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The rich hit back at the poor

by Kevin Rafferty

Special To The Japan Times

On Friday nights and at the weekends, it seems as if all of London is one big party. From the financial heartlands of the City of London and Canary Wharf, the pubs and restaurants are doing a roaring trade.

Drinkers swill over and take over the pavements even in unfashionable areas like Euston and King’s Cross, while from the King’s Road in the west to Islington in the north, it is hard to find a seat, whether you are looking for French cuisine or Indian or Mexican or Turkish or even Aussie tucker.

Upscale restaurants are full and the most trendy ones booked weeks ahead. If you listen to the raucous laughter — hard not to since it is so loud and braying — everyone is having a happy time with lots to spend and few cares in the world.

How can this be when the economy is supposed still to be recovering and Mark Carney, the photogenic governor of the Bank of England, has promised that he will hold interest rates low until unemployment is 7 percent or less? It is currently 7.7 percent, which is far higher than when coming out of previous recessions.

Output in the United Kingdom is still 3 percent below 2007-2008, and a massive 17 percent below what would have been expected from historical trends.

The answer is a simple but painful one — life is a party if you have a well-paid job, but not fun if you have no job or one of the increasingly low paid ones that employers are offering.

Going north outside London the party stopped long ago. Today there are 50 towns where more than a quarter of the homes have no one working. In Middlesbrough, a third of the homes have no person working. Other major cities also report grim unemployment figures: in Glasgow, more than 30 percent of homes have no worker to support them; in Liverpool it is 28.7 percent’ Kingston upon Hull, 27.6 percent; and Birmingham, the old industrial heart of England, 27.4 percent.

Across London and in the prosperous south, apart from black spots like Barking and Hackney, the average was 6 to 15 percent. Overall, the government boasted that in August the number of workless households had fallen to record low of 17.1 percent (the figures only started in 1996).

Critics complain that the government is trying to squeeze the jobless by cutting their benefits. One long-suffering government employee responsible for the grim job of doling out benefits to the unemployed in a gritty area of Yorkshire told me: “A few years ago I used to joke that I’d never be out of work because unemployment was rising and we were on the frontline assessing benefits. But they are trying to squeeze us too, with threats that we’ll have to re-apply for our jobs every year.”

Recession and the unbalanced recovery that has widened the gap between the rich and the poor has been a theme of U.S. newspaper and journal articles rich with statistics of how the 0.1 percent and the 0.01 percent have collared all the benefits. The situation in the U.K. may be less extreme, but the divide between the haves and the have-nots is growing dangerously.

Life is somewhere between difficult and desperate not only for the unemployed but also for the increasing numbers with poorly paid work.

The U.K. has pioneered a special work contract called “zero hours.” This means that the worker is on call, but the employer does not have to guarantee any hours per week or month, or indeed to give her or him any work at all, although when the employer calls, the worker must be paid the minimum wage (increased to £6.31 per hour from October). As for holiday pay or sick pay, forget it.

What kind of security does a job like this offer? But the concept of zero wages appeals to employers and looks to becoming the norm across large sections of the U.K., with up to 56 percent of home care workers on such contracts, 20 percent of workers in hotels and restaurants, almost 15 percent in health care, and 10 percent in education.

Even universities in the elite Russell Group, which includes the most sought-after universities in the world, such as Oxford, Cambridge, Durham, London and Manchester, are employing lecturers and teachers on zero hours, relishing the flexibility the scheme offers, but forgetting the worker’s plight. Edinburgh University promised not to employ staff on zero-hours contracts, only after it was found to be the biggest user of them.

A bigger surprise is that the rich partygoers are beginning to hit back against the poor. The United States demonstrates the extreme, where the Republicans are prepared to hold the country to ransom to prevent tax increases.

