Give working people more money because they will spend it

It's not about fairness, it's about the economy, stupid.

To date, the history of our current financial crisis has concentrated minds on the distribution of wealth in a way that we haven’t really seen for a generation. Filled with materialistic expectations, the withdrawal of credit and government subsidies from society has brought home some harsh realities. We can’t afford the lifestyle we have come to think we are entitled to. Wealthy people, once seen as social leaders, are increasingly treated as though they somehow stole what they earned.

Most of the time the redistribution of wealth is put in political terms – it ignores who had the original idea for a company or product or who put the money up in the first place to fund it. Instead, agitators argue that workers, because it is their toil that creates the goods and services, should get an equal participation in profits. Ironically, this is probably the right answer but the wrong reason – people should be given more money so that they can spend it.

The World Bank recently released numbers on the distribution of Corrado Gini’s index of income and wealth distribution. The Gini Index ranges from 1 to 100 and seeks to measure financial inequality in a society; a value of 100 means that a single person has all the money whilst as it declines money is more and more equally distributed.

Some interesting trends are showing up. For instance, in Latin America wealth inequality, although at a high level, is declining as a phenomenon. Crises like that seen in Argentina are working to redistribute wealth whilst in Brazil the new-found economic prosperity is becoming shared by a greater and greater proportion of society.  Africa, notably South Africa, displays disturbingly high levels of wealth concentration in the hands of a few.

Although we have a tendency to pillory ourselves here the UK, we actually come out quite well with a score of just under 26 – you would have to go to parts of Eastern Europe to find other countries with the kinds of equality that we possess. In fact, equality of wealth distribution has improved markedly between 1995 and 2010 when the latest data is available and embraces the financial crisis.

What is most disturbing though is the United States. The Gini index for the US has shown a marked and continuous increase of inequality, an effect that has been occurring since the 1970’s, and a phenomenon that has accelerated as the recovery from the financial crisis has gathered pace.

Economic commentators often talk about "the wealth effect", the confidence-boosting mental state that allows ordinary people to look at their total assets and give themselves the psychological comfort to stop hoarding money and start spending it. To this end the Federal Reserve in the US and western central banks have been complicit in propping up the stock and housing markets through ultra-accommodative monetary policies that placate the electorate through the illusion of financial affluence.  They will go about their day without necessarily calling for higher levels of taxation or the forced redistribution of wealth in the face of obvious inequalities. This has by and large worked to date but we are now entering a phase of prolonged sub-potential growth combined with rising wealth inequality in the US that will have long-range effects economically, socially and politically.

The problem arises from the fact that if you give wealthy people more money they don’t necessarily spend it – it becomes dormant and redundant. Give a poor person an extra £10 and they will spend it on food or new clothes, propelling consumption, but give an ultra-high net worth person another million pounds and more than likely it will lie in the bank largely unnoticed and more importantly unused. So in many respects the inequality of the distribution of wealth is not so much about "fairness" or venality, but more that the concentration of too much money into too few hands leads to economic stagnation adding to an already sub-par economic atmosphere.

Photograph: Getty Images

Head of Fixed Income and Macro, Old Mutual Global Investors

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In defence of the metropolitan elite

Railing against low-paid academics will not solve Britain's inequality problem. 

It’s a measure of how topsy-turvy our political culture has become that Theresa May, a Conservative, Oxford-educated prime minister, can claim to be on the side of "ordinary working-class people" against a sneering "elite". But while Brexit has made this division central to our political culture, we’ve been heading in this direction for a while. 

Earlier this year, I was watching a heated exchange between centrist Labour MP Alan Johnson and Left Unity’s Simon Hardy on the Daily Politics show. At one point, Johnson bellowed across the table: "You’re a middle-class intellectual!" So this is now a stand-alone insult, I thought to myself, and took to Twitter to share my indignation. A friend immediately replied: "He means you." And she’s right. I am indeed a middle-class intellectual, a member of the metropolitan elite. Given the prevalence of post-Brexit elite-bashing, I’m loath to stick my head above the parapet. But as my liberal intellectual English lecturers used to say, these terms need unpacking. 

