The New Serfdom

by Angela Eagle

  It means that families are finding it harder to pay for what they need and more frequently find it impossible to pay for what they want.

  This affects everyone’s future prospects, but it hits the youngest generation hardest. The age at which young people buy their first house in Britain is rapidly rising. The time taken to save for a deposit for low- to middle-income households has increased from less than five years in 1997 to more than twenty years today. At the same time, rents are going up and up. The Office for National Statistics reported in its August 2017 bulletin that ‘between January 2011 and August 2017, private rental prices in Great Britain increased by 15.1 per cent’. And all this means we are saving far less than ever before, leaving people far less resilient to sudden shock, like loss of employment or a bereavement, which can drive them into acute destitution.

  In the past, analyses of want have tended to focus on either poverty or inequality. But that is insufficient to understand what is happening today. There are more and more people just getting by; more and more who graft every day but find themselves going backwards. For them, no matter how hard they work, the standard of living they once had or expect is increasingly out of reach. This is not a perception issue, but one of hard economics. If wages are stagnating and basic needs are getting more expensive to acquire while wage growth isn’t keeping up with inflation, there can be no doubt that for the first time in decades, we have had a sustained period in which things are not getting better for British people. They are getting worse.

  Not to mention that, while all of this is happening, the FTSE 100 Stock Index, a measure of the value of British companies, has reached an all-time high on the back of soaring corporate profits.

  It doesn’t quite seem fair, does it?

  In the post-war years, until the 1970s, Britain was overall a poorer but much more equal country than it is today. Since then, inequality in Britain, by any measure, has increased.

  There are lots of different ways to understand and quantify inequality, but what is true is that the UK has a very high level of income inequality compared to other developed countries.

  In Britain today, the poorest 10 per cent receive, on average, an income of £4,436, while the top 10 per cent receive twenty-four times more: an average of £107,937. After you take into account taxes and redistribution, things get a little better, but the situation is still pretty dire. Households in the bottom 10 per cent of the population have on average a disposable (or net) income of £9,644 (this includes wages and cash benefits, and is after direct taxes like income tax and council tax, but not indirect taxes like VAT). The top 10 per cent have net incomes almost nine times that (£83,875).

  It gets worse if you look at the most rich of all. The top 1 per cent have incomes substantially higher than the rest of those in the top 10 per cent. In 2012, the top 1 per cent had an average income of £253,927 and the top 0.1 per cent had an average income of £919,882.

  All of this has happened in the past forty years. The rise in inequality in Britain started under Thatcher, continued under John Major, and, to our regret, was held static but not reversed under New Labour. Meanwhile, the top 1 per cent soared further away from the rest. One measure of inequality is something called the Gini coefficient, which is a measure of the dispersion of income distribution among the population. This radically increased after 1979 and has remained at the high it reached under Thatcher since then.

  So how was this allowed to happen? Politics is, at one level, about telling stories to explain complex phenomena like the economy. Stories and ideas matter, and in this instance it was the story that inequality creates an incentive for people to work harder and that redistributing income actually disincentivises hard work.

  As Gordon Gekko, the main character in the 1980s Oliver Stone movie Wall Street, would say: ‘Greed, for lack of a better word, is good … Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms – greed for life, for money, for love, knowledge – has marked the upward surge of mankind.’

  This social Darwinian mantra is part of the core Hayekian creed. It was the bedrock of Conservative economic and political ideologies in the 1980s and 1990s both in Britain and around the world. This explained why it was right in their minds to cut the welfare state and allow the concentration of Britain’s wealth into fewer and even more lavishly wealthy hands. It was selfishness recast as kindness; greed cast as virtue; poverty cast as wrongdoing.

  It turned out, however, that they were wrong. In 2009, two epidemiologists – people who study the spread, incidence and solutions to disease and ill-health – started looking at what happened as societies become more unequal. The results of Richard Wilkinson and Kate Pickett’s analysis, detailed in their book The Spirit Level, was startlingly clear. They identified the ‘pernicious effects that inequality has on societies: eroding trust, increasing anxiety and illness, (and) encouraging excessive consumption’. Their work showed that for eleven different health and social problems – physical illness, mental illness, drug abuse, poor education, imprisonment, obesity, social immobility, lack of trust and community life, violence, teenage pregnancies, and low child wellbeing – outcomes are significantly worse in more unequal rich countries. As they went on to say:

  human beings have deep-seated psychological responses to inequality and social hierarchy. The tendency to equate outward wealth with inner worth means that inequality colours our social perceptions. It invokes feelings of superiority and inferiority, dominance and subordination – which affect the way we relate to and treat each other … Research has shown that greater inequality leads to shorter spells of economic expansion and more frequent and severe boom-and-bust cycles that make economies more vulnerable to crisis.

