The Consequences of Slow Growth, part one

 Echoes of the global financial crisis of 2007-9 are in the air. Both the US Nasdaq and the tech-heavy South Korean stock market have fallen heavily recently, prompted by threats by the US Federal Reserve to raise interest rates. Back in February 2007, stocks in the US and Asia also nose-dived, presaging ‘Debtonation Day’ in August of that year.

And the proximate cause of the credit crunch, which many very knowledgeable people assured us could never happen, was an incremental rise in interest rates.

But whether an almighty bubble is about to burst, as it has threatened to many times before, there is one thing we in the West can be sure of. We are living in a society defined by slow economic growth, which qualitatively distinguishes it from economies in most of the second half of the 20^th century.

Statistics can lie but not here because they are so stark. In the decade to 2025, UK GDP grew by just 14%, an annual growth rate of just over 1 per cent. In the decade to 1965, growth was 37%, and economic growth per capita (growth adjusted for population growth) in the last 10 years has actually been negative.

The European Union has seen average growth of 1.3% over the last 19 years and 1.1% in the Eurozone.  This is a decline from nearly 5% in the 1960s, 2.1% from 1973-83, and 1.6% in the 1990s.

The US, the world’s largest economy, has performed slightly better but the trends are still unmistakable. In the 1950s and ‘60s, the growth rate was above 4% before decreasing to around 3% in the 1970s and ‘80s. Over the last ten years, the average has been below 2%.

These are not figures relative to other economies. Other parts of the world, like China, have clearly been catching up over the last few decades. But the West’s growth decline is palpable without comparisons to other countries.

Nor, as an aside, is this what was meant to happen. Thatcher and Reagan’s ‘free market’ economic medicine was sold on the basis on reviving the economy, ushering in an era of prosperity. But as these supply-side prescriptions have bedded down into conventional wisdom, they have had precisely the opposite effect.

 And slow growth has definite consequences. One of these is that ‘democratic’ government (to the extent that our government can ever really be called democratic’) gets absorbed by private economic power. Back in the 1930s, US President Franklin Roosevelt called this “the essence of Fascism”.

I was reading recently a book about “deaths of despair” in the US. These are deaths by suicide, drug overdose, or alcoholism, which the authors contend have shot up among white people without a degree since the turn of the century. There are many possible reasons, which I can’t go into here, but one factor is slowing economic growth.

“What may seem like small differences in growth rates have effects over long periods of time”, the authors, Anne Case and Angus Deaton (not that one), say.

One of these effects is increasingly bitter fights over distribution. “With lower growth, there is more pressure to shut out less successful groups”, they write.  This “poisons politics”.

Such a poisoning can be seen in British politics in the demonisation of immigrants and refugees. Or in the intense concentration on attacking the very limited, and very conditional, benefits of sick and disabled people; an issue which simply didn’t exist prior to the 1990s, in an era marked by higher economic growth. The ‘problem’ of excessive benefits paid to vulnerable people has become an obsession of British politics in the age of austerity.

Case and Deaton also say that with slower growth, the “positive-sum game of innovation” gets usurped by “Rent-seeking”. This turns into a “vicious circle that impoverishes everyone”.

Rent-seeking does not just mean seeking housing rents from tenants, but the appropriation by powerful corporations of the existing income of government and society, rather than attempting to create new sources of wealth.

Based on these insights, the basic features of slow growth society, in Britain and elsewhere, can be identified.

In a slow growth society, living standards decline or stagnate

Wage rates in the US have been stagnating for half a century. In Britain, the process has been more telescoped but no less pronounced. According to the Resolution Foundation, if wages had continued to grow as they had been before the 2008 financial crisis, they would be 37% higher than they actually are.

This has taken place in the context of a decline in real GDP – GDP that takes account of a rise in population. “It is extremely difficult for living standards to rise in such circumstances” says socialist economist Michael Burke. Likewise, Case and Deaton say that in an economy growing at 2.5%, living standards double in 28 years but at 1.5% it takes 47 years.

Of course, in a strongly growing economy, there is no guarantee that income will be shared out. While global GDP has increased by 65% since 1990, for example, the number of people living on less than $5 a day has increased by 370 million.

