Surplus wealth has given humanity abundance (see chapter 3). Human ingenuity and capacity for hard work have created surplus wealth in ever-increasing quantities, but who should create the wealth and who should enjoy it are questions that have preoccupied humanity since earliest times. These are political questions.
Throughout history people have wanted to enjoy surplus wealth but have others create it. Slave-owning civilisations succeeded by allocating all the surplus wealth to slave owners and none to the slaves - the creators of the bulk of wealth - who were allowed only their survival needs so as to maintain a sufficient quantity of slaves. Such regimes could only be maintained by force and the threat of force. Later non-democratic regimes have applied similar mechanisms to preserve the privileges of the wealthy at the expense of the poor, and many, after long periods of suffering, have been violently resisted by the oppressed population - violence often merely replacing one form of oppression with another.
Democratic societies, at least in principle, must allocate shares fairly, or at least as little unfairly as is tolerable to the voters. Also, in order for prosperity to continue the requirement is for the capacity to create wealth to be maintained. Therefore the shares that people receive must be consistent with this requirement. Different schools of economic thought have very different views on these relative shares and their ability to deliver prosperity, and this is why they impact directly on people's lives and wellbeing.
A distorting factor is that an economic regime that allocates the biggest share to a particular sector is strongly supported by that sector because they enjoy the greatest prosperity from such a regime, whether or not it delivers the highest level of prosperity for all of society.
Vested interests will do all they can to manipulate the economic regime in their own favour, regardless of the effects on society as a whole.
The current neoliberal regime that promotes amongst other things:
· big shares for the wealthy - because they create jobs and their wealth trickles down to everyone else;
· austerity - because that gets the deficit down which is in everyone's best interests;
· privatisation - because the private sector does everything better than the public sector;
· unfettered markets in goods, services, labour and money - because they self-regulate and maximise efficiency;
· free movement of capital - because that allocates it to where it is most beneficially employed;
· small government - to prevent it disrupting the ideal regime of unfettered markets;
· minimum public spending - to maximise the scope for private markets to work their magic;
· limited welfare - to wean people off dependency;
· labour laws that favour employers - to prevent workers from promoting their own interests at the expense of productivity;
· low inflation, regardless of unemployment - because stable prices are more important than employment;
· unfettered global trade - because that benefits everyone and lifts people out of poverty;
· low taxation for businesses and high earners - because they create prosperity for everyone; and
· claims that there is no alternative - because there is no alternative;
is just such a manipulative regime where those in positions of power and influence are bombarded with loud voices proclaiming the benefits of neoliberalism. The volume of a voice depends on the power available to amplify it, and wealth power has plenty of that. The voices of those without power are much quieter and largely drowned out.
To what extent those shouting the loudest sincerely believe in the universal benevolence of the neoliberal regime is an open question, perhaps many do, but in any event they are helped by the strong tendency inherent in us all to believe what is in our interests to believe. Also to what extent those hearing the voices sincerely believe what they are hearing is also an open question, though judging by the policies they have promoted they give every indication of being fully convinced. However such beliefs must by now be very stretched in anyone of conscience when they consider, if they do, the effects of austerity on the poor and disadvantaged in society when even many of those with jobs are forced to turn to food banks to keep themselves and their children alive (O'Hara 2014 pp21-22), and are thrown into the hands of payday lenders and loan sharks to pay for energy, food, rent, or to give their children treats for birthdays and Christmas (O'Hara 2014 Chapter 3). Michael Meacher knew what was going on:
Britain is run by the elites in finance, business, the media and politics, and each of them has failed profoundly in their role to contribute towards producing a viable, sustainable and harmonious society. They have chosen instead to maximise their own interests to the intense detriment of the wider public interest. (Meacher 2013, the quotation is from p63 and Chapter 5 provides the evidence.)
There are four main contenders for shares (in the form of entitlement) of newly created wealth:
· workers;
· business owners;
· rentiers (owners of debts and assets used by business owners in running the business, where interest and rents are paid to the rentier); and
· society.
Workers are those directly employed in creating the wealth, and generally - though not always - receive at least enough to provide for their survival and self-respect needs. Business owners own or rent all equipment and property required to run the business and receive the after-tax profits; rentiers receive interest on loans and rent on property; and society receives taxes.
Worker shares are determined by negotiation on the basis of abundance or scarcity of particular skills but strongly influenced by prevailing labour laws, the general level of unemployment, and, in the case of managers, their ability to manipulate company performance to their own advantage. Business owner shares are those left over after all other shares have been allocated, and they do all they can to minimise those other shares. Rentier shares are determined by negotiation with business owners or managers, and society's share - taxes - are determined by government but strongly influenced by avoidance measures that big businesses, powerful rentiers and high earners are able to exploit.
For analytical purposes shares are normally split between labour (workers) and capital, where capital consists of everything involved in production apart from labour. In this split owners and rentiers are merely different elements of capital since they are the owners of capital. Taxes are considered in terms of adjusting labour and capital shares, which are presented as gross (before tax) or net (after tax) proportions. Chapter 97 analyses in detail the factors that determine capital and labour shares.