Thursday, June 05, 2008

The Costs of Neoliberalism



Forty years ago a single skilled manual wage was enough to provide a living for a working-class man, his wife and family. Now even a middle-class couple with both partners working can't bring in enough to make ends meet.
The golden age for the salaried worker across all the OECD countries was between 1945 and 1973, when ordinary working people gained their highest percentage share of GDP. Since then the real wages of the middle and working class have stagnated or fallen, while income for the rich has rocketed and that of the super-rich has hit the stratosphere.
The facts are astounding. Contrary to the delusions of the free-market fundamentalists, the Thatcher/Reagan revolution has come at a great cost to the working and middle classes. In the US, the top one per cent have seen a 78 per cent increase in their share of national income since 1979 with the bottom 80 per cent of the population experiencing a 15 per cent fall.
Far from being a tide that raises all boats, neo-liberalism has undermined the wealth and security of the majority of the working population. In Britain for example, the liquid wealth of the bottom half of the populace has fallen from 12 per cent in 1976 to just one per cent in 2003, while the top 0.01 per cent in Britain are taking a larger share of national income than at any time in modern history and have seen their incomes rise by more than 500 per cent in under a generation.


You can read more of Philip Blond's excellent First Post piece on the consequences of the neoliberal counter-revolution here.

It is clear that what we have witnessed over the past thirty years is a massive redistribution of wealth from the working class and middle class- to a new group of global super-rich. Their enormous wealth has been made at the expense of you and me, me dear reader, and it's time we- the majority- did something about it.

UPDATE: In similar vein, here's Seumas Milne writing in today's Guardian:

The absurdity is that, precisely when the breakdown of the orthodoxy of deregulated markets, the small state and corporate privilege is plain for all to see, the main political parties are clinging to it ever more tightly. Locked into a free-market framework, it is impossible to tackle the growing crisis of inequality, insecurity, social immobility and falling living standards - because those are the very policies that caused it. But that also creates opportunities for those, inside and outside Labour, pressing for a genuine alternative.

11 comments:

Nick said...

Nearly time for the revolution, I think.

Anonymous said...

During Prime Minister’s Questions last week an insignificant Nu Labour backbencher leapt to his Leader’s defence and announced proudly that since coming to power Nu Labour has managed to increase the number of working people in Britain from 26 million to 29 million (I have forgotten the precise figures quoted).

Why an MP who claims to represent the working class should think that this is a matter for pride is quite beyond me.

The reason why so many more people are employed is because so many more mothers have to work to supplement their husbands’ income. Many families can no longer live on one income. If a woman wants to work, then that is fine. But the reality is that many women no longer have a choice, they have to work.

On a related point I should like to tell you about a friend of mine who has recently been promoted to the position of Consultant in the NHS. She has bought a ground floor flat in Chiswick, West London for lot of money. The tragedy is that the property she has bought was formerly a modest railwayman’s cottage. 30 years ago a relatively low paid railway worker could afford to live in the whole cottage and his wife could stay at home looking after the kids. Today, an NHS hospital Consultant can afford to live only in half the cottage.

I wonder where railway workers live these days.

Mark said...

You're quite right to draw attention to the widening gulf between the super rich and the rest of us.However it's worth pointing out that for the first nine years of Thatcher's premiership, the top rate of tax was 60%.The 40% rate (and the abolition of the unearned income surcharge)was not introduced until 1988.
The massive redistribution to which you refer has thus only been part of the economic architecture of this country for 20 years.The 'loadsamoney' ethos of the 80s was more a reflection of poorly policed insider trading pre the 87 crash, and not a hardline neoliberal tax regime.

Roland Hulme said...

I still believe capitalism is the answer, but I agree with you that 'Reaganomics' was an almighty fraud and failure - which nobbled the American working and middle class.

Reagan gave the rich huge tax cuts. Payroll taxes for regular folk actually went UP.

jolies-couleurs said...

The regulation of the financial system, making it a servant of economic development rather than the master, established at Bretton Woods in the 1940s was the framework for a period of sustained improvement in the lifes of all. Its dismantling, unilaterally by Richard Nixon, in 1971, was the prelude to the severe imbalances you refer to. Bring back government regulation of the flow of money and the creation of credit - you can even call it managed capitalism if it makes you feel better - and we might find our way to a more equitable and balanced system. We need a new Keynes, measured against whom, many of our current hireling economists are made of straw!

Anonymous said...

Hey Neil,

I seem to always disagree with you, but i wish youd post more. You make me think, and thats more than most blogs manage.

Not a great deal of praise from a lefty imbecile, but do keep it up.

Ta

Anonymous Pete

neil craig said...

A fall in percentage of national income means little if there is no mention of how much national income has changed. Unfortunately national income, while far greater than in the 1970s, has not risen nearly as fast as in more successful countries such as Ireland.

There is a real argument that income inequality within a country engenders more disquiet than everybody having a similar & lower income. There is equally an argument that people actually like an aspirational society, which is why, for example, they play the lottery.

You take your choice. Would you rather have your income rising 3% annually in a Britain with 2.5% growth or 6% annually in an Ireland with 7%?

Neil Clark said...

Nick- when you've got letters in the Daily Telegraph saying its time for a revolution you know that we're living in interesting times!
anonymous: brilliant post. Your point about the NHS consultant and the railwayman's cottage says it all. We've gone backwards in the last 30 years in so many ways.

mark- true, but don't forget Thatcher cut taxes for the rich straight away on coming to power- and hiked up regressive taxes like VAT. But I agree, the real damage was done in the late 80s when Lawson was Chancellor and the top rate of tax was reduced to 40%.

roland: you're right- Reagonomics was an almighty fraud and failure.


jolies: I couldn't agree more!

anonymous pete- many thanks for your kind words. Sorry for the relative lack of posts in the last few weeks, normal service is now resumed!

neil: if I was a newcomer to Earth, I wouldn't live in either Britain or Ireland- both countries have become too commercially orientated. There's more to life than the acquisition of material wealth.

Roland Hulme said...

"There's more to life than the acquisition of material wealth."

Wine and sex?

That'd do it for me.

neil craig said...

A few years ago the Economist did a poll around the world of happiness. Ireland & Switzerland came top.

You may not approve of the Economist (I don't like their New World Orderism either) but this was a poll of how happy people felt whereas most surveys of happiness tend to actually be checking the amount of agricultural land & seal cubs & stuff like that.

Neil Clark said...

Roland: great line. Football, horse-racing and sex would do it for me. And reading. But the reading not taking place at the same time as the rest.
Wine- I can take it or leave it.

Neil: the findings that Ireland and Switzerland are at the top of the happiness survey doesn't surprise me- although Ireland has followed a fairly neoliberal path in the last few years, it's still hard to eradicate the greater sense of community there. And as for Switzerland, as I've written before, it's a mistake to think that it's a Friedmanite free market economy. It is a mixed economy- and there are plenty of areas where capital is not allowed to go- unlike in Britain.