But in a stagnant economy, there is even less chance of living standards increasing. Why should this be so? Partly this is because living standards are dependent on labour productivity which is in turn dependent on business investment. And both of these metrics have been falling over the last few decades. As Case and Deaton say, “investment is a prerequisite for growth, it embodies the latest knowledge and techniques and it raises productivity.”

In the absence of investment, business tends to concentrate on low-cost labour, possibly overseas, or cheap AI transformations. Neither of which raise living standards.

There is easy money to be made – for some people

But in these circumstances, capital is irresistibly attracted to something else – rent-seeking. This involves making money, not from consumer spending on new products, but from government revenues or unavoidable spending by consumers (on housing or heating costs, for example). Something that is already there and merely has to be tapped or exploited. The deal negotiated by pharmaceutical companies with the Starmer government to double NHS spending on new drugs over the next decade – the cost of which has been variously placed at £64 billion or £44.7 billion, causing hundreds of thousands of excess deaths – is a prime example of rent-seeking.

The “VIP Lane” created by ‘Boris’ Johnson’s Conservative government, to enable firms with political connections to the Tories to get PPE contracts under Covid, is another.

More generally, Britain’s ‘privatised’ utilities – in truth not genuinely privatised but contracted out – are a haven of rent-seeking. They provide both a monopoly ensured by the government and a captive market of consumers who have no choice but to buy the ‘product’ being sold. Unsurprisingly, charges have increased way beyond the rate of inflation.

But rent-seeking can occur in purely private sector settings. When a private equity consortium buys a company, in the process loading it down with debt, and then prepares it for re-sale by asset stripping it and increasing the charges to customers, that is rent-seeking. It is destructive to the viability of the firms that are acquired, but the ‘investors’ acquire massive profits.

These processes come to dominate entire economies. The Tories’ PPE scandal has been described as “the rule of contemporary British capitalism, rather than the exception”, while a recent report by UCL professor Mariana Mazzucato has characterised the European economy as a “capitalism of rent”, where income is captured not by producing anything but by achieving market power, and owning assets and charging for access to them.

It is no accident that this degradation has occurred in an era of slow GDP growth, where the levying of rent becomes a far more lucrative and risk-free strategy than actually creating anything.

In a slow growth economy, everything costs more – for a reason

As the Mazzucato report asserts, the crux of corporate strategies is the achievement of market power, which enables income to flow from charging people or other companies to access what you possess. This brings into focus another aspect of slow growth economies – an increase in price mark-ups.

A price mark-up is overcharging for products. According to orthodox economic theory, the price of goods is determined by the cost of the labour and raw materials it takes to produce them, plus a ‘normal’ rate of profit (as we are talking about a profit-based system).

But under a regime of price mark-ups, this normal level of profit becomes ever more elastic. According to one recent book on the cost-of-living crisis, the largest UK firms have massively raised their mark-ups over the last two decades, from 58% in 2002 to 82% in 2020.

This ability to profiteer, and impose what is essentially a private tax on consumers, is intimately related to size and market power. Research by the anti-monopoly group The Balanced Economy Project, reveals that for the world’s top 20 companies, in the five years to 2022, the average mark-up rose to around 50%. For the bottom half of firms (around 34,000 companies were studied), however, the average mark-up was just 25%.

And for some sectors of the economy – pharma or Big Tech for example – mark-ups can be huge, many hundreds of per cent.

The economist Isabella Weber coined the term “sellers’ inflation”, to account for the inflation that took hold after Covid-19 that, she said, was based on “the ability of firms with market power to hike prices”. In truth this process was happening before the Covid epidemic, but as inflation was so low few noticed.

A decade ago, the Economist magazine found that corporations in the US were raking in “exceptional profits” of $300 billion a year, equivalent to a third of taxed operating profits. Some sectors of the US economy were seeing price rises of double the rate of inflation. This, at a time when inflation was negligible (indeed there was a pervasive fear of deflation). Of course, GDP growth was tiny as well, lower than it had been since before World War Two.

What is interesting is that these price mark-ups were occurring in the most concentrated parts of the American economy. In the same article, the Economist analysed 900 sectors of the US economy and found that 2/3rds had become more concentrated between 1997 and 2012.

