I’m So Bored With the USA: Inequality is the Problem, Not Immigration  

 

 

“Families sleeping in the cars in the southwest
No home, no job, no peace, no rest” 

 

 

 

One of the key roles of government is the safeguarding of its people. Within this is the need to care for all, including those, who, for some reason or other, cannot care for themselves

 

An example of this might be the pensioners winter fuel allowance. Where this allowance went wrong was that it was for all pensioners, rather than just the ones who needed it. Equally, Labour’s decision to dismantle the benefit without allowing time for thought, was also wrong.  

At the time the benefit threshold was set at £11,500, I.E., any pensioners with income greater than that wouldn’t qualify. The government, for whatever reason, has now acknowledged its mistake, saying: “We’re open to adapting policy as the circumstances allow. So when there’s an opportunity to make people better off, which is our central purpose, then we’re going to take it.”   

Downing Street said the change was a result of an improved economic landscape, with sources saying ministers could revisit policies including the two-child benefit cap or health and disability cuts if the economy continued to improve. 

There is also the suggestion of a package of up to £750m to tackle child poverty at the spending review in June, although the final figure is yet to be agreed. 

All of this is clearly a U-turn, bought about by the threat of a backbencher rebellion, and the insidious rise of Reform. The latter explains the governments increasingly tough approach to immigration and inflammatory rhetoric such as the PMs suggestion that Britain risked becoming an “island of strangers.”  

 

‘a U-turn, bought about by the threat of a backbencher rebellion, and the insidious rise of Reform’

 

All of this begs the question we have asked several times before; what is this government here for? Where is the focus on the issues that you should expect from a progressive government, such as poverty, industrial decline, the UK’s class divisions? If we are an “island of strangers” the divide is being driven by inequality. 

Even allowing for the fact that Starmer has been PM for only 11-months there is little sign of any change coming. The stagnation and decline that started in 1980 and gathered pace post-GFC, are driving the anger and fear that is destroying mainstream politics. Whilst I accept that there will always be some racism, if the  majority felt prosperous their attitudes would be different. Farage, like all populists, thrives when the established political class no longer deliver hope to the electorate, allowing their naked opportunism to offer their own prejudices as the answer. 

In opposition, Labour offered something close to a Green New Deal, a “modern industrial strategy” built on “a true partnership between government, business and trade unions”. Starmer told us that the modern state could “support businesses to innovate and grow” and “bring in the creative genius of our scientists and universities”. 

Within this £28bn project were clear visions: “Let’s get clean hydrogen energy in South Yorkshire, in the east of England … Offshore wind in Scotland, Teesside, East and North Yorkshire. Solar power growing rural communities”. Starmer promised not just a million new jobs, but training for plumbers, electricians, engineers and builders.  

Here was a vision that would have started to deliver the long-promised levelling-up, a vision that he promised would start  “within the first 100 days of a new Labour government.” 

Some of those ideas live on in the scaled-down, inadequately funded policies still being pursued by Ed Miliband’s Department for Energy Security and Net Zero.  

Instead of a new green economy we have the right-wing media and Reform quashing the idea that a green industrial policy will improve people’s lives. A fortnight ago, Richard Tice, Reform UK’s deputy leader, responded to his party’s victories in Lincolnshire by announcing plans to tear down industries that contribute about £980m to that county’s economy and account for more than 12,000 jobs.  

 

‘right-wing media and Reform quashing the idea that a green industrial policy will improve people’s lives’

 

 

All Reform are good at is hate, stoking divisions; anti-DEI, anti-climate change, anti-immigration. No policies, no ideas, no visions, just hate. 

The real division is inequality, the massive upward redistribution of wealth to the few. 

According to the University of Greenwich, when the Sunday Times first published its annual rich list in 1989, to be included someone would need to have 6,000 times the wealth of the average person in the UK today that figure is 18,000! 

To make this years’ list you need net assets of £350m, C.1,000x the UKs median household wealth.  

