Rising Inequality Shows ‘Democratic Capitalism Is Broken,’ Warns Nobel Laureate

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Inequality in the U.K. has become so detrimental to society that a leading research institute has teamed together with a Nobel Laureate to launch “the most comprehensive scientific analysis of inequalities yet attempted.”

Professor Sir Angus Deaton, who was awarded the Nobel Memorial Prize in Economic Sciences for his analysis of poverty and welfare in 2015, will conduct the study with the Institute for Fiscal Studies (IFS). The five-year endeavor will be funded by the Nuffield Foundation. 

Launching the study on Tuesday, Deaton said inequality levels were “threatening our society” in a range of ways.

These include rising deaths from suicide and drug overdoses among middle-aged people and single parenting among low-income and low-educated families.

Nobel Laureate Sir Angus Deaton will lead the Institute for Fiscal Studies review of inequality funded by the Nuffield Foundation (AP Photo/Mel Evans)

The Problem Of The Super Rich

The launch of the landmark study comes just days after The Sunday Times found the collective wealth of the 1,000 richest people in the U.K. increased by £113 billion ($144 billion) last year.

Another study, by Credit Suisse, shows the top 1% of global wealth holders held 47.2% of all household wealth in 2018, an increase of 4.8% from ten years earlier when the global recession hit. 

Meanwhile, inequality in total net household income in the U.K. has changed little since rising sharply in the 1980s.

While Deaton says that getting rich is a “good thing,” he is against what he calls, “the other kind of getting rich, ‘taking’ rather than ‘making,’ rent-seeking rather than creating, enriching the few at the expense of the many, taking the free out of free markets.”

This, he says, “is making a mockery of democracy. In that world, inequality and misery are intimate companions.”

A report introducing the IFS Deaton Review points to executive pay as part of the issue. “A string of executive pay scandals and high-profile leaks in tax havens have put the super-rich at the forefront of the debate on inequality.”

Data from the High Pay Centre shows CEO pay among FTSE 100 companies in the U.K. in 2017 was 145 times higher than the salary of the average worker.

Let the U.K. Not Follow The U.S.

While inequality is high in the U.K., it is higher in the U.S.

Of all OECD countries, the U.S. has the highest Gini coefficient of household income inequality, meaning it is the most unequal.

The IFS Deaton Review will look at the risk of the U.K. following the U.S. in certain social problems associated with inequality. “Many of the things happening in the United States are really threats here,” Deaton told the BBC on Tuesday. 

Deaths from suicide, drug overdoses and alcohol-related liver disease among the lower educated population have been rising in the U.S. since the turn of the century. Wages for non-college-educated men have not risen for five decades in the U.S.

There is evidence to suggest the U.K. is following suit, the IFS believes.

“We need to find a way to stop that happening here,” Deaton says. 

 

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