Not only do high mark-ups contribute high profits and high market value, they are enabled by it. When it comes to charging much more for your products than it takes to produce them, the bigger you are the better.

Which leads to another insight.

Bigness is a curse

In the late 1930s, Franklin Roosevelt called attention to a “concentration of private power without equal in history”.

0.1% of corporations in America, he told the US Congress in 1938, owned 52% of the assets of all of them. Now that figure has risen to 90%.

Roosevelt said something else in his speech, delivered in the midst of the Great Depression. That the history of modern times “proves that in times of depression concentration of business speeds up. Bigger business then has a larger opportunity to grow still bigger at the expense of smaller competitors who are weakened by financial adversity.”

We are undoubtedly now faced with, and have been for some time, conditions of “financial adversity”.

A slow growth economy means generalized financial adversity — not just among people struggling to make ends meet but among small businesses who are dependent on consumer spending or may be the suppliers of corporate behemoths like Amazon.

One group, though, palpably not suffering from financial adversity are large corporations. Corporate profits are at all-time highs, eclipsing previous all-time highs achieved a few months before.

And the large are getting larger. According to Goldman Sachs, “despite uncertainty in the global economy” mergers and acquisitions – which by definition involve the creation of ever larger economic and financial entities – could hit $3.8 trillion in 2026, surpassing the previous peak in the Covid-year of 2021.

Received wisdom has it that the threat of Fascism is nurtured by conditions of inequality, poverty, anxiety, and a lack of social mobility. Conditions that will call out for scapegoats to be found which temporarily soothe the anxiety.

But if we listen to Roosevelt who was speaking when Nazism was approaching its zenith, that isn’t the whole story. Fascism also has an economic corollary, what he called “a cluster of private collectivisms” … “masking itself as a system of free enterprise” that seeks to control democratic government.

Fascism doesn’t just base itself on the exploitation of popular discontent among its mass base. It also has an elite element, which finds nourishment, as it did in the 1930s, in the conditions of a slow growth society.

What Roosevelt termed the “essence of Fascism” is what I want to consider in the second half of this article.

The free market reveals its true colours

 

Corporate profits, not workers’ wages, are the largest factor behind the inflation afflicting Europe, it was revealed last month.

This was the conclusion of the International Monetary Fund, a body not noted for its pro-worker outlook. Rather it’s been a bastion of the austerity mania besetting the world over the last few decades.

The IMF conceded that domestic profits were responsible for 45% of the inflation that occurred in Europe over the last year. Rising import prices, by contrast, contributed 40% and labour costs 25%.

This rather contradicts the assertion of conservative commentators that we are in the grip of a ‘wage-price’ spiral. This idea was always fantastical in the context of the longest wage stagnation in Britain since Napoleonic times.  Costs – labour costs – that are going down, or barely rising, in real terms, can’t be responsible for soaring prices (inflation).

Gouge Away

In contrast, the evidence for a ‘profits-price spiral’ is strong. One recent book on the cost of living crisis in Britain found that the biggest companies increased their “mark ups” – prices above the cost of production – from 58% in 2002 to 82% in 2020. The Bank of England has recently found that goods price inflation (prices) is still rising while the cost of inputs is falling. Now we have the IMF – hardly a neutral body – admitting that “firms have passed on more than the nominal cost shock” [of the rise in commodity prices caused by the pandemic, the war in Ukraine etc.] to consumers.

But what is really interesting is that if mainstream economics is remotely trustworthy as a description of reality this profits-price spiral shouldn’t be happening at all.

The core belief of mainstream economics is that we inhabit an innately competitive, self-regulating market economy whose defining characteristic is price competition. As neoclassical economist Milton Friedman asserted, competition exists when there are a large number of firms and none of them can control price levels even though they might want to. “An individual firm is powerless to intervene in ways that change the basic competitive forces it or another firm faces,” he said. “The fate of each business is thus largely determined by market forces beyond its control.”

Fellow ‘free market’ economist, and favourite of Margaret Thatcher, Friedrich Hayek echoed, “the price system will fulfil its function only if competition prevails, that is, if the individual producer has to adapt himself to price changes and cannot control them”.

Essentially, under the system, if one firm raises prices way beyond the cost of production, it will immediately face competition from another firm offering lower prices. Either it relents, or it goes bust.

