Alexander Bowen is an MPP-MIA student at SciencesPo Paris and St Gallen specialising in public health.
A society with more wealth inequality than Putin’s Russia, dominated as it is by the newly “re-elected” President and his circle of kleptocrats. A society with more wealth inequality than Saudi Arabia, it too dominated by a circle of princelings and with the added flair of being home to some of the worst excesses of modern day slavery in the Gulf.
What society is this that I am describing?
Though you may think you have spotted the trick and gone ‘the UK!’ (or perhaps ‘the US’), I regret (or I suppose rather am happy) to inform you that it is neither.
This society, with more wealth inequality than Putin’s Russia or Bin Salman’s fiefdom, is Sweden. Yes really, that Sweden.
As Crédit Suisse revealed recently, in its Global Wealth Databook, on the Gini wealth inequality index (where 1 means all the nation’s wealth is held by one single person and 0 means all the nation’s wealth is held absolutely equally) Sweden scores 0.881. Our modern day images of inequality, Russia and Saudi Arabia? Their scores sit at 0.880 and 0.864 respectively.
As for the UK, its wealth inequality stands as one of the best in Europe (and indeed the world) at 0.706, placed 140th out of the 170 countries assessed.
Now some of this is a statistical artefact of welfare state design. But the data from veteran left-wing economist Thomas Piketty’s team yields much the same result.
What about the much-execrated “one per cent”, the rhetorical daemon that dominated early-2010s left-wing discourse, or at least that of the amorphous 2011 Occupy Wall Street and Los Indignados blob?
Well, it today holds a smaller percentage of national wealth in the “bastion of Anglo-Saxon capitalism” that is the United Kingdom than it does in every single “socialistic” Scandinavian country: 21.1 per cent of net personal wealth is held by Britain’s richest one per cent; the same figure for Denmark sits at 21.2 per cent, for Norway 22.7 per cent, and for Sweden 27.6 per cent.
The pattern for income is much the same too. The share of pre-tax national income going to the bottom 50 per cent in Britain is today at a three-decade high, whilst inversely those of the top one and top ten per cents are at a three-decade low.
More importantly, income inequality post-tax has been flat. Indeed, again using Piketty’s data, the Gini index of the UK’s income stands today where it was in 2010, and where it was when the data needed to measure it first started existing (1980) at just 0.27 (remember: 0 means everyone has the exact same income, and 1 means one person earns the entirety of the national income).
That’s the same score as our progressive neighbour, Norway.
What about another of everyone’s favorite rhetorical devices: the billionaire? Well, Sweden specifically has produced some 39 of them, compared to the UK’s 52. This despite the Britain’s population being nearly seven times the size of Sweden’s; in per-capita terms, we are well behind.
(Of course, this hasn’t stopped Britain being home to a hundred or so foreign billionaires, including some Swedes).
When you actually look at it, the most notable difference between the two countries’ lists is what each country’s billionaires do. Whilst the British billionaire list, shorn of Jim Ratcliffe and James Dyson, looks rather like a selection of Britain’s biggest landlords, on the Swedish list you find the founders of tech-adjacent companies like Spotify, Klarna, and Mojang.
If you really want a startling fact, the UK is right now so broken that inheritance actually represents a progressive transfer. That is to say, inheritances reduce inequality.
That’s the essential point here actually. Any sincere reading of the British economy since 2010 need acknowledge one basic thing: that the essential problem with the modern economy isn’t income inequality, but a lack of income. There is no growth-motor.
The latest Institute for Fiscal Studies’ report made that quite clear: Annual real income growth since 2010 for the fifth to 95th percentile sits at just a third of that from 1997-2010, and is near flat across the income distribution.
Now none of this is to say that inequality isn’t a problem; we can and should raise more revenue from the top social strata. There are plenty of ways this might be done.
Replacing the council tax system, that lets an £8m Westminster townhouse pay £200 less council tax than that of a £150,000 bungalow in Hartlepool, would be a good start.
So too would implementing Arun Advani’s alternative minimum tax, which stop 25 per cent of people earning over £5m paying a lower tax rate than someone earning just £15,000; or creating an exit tax, to make it just a little harder for the super-rich to take their assets to tax havens.
But collectively, even adding in recent changes to non-dom tax rules, we’re talking about raising figures that sit in the low tens of billions.
Now £20bn or so is certainly something. But when compared to the scale of our budgetary priorities, it’s much ado about nothing. Such a sum gives you a 35 per cent hike in defence spending or a ten per cent hike in health spending. Once.
Ask Charles I or Henry VII: creative tax changes can only get you so far. None of these tax changes are going to raise the kind of revenue needed to make up for the growth gap that’s emerged.
Peter Mandelson’s adage that “We are intensely relaxed about people getting filthy rich” (and its oft-neglected qualifier, “as long as they pay their taxes”) should be a good starting point going forward. We can talk about “making” and “taking” in the British economy when someone actually starts doing some “making” from which to “take”.
In the 1980s anti-growth activists coined the phrase ‘another world is possible’. But when it comes to economic growth the phrase it was responding to – that there is no alternative – remains correct. If you care about fixing public services and boosting living standards, then getting the economy “making” again is Alternativlos.
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Author: Alexander Bowen
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