Osborne– who was chancellor under David Cameron’s government and was instrumental in bringing about austerity – said that the cuts announced by Reeves on Monday were “almost identical in structure and form” to those he made in 2010, when he announced £6.2bn worth of cuts.
…
“I don’t think there was anything she announced that I would have violently disagreed with or not done myself.
“In fact, it was almost identical in structure and form to what I did in the first couple of months that I was Chancellor of the Exchequer.
“So, you know, ‘Continuity Osborne.”
Sharing a clip from the podcast on social media, SNP Westminster leader Stephen Flynn said: “No comment.”
“The idea that rich and poor are equal before government in democratic societies is ludicrous,” writes Polychroniou. “As disparities in wealth and income grow, so do the disparities in political influence.” (Photo: flickr/Creative Commons)
Wealth taxation may sound like a good idea, but can it really address, let alone solve, the problem of inequality?
Economic inequality is the scourge of the 21st century. The rich are getting richer and faster than any other time since the onset of neoliberalism, which calls for “free-market” capitalism, regressive taxation, fiscal austerity and the rejection of the social state. They get richer not only when the economy is on an upswing but even amid crises. Billionaires more than doubled their net worth during the pandemic, according to Bloomberg Billionaires Index.
The latest analysis shows that the richest 1 percent gained $42 trillion in new wealth over the past decade, which amounts to “nearly 34 times more than the entire bottom 50 percent of the world’s population.” In the meantime, the very poor and low-income people across the globe, including the U.S., are actually getting poorer. So much for trickle-down economics which was popularized during the 1980s by the Reagan administration’s vast capital gains and income tax cuts and continues to persist to this day in spite of its major flaws. Cutting taxes on the rich not only increases economic inequality but has no effect on economic growth and unemployment.
There must be something very rotten with an economic system that allows individuals to generate obscene amounts of wealth to the point they can hijack the political system and undermine democracy.
However, inequality should not be examined purely from an economic perspective. Over the years, numerous studies have shown that economic inequality influences public attitudes toward democracy by generating political disillusion and low trust in government and other institutions, like Congress. Inequality also undermines social mobility, contributes to political polarization and fuels authoritarianism.
Finally, inequality contributes to climate change. The richest 1 percent is responsible for more carbon emissions than the poorest 66 percent, according to a 2023 report by Oxfam. Of course, while the world’s wealthiest people make a huge contribution to climate change, they are also able to insulate themselves from the worst impacts of global warming.
In sum, the super-rich can be blamed for many of the most serious ills confronting societies in the twentieth-first century. The only consequential question here is this: what can be done about it then?
One of the most frequent responses to the problem of rising inequality is a call for the implementation of a wealth tax. Wealth taxation may sound like a good idea, but can it really address, let alone solve, the problem of inequality? The answer is an unqualified “no.” At least for the world’s advanced economies. Indeed, even if it’s possible to discover all the wealth that the very rich people own (much of which is hidden in companies or put in trusts) and then proceed with an accurate asset valuation, this will have very little impact, if any, on the daily lives of people who try to survive on minimum wages. Wealth taxation alone will have no impact on workers without social protection and no bargaining power at companies. It won’t protect workers at the “gig economy” and part-time workers.
To effectively address economic inequality, we must identify the root cause of the problem, and one simple way to do this is by asking a rather simple question: How does one become superrich? Where does this immense wealth come from? Because as the renowned progressive economist James K. Boyce recently put it “nobody ‘earns’ a billion dollars.
There must be something very rotten with an economic system that allows individuals to generate obscene amounts of wealth to the point they can hijack the political system and undermine democracy. Democracy cannot exist when we have wealth concentrated in the hands of a few. The idea that rich and poor are equal before government in democratic societies is ludicrous. As disparities in wealth and income grow, so do the disparities in political influence.
Take corporations, for example, which exert enormous influence, thanks primarily to campaign donations and lobbying Their actions, which range from opposing labor laws and policies that benefit workers to restricting unionization, exacerbate inequalities at all levels of society and across the globe. Moreover, the surge in billionaire wealth and the surge in “corporate power and monopoly power” form a powerful connection. The very rich are not simply beneficiaries of the existing economic order. They are in control of the working arrangements of the global economic system. Yet despite the enormous power that corporations have on people’s lives and the communities in which they operate, there are very few policies and mechanisms at national or international level to curtail that power.
Of course, we know that billionaires and big corporations pay very little in taxes, but we need much more than wealth and corporate taxation. We need ways to curb the power of big corporations and their drive to maximize shareholder value at the expense of everything else. We should also set a cap on extreme wealth. There is no social value for having billionaires. We should abolish the superrich, perhaps an easier task, politically speaking, than finding ways to tax them. Democratic societies could hold a referendum on whether we should abolish extreme wealth.
In addition, we could create economic arrangements that provide a minimum income to ensure that everyone’s basic needs are met. This can be done either through universal basic income or guaranteed income programs.
