Inequality, class and the crisis

17th February, 2012 12:01 pm

Redistributive policies need to be part of the answer to income inequality, and politicians should lead the way in building public support for them. Labour must convince the public that extreme inequality is not an inevitable product of a capitalist society.

One positive by-product of the economic crisis is that public awareness and concern about inequality is greater than at any time in living memory. The damaging economic and social impact of inequality has been widely recognised, whether by the leader columns of the Financial Times or the tents of those identifying as part of the 99%. In particular this resentment has been reflected against the City and the undeserving rich. The recent Fabian/TUC poll suggests inequality is now an issue that the UK’s ‘squeezed middle’ are concerned about.

For egalitarians, this potentially offers a great opportunity. But, as we saw with the economic crisis, the right can be adept at re-framing to their advantage what should rebound on them.  We must acknowledge the increasingly punitive and demonising attitudes towards those at the bottom, who are seen by many as even more undeserving than those in the City. Class is a social relation as well as an economic distributive category that shapes life chances. The ‘hidden injuries of class’, as Richard Sennett put it, are one of the themes of Owen Jones’s book Chavs: The Demonization of the Working Class. In my own work, I have called this the ‘othering’ of people in poverty. This ‘othering’ diminishes the sympathy and solidarity necessary to build public support for effective action against poverty.

The potential problem with the notion of the ‘squeezed middle’ is that it runs the danger of encouraging resentment against those at the bottom as well as the top, particularly when reinforced by constant references to the merits of ‘hard-working families’.

We also need to take on board that, in spite of the consistent public belief that the income gap is too wide, enthusiasm for egalitarian policies is diminishing, with particular regard to redistribution via the tax and benefits system. Some will respond that we should give up on further redistribution. But public attitudes are not fixed; politicians should lead, not simply follow public opinion. While certainly redistribution is not the only answer to inequality, it has to be part of the answer. Even the OECD acknowledged the importance of redistributive tax-benefit policies in its recent report on growing inequality. The report recognised the potential for top earners to pay more of their fair share of tax, given their greater share of overall income. It also noted that the tax and benefits system had become less redistributive in the UK since 1975.

A number of analysts have suggested that the shift in public attitudes against redistribution reflects, in part at least, New Labour’s antipathy to the idea (even if in practice it was redistributing by stealth). I agree. Nevertheless, as Karen Rowlingson and colleagues pointed out in the 2010 British Social Attitudes Survey, a significant proportion of people “are sitting on the fence” when it comes to redistribution. They argue that, by making a stronger case for redistribution, politicians and lobby groups could play an important role in getting them off the fence.

However there are other ways, aside from income redistribution, that we should be tackling inequality. We also need to challenge the distribution of original income, asking fundamental questions about the value we attach to different kinds of work. This must be done in relation to both high and low pay, and will be a highly gendered question. The importance of what has been called the ‘pre-distribution’ of income is the central theme of a new Smith Institute report by David Coats, From the Poor Law to Welfare to Work. And inequalities of wealth are even greater than those of income: we must also address these and the role of inheritance.

Whatever the specific policy agenda, the left needs to challenge the idea that such extreme inequality is inevitable in a capitalist society. The task is to persuade people that a more equal society would mean both a stronger economy and a society in which the great majority can live better lives and be free to pursue their dreams.

This is an essay from the latest Fabian Society pamphlet “The Economic Alternative”, posted here as part of our “Economic Alternative Day”. You can download the pamphlet in full here.

  • GuyM

    What actually is this article saying?

    There simply is not enough of the “1%” to go around, so by all means curb the distastful levels of excess at the very top of banking etc. but that won’t do very much in terms of increasing income for those at the bottom.

    You are either going to grasp the nettle and go for those on the £75,000 to £150,00 incomes as well as the 1% or you’ll get nowhere.

    But you know what will happen if you start getting heavily redistributive at such a low level and that will be highly uncompetitive tax rates and a likely brain drain in a global marketplace.

    As for the last bit on inheritance tax, I really don’t think you want to go there. Gordon Brown got frightened away from calling an election due to a Tory policy in that area and most people in the country would look badly at a policy that took their life savings and property away from them upon death and left little too their children.

    Which is hardly surprising is it? If you spend 30 to 40 years working, saving and sacrificing to get your children set up, educated and looked after, you are not going to suddenly wash your hands of that mindset upon your death bed and hand most of your life’s work over to the state.

  • Daniel Speight

     Ruth haven’t there been some polls pretty much on the question of, I will crudely put it, taxing the rich. Public attitudes are now more than they have been for a long time in favour of reducing inequality by using taxation. It’s Osborne that finds the subject of the 50p tax rate toxic not Labour.

  • Jeffmac

    The worrying truth is that Labour should be much further ahead in the polls by now. Labour high command has to get a grip. People are getting very, very scared and very angry.  There is now a new reality to confront, even since Christmas things have moved on. We’re now facing the very real prospect of a privatised health service, disabled and terminally ill people are having benefit cuts and are being forced to work, Tescos and others are now using slave labour! Why has this been allowed to happen?

    One of the reasons Labour lags behind in the polls is because its ‘tory lite’ stance on all these issues has no constituency. Right wingers have the real thing in the Tories and Lib Dems, and they’re loving all this. Many on the left, and centre for that matter, now have to look at alternatives because Labour just isn’t cutting it. 

    If the Labour Party is to survive it now has to ask itself whose side is it on? Maybe New Labour was right for 1997 but that’s gone and the new reality needs a new approach. These right wing neo con Tories are much worse than anything we’ve ever see; vile, ruthless, heartless, mean…….they are much lower than vermin. I suggest Labour now pins its colours to the mast, gets behind its core and fights for the people of this country. People are basically fair and decent minded in this country and this right wing government does not represent – by any stretch, a majority view of how we should run a society.

    I think the argument for redistribution and fairness now can be made very strongly,like Obama in the states and Labour should make it….I still have faith in the people of this country but they need a choice.

  • Winston_from_the_Ministry

    “Labour must convince the public that extreme inequality is not an inevitable product of a capitalist society.”Good luck with that, maybe afterwards you can try convincing them that we can live off unicorn rainbow glitter farts.

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