  The book’s serendipitous timing, shortly after the financial crash, meant it had a huge impact. At a time when around 80 per cent of Britons now think the income gap is too large, world leaders cannot help but listen. Barack Obama has said income inequality is the ‘defining challenge of our times’, while Pope Francis states that ‘inequality is the root of social ills’. Even the IMF has now decided that inequality is pernicious and needs mitigating.

  Further research showed a link between inequality and economic growth. The Organisation for Economic Co-operation and Development released a study in 2014 which argued that reducing inequality was crucial to kick-starting growth. Their analysis of countries around the world showed that rising inequality slowed down growth. Unveiling the report, the organisation’s Secretary-General, Angel Gurría, said: ‘This compelling evidence proves that addressing high and growing inequality is critical to promote strong and sustained growth and needs to be at the centre of the policy debate … Countries that promote equal opportunity for all from an early age are those that will grow and prosper.’

  This overdue reformation against the greed gospel of Hayek’s acolytes is something that we found, in talking to people around the country, was deeply felt. Countless people have told us: ‘It just really gets me angry that I’m busting a gut to survive and yet so many people are making money for doing nothing really or actually causing all these financial crises.’ It’s this perception of inequality that has really exploded, powered in part by the enormous expansion of our access to news and information, to see people doing very, very well, while most people feel that they are just as decent and hard-working, if not more, but simply aren’t getting by.

  When so many feel their basic needs and wants are being denied, it’s not hard to see where the inchoate, latent anger that is driving our political volatility comes from. When people feel the rich have lived it too large and left so little for their fellow citizens, there comes a time of political revolution.

  We’ve spoken about those just managing to get by, but what about the very poorest in our society?

  Britain has established an enormous infrastructure to support our country’s post-war determination to eliminate destitution. This comprises the collection of taxe
s and the disbursement of tens of billions of pounds a year to support those with little income and capital. Unfortunately, thanks to relentless propaganda, there is little popular understanding of what the money is actually spent on. The truth is that most of the ‘benefits’ budget goes on pensions, and comparatively little on unemployment benefits. One of the biggest growth areas in our benefits bill is actually housing benefit. This might be more accurately called ‘landlord benefit’, because it is of course paid by the state overwhelmingly to landlords and, increasingly, to private landlords. It’s another shocking and disgraceful example of the housing crisis in Britain. Instead of building new houses, we’re giving money to private landlords to subsidise private rents, which are rising because of the subsidy.

  The social security system has been under severe pressure to reduce the amount of benefits and eligibility for quite some time, however. The truth is that the distribution of unemployment benefits has never been a popular cause to advocate. The British Social Attitudes Survey shows that support for greater spending on unemployment benefits was highest in 1996 – after seventeen years of a Conservative assault on the poorest. But even then, only one third of people supported higher spending. In the most recent survey, in 2016, only 16 per cent of people supported an increase.

  Polls are just a snapshot. As more people become aware of the scale of suffering of the poorest in Austerity Britain, attitudes will change. But it is never easy to champion the rights of the poor and it does not always make you popular. That doesn’t mean that politicians, in particular those from the Labour tradition, can’t always be there to protect those that are struggling. Many MPs would agree that in recent years, since the financial crisis, there has been an increase in the number of people coming to their advice surgeries that are in acute crisis – destitution. That’s when someone can’t afford to buy the essentials to eat, keep clean and stay warm and dry.

  The Joseph Rowntree Foundation, one of the biggest charities focused on poverty in Britain, estimated that 1,252,000 people, including 312,000 children, were in this situation in the UK in 2015. Their report states that the key triggers pushing people into poverty include debt repayments, benefit delays and sanctions, high living costs and, for some migrants, extremely low levels of benefits and lack of access to the UK labour market. Disability and ill-health were important factors. Seventy-six per cent of these people – our fellow citizens – said they had had to go without food. Seventy-one per cent didn’t have clothing and/or shoes suitable for the weather.

  It is the case that many of those classified as destitute in Britain today are there as a result of the cuts to benefits and the introduction of a punitive sanctions regime that means people can be punished with a complete loss of their safety net in a variety of sometimes Orwellian circumstances.

  The Conservatives have always tried to portray those who are destitute as individually responsible for the difficulties in which they find themselves. They believe that you have to punish people and give them tough love to shock them back into economic sufficiency. In 2011, when launching a scheme intended to help, David Cameron identified some of these people as ‘troubled families’. It’s worth rereading his words:

  I want to talk about troubled families. Let me be clear what I mean by this phrase. Officialdom might call them ‘families with multiple disadvantages’. Some in the press might call them ‘neighbours from hell’.

  Whatever you call them, we’ve known for years that a relatively small number of families are the source of a large proportion of the problems in society. Drug addiction. Alcohol abuse. Crime. A culture of disruption and irresponsibility that cascades through generations … Now there are some who say: ‘Yes, this is terrible, but this Shameless culture is now a fact of modern British life, and there’s nothing we can do.’ They’re the same people who believe that poverty and failure, like death and taxes, will always be with us. But I am an optimist about human nature. I don’t believe in writing people off. I don’t think people are pre-programmed to fail because of where they come from. And I hate the idea that we should just expect to pay ever-larger amounts in welfare to an ever-larger chunk of society and never expect the recipients to change their lives.