But this is true only if it is the case that we live in this fabled market system, where impersonal competition is the rule everyone must abide by. But what if we don’t? What if, in fact, we live – whether we like it or not – in a corporate capitalist system where large, dominant firms are able to determine prices and levels of investment?

Marxist truth bomb

This is the conclusion of a variant of Marxist economics, known as monopoly capitalism. A group of large firms, it says, – not just one as the name suggests – rise to dominance and, as a result, are able to collude in raising prices, controlling levels of investment and the introduction of new technologies, and making it difficult for smaller firms to gain a foothold in the market.  This process is enabled by the fact that markets in general are becoming more concentrated – i.e. mergers mean that larger and larger firms dominate markets as opposed to the competitive idyll of a welter of small firms.

A think-tank report last summer in Britain found that, at the close of 2021, the profits of the largest non-financial companies were up 34% compared to pre-pandemic levels, with over 90% of the increase accounted for by just 25 companies. “Some firms could have considerable market power with very few competitors,” the report argued, “and this could be making the cost of living crisis worse by raising prices beyond what would be economically justified.”

What gives credence to the idea that the ‘market economy’ is not as innately competitive as claimed is that a profits price spiral was happening before the current spate of run-away inflation. As I noted in my 2019 book The Disobedient Society:

In 2016 The Economist magazine analysed 900 sectors of the US economy and found that 2/3rds became more concentrated between 1997 and 2012. As a result, corporate America was raking in ‘exceptional profits’ of about $300 billion a year, equivalent to a third of taxed operating profits. And contrary to ‘one of the fundamental principle of economics’—that prices equal marginal costs—these profits were not being passed on to the consumer, with some more concentrated sectors of the economy, according to The Economist’s analysis, seeing prices rises of double the rate of inflation.

Of course, back in 2016, consumer inflation wasn’t an issue, it was negligible. Rather, the fear was deflation and what that would do to the economy. Which does beg the question of what the original cause of the inflation we are now experiencing was? Possibly price gouging, therefore, didn’t spark the jump in inflation, but is helping to prolong it.

Reneging on the Deal

But what this does unquestionably do is undermine the whole justification of the ‘market’ economy.  Essentially, we in the West were presented with a deal. Put up with submission to the will of an employer in the form of wage labour, in addition to skyrocketing inequality, and you will be rewarded with cheap food and other consumer goods. In mainstream economics, labour is the burden for which consumption enabled by wages is the compensation. But this compensation is looking remarkably threadbare, and for many, non-existent. In the process, the whole concept of the market economy – competitive markets allocating scarce resources and ensuring the consumer gets the best possible outcome – is revealed to be something that exists in the pages of a textbook rather than in the real world.

The logical consequence is that if we can’t rely on the putative ‘market’ economy to do what it is supposed to do, then – at the very least – it needs to be properly regulated in the public interest by some body that is genuinely independent of corporate interests. Policies such as an excess profits tax and price caps become ways to correct what the market – because it isn’t a real market – is failing to do.

Meanwhile, we continue to reap the benefit of the ‘free market’. Even though it isn’t free and it doesn’t operate like a market.

The Generosity of the Working Classes

Whenever workers are accused of being greedy for wanting their wages to keep up with inflation – as RMT members, BT workers and train drivers are now, in common with workers generally in the late ’70s – it always puts me in mind of two Austrian economists.

One is the über free-marketeer, and also Margaret Thatcher’s favourite practitioner of the ‘dismal science’, Friedrich Hayek. He was adamant that society would benefit, and become immeasurably wealthier, if everyone was motivated solely by profit. “In fact, by pursuing profit we are as altruistic as we can possibly be,” he said, “because we extend our concern beyond to people beyond our range of personal conception.”

Another Austrian, Karl Polanyi (technically Hungarian but he was born in Vienna and lived there for many years), noted that this admonition to behave as selfishly as possible in economic matters pointedly didn’t apply to workers. In fact if wage earners didn’t act in precisely the opposite way – with admirable restraint and concern for the common good – the whole profit maximising system would rapidly fall apart.

