’s real and what’s not.
    And, if you have any doubt in your mind about what is taking place in our economy, buy some provisions.

    PLEASE Do Not Hoard. Figure out what you need to get by for at least a month and better yet, three months (canned and dried food, water, prescriptions, first aid, bleach, toilet paper, cash, etc.). Go out and calmly purchase what you need. Buy what you normally would use so if you are fortunate enough not to need all of it for this particular situation, you’ll eventually use it anyway – no wasted money on your part.

    Again, I cannot stress this enough. Please Do Not Hoard. Please do your own due diligence – it is very important for all of us moving forward to Think For Ourselves.

    I wish you all well.

  • mwildfire

    They say they did focus groups across the UK–well maybe the UK is different. I don’t buy this…in my experience the one thing the Right and Left agree on is resentment of the fat cats. It’s just that the Right has somehow persuaded its minions (via Fox News etc) that the rich elite are socialist liberals.
    I mean really–WORKED for it? I know money can buy you a lot but if a janitor works an exhausting 8 hour shift for say $80, and Jeff Bezos makes a million bucks that day, did Bezos somehow put in several hundred hours of work in a day? This is OBVIOUSLY horseshit.

  • mwildfire

    You need to make the distinction between stashing provisions and hoarding. I guess what you mean is, stash up a few months’ supply of things for your own use, but don’t grab more than that to use for trade or enrichment.
    I will add a coda, though I’m not sure your alarm is actually merited. Stashing important supplies like food and medicine is important, but it would be wise in the long run, for the complete collapse that may be in the offing now or later, to prepare for greater self-sufficiency. This means having a means of collecting or filtering potable water (but only about 1% of what you need has to be potable). Have access to at least a small garden, acquire seeds, and learn how to grow some things. Consider chickens. If you are thinking about going solar, do it now. Work on community preparedness and establishing ties with neighbors.

  • Thank you for clarifying what I meant as ‘hoarding’; yes, I meant take no more than what you need so others can get what they need.
    And you are also correct that people need to do some of what you suggested for longer term preparations. My focus today is on preparing to get through the immediate impacts.

    For the foreseeable future, my time and efforts will be directed toward my family and my local community (why I said this was likely to be my last heads-up). The more people in my local community that are prepared, the less desperate people I need to worry about. Community can also be a place where we can turn when a crop fails, when someone needs to borrow a tool they forgot to buy or didn’t think they’d need, when we need knowledge beyond that which we possess as individuals, etc.

    I respect your skepticism as to whether or not my warning is merited. I have enough knowledge and information to be quite convinced that it is. And, yes, that is my own conviction. Everyone needs to decide what’s best for themselves and that includes what they want to believe.

    I wish you and this community of change agents well.

  • Of course. For those with critical thinking skills, the whole “meritocracy rewards hard workers” pitch by the Capitalists has always been self serving BS. The somber scolding admonitions from the Capitalist parasites that the poor “deserve to be poor because they are irresponsibly lazy” has also ALWAYS been empathy deficit disordered bullsh^t.

    “Capitalist ideology claims that the world is perfectly ordered and everybody is in their place (i..e. everybody gets what they deserve). This self legitmating aspect of Capitalism is Socially Catastrophic. This is the Victorian view of the world.” Rob Urie – Author ” Zen Economics”

  • Southern

    Has anyone figured out the link between the 21 Trillion that the Pentagone has proven unable to account for and the rise and rise of the total combined wealth of the financial elite?

  • manfred127

    Alexandra Bruce’s forbiddenknowledgetv on November 27,2019 posted a Catherine Austin Fitts interview “Where did the missing trillions go?Catherine Austin Fitts on The Corbett Report”.

    “My personal guess is that much of this money has gone into the creation of the tech giants to create the emerging system of global control. Consider that Amazon is running the cloud computing for the US intelligence agencies and that Microsoft will be running the cloud for the US Department of Defense.
    Says Fitts, “Once you get those two clouds in place with FASB 56, you can re-engineer the entire government operation…to be absolutely controlled by a secret group of people who can do whatever they want…it is a complete coup d’état. We go from a financial coup d’état to a complete coup d’état.” “

  • Steven Berge

    Same people in charge of both I would imagine. Probably the people who print money for free.

  • manfred127

    Yes indeed.
    Oddly enough Ms.Bruce posted another utoob interview with Catherine Austin Fitts today with Dark Journalist”Black Budget Space Wars and AI Superpowers!”

    A few tidbits:
    “”So, they need to come off the petrodollar. What do they need to do? They need to electrify. So, if you look at the Climate Change Op, [it’s] designed to basically force electrification at high speed and allow that group to lock in the global currency…it’s the pushback of the Unipolar model….

