If growth benefits only the rich, politics will get very interesting
Posted on 22 May 2011 | 10:05am
An interesting and thoughtful piece from Gavin Kelly in The Observer. You can read the whole article at the bottom of this post, but the basic point is that there has been something of a collapse in living standards for what Ed Miliband, Gavin’s former colleague in the Gordon Brown team, calls the squeezed middle, and that this may continue even when growth comes, with significant political consequences.
In his speech yesterday, Ed said the gap was no longer between rich and poor, but between rich and everyone else. In other words, there are people who are doing very well, and people who are struggling at the bottom end, but now most people in the middle feel they are struggling too.
Gavin, who now heads the Resolution Foundation which is publishing a report on all this later this week, points out that generation after generation has seen kids doing better financially than their parents, but that this generation may not. He points out that the political consequences of this may be profound.
It is interesting to see the Spaniards now taking part, despite being a democracy, in protests that owe their inspiration and their style to the Arab spring. That is what 40 per cent plus youth unemployment can do to you.
Here in the UK, you sense that the bankers feel the storm they helped cause has passed and they can go back to their old ways, their old bonuses, and let superinjunctor Fred Goodwin continue to act as a lighting rod for all of them. Gavin’s report confirms me in the view that they are wrong and that unless they both signal they get it, and also do a better job of explaining why they are part of the solution as well as the problem, the heat will be back on them before long.
Soon, the name of Glencore will enter the national lexicon and we will have paraded in front of us a group of men for whom the flotation of their company will deliver wealth on a par with whole regions of some of the countries where they operate.
What governments do about this is not simple. But it seems fairly evident that when everyone feels like they benefit from economic prosperity, the many will just about tolerate the excesses of the few. Gavin Kelly and his report seem to be suggesting that even when growth comes it is likely to benefit the few not the many. That will make for a very interesting and challenging political landscape, which will make the tuition fees row look like a stroll in the park.
You can read Gavin’s Observer piece here