Parliament or Democracy?

The Rich get Richer...


Politics Is About Who Gets What,
Especially As A Result Of Government Action

George F. Will, 1988
Conservative Commentator

Governments change but policies don't. This, for the most part, is an adequate description of how parliamentary democracy operates. It probably sounds like something an anarchist would say - yet the figures bear it out. Take the case of the United States - often regarded as the 'home of democracy' or even 'the most democratic state in the world'. Despite the various changes in Government that have occurred in the US over the last twenty to thirty years, there has hardly been a hiccup in the most obvious result of Government policy - that rich people have got dramatically richer. Figure 2 shows this.

Figure 2: Mean Incomes of Population Quintiles, 1954-86
Thousands of US dollars

Mean income of pop quintiles 1954 to 86

During the period of time covered by this survey of incomes (1954-84) there have been eight Presidential elections in the US. The outcome of these elections has led to a steady exchange - between Republicans and Democrats. The following 'administrations' have been in power: Republican (1956-60), Democratic (1960-64), Democratic (1964-68), Republican (1968-72) Republican (1972-76), Democratic (1976-80), Republican (1980-84).

Yet it is clearly evident from Figure 2 that 'universal suffrage' has had only a marginal effect, if any, on the policies that have been pursued. The income of the top 40% of US society (the 4 and 5th quintiles) has steadily increased in comparison with the bottom 60%. The real beneficiaries have been the so-called 'super-rich' - the top 5% of the population. As can also be seen in Fig 3, the very rich have been holding steady in terms of their percentage holding of wealth in US society throughout the entire period. (Interestingly enough, the one point where their wealth holding dropped by a significant amount, between 1972 and 1976, was due to the onset of recession and the 'oil crisis' and not due to any Government policy!)

Figure 3: Estimated % of Total Wealth Held by the
Top 1% of US Households

The wealth of the super rich

In fact, to the extent that things have changed at all, in any significant way, from election to election, they have mostly changed for the worse. The policies implemented by Reagan, Bush and Clinton (Republican, Republican and Democrat) have had a dramatic impact on the distribution of income and wealth in the USA. Kevin Phillips' mainstream study, The Politics Of Rich And Poor, described the worsening situation as follows:

'By the middle of Reagan's second term, official data had begun to show that America's broadly defined 'rich' - the top half of 1% of the US population - had never been richer. Federal policy favoured the accumulation of wealth and rewarded financial assets, and the concentration of income that began in the mid-1970s was accelerating. In 1988, approximately 1.3 million individual Americans were millionaires by assets, up from 574,000 in 1980, 180,000 in 1972, 90,000 in 1964, and just 27,000 in 1953. Even adjusted for inflation the number of millionaires had doubled between the late seventies and the late eighties. Meanwhile the number of billionaires, according to Forbes magazine, went from a handful in 1981 to 26 in 1986 and 49 in 1987. As of late 1988, Forbes put that year's number at 52 billionaires.'102

This 'phenomenal rise' in the wealth of the rich occurred at the expense of those who work, it would seem. See Figure 4.

Fig 4: Divergence between pay of workers and CEO's in the 1980's

Pay of workers versus CEO's

Phillips continues:

'Most of the Reagan decade, to put it mildly, was a heyday for unearned income as rents, dividends, capital gains and interest gained relative to wages and salaries as a source of wealth, increasing economic inequality.'103

A situation that was put down (quite rightly) to Reaganomics. Yet when Reagan and his successor, Bush, were finally removed from office in 1992 on foot of Clinton's 'put people first campaign', the super-accumulation of wealth merely continued. Assessing Clinton's impact (after his first term in office) in 1996, the Economist reported that 'real wages are slightly lower than they were 20 years ago'. 104 Inequality had never been higher as we can see in Figure 5.

If we look at another flagship of 'democracy' - Britain - the picture is more complex but broadly similar. Even so what is interesting about Britain is the presence of the Labour Party - a party that until quite recently was committed 'to public ownership' of industry (Clause 4) among other things. Indeed, on face value, the British electorate would appear to have a 'reasonable' choice at election time (within the confines of very narrow limits admittedly). Face value is a deceptive thing, of course.

