The Swiss village of Davos, which hosts the annual summit. Photo: Getty
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The global elite in Davos must give the world a pay rise

Speaking for the 99 per cent at the World Economic Forum.

George Osborne may be feeling quite pleased with himself when he gets up to address the World Economic Forum in Davos this week. The self-styled poster boy of post-crash recovery will no doubt boast of Britain's return to growth and rising employment. But one uncomfortable fact that he and other politicians here are unlikely to mention is the continuing slide in the share of global wealth going on wages.

I’m in Davos too, as part of a small delegation of trade union leaders from around the world. We may be in a minority here among the heads of state and titans of finance, but we speak for the majority of the world – the 99 per cent. And just as the TUC has argued that Britain needs a pay rise, we are arguing in Davos that the world needs a pay rise too.

The share of national income going to wages across industrialized countries has fallen from over 66 per cent in the early Eighties to around 61 per cent, according to the OECD. Globally, the decline is even sharper – from 62.5 per cent in 1980 to 54 per cent in 2010, according to the United Nations. What’s more, the falling share is distributed increasingly unequally. Rising pay inequalities at the same time as a falling wage share mean even less of the rewards of growth go to the working people who create them.

The loss for most people’s wages means a greater share globally is going to those who are already the wealthiest. It means the super richer are getting stupendously richer and the rest of us are being left behind. And it means that politicians who keep telling us they want to ‘reward hard work’ have been speaking hollow words.

The World Economic Forum itself has at least finally put deepening income inequality at the top of its list of global concerns. It says that poverty, environmental degradation, persistent unemployment, political instability, violence and conflict are all related to deepening income inequality. But are the members of the global elite gathered in their exclusive mountain retreat ready to take the action needed to reverse this trend?

It means rejecting a broken economic system that has made them very rich, but brought the rest of the world an avalanche of social problems and restricted economic growth. The evidence that inequality within countries is bad for growth has been presented in recent reports from both the IMF and the OECD.

The world economy is wage led, and if the wages for the 99 per cent increase then their greater spending power boosts growth. Giving more and more to the top one per cent does not have the same impact – except perhaps on the luxury yacht market or future industries like private space flights.

The collapse of oil prices, and the resulting low inflation, will no doubt give the economy an immediate boost at a convenient time for George Osborne. But while an adrenaline shot can get a sick patient out of bed for a while, it’s no cure.

Cheap oil is a sign of a weakening global economy, reflected in the decision this week by the IMF to downgrade its growth forecasts for the UK and global economies. Global demand is growing weak, and there’s a very real risk that low inflation is the calm before the storm.

The lasting cure that Britain and the world need is a new global business model that works for us all. And at the heart of it must be a return to stronger wage growth. This would create a sustained increase in demand. It would help create the conditions in which new businesses can be created and prosper. And it would reverse the deepening inequality that is blighting so many lives.

This can only be achieved if workers have a stronger voice. Collective bargaining must be extended, and we need stronger employment rights to reverse the trend of casualisation. A solid and secure economy will never be built on the shaky foundations of zero-hours contracts, agency workers, job insecurity, and a global race to the bottom for pay and conditions.

Corporations need to start paying the taxes they owe in the countries where they make their vast profits – and governments need to make them. This will help ensure countries have the revenue needed to invest in long-term growth.

And a financial transactions tax – now backed by the Democrats in the USA as well as eleven EU member states – would crack down on financial speculation. That could help shift the focus of financial institutions back to long-term investment in high-skilled and well-paid job creation in real industries, instead of casino capitalism.

Frances O’Grady is TUC General Secretary

Frances O'Grady is the General Secretary of the TUC. 

Photo: Getty
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Saudi Arabia is a brutal and extremist dictatorship – so why are we selling it arms?

With conflict in Yemen continuing, it’s clear that we’re failing to moderate the actions of “our despots”.

This year, during Pride week, I noticed something curious on top of the Ministry of Defence just off Whitehall. At the tip of the building’s flagpole hung the rainbow flag – a symbol of liberation for LGBTIQ people and, traditionally, a sign of defiance, too.

I was delighted to see it, and yet it also struck me as surprising that the governmental headquarters of our military would fly such a flag. Not only because of the forces’ history of homophobia, but more strikingly to me because of the closeness of our military establishment to regimes such as Saudi Arabia, where homosexuality is a sin punishable by jail, lashing and even death

That relationship has been under the spotlight recently. Ministers writhed and squirmed to avoid making public a report that’s widely expected to reveal that funding for extremism in Britain has come from Saudi Arabia. The pressure peaked last week, after a series of parliamentary questions I tabled, when survivors of 9/11 wrote to Theresa May asking her to make the report public. At the final PMQs of the parliamentary term last week, I again pressed May on the issue, but like so many prime ministers before her, she brushed aside my questioning on the link between British arms sales and the refusal to expose information that might embarrass the Riyadh regime. 

The British government’s cosy relationship with Riyadh and our habit of selling weapons to authoritarian regimes is “justified" in a number of ways. Firstly, ministers like to repeat familiar lines about protecting British industry, suggesting that the military industrial complex is central to our country’s economic success.

It is true to say that we make a lot of money from selling weapons to Saudi Arabia – indeed figures released over the weekend by the Campaign Against Arms Trade revealed that the government authorised exports including £263m-worth of combat aircraft components to the Saudi air force, and £4m of bombs and missiles in the six months from October 2016.

Though those numbers are high, arms exports is not a jobs-rich industry and only 0.2 per cent of the British workforce is actually employed in the sector. And let’s just be clear – there simply is no moral justification for employing people to build bombs which are likely to be used to slaughter civilians. 

Ministers also justify friendship and arms sales to dictators as part of a foreign policy strategy. They may be despots, but they are “our despots”. The truth, however, is that such deals simply aren’t necessary for a relationship of equals. As my colleague Baroness Jones said recently in the House of Lords:

"As a politician, I understand that we sometimes have to work with some very unpleasant people and we have to sit down with them and negotiate with them. We might loathe them, but we have to keep a dialogue going. However, we do not have to sell them arms. Saudi Arabia is a brutal dictatorship. It is one of the world’s worst Governments in terms of human rights abuses. We should not be selling it arms.”

With Saudi Arabia’s offensive against targets in Yemen continuing, and with UN experts saying the attacks are breaching international law, it’s clear that we’re failing to moderate the actions of "our despots".

The government’s intransigence on this issue – despite the overwhelming moral argument – is astonishing. But it appears that the tide may be turning. In a recent survey, a significant majority of the public backed a ban on arms sales to Saudi Arabia and just this weekend the Mayor of London denounced the arms fair planned in the capital later this year. When the government refused to make the terror funding report public, there was near-universal condemnation from the opposition parties. On this issue, like so many others, the Tories are increasingly isolated and potentially weak.

Read more: How did the High Court decide weapon sales to Saudi Arabia are lawful?

The arms industry exists at the nexus between our country’s industrial and foreign policies. To change course we need to accept a different direction in both policy areas. That’s why I believe that we should accompany the end of arms exports to repressive regimes with a 21st century industrial policy which turns jobs in the industry into employment for the future. Imagine if the expertise of those currently building components for Saudi weaponry was turned towards finding solutions for the greatest foreign policy challenge we face: climate change. 

The future of the British military industrial establishment’s iron grip over government is now in question, and the answers we find will define this country for a generation. Do we stamp our influence on the world by putting our arm around the head-choppers of Riyadh and elsewhere, or do we forge a genuinely independent foreign policy that projects peace around the world – and puts the safety of British people at its core?

Caroline Lucas is the MP for Brighton Pavilion.