The right-wing anti-elitism that we are seeing all around us co-opts the left’s opposition to financial and corporate dominance and converts it into opposition to those who are educated. To listen to Tory speeches now it’s as if the top 1 per cent didn’t own half the world’s wealth, as if the sales of individual global corporations hadn’t overtaken many national economies, as if CEOs didn’t earn 300 times the salary of the average worker. No, it’s the liberal, metropolitan elite that’s the real menace – those mighty "experts" and "commentators". As Michael Gove, another Oxford-educated Tory, declared during the EU referendum: "People in this country have had enough of experts." 
Anti-elitism conflates political office and cultural and educational distinction on the one hand, with social privilege on the other. But there’s no intrinsic reason why there should be a homogenous "political class", or that those with expertise or artistic judgement should necessarily be rich. In 1979, 16 per cent of MPs had a background in manual work; in 2010 the proportion had dropped to 4 per cent. The history of the Worker’s Educational Association and the Open University reveals a lively tradition of working-class intellectualism. It’s true that, right now, political and cultural capital are appallingly centralised, and there is a revolving door between ministerial office and business. The range of people entering the arts and higher education has been narrowed by the removal of social security and block grants.

Today's anti-elitism, far from empowering the disenfranchised, covertly promotes neoliberal economics. High standards are equated with having the upper hand. Attacks on "cosmopolitan elites" - i.e. those who benefited from affordable education - entrench inequality, put the left on the back foot and protect the real elites – all this while producing a culture that’s bland, dumbed-down and apologetic.
This manoeuvre is everywhere. Brexit is a surreal pageant of inverted protest - May’s use of the royal prerogative supposedly represents the will of the people. The beneficiaries of the PM's grammar school "revolution", she claims, will be "the hidden disadvantaged children". Those who question the evidence base for this are simply metropolitan snobs. ‘This is post-referendum politics’, the BBC’s education editor reminded us tellingly on Today, ‘where the symbolic status of grammar schools as a chance to better yourself has trumped the expert consensus’.
The higher education bill currently going through Parliament brandishes the downtrodden student consumer as a stick with which to beat academics. According to the business-friendly University Alliance, academia’s reluctance to emphasise "employability" carries "more than a whiff of snobbery". Top-down curation is out; impact, feedback and engagement the new mantra. With their worth constantly weighed against the most pressing social priorities, cultural organisations no longer seem convinced by their own right to exist.
The "democratisation" of education, media and culture must be recognised for what it is -  a proxy for real democracy and any attempt to tackle social and economic inequality. Just as the redistributive work of politics is shunted onto embattled and underfunded sectors, the same anti-elitist pressure weakens politics itself. Democracy is thoroughly distorted by economic forces. But the solution is not, as right-wing populists do, to attack the system itself - it’s the only means we have of creating a fairer world. 
This anti-political sentiment is aimed disproportionately at the left, at do-gooding idealists and defenders of the "patronising" welfare state. Stricken with anxiety about being out of touch with its former heartlands, Labour is unable to strategise, put up a credible leader, or confidently articulate its principles. Unless it can tell a positive story about informed debate, political institutions and – yes – political authority, the left will remain vulnerable to whatever Ukip contorts into next.

It’s time to stand up proudly for good elitism – for professional judgement, cultural excellence and enlightenment values. Once, conservatives championed political authority and high art. But now that they’ve become scorched-earth modernisers, it’s time for progressives to carry the torch. Otherwise, disparities of wealth will become ever sharper, while the things that give our lives meaning dissolve into mediocrity.



Eliane Glaser is a senior lecturer at Bath Spa University and author of Get Real: How to See Through the Hype, Spin and Lies of Modern Life.