Figure 6: Distribution of Personal Income (UK)

UK income distribution

Figure 6 shows the 'Distribution of personal income' between 1949 and 1976. In Wealth, Income and Equality, A.B. Atkinson gives this assessment:

'The overall impression from the figures is a reduction in inequality but, if the decline in the share of the top 1% is ignored, the shape of the distribution of income is not greatly different in 1976-77 from what it was in 1949. The major part of the fall in the share of the top 1 per cent is balanced by an increase in the shares of the other groups in the top half of the distribution. The income distribution shows a remarkable stability from year to yearÉ'105

And of course, it normally follows that if income distribution fails to change, wealth (fixed asset) distribution doesn't either.

The Labour Party was in power for considerable periods during this time: between 1945 and '51 under Atlee, between 1964 and '70 under Wilson, and - traumatically - from 1975-'79 under Wilson and Callaghan (apart from the brief Liberal-Labour pact, 1977-78). Indeed Labour's period at the helm coincided with the creation of the 'Welfare State' - regarded as the high-point of achievement. So much so that the influential Labour MP, Anthony Crossland, was able to state in The Future Of Socialism in 1956 that,' almost all the basic features of traditional pre-1914 Capitalism have either been greatly modified or completely transformed.' 106 Indeed Crossland was so carried away with the success of Labour in power that he began to wonder if they hadn't gone too far (the heady height of power, one imagines!). He said: 'I'm sure that a definite limit exists to the degree of equality which is desirable. We do not want complete equality of incomes, since responsibility and exceptional talent requires and deserves a differential award'. 107

Those who remained outside the corridors of power saw a different and depressingly familiar picture. Richard Titmuss, in his study, was one of the first to conclude that 'the Welfare State in Britain after WW2 has not led to any significant re-distribution of wealth in favour of the poor classes.' 108 An assessment that is backed up by Padgett and Paterson in their authoritative study, A History of Social Democracy in Post-war Europe. They note, 'Britain in the immediate post-war period saw a reduction in pre-tax incomes of the highest earners, but the beneficiaries were those in the upper-middle income bracket ... The share of pre-tax and post-tax income accruing to the bottom third of the income ladder remained steady from 1945 to the mid-1970s.' 109 Wealth distribution, in fact, was hardly affected until the late 1970s when, on foot of Thatcher's rise to power, the situation dramatically disimproved. So much so that Britain became 'the most unequal country in the Western World' by 1996. It could proudly claim that 'the richest fifth of Britain's population enjoy, on average, incomes 10 times as high as the poorest fifth'. 110

***

The 'Welfare State' was an important development in the post-war period to the extent that it lifted the standard of living of society in general - though it did not markedly affect wealth distribution. This should not actually surprise us since, as commentators have noted, 'Social Democrats have often regarded the welfare state possessively as 'their own' property, looking to it as a vehicle for this egalitarian philosophy. However the origins of the welfare state predate government social democracy, and it is a common feature of all capitalist societies irrespective of their experience of party government.' 111

Nevertheless, as the 1980s proceeded, and the balance of power shifted significantly in favour of the 'rich and privileged' - especially in the workplace under the aegis of high 'managed unemployment' - it became possible in many countries to consider 'ending the welfare state as we know it'. This broad objective was achieved in a number of countries in a number of ways. In Britain it was 'Thatcherism', in the USA it was the Reagan and Clinton administrations. In a host of other countries however - especially in Europe and in Australia - the various Labour and socialist parties did the bidding.

Indeed the period between 1980 and 1995 is remarkable for the large numbers of socialist and Labour parties that came to power - in France, Spain, Portugal, Greece, Ireland (in coalition), Italy, Belgium, Denmark, Australia and New Zealand, to name just some. We can of course speculate on why: was it a 'cry for help' by the working-class and the poor? If so, it went unheard.

