The distinguished economist sheds some light on the UK's inequality
He has recently published a new book, Inequality: What Can Be Done? which shows that we can actually do far more than the sceptics imagine.
Journalist JP O’Malley caught up with Atkinson in London to talk about the housing crisis, trade union rights, and why debt is useful.
JP: In the immediate decades after the Second World War in the UK, the real value of the wealth of the top 1 per cent continued to decline, whereas that of the bottom 99 per cent rose substantially: what were the main reasons for this?
TA: The wealth at the top was falling because we had fairly progressive tax rates.
The top rate was well above 40 percent. That certainly had an effect.
It was also before we had the stock-market boom of the 1980s: which did something to restore wealth at the top. And then on the other side, the bottom 90 percent were beginning to acquire assets and save.
The post war period was one of relative prosperity, so it was natural that people were saving.
Owner occupation grew phenomenally during this period: It was around 10 percent at the beginning of the 20th century, and then it was around 40 percent by the 1950s.
JP: Inequality, you argue, is embedded in our social and economic structure, and to maintain a significant reduction, we need to examine all aspects of this social structure. On a practical basis, how can we do this?
TA: We don’t discuss any more the position of small savers, who now seem to be an abandoned class of people.
For instance, we don’t have index link bonds that Ireland has. In Britain it’s difficult for people to save, and actually get a return on their savings. And this is clearly a problem because people rely on savings much more than they used to when a more generous state pension system existed.
JP: Is it true that trade union members have fewer rights in the UK now to take industrial action than they did in 1906?
TA: Yes. Almost every year between 1980 and 1993 [under the Tory government] there was a new law making it harder to take industrial action. So now you have things like zero hour contracts: where basically workers don’t even have minimal rights.
We’ve also seen a lot of companies closing pension schemes, which is going to cause a lot of problems in the future. If trade unions were stronger they might have prevented those things from happening.
JP: The Conservative ‘Right to Buy’ scheme, introduced in the 1980s, initially this had the effect of raising the share of wealth of the bottom 99 per cent. But it also led to the current housing crisis in the UK, right?
TA: It did initially benefit people who were tenants and who became owner occupiers. What this now means, however, is that we have a class of owner occupiers, and younger people who are tenants because they cannot get on the housing ladder.
So if one thought of the state housing stock as a vehicle to get established in housing, and then move into owner occupier housing, it now ceases to do that because the stocks have disappeared.
One reason why the buy-to-let has grown is because the state pension system isn’t so good anymore. So if you could retire on 45 percent of your final earnings, then you would be alright. But the current state pension is far below that. And so the most profitable way of operating is to now buy a house and rent it out.
This has driven up the demand for house prices. And consequently made it much harder for younger people to buy their own house.
JP: Anglo Saxon Countries have much higher overall income inequality than continental Europe and the Nordic countries: what is the reason for this?
TA: Firstly, it’s a combination of how both countries determine wages and pay, particularly in managerial positions. The Anglo Saxon countries are much more run by executive pay committees. And there is very little representatives of the labour force on the boards, like say, the Germans have.
In [the UK] we don’t have the same power with trade unions that the Nordic countries do. In countries like Denmark, for example, the positions of workers and trade unions is much stronger. They have a different policy towards the labour market. It facilities people while they are getting back into jobs, and then funds them while they are doing so.
They have a better system of support for the unemployed. One of the big changes that happened following 1979 in the UK is that we’ve basically cut unemployment benefit substantially. That’s made it quite difficult for people, particularly those with children.
JP: Why is debt the only conversation the current government is interest in?
TA: Debt actually serves a very useful function in the economy: it makes the economy work.
If you told me that you bought a house and you used a loan to do so, I wouldn’t say, oh that’s terrible, you are borrowing money!
But very recently George Osborne says he is going to sell off the Royal Mail and the land around Kings Cross in London. His argument is that this will benefit the tax payer. But unless he is able to sell the Royal Mail for more than it is worth, it won’t benefit the tax payer.
Essentially he is saying: we are reducing the debt, but we are giving away assets for probably more value than the debt. He’s just giving away profits to the private sector. It’s madness.
JP O’ Malley is a freelance journalist based in London. He will be interviewing Tony Atkinson on Inequality in the Boogaloo pub in Highgate on Wednesday July 1st @7:30
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