A rising tide does not lift all boats: why we need to declare war on inequality

We need to restructure the economy so that growth is driven by investment in infrastructure, creating the well-paid jobs we need to ensure working people get a fair deal.

We need to restructure the economy so that growth is driven by investment in infrastructure, creating the well-paid jobs we need to ensure working people get a fair deal

‘A rising tide lifts all boats’ has long been the free market fundamentalists’ favoured line, peddled to assuage fears of growing inequality.

Just as the child who discovers the presents hidden in mum’s wardrobe on Christmas Eve may have a hard time letting go of their belief in the existence of Santa Claus, so belief in the ‘trickle-down fairy’ remains, despite strong evidence to the contrary.

Armed with a wealth of data, a report published this week by the transatlantic Commission on Inclusive Prosperity, co-chaired by shadow chancellor Ed Balls, convincingly dispels the myth of trickle down.

It concludes that the free market can no longer deliver for low and middle earners in developed economies and that major reform of our social and political institutions is necessary to make 21st century capitalism work for the many and not just the few.

Even in the boom years, those on average incomes were not benefitting from economic growth. Wages in the UK have remained stagnant since 2003 – well before the crash of 2008. And while the average wage has remained flat at around £27,000 a year, executive pay rose from £2.6m to £4.3m in the decade to 2012.

The UK is the only G7 country to have grown consistently more unequal this century.

Inequality is damaging to both society and the economy. As Wilkinson Pickett’s landmark book ‘The Spirit Level’ shows, it is associated with a range of negative health and social outcomes.

Unequal societies are more likely to suffer from lower life expectancy, poorer educational attainment, higher crime rates, and lower levels of social mobility and community cohesion than more equal societies.

Inequality is also an economic problem. When wages fail to cover the bills, families are forced to turn to debt to keep a roof over their head and put food on the table.

And it was consumer debt that brought the global economy to its knees in 2008; high levels of inequality make it much harder to achieve economic stability.

As the Commission on Inclusive Prosperity argue, we need to move to a high-wage, high-productivity economy. The current recovery is being fuelled by consumption and debt, and the private sector job creation we have seen has been concentrated in low-wage sectors.

We need to restructure the economy so that growth is driven by investment in infrastructure, which will create the well-paid jobs we need to ensure working people get a fair slice of the pie.

Corporations must stop focusing on short-term share prices at the expense of investment, innovation and wage growth. And shifting the burden of taxation from income to wealth and assets, by introducing a land value tax, for instance, could also make a huge contribution to reducing levels of inequality.

Encouragingly, inequality has moved up the political agenda since the financial crisis. Express concern about the vast disparities in income and wealth and you’re no longer as likely to be dismissed as a tree-hugging, sandal-wearing lefty. Inequality has gone mainstream.

In the summer, Barack Obama labelled inequality ‘the defining challenge of our time’, and over the past couple of years the Pope, the IMF and the OECD have all identified inequality as one of the greatest threats to future prosperity.

Even David Cameron has occasionally jumped on the bandwagon, saying in 2009 that more unequal societies do worse ‘according to almost every quality-of-life indicator’.

But he has since gone on to lead a government that has implemented a cut in income tax benefitting those earning over £150,000, while those at the bottom have endured poverty pay, a rise in VAT and cuts to the social security safety net. Actions tend to speak louder than words.

The Commission on Inclusive Prosperity’s report shows that laissez-faire economics of the kind pursued by the Tories has no answer to rising inequality and the problem of stagnating incomes. Only a progressive policy agenda can ensure that working people once again benefit from economic growth.

In 1964, President Lyndon Johnson told the US Congress: “administration today, here and now, declares unconditional war on poverty in America.” Half a century on, it’s time we declared a war of our own – on inequality.”

Matthew Whittley is a recent graduate and Labour party member and works as a researcher for a Midlands-based housing association. Follow him on Twitter

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8 Responses to “A rising tide does not lift all boats: why we need to declare war on inequality”

  1. littleoddsandpieces

    The Tory newspaper The Daily Telegraph has proven the con that is the flat rate pension, that will give LESS NOT MORE state pension, as low as £55 per week, below even the current basic state pension.

