Inequality -Europe and the Precariat

by Michael Patrick O'Leary

A version of this article appeared in the July 2014 issue of Echelon magazine

 

European Values and Inequality

In theory, the core of the EU project was opportunity. Free movement, competition, a single market and non-discrimination should be pillars of an equal society. Nevertheless, socio-economic inequalities in Europe are greater today than in the 1980s and many who oppose free movement were recently elected to the European Parliament.

 

Five years of austerity policies have led to a further deterioration of living standards. Europe’s social model of welfare will no longer be sustainable if a majority of citizens can barely scrape by and have no security or opportunity. In Greece, infant mortality is up 43% because of stringent cuts to healthcare services. In Spain, over 400,000 families lost their homes. There were 4.5million people in Ireland on Census night (10th April 2011). There are an estimated 1,300 ghost estates in Ireland with 300,000 houses lying empty. There are plans to demolish these estates. In 2012, Focus Ireland, a charity for homeless people dealt with 8,000 customers.

 

Spending on education has effectively dropped in most EU countries. Youth unemployment affects a quarter of young Europeans and in Greece and Spain, 50% of the young are unemployed.

A study launched by UK deputy PM (at time of writing) Nick Clegg (educated at the private Westminster School and Cambridge University), shows that in Britain, one child in five is on free school meals. Only seven per cent of children attend private schools, but these schools provide 70 per cent of High Court judges and 54 per cent of FTSE 100 CEOs.

David Boyle, a fellow at the New Economics Foundation think-tank, warned that rising property prices would effectively render the middle classes extinct as the dream of home ownership becomes ever more distant. The “squeezed middle”, would need to take three or four jobs just to make ends meet and no longer have time for cultural activities.

Causes of Inequality

Over the last few decades, large international corporations have been powerful generators of inequality. By the early 1980s, the CEOs of the largest 350 US companies were getting 30 times as much as the average production worker. By the start of the 21^st century, they were getting between 200 and 400 times as much. Among the 100 largest UK companies, the average CEO received 300 times the minimum wage.

The EU encourages cuts in social spending, even presenting them as preconditions of recovery. They argue that recovery depends on “employer-friendly practices”. “Labour flexibility” really means crushing trade unions. More than a third of all workers in the private sector were union members forty years ago; now, fewer than seven percent are members of a trade union. France and Spain used to have powerful unions, but today less than ten per cent of their workforce is unionised.

Precariat

Employment is becoming increasingly unstable. Privatisation of government services, short-term and part-time contracts, temping agencies and low wages undermine job security. The British economist Guy Standing has coined the term precariat. Professor Standing argues that the dynamics of globalization have led to a fragmentation of older class divisions. The precariat consists of temporary and part-time workers, interns, call-centre employees, sub-contracted labour – those who are engaged in insecure forms of labour that are unlikely to help them build a desirable identity or career or guarantee them secure accommodation.

Spirit Level and Malignant Growth

The Spirit Level is a book by Richard Wilkinson and Kate Pickett, published in 2009. The book argues that there are “pernicious effects that inequality has on societies: eroding trust, increasing anxiety and illness, (and) encouraging excessive consumption”. The authors claim that for each of eleven different health and social problems: physical health, mental health, drug abuse, education, imprisonment, obesity, social mobility, trust and community life, violence, teenage pregnancies, and child well-being, outcomes are significantly worse in unequal rich countries.

Piketty

Capital in the 21st Century, by French economist Thomas Piketty, focuses on wealth and income inequality in Europe and the US since the 18th century. The book’s central thesis is that inequality is not an accident but rather a feature of capitalism that requires state intervention to reverse. The book argues that unless capitalism is reformed, the democratic order is in danger.

Piketty predicts that the rise in inequality under neoliberalism will increase throughout the 21st century, reaching Victorian levels by 2050. He argues that if growth is low, labour’s bargaining power weak, and the returns on capital high, this will encourage speculation rather than entrepreneurial risk-taking or working hard to accumulate wealth.

Arguments against Promoting Equality

Companies are reluctant to implement equality measures because of what they see as heavy costs, which reduce their profit margins and impede their investment capacity. Equality and anti-discrimination contradict the ‘freedom’ of their enterprise, as executives would not be free to hire and do business the way they choose. They argue that inequality is not systemic but a failure of individuals to be resilient.

The engine of the neo-liberal system is widespread discrimination, and inequalities of class and geographical location. Globalisation so far has ensured that cheaper labour can always be found somewhere else. Some entrepreneurs have been cynical enough to claim that discrimination makes perfect business sense and should be acknowledged as such. From this perspective, removing inequalities would bring this very profitable system (for a few) to collapse.

Arguments for Equality

Almost all production and wealth creation is the result of cooperation. Society as a whole and its infrastructure contributes to everyone’s income and living standards. Accumulated technical and scientific knowledge, an educated population, transport systems and electricity supplies help the wealthy to become and remain wealthy. The combined efforts of vast numbers of people affect the living standards of even the rich.

Promoting equality is an investment. Excluding able individuals entails a huge loss of talent and skill when the economy needs to harness all potential creativity. A 2012 talent shortage survey found that around one in three employers around the world found it difficult to fill vacancies. Talent is often wasted because of discrimination.

Conclusion

In a speech to the Sutton Trust, Mr Clegg admitted that the Coalition “cannot afford” to leave a legacy like the current position. “Morally, economically, socially: whatever your justification, the price is too high to pay. We must create a more dynamic society.” Clegg’s statement is part of the “therapeutic management of inequality”- the officially sanctioned smokescreen of seeming to promote fairness, social justice, social equality, and equal access to education. A fear of what UK PM David Cameron called a “broken society” is the organising principle behind a wide range of measures to regulate supposedly dysfunctional behaviour. The “middle” sees itself as living in a nightmare world being ripped apart by greedy bankers at one extreme and sub-human Chav ‘trailer trash’ at the other.

Standing noted that, lacking any work-based identity, or sense of belonging to a labour community, the psychology of the precariat is liable to be determined by anger, anomie, anxiety, and alienation. Perhaps the precariat will rise up but they are not the real vandals. The one per cent or ten per cent’s constant looting of the middle classes as well as the working class engenders resentment. In a context of too much debt and slow or no growth, austerity weakens the body politic rather than strengthening it. Austerity only really helps those who are wealthy enough to take advantage cheaper asset prices and sell the assets back later.

The EU needs to remember its founding principles and take action to complete the banking union, protect small savers from the banksters, create decent jobs, implement a realistic investment policy, and protect consumers and the environment. Equality must be at the heart of every European policy.