UK inequality: It’s not the size of your GDP that matters.
This week Oxfam released a damning statement detailing inequality in the UK.
This quote stood out for me:
Despite the fact that the UK is one of the richest countries in the world, one in five people live below the poverty line, struggling to pay for essential bills and put food on the table. According to data from the widely respected CreditSuisse, the richest 10 percent of the UK population own over half of the country’s total wealth(54 percent), and the richest one percent own nearly a quarter (23 percent), while the poorest 20 percent of the population – nearly 13 million people – share just 0.8 percent of the country’s wealth between them.
The UK has an above average GDP compared to other OECD countries:
Yet we are one of the most unequal countries:
Countries that are unequal perform badly on health and social issues.
Many countries that have a lower GDP than the UK perform better.
Clearly the UK has the wealth, but not the impetus, to share the wealth it generates but why might this be?
In the income equality table above the most equal countries have a few things in common. They are all small developed European countries with governments elected via proportional systems. That means they have governments close to the people who broadly reflect the needs of the people.
The UK is a large country with a government elected by a majoritarian system and a second chamber that isn’t elected at all. This means governments rule from a distance and often gain power with only a small share of the vote.
Why might more representative governments in small countries lead to more fairness?
Well, small countries with proportional systems have governments that are more responsive and they have to look after the majority in order to stay in power. In turn, broader sections of the populations of those countries feel empowered and are more politically active. Hence, governments can’t ignore their needs in the way it is possible to do in larger, less representative countries.
Proportional systems also make it easier for smaller parties to grow giving more political diversity and choice.
In the UK the First Past the Post System allows an ideological minority to gain control.
There is very little choice as the system leaves space for fewer parties. The two parties who can win power only have to please a small section of society in order to get elected.
Those less well off get disenfranchised and don’t see the point of voting. The government only needs to appeal to a small band of middle income voters in a few marginal swing seats.
The exclusion of so many from the system is one of the factors that led to the Brexit vote.
For decades the system has allowed politicians to neglect large sections of society while at the same time blaming external factors for the social problems those people face. The problems are systemic; caused by lack of representation at UK level but people lashed out and blamed the EU. Not noticing that many EU countries that are more equal don’t have the same issues at such a scale.
Going forward most experts are predicting a fall in GDP because of Brexit. In a recent report the Fraser of Allander Institute said:
Over the long-run (i.e. 15+ years), most economists predict that the decision to leave the EU will damage trade, labour mobility and investment.
They also highlighted the continuing real term cuts to the Scottish Budget.
So, it looks like we will have less money to go around in the future but will still be living in a country where there is no incentive for politicians to use the money fairly.
The conservatives will be in power for the foreseeable future. Labour are in big trouble, partly due to boundary changes but more worryingly due to infighting caused by an ideological schism in the party. The majority of Labour MPs know that under the current system they need to chase those middle income voters in marginal seats in order to get elected. They know they can’t win with Corbyn while the voting system remains unrepresentative.
During the Scottish referendum we were told about the broad shoulders of the union.
We were told about how rich and successful a country the UK is and how remaining is the best way to protect us in an uncertain world. At the time we argued that it would be better to be like one of the small representative European countries as equality trumps GDP. There is no point having lots of wealth if only a few benefit from it.
We said that small representative countries are fairer, more democratic and more adaptive. They can react better to the big events that shape the world. They can make better decisions. The Brexit vote and its coming fallout strengthens that view.
Many have argued that there are problems within the UK but that they can be fixed from within
There is now talk in some quarters of changing to a federal system with representative devolved regional parliaments. Hanging on for this seems a bit of a pipe dream. The establishment are not going to willingly change a system they benefit from and nobody suggesting it has any power to deliver it. That said, even if we did have a referendum on such reform we would probably reject the idea.
It has been shown that the public of unequal countries actually prefer a less representative system. Given the choice to change to PR there is a good chance the UK would vote against it. First Past the Post would continue to deliver unrepresentative government. The un-elected Lords would still exist. Politicians will continue to make policy that benefits a narrow section of the population.
Personally, I would rather take my chances in an independent Scotland, which would automatically be a small country with a representative parliament close to the people. Just like the most equal countries on the chart above.
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