In Forbes magazine in September, a philosopher and disciple of Ann Rand, Harry Binswanger, boldly praises the rich 1 percent. He declares: “The 99 percent get far more benefit from the 1 percent than vice versa. … For their enormous contribution to our standard of living, the high earners should be thanked and publicly honored. … Anyone who earns a million dollars or more should be exempt from all income taxes.”

Binswanger declares that it is a moral issue, not a financial one, and suggests that the year’s top earner should be awarded the Congressional Medal of Honor. He claims that Lloyd Blankfein “in guiding Goldman Sachs toward billions in profits, has done infinitely more for mankind” than Mother Teresa. He condemns income taxes as “an envy-ridden moral code that damns success, profit and earning money in voluntary exchange.”

The British version is milder. In the splash front page article of the Sunday Telegraph, Chris Grayling, the justice secretary, no less, attacked both the Liberal Democrats, who are in the coalition government, and Labour and demanded that, as the headline said, “Stop clobbering the rich.”

Grayling described Labour policies: “Squeeze the rich. Bosses bad, workers good. More welfare. More government interference. A complete lack of understanding of the world.” He praised businesses, new technologies and “people who want to take a risk with a chance of succeeding, people who believe they can get on in life.”

Grayling drew attention to the challenge from Asia and from Africa, which is benefiting from investment from China. But he failed to connect the economic, political or moral dots in his argument to ask whether even the boldest entrepreneur can succeed without good workers or how a country can succeed when it has Britain’s weak links with so many people being left out.

Remember the old adage that a chain is only as strong as its weakest link. It applies to countries too, with the additional moral dimension that we are talking of people and their lives, not a mere mechanical device.

Kevin Rafferty is a professor at the Institute for Academic Initiatives at Osaka University.

  • http://www.sheldonthinks.com/ andrew Sheldon

    Kevin has been in academia too long…he clearly does not understand economics. The cost structure in the West is too high. It needs to come down. Unskilled workers need to become skilled, which means Westerners need to start thinking, and developing capacities that differentiate themselves and add value. Large corporations might eventually be ‘creatures of the past’; but that trend might well turn around with rising emerging market labour costs in the next 15-20 years. That’s a generation of change still unfolding. It hasn’t really touched academics like Kevin yet…I’m sure he will be full of apprehensions when it arises. I see already the Labour govt in Australia made major cuts to university funding before it lost office? The edge of learning? No, people are learning in ‘low-cost’ informal ways.

    • donschneider

      Ayn Rand’s swill is intoxicating only for the vulgar cynic !

      • http://www.sheldonthinks.com/ andrew Sheldon

        Rand made mistakes; but there is so much to recommend about her. People who smear her tend not to have read her books; they tend to have no critical analytical skills; only a penchant for smear. These tragic traits are synonymous with liberals and environmentalists, but not restricted to them. Let me correct your one sentence contribution: Rand was a romantic idealist who developed a theory of values. She is the perhaps the 2nd last step after Aristotle-Nietzsche, with due respect for other misguided people like JS Mill and Adam Smith (utilitarians). All that kind of sweeps your moral indignation/self-righteousness aside. If you have some substantive criticism to make of Rand, please make it.

  • C321

    Great article, I packed up and left the UK a few years ago because of this. In Japan inequality is much lower, the average CEO earns only 11x their average employee. In the UK the figure is more like 40x (not far away from India!) and in the US it is something like 380x. Such inequality damages solidarity and results in an unpleasant atmosphere where the rich consider everyone else scroungers and the poor consider the rich thieves. No wonder there were widespread riots 2 years ago. Even poor people in work cannot afford accommodation and food, the people out of work can’t often even afford to visit the benefit office to get their now greatly reduced payments. The rich have over the last 30 years fixed the system, it is now nearly impossible for the poor and middleclass to improve their quality of life as all the productivity gains of the last 30 years have gone only to the rich.

    • Thaddeus Stone

      Utter tosh. You left the UK because you couldn’t make it there. That reflects upon you, not the UK or the “rich”.