If, Polanyi noted in his most famous book The Great Transformation, what workers are selling – their labour – is just the same as any other commodity produced for sale, like sugar or bottles of vodka, they should seek the highest possible price for it. If, that is, they are motivated solely by maximising profit, which Hayek and his predecessor Ludwig Von Mises thought everyone should be. Polanyi elaborated:

Consistently followed up, this means the chief obligation of labor is to be almost continually on strike … The source of the incongruity and practice is, of course, that labor is not really a commodity and that if labor was withheld in order to ascertain its exact price (just as an increase in supply of all other commodities in similar circumstances) society would very soon dissolve for lack of sustenance.

Naturally workers would not be allowed to continually renegotiate the sale of their labour in this manner. This is where the neoliberal solicitude for freedom crumples like leaves on a bonfire. Margaret Thatcher famously used the power of the state to destroy the influence of organised labour the moment it ceased to be a compliant partner of employers and tried to protect the living standards of its members. And in response to the actions of the RMT and others, Liz Truss, the favourite to be next British Prime Minister, wants a legal requirement to maintain “minimum service levels” even when public sector workers have balloted for a strike. If enacted Truss’s promise would return Britain to the salad days of the liberal utopia (coincidentally the original title of The Great Transformation) before disputes between employers and employees were made civil matters and when workers could be – and were – jailed for breaking their employment contract.

Liberal Fascism

And this, shall we say, fickle relationship with freedom is by no means a new impulse on the part of conservative-liberals. In the 1920s, one of the original economic liberals, Ludwig Von Mises, thought the merit of Italian Fascism would “live on eternally in history” for having “saved European civilisation” by smashing, quite literally, the workers’ movement in Italy.

It is illuminating that wage earners – flesh and blood people with bills to pay and other people to look after – are the only element of the economy expected to exercise restraint in economic matters out of concern for the common welfare. Nobody in power really thinks for one moment profit should not be maximised by corporations. And despite the propaganda that in these enlightened times, corporations ‘do well by doing good’, it certainly is being unashamedly maximised. Both Shell and Centrica (British Gas) recently posted record profits notwithstanding predictions that energy bills will soon triple. According to research by the union Unite, profit margins for the UK’s FTSE 350 companies (big business in other words) were 73% higher in 2021 than they were before the pandemic.  Despite Sir Keir Starmer telling us that “When business profits, we all do”, the bedtime story that high profits produce economic growth and rising wages like parched earth blossoms after a cloudburst just won’t wash anymore. Are we supposed to ignore the experience of last three decades?

Not selfish enough

The conclusion that economic selfishness is in fact a virtue when practised by those legal entities called corporations is defended despite the fact that excessive profits are a more likely inflationary culprit than high wages (which in fact have been stagnating or falling for years). In the words of the father of market economics, Adam Smith, “Our merchants and master-manufacturers complain much of the bad effects of high wages in raising the price and lessening the sale of goods. They say nothing concerning the bad effects of high profits. They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people.”

One could argue that workers in Britain – and elsewhere – far from being too selfish, aren’t being selfish enough. The RMT is demanding a pay rise of 7% which when inflation is at 9.1% is obviously a real terms pay cut. And here lies the crucial difference between wage earners and other elements of the economy, or ‘factors’ in production. When employers seek sky high profits or when landlords raise the rent by way above the rate of inflation, they do so because they can and because the practice is socially validated. When workers submit to whatever wage they can negotiate (usually whatever they are offered, even to get a trade union recognised is an immense struggle) they do so because they have to. Because, lacking independent means, they have to procure the means to survive for themselves and their families.

Historically, this unequal ‘deal’ been accepted, partly out of brute power, and partly because it promised benefits – to consumers, to workers receiving rising wages – that seemed to accrue from submission to the demands of capital. But what if, as in happening now in the West, the bounty stops flowing. How long are we going to continue to oppress ourselves?

 

 

 

 

 

 

 

 

 

 

 

 

Our Pikettian Universe

Earlier this month, in announcing plans to replace the David Cameron-created Social Mobility Commission with a new Social Justice Commission, Jeremy Corbyn made a telling, though seemingly unremarkable, observation: “Social mobility has failed, even on its own terms,” he said “… the greater inequality has become, the more entrenched it has become”.

