Bold measures are pragmatic at a time when advanced economies are seeing income and wealth concentration levels near historic highs. HPC Executive Director Luke Hildyard writes for Inequality.org
Why are advocates of measures like wealth taxes and maximum wages designed to address extreme concentrations of income and wealth seen as naïve or idealistic, while critics of these policies depict themselves as sober, sensible realists?
My new book “Enough: Why it’s time to Abolish the Super Rich” argues that the exact reverse is true. A major and transformative policy program to re-distribute and re-direct the fortunes of the super-rich to the wider population would be an obvious, effective, and immediate way to enhance prosperity for large numbers of people. The excess and unmerited riches captured by those at the top represent an immense and readily available resource that could be used much more efficiently to deliver huge socio-economic improvements.
Policymakers who lack even a basic curiosity about how to do this expose their fundamental unseriousness.
The arguments in the book are based on both evidence and experience. Throughout history, governments have raised living standards by introducing policies that channel income and wealth previously captured by the very richest in society to the rest of us instead.
Sometimes this happens via direct re-distribution such as the welfare programs and public services funded by progressive taxation. Sometimes it’s done through mechanisms like minimum wage laws or employment rights that enable generally lower-paid workers to achieve higher incomes out of revenues that would otherwise benefit wealthier business owners and executives.
These policies are typically associated with continental Europe where taxes and regulations tend to be higher, meaning public services and infrastructure are of a better quality, while inequality is lower. But to differing degrees they apply across all advanced economies and are widely held to have raised living standards, particularly for the low- and middle-income households whose living standards most urgently need to be raised.
Right now, the share of total income and wealth held by the richest 1 percent of the population is at historically very high levels. According to the World Inequality Database, the share of total incomes going to the top 1 percent of population in the UK is around double the low point of around 6 percent in the early 1980s and is higher than at any point in the second half of the 20th century. The wealthiest 1 percent of the UK population holds nearly a quarter of all wealth, according to some estimates.
In the United States, the figures are even more extreme. The top 1 percent by income take almost a fifth of total income while the richest 1 percent by wealth hold around a third of all wealth. Both these figures are at their highest level since at least the Second World War.
At the same time, environmental, demographic, and political challenges are making it more difficult to increase aggregate levels of income and wealth.
In Europe, most major economies have struggled to generate economic growth in the aftermath of the Covid pandemic and the war in Ukraine. In the United States, headline growth levels have been healthier but when the poorest 50 percent of the population gets barely 10 cents of every dollar made in the country, growth doesn’t necessarily lead to massive leaps in living standards for everybody.
A recent Financial Times analysis found that while the richest Americans are richer than their counterparts in other rich nations, the incomes of the poorest 10 percent of American households now lag those of the poorest 10 percent in Slovenia — never mind countries like France or Germany or the Netherlands.
In this context, policymakers promising to raise living standards by generating greater economic growth while ignoring inequality look like the naïve utopians. Those who recognize that distribution matters and want to address the problem of the super-rich are the sober and sensible realists.
As a society we won’t realize our full potential to improve people’s lives until this is more widely understood (and I hope my book can play a small role to that effect).