Last, but not least, we can challenge the rule of capital by advancing democratic forms of economic governance and economic planning. Participatory economics is one such alternative that would change the economy as we know it since it entails social ownership of production and self-managed workplaces. Worker cooperatives are established is various parts of Europe, particularly in Italy and Spain. The Mondragon Corporation in the Basque region of Spain is owned by its workers and represents the biggest and most successful case of worker cooperatives. Of course, for economic transformation to occur, breaking down hierarchical structures and putting workers in charge of business activities is not enough. What needs to happen is that the values of worker cooperatives spread across the economy and that power is wrested away from the capitalist class.In today’s world, we can tackle economic inequality only by shifting the conversation to its root causes and then coming up with blends of policies that work together to put an end to the driving forces behind inequality. Spending all political capital on something like a wealth tax will only help to prolong the life of an immensely cruel and dangerous economic system. An easier and far more effective way to end plutocracy is through the power of democracy via a binding referendum that calls on citizens to decide whether or not we should abolish altogether extreme wealth.
The focus on growth to ease the UK’s economic ills will not be nearly enough, but there is a way to raise the sums needed
Never let your opponents define the terms of a debate. All too often, Labour has allowed the Conservatives and the billionaire press to demonise the notion of “tax and spend”. It went to great lengths before the election to assure voters it had no such intention. Now it drives home the message: instead, our needs will be met by “growth, growth, growth”. But tax and spend is the foundation of a civilised society.
Few of the changes this country requires can be achieved while adhering to the “tough spending rules” the new government has imposed on itself. We urgently need massive public investment in the NHS, social care, schools, environmental protection, social housing, local authorities, water, railways, the justice system and virtually all functions of government. We need a genuine levelling up, across regions and across classes. The austerity inflicted on us by the Conservatives was unnecessary and self-defeating and Labour has no good reason to sustain it.
The new government insists it is ending austerity. It isn’t. As the Institute for Fiscal Studies (IFS) pointed out in June, Labour’s plans mean that public services are “likely to be seriously squeezed, facing real-terms cuts”. Similarly, the Resolution Foundation has warned that, with current spending projections, the government will need to make £19bn of annual cuts by 2028-29. However you dress it up, this is austerity.
We are constantly told: “There’s no money.” But there is plenty of money. It’s just not in the hands of the government. The wealth of billionaires in the UK has risen by 1,000% since 1990. The richest 1% possess more wealth than the poorest 70%. Why do they have so much? Because the state does not; they have not been sufficiently taxed.
At the end of last year, the UK was officially in recession. The economy shrank by 0.3% between October and December 2023, after a previous contraction between July and September.
New figures for January 2024 show a slight improvement. But there is nothing to indicate that the UK has made meaningful progress when it comes to productivity growth – and how the UK needs to produce more goods and services if living standards and wages are to improve.
Productivity growth in the UK has been virtually non-existent since the financial crisis of 2008. It lags significantly behind countries like Germany and France, and even further behind the US.
Growing productivity is not easy. Having researched this area of the economy extensively, I’m acutely aware of the the challenges facing firms which are trying to be more productive. They include everything from investment levels and access to research and development to regional inequality and a shortage of skills.
But there are some things that could be done to improve the situation. And two of the most important ones are greater investment, and a more localised approach to the national economy.
For example, one major problem in the UK is that its labour market prioritises what economists call “flexibility” – allowing firms to hire and fire employees fairly easily (compared say with France, where it is more difficult) – and getting people into entry-level jobs. It is much less focused on training and development.
Major investment in training at all levels, from basic skills through to high-level technical and managerial skills, would make workers more productive. It would allow greater job mobility, which in turn leads to a better match between demand and supply.
The UK also needs to invest in what’s known as “capital equipment” – the stuff that businesses use to produce things. For a building company this might mean buying a JCB digger instead of shovels, or for a dressmaker it could be buying a sewing machine. Put simply, if UK industries had more kit, productivity would improve.
A recent change to capital allowances which allows firms to offset investment against tax is welcome. But companies need to know that this will stay, and not be subject to political changes and inconsistent economic policy.
Freedom to grow
So money needs to be spent, and investments need to be made. But another crucial element is that the money needs to be invested locally, in the places where people actually live and work.
To be truly beneficial, this needs close collaboration between local authorities, education providers and the private sector. Local knowledge about where certain sectors are being held back, what skills are required and where they are needed, is fundamental.
Local authorities should be able to address these issues, rather than having to constantly defer to London. This means doing two more things (neither of which have ever had national government support).
The first is simplifying the workings of local government, which is notoriously complex and a constant drag on regional productivity.
And the second is helping those local governments financially, not just in terms of the current funding crisis, but also by allowing then to plan investments in skills and infrastructure over the long term, rather than having to bid piecemeal for short term funding.
It is clear to me from the work I have done in the West Midlands area of England that the UK economy is far too centralised. Everything from access to finance and venture capital, to investment in skills and infrastructure is heavily skewed towards the south east.
Away from that region, the UK has a low level of what economists call “aglomeration economies”, where a particular industry is concentrated within a geographical area, and supported by decent infrastructure and a good supply of skilled workers.