    What Mr. Global wants is low cost, low fee, low transactions but on a digital infrastructure where you can also do energy – and you can bring up breakthrough energy as as soon as you have a sufficient digital infrastructure…

    “That’s the war right now: can the oil producers plus China de-dollarize fast enough to create a multipolar world? Think of it this way: Mr. Global is on both sides. Mr. Global doesn’t care who wins. Mr. global cares that we have a digital currency, so you see, a competition between different factions for the control of the digital currencies, one of my questions before the coronavirus is, are we going to split into two digital systems? Is the solution going to be a China-based Asian digital system and then you have a US dollar-based?”

  • Southern

    Thanks the explanation in the video made perfect sense to me – the digitization of governments around the world plus the privatization of what were once public services all serve the same masters.

    Specially interesting is how Catherine explains that its possible for the missing trillions to be retrieved.

  • manfred127

    Look up Corey’s Digs—-“Shipwrecked on Ten Islands with Clintons & Branson” to see the nexus with energy writ large,so to speak.I would send the you-are-ell,but you can’t here.

  • Kapricorn4

    98% of all money is now digital, whether it is the US dollar, the Euro or Swiss Francs et cetera. Right now all these currencies are under the control of a private banking oligarchy, who create all this money ex nihilo on their computers as debt every time they make a loan, with the exception of China, whose central bank is government owned. This is why the private banking cartel accuse the Chinese of currency manipulation and why China is surrounded by US military bases, and subject to US tariffs, because without debt China’s economy will soon surpass that of the US.

    “If this mischievous financial policy, (of creating debt free money) is used by China, shall become indurated down to a fixture, then that Government will furnish its own money without cost. It will pay off debts and be without debt. It will have all the money necessary to carry on its commerce. It will become prosperous without precedent in the history of the world. The brains, and wealth of all countries will go to China. That country must be destroyed or it will dominate every country on earth.

  • manfred127

    I went memory tripping on Charles Walters, so ended up on the ‘Zon reading reviews of his book”Unforgiven”.

    One of the reviewers posted the poem from the forward by Tomasso Campanella,”The People”:

    “The people” is a beast of muddy brain
    That knows not its own force, and therefore stands
    Loaded with wood and stone; the powerless hands
    Of a mere child guide it with bit and rein;

    One kick would be enough to break the chain;
    But the beast fears, and what the child demands,
    It does; nor its own terror understands,
    Confused and stupefied by bugbears vain.

    Most wonderful! with its own hands it ties
    And gags itself-gives itself death and war
    For pence doled out by kings from its own store.

    Its own are all things between earth and heaven;
    But this it knows not; and if one arise
    To tell this truth, it kills him unforgiven.

  • Kapricorn4

    “In prison Campanella (1568- 1639) reverted to Roman Catholic orthodoxy and wrote his celebrated utopian work, La città del sole. His ideal commonwealth was to be governed by men enlightened by reason, with every man’s work designed to contribute to the good of the community. Private property, undue wealth, and poverty would be nonexistent, for no man would be permitted more than he needed.”

  • manfred127

    I can see where being steeped in ideas like the Kingdom of God and personal sublimation into the Body of Christ certain conclusions might be forthcoming.
    Van Gogh had an early religious phase where as a lay preacher he gave away all he had and found himself dismissed for his literalism.Some ideas fit better into art than realpolitik.

  • Kapricorn4

    Long ago religion was the science of its day to explain good fortune or bad. Kings were the military rulers by conquest, who appointed a priesthood from its own ranks to further their interests by keeping the proletariat in their rightful place of subjugation by means of superstition.

  • manfred127

    The unvarnished view of Seneca :”Religion is regarded by the common people as true, by the wise as false, and by rulers as useful.”

    For my part I am most appreciative for whatever motivated the ancient Irish monks to copy manuscripts ,or Bach.

  • Kapricorn4

    It was the life of O’Riley compared with working in a factory 🙂

  • manfred127

    Given the picture of all this manipulation and the world they seemingly want to make of it,you really must take a gander at this,especially the last half.It would seem things are to get even more perilous:

    https://www.lewrockwell(dot)com/2020/03/thomas-luongo/russia-just-told-the-world-no/

  • Southern

    Thanks that made an interesting read – a drop in the price of crude is hardly ever passed on to the end consumer .

    I’d be fair to notice a drop in fuel prices at the pump or par with this article’s price for crude.

  • manfred127

    Its going to be even more interesting if that mountain of debt they piled up frakking our way into an oil and gas bonanza blows.Assuming there was to be a plan to transition out of the dying petrodollar,it looks as if they may have bungled it and inadvertently dealt Vladimir a royal flush.