The ever-increasing many who are struggling cannot support a structure that favours a tiny number of the very rich
Observer/UK Editorial February 3, 2013
Antony Jenkins, chief executive of Barclays, who appears before MPs and peers on the banking standards commission this week, has removed one issue from the agenda, namely his right to a bonus of more £1m. The bank has been fined £290m and faces an official investigation by the Serious Fraud Office and the Financial Services Authority into its dealings. So this is the least Jenkins could do.
Last month, Barack Obama, on his re-election to a country with 42 million living in poverty, warned: "America cannot succeed when a shrinking few do very well and a growing many barely make it." At the World Economic Forum in Davos, its founder, Klaus Schwab, said: "Capitalism in its current form no longer fits the world around us." How badly it "fits" is powerfully demonstrated in Inequality for All, a documentary made by Jacob Kornbluth, that recently won the special jury prize at the Sundance festival. As discussed in today's New Review, the film "stars" Robert Reich, professor of public policy at Harvard, prolific author, campaigner, former labour secretary under Bill Clinton, a charismatic man whose lectures are renowned for the way he surgically dismembers the mutant capitalism that has taken hold in the US over the past 40 years.
Reich explains in chilling detail why growth alone may not be enough. For too many, he explains, social mobility has begun to slide backwards. A small but growing band of global pirates – billionaires all, without allegiance to community or country, accrue wealth from the continued immiseration of the squeezed majority. These hugely rich are fawned over and subsidised by governments even as inequality widens to a chasm.
Reich's analysis is similar to that of the UK thinktank, the Resolution Foundation. It launches its definitive study of low- to middle-income families, Squeezed Britain, this week. Britain has more than 10 million adults living on between £12,000 and £30,000 gross, the majority in work. However, this squeezed middle is fast becoming the squeezed majority, with even those on £50,000 seeing their children's prospects decline. The cause, Reich points out, is that while wages have flattened for years, the cost of living has spiralled and the richest have accelerated away. In the US, in 2008, 400 billionaires were "worth" more than 150 million of the US population.
Over the past few decades, average families have coped by more women going into employment, by working longer hours and by credit. But since 70% of the US economy is based on consumer spending, a lack of surplus cash means the engine is running out of fuel. The rich are small in number and don't spend nearly as much as the majority. "Free" markets with the rules written by the richest result in a shrinking public sector, deregulation, unemployment, low taxes for the most affluent and the threat of globalisation, depressing wages still further. The sum impact isn't "bad" capitalism, it is modern-day capitalism. How it changes, and how rapidly, is a challenge to its own survival. Once, the advancement of the employee was a part of the social contract. Under Thatcher, the aspiration of the average citizen was central via shareholding and home ownership. Now, a more brutal set of priorities pushes the requirements of "the little man" aside, while those who have money buy the influence that unjustly shapes the world in which we live. So how do we forge again the link between morality and the markets?
Iceland, post 2008, forced the resignation of the government, refused to bail out the banks and placed 200 "banksters' under investigation. In 2011, its economy grew by 2.9%. Would a similarly tough approach persuade some of today's pirates that the much mocked habits of the bourgeoisie do have a value that also matters: moderation; giving something back; a sense of civic duty. In that context, Apple would desist from legitimately funnelling more than a billion dollars' worth of iTunes sales through the tax haven of Luxembourg, while the British Virgin Islands would no longer be home to 30,000 people but a staggering 457,000 companies legally siphoning money that could build sustainable communities.
Reich's agenda for positive change includes more jobs; greater investment in skills and higher education; a just taxation regime; strong unions; investment in public infrastructure; a living wage and a narrowing of the earnings gap. Reich ends with a warning: "We are losing the moral foundation stones on which our democracy is built," he says. How much more evidence do we need? [Abridged]
© Guardian News and Media Limited 2013