Section 2. For the Few, Not the Many
The longevity of the neoliberal economic model over the past several decades, as well as continued support for it, can be partially explained by the existence of a veneer of prosperity that obscures some of the weaker or deteriorating underlying trends.
In other words, the model often works for a small subset of the population who are able to grow their wealth and power. Then, through cultural and political reinforcement, these examples are offered as “proof” that the economy is delivering positive economic results.
However, investigating trends in inequality over time exposes this myth and demonstrates that the British economy is increasingly working only for an increasingly small fraction of the population. As financial extraction grows and the capital gains economy becomes the basis of accumulation, the squeeze on wages and living standards intensifies. Politicians insist that not much can be done about this in the short term because – in the constant refrain of austerity economics on both front benches – “the money isn’t there.”[40]
This is a political fiction.
The United Kingdom is the sixth largest economy in the world. By any measure, it is one of the richest societies in human history. But nowhere does it appear this way except in the precincts of the very wealthiest, for whom the system is delivering vast material gains and great financial prosperity.
“Despite the dire state of the country, the problem is not a shortage of resources, but rather that plentiful resources are hoarded at the top.”
That Britain does not feel affluent is a result of the extremes of growing inequality and the diversion of wealth and productive capacity away from public goods and services to elite private accumulation and consumption. The story is one of concentrated private affluence amidst widespread and growing public squalor.
Despite the dire state of the country, the problem is not a shortage of resources, but rather that plentiful resources are hoarded at the top.
By way of comparison, in 1945 the postwar Labour government inherited a war-shattered economy laden with debt and had to literally rebuild amidst the ruins. But they managed to create the NHS, nationalised a fifth of the economy, and established the welfare state and the postwar settlement – a truly transformative programme that reshaped the political economy for decades to come.[41] In real terms, Britain’s GDP in 1945 was £383 billion, compared to around £2.3 trillion today; we are more than five times richer in real terms than Attlee’s Britain.
But it’s even better than that. Britain today is not only richer than Attlee’s Britain, but is also richer in real terms than Harry Truman’s United States – the colossus that bestrode the globe and helped reconstruct war-torn Europe and Japan through the Marshall Plan. America’s GDP in 1945 was equivalent to £1.95 trillion today.
The story that Britain lacks the resources to tackle child poverty or to invest in public services or to drive the green transition or rebuild the depleted public realm is exactly that – a story. There is greater wealth in Britain today than was available to the U.S. superpower constructing the postwar international order.
There is just a political unwillingness to shift the resources of a rich system from private accumulation to public need.
2.1 Income Inequality
Historically, Britain had high levels of income and wealth inequality due at least in part to the existence of a monarchy and landed aristocracy and the continual passing down of inherited fortunes.
From around 1914 onwards, income inequality began to fall – a process accelerated by the Depression era, the Second World War, and the post-war social democratic period which saw the construction of the modern welfare state. In 1978, income inequality hit its lowest point before rising considerably in the 1980s. Since then, there have been further (uneven) increases in income inequality. In 2023, the Gini coefficient (after housing costs) was 0.387, up more than 56% from 1978.
Furthermore, the rise in income inequality since the 1980s has been driven mostly by the top 1% of earners. In 1978, the ratio of the 99th percentile (top 1% of earners) of net income (after housing) to the 10th percentile (bottom 10% of earners) was 5.6; by 2023 it had risen to 15.56 (a 177.8% increase). By comparison, for the 90th percentile (top 10% of earners) the rise was 71.7%; and for the 50th percentile (top 50% of earners) the rise was 42.4%.