#3 Reasons to be Cheerful: Towards a More Equal Economy

In this series of short articles, which first appeared in the July print edition of Byline Times, Compass highlights just some of the work from its ‘New Settlement’ project.

Extreme inequality is the primary source of many of Britain’s multiple crises, from stagnant living standards and deepening impoverishment, to falling life expectancy in deprived communities. The effect of the widening wealth and income gap is a society of over-consumption on low social value luxuries and under-consumption on high social value necessities. 

The combination of extreme inequality and over-privatisation has proved a toxic mix, driving the rising numbers unable to afford the most basic of needs. 

The return of high concentrations of income and wealth, nationally and globally, has also been a key cause of global warming, with the world’s richest 10% of the population producing half of global carbon emissions.

With vital public services – from social care and health to children’s services – close to collapse, the process of wealth accumulation by a few has been bad for society and the economy.  

Creating a better society depends on tackling what my book, The Richer, The Poorer: How Britain Enriched the Few and Failed the Poor. A 200-Year History, calls Britain’s centuries’ long growth-sapping and socially destructive “high inequality, high poverty” cycle. 

This cycle has only been broken once, in the post-war experiment in social democracy, and then only for a single generation. Greater equality would steer resources into building a better society for all. 

Britain is an asset-rich country. Despite its dismal economic record, levels of personal wealth have surged. National wealth – a mix of personal property, business, financial, and state assets – stands at almost seven times the size of the economy, up from three times in the 1970s. Much of this private wealth surge has been unearned and nearly all captured by a few who have gained from it. 

An extortionate nine-tenths of the national asset pool is now privately owned, while the share publicly owned has fallen from around 30% in the 1970s to only a tenth today.

A new economy that works for all would harness a rising share of this wealth pool for the public good by rebuilding ‘the commons’. This would raise the proportion of the economy owned directly or indirectly by the state and community, so that all citizens have a larger direct stake in economic progress. 

This could be achieved by the creation of national and local social wealth funds owned by citizens. 

• The Alaska Permanent Fund, created in 1976 from oil and mining revenues, has paid out a highly popular annual dividend, which averages approximately $1,600 per resident each year. 

• In 1974, the Shetland Island Council established a fund through disturbance payments from oil companies in return for operational access to the North Sea. The returns have been used to fund social projects, from leisure centres to support for the elderly. 

Britain should aim to bring back key eco-related sectors into forms of public or social ownership including transport, water and energy, and also newly-created assets such as data. 

A prudent society would ensure that services where quality relies on responsive, caring relationships, such as childcare and care for vulnerable adults, are delivered free from the profit motive. 

This would shift the economy away from an over-reliance on a London-centric banking sector and ‘extractive’ global corporations towards municipal companies, cooperatives, and social enterprises that serve the social good. 

• Dorset Community Energy is a not-for-profit ‘community benefit society’, which facilitates community ownership of renewable energy production. Established in 2013 with support from the BIG Lottery-funded ‘Communities Living Sustainably in Dorset’ project, it has 152 members who have invested £490,000, which has gone on to finance the installation of solar panels on 12 schools and four community buildings in the county. Electricity is provided to the community buildings at zero or low cost, and any electricity not used on the sites is exported to the national electricity grid. This money is then used to cover operational costs for the society and a return on investment to the members.

A strategy of greater common ownership would weaken the bias to inequality in the economy and, by raising the level of democratic control, reallocate resources towards essential needs.  

Stewart Lansley is an author, a member of Compass, and Visiting Fellow in the School of Policy Studies at the University of Bristol