A report by the Equality Trust reveals that the 50-wealthiest UK families now own more than the poorest half of the population combined. 

‘The real division is inequality, the massive upward redistribution of wealth to the few’

 

Since the 1980s, regressive tax changes have enabled the wealthy to keep more of their money and pass it through the generations. In advanced economies, the amount of inherited wealth has more or less doubled as a proportion of GDP, compared with the middle of the last century. 

As the period post-GFC highlighted, wealth begets wealth. Yes, whilst there have been half-hearted attempts to ease income inequality with policies such as the minimum wage, and progressive taxes, wealth accumulation has been ignored by successive government who claimed to be for “working people”. Too much of this wealth accumulation has been “passive”, based on returns on existing wealth, rather than earned through hard work or entrepreneurial brilliance.  

In-place of entrepreneurialism and business dynamism, the tools that enhance wealth and reward the wealthiest are constructed and policed by the state, such as intellectual property rights, strengthening legal monopolies and encouraging tax avoidance in areas such as inheritance. 

As an example of this, in the UK it is estimated, that >236,500 properties across England and Wales, worth more than £64bn, are held in “opaque” trust structures.  

Source: Transparency International. 

The government introduced a register of property held through offshore vehicles in August 2022, revealing a string of unknown owners, including high-profile British figures, as well as Russians under sanctions, Gulf royals and the Chinese state. 

But the register still allows thousands of property owners to hide their identities using tactics such as registering the asset in the name of a trust, or a company owned by a trust. 

Many developed economies now suffer from being two-tier societies that offer limited opportunities to the assetless young and undermines the basis of the social contract.  

 

‘the 50-wealthiest UK families now own more than the poorest half of the population combined’

 

 

Last week, the French president, Emmanuel Macron was accused of having become a “president for the rentier class”. Clearly Macron doesn’t understand inequality, as his unpopular PM, François Bayrou, is proposing an austerity budget that would impose €40bn in spending cuts, which, he said, “will demand efforts from everybody, and given its scale, it cannot succeed unless the French people support it”.  

Germany is no different, as the new chancellor, Friedrich Merz, is pushing a similar message of collective sacrifice, saying Germans must “work more, and above all more efficiently” to get a stagnating economy back on track. 

Along with our Labour government, centrists appear to prefer echoing the shameless racist rhetoric of the right, rather than confronting the fact that a self-reproducing wealth divide is corroding their countries. 

There has been too much government sponsored support for billionaires, often lobbied for by people with access to government, on behalf of those who stand to profit. Over 25% of UK billionaires built their wealth through property and inheritance, and another quarter through finance – sectors that rely on rent extraction more than innovation. 

Successive governments have allowed the rich to get richer, often in service of their own ambitions. The new Labour governments first act was to cut the winter fuel allowance for pensioners, this was followed by an attack on welfare benefits, which begs the question, why would a Labour administration target some of the country’s most vulnerable people instead of making the rich pay more, through a real wealth tax?  

Tax Justice UK proposal of a 2% wealth tax on assets over £10m could raise £24bn annually. Oxfam says 78% of the public would support such a progressive levy. 

There isn’t radical its common sense. What is radical is the fact that monopoly profits end up in private hands while the state can’t fund public services. It is inescapably true that the rules have been written to benefit a tiny elite.  

 

‘a 2% wealth tax on assets over £10m could raise £24bn annually’

 

Curbing immigration will change nothing. The success off populism is that it has fuelled voters anger over many countries democratic decay fostering a long-term loss of trust in mainstream politics. 

This is the same anger that fuelled vote “leave” in 2016, along with a host of broken promises of Brexit such as the massive economic boost it would deliver, along with £350mm extra funds for the NHS every week. 

Having been away last week I missed much of the furious reactions of hard-line Brexiteers on the verge of self-combustion as they fell back on accusations of treason and betrayal, while presenting improbable political opinions as irrefutable facts.  

