The debate about the future of equality in an era of rapid globalisation is gathering momentum. There are growing concerns about the rate of progress in tackling inequality – despite dramatic reductions in child and pensioner poverty since the late 1990s. The role of the ‘super-rich’ is increasingly under the spotlight in the industrialised countries, as global capitalism fuels a rise in earnings differentials driven by ‘winner-takes-all’ markets. The cycle of inter-generational disadvantage appears evermore entrenched.
In reality, this is the first Labour government in history to achieve significant and sustained redistribution in favour of the poorest. Some on the traditional left envisage a post-war age where genuinely radical measures were enacted. Yet, like most ‘golden ages’, such an era never existed, as Labour governed for brief intervals and fiscal instability constantly derailed the party’s broader ambitions to create a fairer society.
New Labour’s policy paradigm, however, has reached its limits – despite the continuing relevance of its political approach. The strategy of redistribution through income transfers and work-focussed welfare will secure only modest gains against a rising tide of inequality, and the widening gap between rich and poor.
New policy instruments and programmes are needed to realise egalitarian aspirations in a world of rapid technological and demographic change, focussing particularly on the nature of work. A new economic era has been created where a phase of intense globalisation has collided with successive revolutions in information technology, exacerbating the polarisation between ‘lovely’ and ‘lousy’ jobs in the new economy.
The assertion propagated by the free-market right is that nation-states no longer have the latitude to pursue goals such as more equality. As Adair Turner argues in his masterful account of modern liberal economies, Just Capital, such myths have become the dominant theme of contemporary economic debate.
It is claimed that countries are no longer free to pursue their own macro-economic policy as they confront the harsh disciplines of global markets. Limits on financial market liberalisation are considered either harmful or impossible; tax bases are under threat as the result of competition for mobile capital and labour; and government expenditure in many EU-member states is too high. According to this pessimistic analysis, just as the welfare state undermines competitiveness, inequality is inevitable.
But, as Turner argues, the problem with these widely accepted assertions and assumptions is that they are either half true but plainly exaggerated, or merely just wrong.
For instance, while part of the UK economy is increasingly open to global trade and competition, it is also true that a growing proportion of economic activity, for example services such as hairdressing, are inherently untradeable. In some ways, economies have become more local and less global since the early 1990s. At the same time, there is precious little evidence that global tax competition makes welfare states inherently unaffordable.
The global economy has not imposed fundamental limits on the pursuit of social and political goals such as greater equality. What has changed is the salience of the policies required to achieve those desirable objectives. The social compact itself needs to be reinvented if trends towards wealth and income inequality are to be reversed in the future.
In a recent book, The Pro-Growth Progressive, Bill Clinton’s policy adviser Gene Sperling spells out eloquently some of the policy alternatives. He argues that the progressive economic contract, emphasising fiscal discipline and budgetary stability with empowerment through active labour market policies, is no longer sufficient.
Greater equality requires strategies that alter the underlying characteristics of the labour market, achieving a fairer distribution of the costs and benefits of globalisation. Renewed focus is needed on the quality of work, the distribution of secure, well-paid jobs, and the role of modern trade unions in combating exploitation.
Labour has to consolidate its strategy for escaping from the low wage, low skill, low productivity syndrome that, since the early 1980s, has come to characterise many sectors of the British economy. Without such a breakout, it is unlikely that Labour governments will achieve living standards or levels of equality that match the best in Europe.
The relationship between globalisation and equality is not a minority concern. It strikes at the heart of recent debates in British politics. What Labour requires is a compelling narrative that reconciles the conflicting impulses in people’s lives. On one side, voters are becoming more individualistic and less deferential as consumers of private and public services. On the other, they want an empowering state that shields them from the multiple economic and physical insecurities that globalisation engenders.
These tensions – far from unique to Britain – illustrate the contradictory fears and aspirations unleashed by global economic change. The centre left can cogently reconcile globalisation with security by stressing the role of active government as an efficient instrument of social justice. The case for greater equality must not be conceded to the ideologues of global neoliberalism.