The EU thread

[Sheilbh]

I agree with your post in general, but wanted to submit the following idea in response to this part: we need to figure out ways to get the money to sustain our social models. States need to get that money where it actually is these days, and increasingly it is not (barring the odd trillionaire) with the general population. We need to tax financial transactions and we need to tax corporations more.

Something like this could be a start:
https://en.wikipedia.org/wiki/European_Union_financial_transaction_tax

So I'm not totally sold because I think the level of revenue to sustain a social democratic system is far higher than you can get from soaking the rich, or corporations. And what worries me is that I think there is less buy-in for the broad based, everyone pays sort of system you need to sustain it - in part, I think, because fewer people feel like they benefit. I'd also add that the estimate for that FTT tax is that it'd raise €55-60 billion a year which is not nothing but split between states is not huge - it's also significantly less than the €150+ estimated revenue EU states could generate by ending the internal tax shelters (Ireland, the Netherlands, Belgium, Cyprus, Luxembourg and Malta). I think building new complex taxes may be more work than it's worth, especially compared to reforming and properly enforcing existing ones (but this is my answer to everything: build back state capacity).

But I also think the bigger challenge is that it slightly hits into the challenge of globalisation. Because we've spent the last 40-50 years encouraging the free flow of capital - it is one of the EU's four freedoms - and part of moving to an economics-dominated world. So in the same way as I don't disagree with the idea of a wealth tax, taxing corporations or financical transactions - all of that seems sort of meaningless if we're still committed to allowing the free flow of capital. It's like using a sieve to bail out - we need less free flowing capital, more control by states with coercive powers to police and punish.

I'd add to the point with Valmy - as I think this is true across Europe - that our discourse is very Americanised on this (it reminds me of the campaigns in the US pushing for a $15 minimum wage, which got pickd up by campaigners here who wanted a £15 minimum wage ). In the UK, income inequality has basically plateaued since the 80s. Wealth inequality for longer - so the share of wealth held by the top 1% in the UK is just over 20%, it was at about 20% in 1980. In the US it's gone from below 25% to over 35%.

[Tamas]

Yes it's too americanised but also the whole world economy depends on how America is going to handle wealth inequality and the billionaire ketaminite ruling class they have created, so to some degree it should be.

[Valmy]

In the UK, income inequality has basically plateaued since the 80s. Wealth inequality for longer - so the share of wealth held by the top 1% in the UK is just over 20%, it was at about 20% in 1980. In the US it's gone from below 25% to over 35%.

Really? I thought the UK was the money laundering capital of the world with a disproportionate number of billionaires and millionaires hiding out with their ill gotten gains.

But maybe those people don't count because they are not UK citizens?

[garbon]

In the UK, income inequality has basically plateaued since the 80s. Wealth inequality for longer - so the share of wealth held by the top 1% in the UK is just over 20%, it was at about 20% in 1980. In the US it's gone from below 25% to over 35%.

Really? I thought the UK was the money laundering capital of the world with a disproportionate number of billionaires and millionaires hiding out with their ill gotten gains.

But maybe those people don't count because they are not UK citizens?

Also income inequality isn't the same as wealth inequality.

[Valmy]

Also income inequality isn't the same as wealth inequality.

Ah. Good point.

[Tamas]

Ah yes I missed that as well. A key distinction.

[garbon]

Not surprisingly the equality trust says the UK isnt great on income inequality and worse on wealth inequality.

https://equalitytrust.org.uk/scale-economic-inequality-uk/

[Sheilbh]

Right but my point - which I think that link largely supports - is that it's broadly plateaued in the UK over the last 40-50 years (on both income and wealth) as I think is common in the rest of Europe. There are fluctuations within a range but, we've not seen a huge shift in the type or scale of inequailty in that period, while there is a change in the US since Reagan:


I think the key reason is that the driver is the emergence of tech as a new industry and we don't have an equivalent tech sector driving that change. Neither does most of the rest of Europe - France is an exception as they have huge luxury goods companies, who've hugely grown serving the new global elite, with significant family stakes. Of the ten richest people in the world I think all of them (except for the Arnaults) are from tech in industries that did not exist 30-40 years ago and overwhelmingly based in the US. If we had billionaires like the US, there'd be problems but we're exposed to those anyway we just don't have a tech sector that means we can easily avoid reliance on American big tech (to Jake's point on Palantir).

I don't think the key point in the UK is that the 1% are hoovering up more wealth or income - because they're not. It's broadly flat within a range. The issue is our inequality interacts hugely with time/generation and location. The biggest chunk of wealth in the UK is property so if you were able to buy a place (including your council flat) in London or the South-East before the boom in property values then you'll have done very well. You see this even in existing council homes where Reeves has said that council homes will not be hit by the "mansion tax", because there are council homes worth over £2 million (and there should be).

So I think the challenges in the UK is more about how young people are able to access wealth, how we generate it more in all regions (and I say generate because there's already huge redistribution - the UK redistributes more North-South than Germany did East-West - FWIW I think devolution is key as I believe Manchester and Scotland are the only regions actually closing the gap) and also after the massive sell-off under Thatcher (which reducd wealth inequality as it hugely increased the number of people who owned stocks and shares or their own home) how to build state, common assets back up (and I think part of that should be tech - nationally owned cloud infrastructure and nationally owned open LLMs for domestic companies and research and public sector etc).

Edit Not least because we've got the bigest wealth transfer in British history on its way with older people who are now sitting on £1 trillion + property assets in often run of the mill suburban homes in outer London/South-East dying and passing that on which will create deeper and more entrenched inequality. Again it's not necessarily about billionaires but becoming a day-to-day Jane Austen/Regency society not Edith Wharton/Gilded Age.

[garbon]

That's fair enough as I think totally true that the US and UK have different relationships to inequality.

If we focus on the UK and look at top 10%, I don't think I'd say things have stabilised but gotten worse since 1990.


This suggests that for top 1%, while property is important, pensions are a bigger factor:


Back on income, I saw it shows while income distribution has for the most part remained fairly the same that still puts the UK in a position worse than most of Europe.