Tackling growing inequality will not succeed without fundamental reform of the current model of corporate capitalism and the “de-concentration” of capital ownership. One of the most powerful tools for achieving such change would be by the creation of one or more collectively-owned social wealth funds.
Since 2008, the Anglo-Saxon model of capitalism – with its emphasis on markets, weak regulation and the concentration of private capital – has been fast losing friends. The model, operated most forcefully in the UK and the United States, has led to entrenched inequality, and far from delivering stable, long term growth, has brought growing economic turbulence. Even former cheerleaders are questioning its sustainability. As the IMF recently asked, “Has Neo-liberalism been oversold”.1
Yet despite the growing scepticism about its merits, the neo-liberal model of corporate capitalism remains largely intact. Driven by decades of rolling privatisation, de-regulation and an antipathy to collectivism, the fruits of economic activity in the UK have been increasingly colonised by a small business and financial elite, leading to one of the world’s heaviest concentrations of wealth and capital.
UK Plc is dominated by large companies. Those with over 250 employees account for 52% of total private sector turnover.2 Great chunks of vital economic activity – from energy supply to food production and accountancy services – are controlled by a handful of giant firms. Big corporations wield disproportionate power over consumers, small businesses and sometimes – because they are “too big to fail” – government. Shareholding has become increasingly concentrated, speculative and destabilising, with less than 12% of shares owned by individuals. Big business has used the rise in the profit share since the 1980s to enrich a small financial and corporate elite, rather than to invest in the long term future of the economy.
Today, the UK is a society ever more divided between extreme affluence and mass impoverishment.3 Since 2008, the wealth gap has continued to widen. As the official wealth statistics have shown, aggregate wealth enjoyed by the top fifth as a ratio of the bottom fifth has risen from 92 to 117 since the 2008 Crash.4 Median real earnings are still well below their peak level in 2009, while relative child poverty is predicted to rise sharply.5 Far from countering these trends, the thrust of state policy since 2010 – loose monetary policy, austerity fiscal policy and regressive tax/benefit changes – has boosted asset values, while transferring income from the poorest quarter of the population to the affluent top.6
There are plenty of voices calling for change. But most suggestions involve tinkering with the existing pro-inequality model. A serious attempt at reform needs to build an alternative “sharing political economy”, one that disperses capital ownership, power and wealth, and ensures that the fruits of growth are more equally divided. Central to such a model must be the de-concentration of capital ownership. Without such a break-up, inequality will continue to rise.