The stark truth is that government figures suggest the UK economy is 4% smaller as a result Brexit. Not to mention the £4.7bn spent on implementing post-EU border arrangements, according to the National Audit Office. 

There is little chance of recouping the Brexit induced losses in the foreseeable future. Even the trade deals with Australia, India and the US cannot begin to redress the harm of hard-Brexit. 

55% of Britons say Brexit was wrong, with only 30% still in favour. 

Whilst there still remains much to be worked out in Starmer’s deal with the EU last week, it is a clear sign that both sides are committed to more agreements. 

Increased cooperation on defence is significant and timely, given the ramping up of geopolitical instability under Trump.  

The area of defence throws up other opportunities, too. For example, Canada has cancelled its military purchase of F-35 jet fighters contract with America’s Lockheed Martin for US$13bn. Other countries that have cancelled similar contracts are Germany, Portugal, and Denmark. Trumps attitude towards Europe has seen trust between the former allies disappear. This will allow the European Union to further develop its armament industry. 

 

‘Trumps attitude towards Europe has seen trust between the former allies disappear’

 

 

On food and fishing, terms have been decided. Fewer checks on exports, including meat, will benefit UK food producers, particularly the smaller ones that were worst affected by Brexit. For Europeans, mainly the French, the big win is a 12-year agreement on fishing in British waters. 

The 41% of UK goods exported to the EU, worth £358bn, are more than is sent to the US and India combined – making this by far the most important of this month’s trade deals. Though the UK remains outside the customs union, and regulations governing other goods including medicines have not been relaxed, the new measures mark a significant easing of trade. 

Defeating populism doesn’t only mean keeping the barbarians from power, it is the opportunity to right the economic wrongs of the last 45-yrs. 

 

 

“I’m looking for a partner, someone who gets things fixed
Ask yourself this question, do you want to be rich?” 

 

‘This week we continue to look at inequality, the impact of which is felt by the majority and is continuing to turn the political world upside down, not just in the US and UK, but in mainland Europe, too.

Since 1980 governments have pandered to the rich. Perhaps initially they were taken in by wonders of neoliberalism and its promise of trickle-down delivering growth for all based on higher rate tax cuts. There was no trickle down, instead we saw a torrent flow upwards and stayed there.

The GFC, rather than signalling the end of this bonanza, lit the touchpaper of a rentier orgy, a frenzy of wealth and asset gathering.

At the time central banks congratulated themselves on staving off recession, but they were wrong. In 2018, in “Hunting for yield in the recession that supposedly never happened”, I wrote: The Global Financial Crisis was the worst economic catastrophe since the Wall Street Crash 1929, unlike the latter the world didn’t go into recession, or did it? Maybe we just didn’t notice.“  

For the majority it has been an “L”-shaped recession. Central bankers weren’t alone in missing this fact, as most centrist governments did, too.

The ones who did see it were right-wing populists, opportunists latching on to the majority’s misery and peddling their own prejudices.  

Today, the US has an opportunist as president, whilst the UK has a centrist government who can’t or won’t face-up to reality, and prefer copying populist policies.

In the UK, there are some signs that the government is sensing an opportunity, for example reintegrating with Europe.

Along with Europe being our biggest trading partner, the continued vagaries of the Trump regime make them an increasingly erratic partner. This doesn’t only apply to trade and tariffs, but to foreign policy where rogue nations such as Russia and Israel appear emboldened by Trump’s dithering.

Today’s lyrics reflect this, we start with Bruce Springsteen’s  “The Ghost of Tom Joad”. We end with the Pet Shop Boys “Opportunities” a celebration of all that was wrong with the “greed is good” era.

Enjoy! Philip.’

 

@coldwarsteve

 

 

Philip Gilbert is a city-based corporate financier, and former investment banker.

Philip is a great believer in meritocracy, and in the belief that if you want something enough you can make it happen. These beliefs were formed in his formative years, of the late 1970s and 80s

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