The Stink of Inequality Will Finally Make Politicians Act

Just over 150 years ago Parliament leapt into action and ordered a massive rebuilding of the sewer system in London the failure of which had caused raw waste to pour into the river Thames.

The problem had been mounting for some years but it was only when the 1858 Great Stink made it intolerable for MPs to conduct their business in the riverside Houses of Parliament that the public purse was opened.

Fast-forward a century and a half and a stench created by inequality is becoming overpowering even for middle of the road politicians. Almost 1.4 million households are on councils’ housing waiting lists in England alone while 740,000 privately rented homes fail to meet minimum legal standards for housing.

Yet the pages of the broadsheet newspapers and glossy magazines are full of advertisements for new homes in shiny developments with prices “starting from £602,500”.

In 2012 people in the bottom 10% of the population had an average net income of £8,468, the top 1% had an average income of £259,917 and the top 0.1% had an average income of £941,582.

202,000 people in the UK — or 550 a day — die prematurely because of social inequalities

The list of examples of inequality goes on but its impact is also making the news. In his new book, former government health adviser Sir Michael Marmot says the richer you are, the better your health. This translates into the shocking statistic that 202,000 people in the UK - or 550 a day - die prematurely because of social inequalities.

There are signs that the stink is reaching the nostrils of the high and mighty. Barack Obama has said it is the “defining challenge of our time” while Pope Francis has condemned it as the “root of social evil”.

Economists are joining in. Christine Lagarde, the head of the International Monetary Fund, said this year that “excessive inequality [was] not conducive to sustainable growth”, while the Bank of England governor Mark Carney said it risks undermining the “basic social contract of fairness”.

But the stink of inequality has been getting more acute for some time, particularly since the 1980s when Conservative governments presided over what economist Sir Anthony Atkinson this year called the “inequality turn” when the top 1% really started to pull away from the rest. However, strong economic growth papered over the crack.

Today’s poor don’t have that luxury. Our current recovery is built on low wages and booming asset prices, which, in simple terms, means the have-nots are getting poorer and the haves are getting richer.

The meagre rise in wages published this week followed years where salaries were growing more slowly than high street prices. That meant that most workers were getting poorer no matter how long they worked. Added to that was the fact that houses and flats are rising at such a pace that they moved further out of reach almost on a daily basis.

inequality is not the result of anonymous forces, but of government policy

Yet for all the moaning nothing changes. It is plainly not enough to sign up to public campaigns, launch boycotts of firms that do not pair their fair share of tax or to dress up in Guy Fawkes masks and disrupt the traffic in the City of London.

What is starting to percolate with voters is that, far from being inevitable - as Atkinson highlights clearly in his book - inequality is not the result of anonymous forces, but of government policy. Marmot’s work adds to the case.

Yes, globalisation has enlarged the labour force in a way that had pushed down wages of unskilled and semi-skilled workers. But it is the failure to invest in training school leavers and an embrace of zero hours contracts that has made working conditions for millions so much harsher.

Equally, there has never been so much money globally looking for places to invest. But it is the decision of every government since the 1980s to keep an open door to foreign capital and a generous tax regime for property owners and landlords that has helped fuel the rise in home prices. These are policy choices that have made matters worse.

Corbyn’s elevation as Labour leader has put the role of the state back at the heart of the debate

If in five years’ time inequality has risen, which is highly likely given the government’s plans to cut top rate tax, cut welfare payments and refrain from intervening in the housing market, the question is what can be done?

Ultimately it is governments that can change the distribution of wealth and income through the policies they implement. The  biggest impact of Jeremy Corbyn’s elevation as Labour leader may be that he has put the role of the state back at the heart of the debate. No longer will both parties agree the market knows best and that we should only tinker with it to a greater or lesser extent.

There are already some signs that the terms of the debate are shifting. George Osborne’s first post-election budget move was to unveil a national living wage. Corbyn put the shortage of affordable housing and the “extortionate” level of rents as top priority in this week’s Prime Minister’s Questions.

Now that the door has been wedged open voters should use their voices to call for more and tougher laws if they want to see a reversal in inequality. It is time for politicians to wake up and smell the stench of inequality and reach for the statute book.         

More about the author

About the author

Phil has run Clarity Economics, a London-based consultancy, since 2007 and, before that, was Economics Correspondent at The Independent.

Phil won feature writer of the year Work Foundation Work World media awards in 2009, and was commended by the Royal Statistical Society in 2007.

He is the author of Brilliant Economics and The Great Economists.

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