    The Tories portrayed everyone of the women born from 1953 and men born from 1951 now liable for the flat rate state pension from this law that comes into force from 6 April 2016, as getting the full flat rate pension of £155 per week.

    Official government calculations and Freedom of Information requests gained by pensions experts, have shown this not to be the case.

    Within the flat rate pension is more pain, with NIL STATE PENSION FOR LIFE for many citizens.

    Detail at:

    This is enough ammunition for Labour now to do a u-turn in Labour’s election manifesto, and
    repeal the Pension Bills 2010-2014 and pay the full state pension at 60 to women and 65 to men, to those who turned that age in 2013 and denied state pension payout, when Labour, by this means, gains a majority government from seats gained in England and Wales in May.

    This would cost a Labour parliament nothing.


    Because Labour has discovered in the House of Lords Library that the ring fenced and full National Insurance Fund is wrongly being called in surplus since 2013, when this is the non paid out state pension since 2013.

    The state pension is payable whether keep job or lose it under the massive austerity job cuts due to reach 2 million after the Autumn Budget.

  2. LB

    The problem is that the state pension is socialist. You’ve redistributed all the contributions. It’s not been in ‘surplus’ ever.

    There’s an accumulated cash flow that’s a ‘surplus’. Nothing more than the profit the state has made on pensions, so far. But that’s going down at 9.5 bn a year. 10% more is paid out that comes in.

    What really matters is the liabilities. How much does the state owe for past contribitions. That’s now well over 7 trillion when you include the other unfunded pensions the state runs such as civil service pensions. Total state debt has gone over 9 trillion.

    That’s 300K per tax payer. Is that going to be paid? Nope. It can’t. The average tax payer can’t pay it and the rich can’t either.

    It’s increasing at over 636 bn a year as of 2010. It had been going up at that rate for over 5 years. Never going to be paid. Total taxes now are only 600 bn with a 733 bn spending

    9 trillion is 15 times revenue. Can you borrow 15 times your income and pay it back? Nope.

    The ‘surplus’ is 29 bn. State pension payouts are 90 bn a year. So the state has borrowed 3 months payout. There will be 18 year olds with 1/30th of a state pension claiming in 100 years time. It’s not a surplus. It’s a con.

    You can’t lend yourself money and make something valuable. The ‘surplus’ is a loan from the state to the state. Worthless.

    You can’t print your way out. It’s value that is the contract. It’s inflation linked. You can’t print value, you can print bank notes. So you can print as much as you want, but pensioners can’t eat bank notes, and the state can’t print tins of beans,

    So how about telling people what the mess is that socialism has generate by redistributing pension contributions.

  3. Alasdair

    If Ed Balls chaired the group which produced this report, why have Labour MPs not been presenting such arguments, which are not new? Why did Labour MPs vote in large numbers this week in support of austerity? Ed Balls was, before he became an MP, one of the spads preparing the neoliberal economic arguments for New Labour. I have never heard Mr Balls making a speech arguing for redistribution.

  4. robertcp

    As you say, New Labour basically supported the neo-liberal consensus, although there were some exeptions like the Minimum Wage.

  5. Guest

    Keep whining about workers living, those EVIL EVIL assets. You demand pensions not be paid, there’s a sharp difference. As you deny fiat currency, too, as the UK looks down the barrel of deflation.

    You are demanding that pensions not be paid. Go out there and tell them that, that you’ll oppose paying pensions under all circumstances because of your economic illiteracy.

  6. Dakiro

    If you are tied down to the bottom, with your head above water, a rise tide is not a good thing.

  7. Leon Wolfeson

    So let’s set a baseline. A Basic Income.

  8. Carol Damer

    We need someone in this country to express why a war on poverty is so important. Some wealthy people don’t like giving up any of their money to help others providing people website borrowing services. When poor people are helped, the spiritual wealth of the entire planet benefits including the people with monetary wealth. That is the takeaway that needs to be spread and examined further.

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