‘The main division,’ one of my PhD supervisors said to me recently, ‘is between those who think the world’s economic cake is of a fixed size and the question is how you divide it, and those who think the cake is of a variable size and the question is how you increase it.’ I replied that, put like that, I went with the second view. He said he did too.
Yet political ideologues of both left and right, from Jeremy Corbyn to Donald Trump, instinctively go for the first view. This leads, in Trump’s case, to stopping anyone else having a share of what he regards as America’s slice of the cake. It leads, in Corbyn’s case, to a focus on reportioning the cake, oblivious of whether this might adversely affect economic growth and thus reduce the size of the cake.
The vast and entirely unprecedented rise in the living standards of ordinary people throughout the industrialised world in the past century or more has been based on two things only. The first is that there has been an enormous increase in the size of the global economic cake. The second is that the cake has been divided more equally. Free market economics can take most of the credit for the first. Democracy can take most of the credit for the second.
Last week (blog of 26 November), I quoted extensively from Francis Pym’s 1983 book The Politics of Consent. Francis believed that the technological revolution, then just beginning, would require radical changes to our working lives and that, without them, there would be mass unemployment and social unrest. He called for what he termed ‘the distribution of employment’ to be given the same weight as ‘the creation and distribution of wealth’.
In one sense, this appears to have happened in Britain, if only by default. The scenario in which not only does the same amount of work require fewer hours, but a greater amount of work requires fewer hours, seems to be playing out differently in Britain than in most other European countries. There, unemployment levels are often high, but the wages of those in work are good. Here, unemployment levels are relatively low, but the wages are often poor. The consequence is a deep political dissatisfaction in all countries, but for different reasons.
This distinction may lie at the root of current concerns over productivity levels. Perhaps low productivity is the price we are paying for low unemployment. In that case, perhaps – at least for the moment – it is a price worth paying. It has always been easier for people with some work to find more, than for people with no work to find any. It is also less divisive for the country, although not if real living standards continue to stagnate or fall.
In Britain, income differentials have actually shrunk, especially in London. The Institute for Fiscal Studies reports that, since the late 2000s, ‘the incomes of low-income households in London have risen by more than 10%, while the incomes of high-income households have fallen by more than 10%… What has happened in London is a more pronounced version of what has happened elsewhere in Britain. In the UK as a whole, income inequality was still lower in 2015-16 than prior to the recession, with median earnings down by around 5% and the employment rate up 1.5 percentage points.’
The reason why this fact will come as a surprise to many lies in the phrase ‘median earnings down by around 5%.’ We have managed to share failure more widely and more equally, but it is still failure. The IFS defines ‘high-income households’ as the top 10%. The feeling persists, whether accurately or not I do not know, that if you looked at the top 5%, or the top 2%, the results might be rather different.
We are becoming a nation of bit-part jobbers, piecing incomes together from a number of activities that do not add up to full-time employment, but which mostly keep the wolf from the door. There is nothing intrinsically wrong with using one’s car to drive for Uber or to deliver parcels for Amazon, or renting out one’s house on Airbnb. But it does not add up to an enticing future. Meanwhile, the impression persists that the companies that are creating the new future are creaming it, while putting as little back into the system as they can get away with.
As new technologies continue to come on stream, and especially artificial intelligence, the workplace will fragment still further. Fewer people will be in regular employment; more will be in irregular employment. In principle, we should all have more leisure. To enjoy it, we need at least the same income as we had before, and preferably more. But this is not happening at the moment. There is no sign of it happening. If it does not start to happen soon, the nostrums of the fixed-cake ideologues could become ever more appealing, and that could make matters worse. If a growing global economy is accompanied by little or no growth in advanced economies, there will be a backlash. There already is.
I have no idea what the answer is, any more than Francis Pym did. His main concern was to flag up the issues so there could begin to be a national conversation about them and a sense that everyone had a stake in finding a solution. That has still not happened.
Somehow, the cake has to be enlarged again. Otherwise, and no matter how we cut it up, we are all screwed.