Only the left can break the cycle of wealth accumulation

This is my opening speech at the Intelligence Squared debate at the Emmanuel Centre, London, 21st February, with Roger Scruton, Stella Creasy and Kwasi Kwarteng: The Left Has Right on Its Side.  

I speak without notes, but this is the text I roughly memorised.

I should confess that sometimes the left drives me round the bend. The meetings, the posturing, the infighting: it can be infuriating. The old adage that the right looks for converts while the left looks for traitors is all too often true.

Despite this, I belong to the left and will never give up on it, because without it there is no solution to a predicament that every generation faces. This predicament is the escalating concentration of wealth and power that threatens to destroy democracy and eventually make life unlivable.

Wealth and power concentrate not because those we confront are wicked (though there are one or two). Their escalation, in the absence of a political movement to restrain it, is an intrinsic feature of complex human societies. It occurred even in the world’s first cities, in southern Mesopotamia.

A useful way of looking at this problem is the concept of patrimonial capital, popularised by Thomas Piketty*. Piketty showed that when the return on capital increases faster than the growth of economic output, inequality spirals, social mobility stalls and the enterprise economy is replaced by a rentier economy.

In other words, once you have money and property, you can use it to accumulate more money and property, taking an ever greater share of society’s wealth, through the harvesting of economic rent. By economic rent I mean charging people over the odds to use a non-reproducible resource over which you exercise exclusive control. Think, for example, of the ridiculous price we pay in the UK for train tickets, because the train companies have us over a barrel.

By this means, through no enterprise of their own, the rich become richer and the poor become poorer. This process has no natural limits. Eventually, as we’ve seen in the past, the very rich can capture almost the entire production of society.

At this point, the debt, destitution and unemployment that results can cause economic collapse: the Great Depression is a good example.

This predicament is not a perversity of the system. It is an innate characteristic. It is bound to work this way, unless there is a political movement capable of breaking the vicious circle of wealth accumulation.

But the problem doesn’t end there. The economic power of the owners of wealth translates into political power. The richer a tiny segment of society becomes, the better it is able to capture politics and undermine democracy. Eventually, we get a government of the elite, by the elite, for the elite. Does that sound at all familiar?

To illustrate this problem, let’s take just one aspect of economic rent; the excessive fees we pay for renting a place to live.

In the late 19thCentury, a notorious slum developed in Bethnal Green called the Old Nicol. Entire families were crammed into single rooms in the slum’s cellars, which were just five feet high and had no natural light. Infant mortality was over twice the national average, partly because most families had only one bed, with the result that many babies were killed through accidental suffocation. The slum was infested with damp, rats, lice and fleas, rotting walls and collapsing ceilings, as the landlords spent next to nothing on repairs.

And yet, per cubic foot, the tenants of the Old Nicol were paying four times as much rent as the tenants of the poshest houses in the West End. Why? Because they had no power, while the power of the landlords was almost absolute.

To pay these rents, they had to work every waking hour of the day. This was why the Old Nicol was known to its inhabitants as “the Sweaters Hell”.

Those who received the rents, who turned out to include peers of the realm, members of Parliament and senior churchmen, didn’t have to work at all to make this money. They didn’t even have to collect the rent, as they employed others to do it for them. Some of them became among the richest people in the country.

In 1885, the Royal Commission on the Housing of the Working Classes scandalised the nation when it revealed that many working-class households were paying more than 25% of their income on rent.

So let’s see where we stand today.

Please raise your hand if you pay rent. Please keep your hand raised if you are paying 25% or more of your income in rent.

Please keep it raised if you are paying 40% or more of your income on rent.

50%?

Any advance on 50%?

This, my friends, is why we need the left.

If we haven’t yet returned to conditions like those in the Old Nicol, is only because we are still enjoying the legacy of the social democratic era, when the left gained a foothold in politics, even though this era more or less ended 40 years ago.

The right will never break the power of patrimonial wealth, because the right exists to defend it. But the left, when it remembers what it’s for, exists to confront it.

During the 1940s, when the left was arguably at the peak of its power in mainstream politics, the top rate of income tax in the US rose to 94%, and in the UK to 98%. Economists today look back on these rates and describe them as irrational. They argue that the Laffer Curve suggests that governments raise no further revenue above a rate of about 70%. But this is to miss the point. The point of these taxes was not just to raise revenue, but to break the power of patrimonial capital, and the vicious circle of wealth accumulation and inequality.

They did so to great effect, which is why this nation came to enjoy, for the first time in our history, decent housing for working people, a National Health Service, high employment and shared wellbeing and a robust social safety net to ensure that no one fell into the condition suffered by people in the Old Nicol.

But after Margaret Thatcher and Ronald Reagan came to power, top rates of tax were slashed, trade unions were suppressed, regulations, including rent controls, were torn down, and patrimonial wealth began to rise again. The vicious circle began to turn once more. Unfortunately, 13 years of Labour government did little to address this, because Tony Blair and Gordon Brown failed to understand the power of patrimonial capital, or the need to contain it.

So how is this process going to end? Who is going to confront the power of patrimonial wealth, to defend democracy and protect society from its destructive impacts? Theresa May? I don’t think so. The Conservative party? I don’t think so.

Only the left, for all its faults, can do it. Only the left, for all its faults, has ever done it. Only the left, for all its faults, will keep doing it.

I do not claim that the left is right about everything. No one is. But in the broad scheme of things, the left has right on its side. My friends, I ask you to support the motion.

*In this talk, for the sake of simplicity, I use the terms patrimonial capital and patrimonial wealth interchangeably. But they are not in fact synonyms. Wealth means all assets, both natural and human-made. Capital is the human-made portion of wealth that is used in production. What Piketty describes is really patrimonial wealth: it is not capital as much as wealth whose concentration has been rising astronomically, particularly the ownership of urban property. I believe his use of the term is mistaken, but I let that pass to avoid complication.

George Monbiot

www.monbiot.com