Speaking about the situation in Spain, Portugal and Greece, Padgett and Paterson note that 'The hallmark of governmental social democracy ... was its pragmatism, most marked in economic policy.' This meant that in Spain and Portugal, for example, Socialist Governments 'introduced austerity programmes immediately upon taking office.' In Portugal this 'bitter pill' meant 'cutting subsidies on basic commodities, inevitably driving up basic food prices. At the same time there was a freeze on wages and a clamp-down on public spending.' In Portugal, the purchasing power of its workforce fell by 10% under 'Socialist' rule. 112 A situation that was broadly repeated in Spain, Italy, Greece, and France, to again name just a few. (France incidentally shot up the 'inequality' ladder after nearly a decade of 'Socialist Party rule').

A performance that was repeated on the other side of the world, in Australia, where the ALP was in power under Hawke and Keating for almost all of the 1980s. Here 'many ALP supporters accepted that a degree of compromise was inevitable when a Labor Government was in office during difficult economic times. Yet many felt frustrated that the Hawke government seemed inclined to ... implement changes in the financial sphere ... often in line with views of conservative economists'.113 Which led one Labor 'stalwart' to note: 'There has been in Australia a move towards the philosophy that whatever is spent on the poor causes a deficit, whatever is spent on the rich encourages investment'.114

Indeed this role of the various Labour and socialist parties of the world in attacking 'their own' is often the basis for a wider decline. Rank and file party activists often suffer demoralisation and confusion in its aftermath, as does the (working-class) electorate, which as usual votes in good faith for such parties. This demoralisation is fertile ground for 'right-wing' politics. It is noteworthy that in a host of countries, where this has happened, the electorate has often returned a 'Conservative' government in the aftermath of a period of 'socialist rule' (France, Spain, Australia, to name just three.) Not surprisingly, the returned 'Conservative' alternative persists with polices that further attack the standard of living of the working-class. A complete circle, as they say.

The recent direction of economic policy in Ireland is a good example of one other tendency in parliamentary democracy: the people voted, but so what. In Ireland the proportion of the GDP that is allocated to 'social spending' has been declining since 1985. However this policy has never actually been voted on by the electorate, despite a number of elections in this time-span. Since the 'public' in Ireland and elsewhere cannot be persuaded to vote for such cut-backs, the various Governments have instead resorted to what is called by the Economist 'Reform ... by stealth'. In a survey entitled the 'Changing Face Of The Welfare State' 115 , the same magazine speculates that this reform by stealth 'might yet transform the welfare state'.

'Reform By Stealth', it notes, has three distinct parts. Firstly, restrict claims by attaching conditions to benefits. Secondly, 'provide universal basic welfare coverage, but ... redefine 'basic' downwards.' Thirdly, introduce 'means-testing'. In Ireland, despite numerous changes in the Government. - Fianna Fail/ PD, Fianna Fail/ Labour and Fine Gael/Labour/Democratic Left - this policy has been ongoing since 1985. It has been quite successful, the articles notes, and has led to 'a nibble here, and a nibble there'. The result is an ever familiar picture: poverty has risen 116 as a percentage of the Irish population during the period under review even though all the parties are committed to 'tackling poverty'.

****

In his well-known study of the democratic idea, C. B. Macpherson, notes the changing fortunes of the 'idea of democracy' among the elite of the world. It has been a rocky road:

Democracy used to be a bad word. Everyone who was anybody knew that democracy, in its original sense of rule by people ...would be a bad thing - fatal to all the graces of civilised living. That was the position taken by pretty nearly all men of intelligence from the earliest time down to about one hundred years ago. Then, within fifty years, democracy became a good thing. Its full acceptance into the ranks of respectability was apparent by the time of the First World War... Since then, in the last fifty years democracy has remained a good thing... so much so that everyone claims to have it.'117

It could not be put more plainly. Parliamentary democracy is a good thing (in fact it is one of the best thing around) if you wish to preserves the current unequal order - as the rich do. It delivers the essential result every time we vote: the rich get richer and the poor get poorer.


on to

Chapter 9. Parliament or democracy?


From the pamphlet Parliament or Democracy?

Parliament or Democracy

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