Why Wealth Inequality Does Not Matter Any More - But Should

21/04/2014 14:15 BST | Updated 17/06/2014 10:59 BST

Since the global crisis of 2008 there has been much talk about the widening wealth inequality gap throughout all Western nations. This debate is most pronounced in the Anglo-Saxon countries, which uniquely amongst the developed Western economies have traditionally had the widest disparities. The "Occupy Wall Street" movement, though long over was the touchstone to light this debate on American shores. "Occupy" spawned similar movements throughout the industrialised world, and though it fizzled out through a lack of a clear message and clear leadership, its legacy was to alert the world to the widening wealth gap and the gilded status of the 1%.

Taken broadly since the dawn of the industrial revolution, the plight of the urban poor has been the driver of political and social change. The first hundred years of the industrial revolution brought an influx of the rural poor into the cities, this exacerbated an already desperate economic plight for workers. Steam power and mechanised muscle created a new "middle class" and wealthy industrialists whose wealth outstripped that of the aristocracy and the landed classes throughout the 19th century. However with the enfranchisement of the middle class, new political movements and the inherent threat of violence and revolution (as was at times rife in continental Europe) should their broad grievances not be met, the working poor slowly achieved a level of political and economic power.

By the end of the 19th century, basic government-led social security was starting to be enacted throughout Europe. This came off the back of philanthropic movements to aid and to elevate the poor. These reactions were founded upon the noble ideals of justice and fairness, and also, as alluded to above, by the inherent threat of disorder, crime and the usurpation of the established order. The German Health Insurance of Workers Law of 1883, which provided protection against the temporary loss of income as a result of illness, was enacted to promote political integration and political stability as well as a sense of fairness. In general, many in power saw this as a form of insurance against the possibility of social upheaval and the loss of control, their wealth and capital. This is the basic European social compact.

That compact of it being "the right thing to do" as well as a way of keeping the broad pillars of the economic system in place, led to the great achievement during the first seventy years of the 20th century of there being rising working class wages and prosperity, the Great Depression aside. Depending on where you looked, this was achieved with the aid of trade unions and with burgeoning technology and the fruits of war, brought on by new markets for industrial goods.

In the US, its bullish economy and relatively low levels of state intervention led to the emergence of cities based around the industrial might of corporations. Detroit became the embodiment of the American dream, through the dominance of The Ford Motor Company. In the UK, civic government sought to create wholesale habitable housing for urban workers, whilst strong trade unions helped create a situation where by the 1960s, a British working class man could feasibly, for the first time since industrialisation, look at owning his own property. In the north of Western Europe, the social compact played a large role in creating social welfare programs that saw companies, government and unions work hand in hand to create stable tenure for workers with generous state provision for those looking for work.

Whatever the model, whichever path taken, in terms of the wealth gap the result was broadly the same; it narrowed between those at the top and those at the bottom of society. The indicators of a society's perceived fairness by those who see themselves as disadvantaged can be read in many ways and could be taken as a chart of "progress". Crime rates are a powerful indicator of a country's inherent view on whether it thinks itself as being broadly one that is fair and just. Countries which have a form of the social compact have historically seen lower rates of crime then the Anglo-Saxon countries.

Pre-industrial societies were crime-ridden and murderous places. It was only through deference, religion and inculcating the sense of a predestined inferiority in the poor that the threat of constant rebellion was kept at bay. As cities grew after industrialisation, crime became one of its immediate burgeoning industries. If you found yourself living in a dark Victorian city, with little in the way of work and no prospect of it, you had every incentive to rob and steal to help balance the economic books. However with the rising prosperity of the working class, rates of murder, theft, and robbery all started to decline during the 20th century, though its level of reporting continued to rise until the early 1990s. There was a correlation between wider economic social mobility, harmony, and the lessening of wealth inequality with falling crime rates throughout the developed world until the 1980s, as society simply on the whole got fairer.

With the Neo-liberal policies adopted first by Britain, then America and other parts of Europe in the 1980s, the wealth divide has started to increase again, though not the level in crime. Crime in the UK is currently at its lowest level in 30 years, having decreased dramatically from its peak in 1995. For example, 4.2 million violent crimes were counted in 1995 compared to 1.94 million in 2011/2012. These figures compare to those in the United States, where crime rates peaked between the 1970s and early 1990s. Since the early 1990s, crime has declined in the United States, and current crime rates are approximately the same as those of the 1960s. There could be many reasons for this; one being the availability of contraception and abortion which for the previous forty-plus years had meant that many unwanted and, as would have been, economically disadvantaged people, simply do not exist. This has been one of the unintended consequences of contraception and abortion policy. However, I consider that falling levels of crime are down to another more fundamental issue; simply that "absolute" poverty throughout the Western world has largely been eradicated. Simply very, very few citizens of western countries die of hunger anymore; this fact with historically unprecedented levels of health, the ubiquitousness of "decent" housing, with the added benefit of access to cheap consumer goods have led to an absolute bottom-line standard of living that the Victorian poor could never have dreamt of.

The calculus of the top 10% is that they need not concede any more in terms of political power or wealth transfers to the poorer sections of society. In the US, voting rights can be nibbled away at and programmes to alleviate social inequality are being defunded. This pattern is being played out throughout the developed world. Political and economic rights can now be slowly withdrawn from the most disadvantaged members of society as there is little to no chance of an upheaval, rebellion or revolution. From 1979 to 2007 incomes of the top 1% of Americans grew by an average of 275%. During the same time period, the 60% of Americans in the middle of the income scale saw their income rise by 40%. The top 5% of income earners in America have 61% of its wealth. In Britain, the five richest families worth is more than poorest 20% of the population. These facts do not even prompt strong debate about economic fairness, let alone urban insurrection or a storming of the barricades. Our addiction to relatively cheap consumer goods has replaced religion in being the instrument that gives us comfort and happiness, whilst social deference has been lost to economic deference based around computer screens. On a very basic level the overwhelming majority of us are, for the most part, comfortable and so the rich can now for the first time in 200 years of industrialisation happily get richer and leave the rest of us behind, and we let them do it. Article over, I'll switch off my Apple Mac laptop now.