Tackling poverty and inequality must be one of the Labour Party’s primary goals

Why are the many still poor? As Labour looks increasingly likely to lead the country, tackling poverty and inequality should now be one of the party’s primary goals.

In 1884, the newly formed left-of-centre think tank, the Fabian Society, published its first tract: Why are the Many Poor? The tract, which sold 100,000 copies, asked further questions including whether Britain has created a “just and wise system, worthy of humanity?” It is a remarkable comment on Britain’s social record that these same questions are as relevant today as a century and a half ago.

In the late 1970s, Britain achieved peak equality and a low point for poverty. This egalitarian high water mark was short-lived. Britain has moved from being one of the most equal of rich nations to the second most unequal after the US. Over the same four decades, the child poverty rate has more than doubled in relative terms. The poorest fifth of Britons are today much poorer than their counterparts in other, more equal, nations. Germany’s poorest, for example, are a third better off than those in Britain.

Levels of inequality and poverty are, ultimately, the outcome of the political, economic and ideological power games that play out between big business, state and society. With the exception of the immediate post-1945 era, this tussle has mostly been won by powerful elites, often with the compliance of the state.

The post-1980 surge in the income and wealth gap was triggered by the doctrine of a small group of anti-egalitarian, pro-market evangelists that Britain had become too equal. “True” Conservatives need “to make the case against egalitarianism” declared Sir Keith Joseph (a close political soulmate of Margaret Thatcher) in 1976, adding: “The pursuit of equality has done, and is doing, more harm, stunting the incentives and rewards that are essential to any successful economy.”

The evidence of the post-1980s, real-life experiment in inequality is crystal clear. Britain has created a pro-inequality bias that has turned out to be a classic case of what the 17th-century philosopher Francis Bacon called “wishful science”. That 40-year long experiment has delivered a second ‘gilded age’ for the few, but via a destructive trail of greater economic and social turbulence that has played havoc with ordinary life chances while contributing to Britain’s low-growth, low-productivity, low-wage economy.

None of this has stopped new Prime Minister, Liz Trust, intensifying today’s pro-rich, anti-poor politics. She shares, it seems, the views of the high profile American economist, Robert Lucas, one of the high priests of the pro-market revolution. “Of the tendencies that are harmful to sound economics,” he wrote in 2003, “the most poisonous is to focus on questions of distribution.”

While Covid and other shocks have fuelled public calls for a fairer society and improved social protection, what is on offer is more of the tried and failed pro-inequality policies of the last four decades. Britain’s deepening divisions have been driven in part by a range of pro-inequality state policies, from the introduction of a much more regressive tax system to a much meaner and more coercive benefits system. In the mid-2010s, five million sanctions (essentially fines) were issued by the Department for Work and Pensions – more fines than the criminal justice system.

Soaring and easy enrichment at the top has also been the result of a largely state-sanctioned process of corporate extraction. Companies have too often been turned into cash cows for executives and shareholders through, for example, anti-competitive devices to rig markets, and by diverting rising profits from better wages and investment to growing dividend payments.

There is an important distinction between wealth creation that contributes to the common good, and wealth appropriation that enriches the few at the expense of wider society. Economic efforts, declared the influential Italian economist Vilfredo Pareto in 1896, “are directed to the production or transformation of economic goods, or else to the appropriation of goods produced by others”. Such ‘appropriation’ or ‘extraction’ was widespread in the Victorian era and, with the increasingly concentrated power of big business, is again common practice.

Excessive inequality is not just economically “corrosive”, as Christine Lagarde – the then head of the International Monetary Fund – put it in 2012. It has also left a long trail of social distress. After a century of improvement, life expectancy rates have started to fall in deprived communities.

Political alienation is widespread, with a rising gap between the electoral turnout of the richest and poorest groups. The return of high concentrations of income and wealth, nationally and globally, is a key driver of global warming. The richest tenth of the global population emitted 48% (and the top 1%, 17%) of all global emissions in 2019, while the poorest half emitted just 12 per cent.

The outcome of the pro-rich, anti-poor philosophy of government has been the return of a form of luxury capitalism last seen in the Victorian age, with extreme affluence alongside severe social scarcity, enfeebled public services and widespread destitution. Contrast Britain’s underinvestment in children’s services, in young adult training, and in social care with a surging demand for private jets, luxury yachts and even mini-submarines. Private airports are big business. Scarce land that could have been used to build affordable social housing has been swallowed up by top-end property investment that serves no social purpose.

The 1970s’ dictum from the influential economist Fred Hirsch that “so long as material privation is widespread, conquest of material scarcity is the dominant concern” has been dismissed. We are all suffering the consequences. With the odds rising on a Labour government, one of the big questions in politics is how far Keir Starmer will re-embrace Labour’s founding philosophy of egalitarianism, and set out to reverse the pro-inequality forces of recent decades.

This essay first appeared in the Fabian Society pamphlet The Equality Question: Why Labour Should Re-embrace Its Egalitarian Roots.