  He ploughed half a billion pounds into the scheme and issued an endless slew of press releases and newspaper briefings on its success. But, as the National Audit Office later revealed, of the 120,000 families targeted, only 12,000 ended up with one person back in work. That means the scheme cost roughly £40,000 per job. They could have paid them a year’s wage for less than that. Instead, the underpinning rationale behind the scheme was persuading Britain that ‘troubled families’ were all about individual fecklessness, rather than an economy that wasn’t working.

  And therein lies the problem. We have an economy that is delivering fewer of the well-paying jobs than people want. We have an accrual of capital by those that already have capital. We have a system that delivers lots of goods we want but is terrible at delivering some of the basic necessities of life – such as affordable housing and utilities. As state spending is relentlessly stripped back, we are robbing people of opportunities to improve their lot in life. People are more financially insecure and vulnerable to a sudden shock in their life circumstances than ever before because they have less saved for when they go through a shock, like losing their job or bereavement. People are more in debt and personal indebtedness is rising rapidly. Moreover, it is a system in which workers have very little voice, as forty years of assaults against the trade unions has left them with fewer members, present in fewer workplaces and incapable of pushing back against these worrying trends. All this has combined to create an unfair economic system that rewards the few while punishing the many.

  CHAPTER FOUR

  IDLENESS

  Labour. It’s the name of our party and it also represents our historic mission: to help people to work and thus contribute to society, and to improve the conditions, wages and security of those workers. William Beveridge saw work as the primary route out of poverty, and for the post-war Labour government, full employment was its central economic goal.

  This has not been uncontroversial. Some people – we would argue unfairly – claim that Labour’s obsession with work has made it blind to the needs of those that cannot work. Some people on the right claim that Labour panders to the workless. The truth is that we have always tried to balance the two: self-reliance balanced with care for those that find themselves vulnerable for whatever reason.

  It is worth addressing why Labour believes that work is so important. This question is at the heart of some of the most ferocious debates about politics and economics. The Conservatives, after all, claim they are the party of ‘hard-working people’, and there has been a long tradition of people on the political left who are at best ambivalent about the importance of work, from Paul Lafargue, a nineteenth-century Marxist who extolled the virtues of laziness, to some who extol the virtues of fully automated luxury communism.

  So why do we work? Let’s start by looking at two perspectives.

  Adam Smith, the eighteenth-century British economist, is regarded as one of the fathers of modern capitalism. His most famous contribution was his description of ‘the invisible hand’ of the market. But something that 21st-century market fundamentalists would prefer to ignore is the fact that Smith was very interested in alleviating poverty. In The Wealth of Nations, he writes:

  No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, clothe, and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, clothed, and lodged.

  Smith recognised the power of inequality and the envy it invokes. In The Theory of Moral Sentiments, Smith wrote of the ‘poor man’:

  To obtain the conveniences which [wealth] afford[s], he submits in the first year, nay in the first month of his application, to more
fatigue of body and more uneasiness of mind than he could have suffered through the whole of his life from the want of them. He studies to distinguish himself in some laborious profession. With the most unrelenting industry he labours night and day to acquire talents superior to all his competitors. He endeavours next to bring those talents into public view, and with equal assiduity solicits every opportunity of employment. For this purpose he makes his court to all mankind; he serves those whom he hates, and is obsequious to those whom he despises.

  ‘Tranquillity’, in Smith’s view, is to not have to work. But to achieve this, we must bust a gut in a laborious profession that we might hate and seek to continually improve ourselves faster than our competitors. In short, our reward for unrelenting toil, fatigue and uneasiness of mind is the ability to have tranquillity in our life outside work.

  In contrast, there is the perspective of Karl Marx, the nineteenth-century philosopher, economist and author of The Communist Manifesto.

  In his work, Grundrisse, Marx mocks Smith’s view of work as a punishment; instead seeing work as a means of internal liberation.

  In the sweat of thy brow shalt thou labour! was Jehovah’s curse on Adam. And this is labour for Smith, a curse. ‘Tranquillity’ appears as the adequate state, as identical with ‘freedom’ and ‘happiness.’ It seems quite far from Smith’s mind that the individual, ‘in his normal state of health, strength, activity, skill, facility,’ also needs a normal portion of work, and of the suspension of tranquillity. Certainly, labour obtains its measure from the outside, through the aim to be attained and the obstacles to be overcome in attaining it. But Smith has no inkling whatever that the overcoming of obstacles is in itself a liberating activity – and that, further, the external aims become stripped of the semblance of merely external natural urgencies, and become posited as aims which the individual himself posits – hence as self-realisation, objectification of the subject, hence real freedom, whose action is, precisely, labour.