By Brian Jowells
In a serious admission the Financial Times, which cannot be accused of pro-socialist bias, has set out the facts on how capitalism, at least in the imperialist economies, now makes you worse off. In an article under the title ‘Spectre of stagnating incomes stalks globe’ it notes:
‘In the postwar years, there was a belief in developed economies that each generation could expect to have materially better living standards than their parents. Yet the outlook for income growth has rarely looked worse than it does today…
‘For some middle-income groups, the idea of stationary or declining incomes is not new. Fork-lift truck drivers in Britain could expect to earn £19,068 in 2010, about 5 per cent lower than in 1978, after adjusting for inflation. Median male real US earnings have not risen since 1975. Average real Japanese household incomes after taxation fell in the decade to mid-2000s. And those in Germany have been falling in the past 10 years.
‘Some of this pressure on the middle income households was masked – at least temporarily – by the credit boom, which allowed families to spend more than they earned. Now, three years after the end of the cheap money era – and with developed countries struggling to get their economies growing again – middle classes around the globe are feeling the squeeze.
‘It is hardly the backdrop politicians would want as they are being forced to contemplate raising taxes and cutting public spending to repair public finances…
‘Two questions are raised by the trends in household wages and incomes. What exactly is happening to incomes across advanced economies? And why?
‘Only recently have the answers begun to be clear. Starting in 1975, male US median pay has stagnated in real terms, while gross domestic product continued to rise rapidly. At first, other countries resisted this trend, leading to concerns in the US that a peculiarly American disease was afflicting its culture and labour market.
‘Growth in per capita national income must go somewhere. In the US, the money flowed almost exclusively to the very richest. The earnings of US individuals with pre-tax income in the top 1 per cent accounted for 8 per cent of total in 1974, but rocketed to 18 per cent by 2008, according to the world top incomes database, a resource compiled from tax return data. Even larger proportionate rises in the share of income went to the top 1 per cent of those with incomes within the 1 top per cent.
‘But rising inequality in recent years is far from a US phenomenon. The Organisation for Economic Co-operation and Development found increasing income inequality between the mid 1980s and late 2000s in 17 out of 22 advanced economies for which it had sufficient data. “There are signs that levels [of inequality] may be converging at a common and higher average,” the OECD said in a recent report and “countries such as Denmark, Germany and Sweden, which have traditionally had low inequality, are no longer spared from the rising inequality trend”.’
The full Financial Times article was published on 27 June and can be found here.