The evidence is all around. According to the aforementioned Social Mobility Commission, social mobility in the UK “has stagnated over the last four years at virtually all life stages”. Last year the OECD reported that, internationally, social mobility was a “reality” for people born before 1975 but has stalled for those reaching adulthood in the 1990s and after. In the UK, according to the OECD, only around a fifth of children of low income families go on to become high earners and only a quarter of children of parents with manual jobs get managerial positions.

These are the results achieved by the unstinting efforts of successive British governments over decades to raise social mobility and achieve a genuine meritocracy. The Conservative-Lib Dem coalition had its ‘social mobility strategy', before then the Blair government vowed to achieve social inclusion, and before then John Major had entered Downing Street promising to create a “classless society”.

Growth and  meritocracy

In Britain, social mobility has all the hallmarks of a secular faith – for people in power at all levels of society a belief in the virtues of social mobility – whatever the evidence – is compulsory, and if it forever seems out of reach, a few policy tweaks, such as adult education or free childcare, will set things on the right course again.

In fact the social mobility faith is remarkably similar to another secular creed – the conviction of the virtues of economic growth. The affinity is most apparent in the fact that belief in them is unshaken by the slight problem that they don’t actually achieve their aims – intergenerational meritocracy in the one case and healthy GDP growth in the other.

LSE anthropologist Jason Hickel, in his book The Divide, correctly observes that “almost the entire economic profession and nearly all politicians” are obsessively focused on raising GDP growth. What he doesn’t go on to note is that this obsession has conspicuously failed to bear fruit. GDP has unquestioningly increased over time, but, as pointed out by the Geopolitical Economy Research Group, the rate of growth, for the world’s industrialised countries, has been trending downwards since at least the mid-1960s.

Since the financial crisis a decade ago, this decline has intensified. For the UK, GDP growth has averaged a mere 1.87% per year since 2010, and for the European Union, the average is even more modest: 1.6%. This is below the 2-3% thought to be essential for profits to be made in the economy and a pale shadow of the 5 or 6% annual growth rates achieved in the 1950s and ‘60s.

Piketty and capitalism

There are several ramifications of low-growth capitalism, one being that debt – corporate, personal and governmental – skyrockets across the board. Another – less noted perhaps – is that low social mobility inevitably follows. In 2014, French economist Thomas Piketty published an almighty tome, Capital in the 21^st Century, to general applause and fanfare. Piketty’s central finding was that when returns to capital are greater than economic growth (when r > g), then inequality is bound to intensify. This is what happened, Piketty asserts, during much of the 19^th century and has occurred over the last 40 years in industrialised countries. It will also be the default state of affairs, he predicts, during the rest of this century.

What are returns to capital? They are income streams that stem from the ownership of assets, such as share dividends, profits, capital gains, rents, royalties and interest. When economic growth is high, Piketty contends, income from labour – which is the only way those without assets can get richer – can outpace these capital returns. When it isn’t, the opposite is the case.

It is fairly apparent, therefore, to see why, in Piketty’s eyes, inequality should increase in an era of low-growth capitalism, such as this one. But it is also the case that returns to capital, should they increase faster than economic growth, also hamstring social mobility. This is because once these assets are amassed, they are almost always passed on to the asset-holder’s children and also because they become concentrated in fewer and fewer hands over time. Essentially they guarantee wealth immobility and ensure that those who are already rich, not only stay rich, but become much richer.

For Piketty, the decades between 1914 and 1973 were unusual because the rate of economic growth was higher than returns to capital.  Coincidentally, this period – certainly the post-WW2 years when economic growth was conspicuously high – was one in which, according to the OECD, social mobility was a ‘reality’.

It is also true that – contra Piketty – in the last decade income from labour in the UK has risen even more slowly than economic growth, reversing the historical norm. In fact wage levels have, in real terms, contracted, while the economy as whole has grown, albeit weakly. Moreover, overall wage levels hide enormous inequality in remuneration. Corporate chief executives have seen vast increases, while earning levels in the lowest income groups have barely moved at all since the 1990s.

But that does not detract from the fact that income from capital has outpaced economic growth, with all the consequences that that entails.

