Groucho Marxism

It is generally agreed now by all but the most zealous capitalist apologists that conditions have not improved for ordinary people in the UK for some time. Recently I have been wondering if there is any data to back up this claim. And it turns out, there is. In this blog post I will go through some of the key statistics that highlight just how little things have improved for working people in this country in recent times, and how in many ways things have been getting worse. I will focus on the period since the 2008 financial crash, as this is when things started to become particularly hard for ordinary people – although it should be noted that the problems set in much earlier, arguably as far back as the 1970s. Let’s start by looking at wages.

Data from the Office for National Statistics (ONS) shows that the average wages adjusted for inflation grew steadily in the period 2000-2008 but then remained roughly constant after that. According to research by the Resolution Foundation, an independent think-tank focused on improving the living standards for those on low to middle incomes, fifteen years of wage stagnation has left British workers £11,000 worse off a year on average than they would have been had wage growth continued at its pre-2008 rate. This is backed up by data on the labour share of national income, which has remained at around 60% since 2008, and by data on income distribution, which shows that the income share of the bottom 10% has remained at around 20% since 2008, compared to around 35% for the top 10%.

The standard economic measure of income inequality called the ‘Gini index’, named after the Italian economist Corrado Gini who devised it in 1912. This index measures income or wealth inequality within a population, ranging from 0 (perfect equality) to 1 or 100% (perfect inequality). According to data from the World Bank, the UK’s Gini index has remained roughly constant at around 35% since 2008, which again backs up the claim that conditions have not improved for ordinary people since then. In fairness, the UK’s Gini index is one of the lowest in the world; but it could be lower. Slovakia and Slovenia, for example, both currently have indices around 25% – and both are classed as ‘high income’ countries. The UK’s Gini index was also around 25% back in the 1970s.

However it is in wealth rather than income that inequality shows up most clearly. According to a report by the Joseph Rowntree Foundation, an independent social change organisation, wealth inequality in the UK is high and rising, with the top 10% of households currently holding 57% of all wealth whilst the bottom 50% own less than 5%. Moreover, wealth inequality has increased significantly in recent years, with the wealth gap growing by 50% over an eight-year period ending around 2019. Net property wealth and private pension wealth are the main drivers of this disparity, with the former accounting for around 40% of total wealth and the latter accounting for around 35%. Individuals aged 65-74 generally have the most wealth, whilst younger, working-age people generally have very little.

You might be wondering how we can square the fact that wealth inequality has increased so rapidly in recent years with the fact that income inequality has remained roughly the same during the same period. The explanation lies in the observation that the more wealthy you are, the less of your income you are obliged to spend in order to survive, and vice-versa. Workers generally spend all or almost all of their income on paying for essential goods: food, housing, clothing, and so in. We could even go so far as a defining a worker as someone who must spend all of their income in order to survive. In contrast, those at the top of the income distribution – those we might label as capitalists – only have to spend a fraction of their income on necessities, and are therefore able to accumulate the rest as wealth.

Wealth inequality matters for many reasons. It drives poverty and precarity for people at the bottom of the wealth distribution. Not having access to wealth makes lives more insecure and makes it more likely that people will be pulled into poverty. According to a 2023 study, more than a quarter of adults at the start of 2020 said that they would not be able to manage on their savings for a month if their income stopped. Wealth inequality is racialized and gendered, and therefore entrenches existing societal prejudices. Men in the UK have on average around £100,000 more in total wealth than women, a gap of 35%. Wealth holdings are also regionally skewed in the UK, exacerbating regional inequality. The South is considerably more wealthy than the North and this difference is growing over time.

An iron rule of capitalism is that the rich get richer whilst the poor get poorer. As the saying goes, it’s easy to make money when you have money. This reinforcing feedback loop is perhaps the key dynamic of capitalism. Marx’s general law of capitalist accumulation states that the accumulation of wealth at one pole (capitalists) necessitates the simultaneous accumulation of misery, agony of toil, and unemployment at the opposite pole (workers). Moreover, such reinforcing loops inevitably lead to crashes and crises. It’s high time we replaced capitalism and its reinforcing loop of capitalist accumulation and worker immiseration with a new system based on a balancing loop of capitalist deaccumulation and worker emancipation.