Compared to Germany or France, public transport in the UK is expensive and patchy, meaning people in towns often can’t access employment opportunities in cities which are relatively close by. This means that we see high levels of inequality over short distances, where poverty exists close by to great wealth.
This kind of imbalance could be addressed by combining increased investment (both public and private) with a much greater willingness to understand the various British regions which make up a currently disunited kingdom. These two steps would make the whole economic system more resilient, and in the long term, more productive.
Rancher Jon Pedotti walks on the cracked remains of a parched lake bed of his 1,561-acre ranch located along San Simeon Creek in the Santa Lucia Mountain foothills of Cambria, California during a drought on October 1, 2014. (Photo: Al Seib/Los Angeles Times via Getty Images)
“This clearly shows that protecting our climate is much cheaper than not doing so, and that is without even considering noneconomic impacts such as loss of life or biodiversity,” a new study’s lead author said.
The climate crisis will shrink the average global income 19% in the next 26 years compared to what it would have been without global heating caused primarily by the burning of fossil fuels, a study published in Nature Wednesday has found.
The researchers, from the Potsdam Institute for Climate Impact Research (PIK), said that economic shrinkage was largely locked in by mid-century by existing climate change, but that actions taken to reduce emissions now could determine whether income losses hold steady at around 20% or triple through the second half of the century.
“These near-term damages are a result of our past emissions,” study lead author and PIK scientist Leonie Wenz said in a statement. “We will need more adaptation efforts if we want to avoid at least some of them. And we have to cut down our emissions drastically and immediately—if not, economic losses will become even bigger in the second half of the century, amounting to up to 60% on global average by 2100.”
“I am used to my work not having a nice societal outcome, but I was surprised by how big the damages were.”
Put in dollar terms, the climate crisis will take a yearly $38 trillion chunk out of the global economy in damages by 2050, the study authors found.
“That seems like… a lot,” writer and climate advocate Bill McKibbenwrote in response to the findings. “The entire world economy at the moment is about $100 trillion a year; the federal budget is about $6 trillion a year.”
This means that the costs of inaction have already exceeded the costs of limiting global heating to 2°C by six times, the study authors said. However, limiting warming to 2°C can still significantly reduce economic losses through 2100.
“This clearly shows that protecting our climate is much cheaper than not doing so, and that is without even considering noneconomic impacts such as loss of life or biodiversity,” Wenz said.
The damages predicted by the study were more than twice those of similar analyses because the researchers looked beyond national temperature data to also incorporate the impacts of extreme weather and rainfall on more than 1,600 subnational regions over a 40-year period, The Guardian explained.
“Strong income reductions are projected for the majority of regions, including North America and Europe, with South Asia and Africa being most strongly affected,” PIK scientist and first author Maximilian Kotz said in a statement. “These are caused by the impact of climate change on various aspects that are relevant for economic growth such as agricultural yields, labor productivity, or infrastructure.”
However, Wenz told the paper that the paper’s projected reduction was likely a “lower bound” because the study still doesn’t include climate impacts such as heatwaves, tropical storms, sea-level rise, and harms to human health.
Unlike previous studies, the research predicted economic losses for most wealthier countries in the Global North, with the U.S. and German economies shrinking by 11% by mid-century, France’s by 13%, and the U.K.’s by 7%. However, the countries set to suffer the most are countries closer to the equator that have lower incomes already and have historically done much less to contribute to the climate crisis. Iraq, for example, could see incomes drop by 30%, Botswana 25%, and Brazil 21%.
“Our study highlights the considerable inequity of climate impacts: We find damages almost everywhere, but countries in the tropics will suffer the most because they are already warmer,” study co-author Anders Levermann, who leads Research Department Complexity Science at PIK, said in a statement. “Further temperature increases will therefore be most harmful there. The countries least responsible for climate change, are predicted to suffer income loss that is 60% greater than the higher-income countries and 40% greater than higher-emission countries. They are also the ones with the least resources to adapt to its impacts.”
Wenz told The Guardian that the results were “devastating.”
“I am used to my work not having a nice societal outcome, but I was surprised by how big the damages were. The inequality dimension was really shocking,” Wenz said.
Levermann said the paper presented society with a clear choice:
It is on us to decide: Structural change towards a renewable energy system is needed for our security and will save us money. Staying on the path we are currently on, will lead to catastrophic consequences. The temperature of the planet can only be stabilized if we stop burning oil, gas, and coal.
McKibben, meanwhile, argued that the findings should persuade major companies to embrace climate action for self-interested reasons. He noted that most corporate emissions come from how company money is invested by banks, particularly in the continued exploitation of fossil fuel resources.
“If Amazon and Apple and Microsoft wanted to avoid a world where, by century’s end, people had 60% less money to spend on buying whatever phones and software and weird junk (doubtless weirder by then) they plan on selling, then they should be putting pressure on their banks to stop making the problem worse. They should also be unleashing their lobbying teams to demand climate action from Congress,” McKibben wrote.
“These people are supposed to care about money, and for once it would help us if they actually did,” he continued. “Stop putting out ads about how green your products are—start making this system you dominate actually work.”