No more Thatcherism

This ‘Pikettian’ problem explains much about the current travails of the Conservative party. The Conservatives simply cannot bring themselves to accept that Thatcherism doesn’t work anymore. The promise of Thatcherism was that assets – such as shares and council houses – would be distributed throughout society, leading to a genuinely popular capitalism. Privatisation, said Thatcher, represented “the greatest shift of ownership and power away from the state to individuals and their families in any country outside the former communist bloc”. The creation of a ‘share-owning democracy’ was the clarion call of the age.

Unfortunately for the Conservatives, the shift was transitory if it occurred at all. Before Thatcher entered Number 10, individuals owned almost 40% of the shares in British companies. When she died in 2013, that figure had shrunk to under 12%. In reality, large companies are now owned by other large companies – frequently banks – in an interlocking system which the small shareholder has no influence over.

Council houses were swiftly transferred from the people who had bought them under the ‘Right to Buy’ scheme to a small coterie of private landlords. Home ownership in general has been in decline since 2003 accompanied by soaring rates of private renting. Governments of all stripes have since the 1980s tried to stoke a perpetual property price boom, mainly by restricting supply and not allowing council or social housing to be built. In these conditions of low-growth capitalism, the main hope of becoming wealthier lay not in a lifetime’s labour but in realising the capital gains (one of Piketty’s returns to capital) from selling your property, possibly numerous times. A route millions took.

The dilemma for the Conservatives (and Blairites) is that high property prices prevent young people from buying homes in the first place, thus ensuring that home ownership becomes more concentrated over time. And because their original promises have proven so hollow, the Conservatives – to save their electoral skin – have resorted to the zero sum game of fuelling a ‘culture war’ and overseeing a no deal Brexit, even at the cost of completely alienating the sector of society – big business – whose interests they exist to protect. ‘Fuck business’ was a retort that came out of Boris Johnson’s mouth, not Jeremy Corbyn’s.

21^st century wage slavery

What our Pikettian universe means is that for many millions of people employment is not – as it was for many decades after the Second World War, even up to the 1990s – an escalator out of their current economic situation and into a better one. As the figures on in-work poverty show, it is merely a means of week to week survival and sometimes, given the fact that many people who show up a food banks also have jobs, not even that.

Naturally, it can be pointed out that most people don’t live in poverty and most people have mortgages rather renting their homes from landlords (and given the fact that interest rates are so low have benefitted from the last decade or so). However, even ignoring the fact that more precarious forms of work are mushrooming, the trend is not in favour of those who clearly gain materially from capitalism. Piketty’s prediction of a low growth future seems quite solid, and in those circumstances, the asset poor will slowly but surely close the gap on the asset rich.

This has ramifications for how work is perceived, although ones that Piketty, who dismisses ‘the lazy rhetoric of anti-capitalism’, does not make. If work no longer comes attached with an ulterior motive – that it represents a way to personally progress – then it will increasingly be seen in terms of its bare essentials: that is, the granting of wages in exchange for obedience. In the 19^th century (the original epoch, Piketty contends, when returns to capital exceeded economic growth and wages were flat), the concept of wage slavery – the idea that the employee is forced by the pressure of need to rent themselves out to employers and endures, in effect, a form of slavery during their time at work – was common on the Left, even the non-socialist Left (see Henry George). If the 21^st century replicates the economic conditions of the 19^th (not literally, mass outbreaks of cholera are unlikely), then the idea of wage slavery will grow in popularity because it will reflect most people’s experience.

This situation also means the traditional ameliorative solution of the social democratic Left – redistribution of income through taxation – will no longer have the effect it once did. If income is primarily secured by the ownership of assets, then redistribution has to focus on ownership. This is why the UK Labour party moves in favour of ‘alternative models of ownership’ – such as cooperatives, municipal ownership and democratic forms of national ownership – are significant. These may be too limited  and too slow  – John McDonnell’s ‘inclusive ownership fund’ would see companies transferring shares to their workforce every year but it would take 50 years for these to constitute a majority – and in essence a policy fix for a systemic problem. But at least they presage a necessary change of thinking.

However, there is a larger problem. Piketty’s central assertion is that low growth capitalism will inevitably lead to inequality intensifying over time. But low growth capitalism is the condition we are told is essential if climate change is to be seriously mitigated. The question is therefore: does averting ecological catastrophe mean entrenching the power of an oligarchy?  I will attempt to provide an answer in a future post.