A New Scotland

Building an Equal, Fair and Sustainable Society

Gregor Gall, Gregor Gall

• Publisher: Pluto Press
• Year: 2022
• ISBN:
  9780745345086
• Edition: 1
• Topic: Politica e relazioni internazionali
• Subtopic: Politica

Inequality and unfairness still stalk Scotland after more than twenty years of devolution. Having done little to shield against austerity, Brexit and an increasingly right-wing Westminster agenda, calls for further constitutional reform to solve pressing political, economic and social problems grow ever louder. The debate over further devolution or independence continues to split the population.

In A New Scotland, leading activists and academics lay out the blueprints for radical reform, showing how society can be transformed by embedding values of democracy, social justice and environmental sustainability into a coherent set of policy ideas.

Structured in two parts, the book takes to task the challenges to affect radical change, before exploring new approaches to key questions such as healthcare, education, public ownership, race, gender and human rights.

PART I

Key Issues

1

The Structural Development of Poverty and Inequality

Carlo Morelli and Gerry Mooney

Introduction

Scotland has higher levels of inequality relative to most other UK regions and nations (see Chapters 8 and 10 especially). Its income inequality is the highest after the South East of England (Morelli and Seaman 2007). Scotland’s health inequalities are also widening, with past increases in life expectancy now stalled (Morton 2020). The pandemic has exacerbated these differences, with indicators of poverty, ethnicity and disability all showing that Scotland’s population is at greater risk from these than the general population. These inequalities are not the outcome of hidden influences, but the direct result of economic and political decision-making. Inequality is structurally rooted within capitalist economies. In this chapter, we examine the structural nature of inequality, the differences in ideological explanations for its emergence, and the policy focus resulting from these ideological perspectives. Central to the conclusions in this chapter is the recognition that inequality is structurally created, specifically around axes of class, and that remedies for eliminating inequality require actions which undermine these class-based inequalities. We begin by examining the arguments of the proponents of ‘trickle-down’ economics, and those encapsulated in Keynesian and Marxist approaches. The chapter then places the rise of inequality within these frameworks prior to drawing out the implications this has for devolution and independence.

Trickle-down Economics

The hegemony of neo-classical economics provides the ideological underpinning for contemporary inequality. An evolutionary economic approach sympathetic to capitalist development would suggest that inequality is an inevitable, indeed progressive, outcome of development due to innovation (McCloskey 2017). Rising inequality is a recognition of rapid changes in the rate of economic development. A ‘Kuznets curve’ exists in which inequality increases due to rapid industrial development. Over time, this inequality reduces via the diffusion of the benefits of economic development spreading throughout the economy (Kuznets 1955). Debates about the extent of inequality and the speed with which it reduces centre upon impediments to market-based economic processes and the efficient allocation of resources. These impediments are then said to prolong and deepen inequality.

Institutionalist economic thinking provides many of the concepts embodied within contemporary neo-liberalism (see, for example, North 1991 and Olson 1971, 1982). North’s work identifies the role of defined private property rights and institutional structures maximising the scope for market exchange and market information in economic development. Government, therefore, acts to establish market mechanisms for the efficient allocation of resources, through price mechanisms, and as a result ensures optimal decision-making and outcomes reflecting the marginal value of each individual’s contribution to the economy. Olson similarly provides a property rights-based explanation for the failures of economies to continue to grow, and indeed, even decline. Tendencies towards sclerotic decline, brought about by the growth of rent-seeking redistributive coalitions, impede market information, leading to inefficiencies in resource allocation (Olson 1982). These distributional coalitions are then understood as crowding-out opportunities for new innovatory and more efficient investment which then leads to lower growth and economic decline. Schumpeter (1994), within an equally disruptive crisis-focused vein, emphasised the role of ‘creative destruction’. Innovation creates new industries while sweeping away older, less efficient forms of production within a revolutionary economic transformation. But these temporary monopoly advantages and inequalities are themselves competed away by new entrants, in line with the predictions of the Kuznets curve. Thus, contemporary advocates of neo-liberalism explain persistence of poverty and inequality as a result of the misallocation of resources. Extending further market-based incentives, whether in the form of privatisation or welfare reform, provides mechanisms not only for economic development, but reducing inequality as a result of individuals actively pursuing their own individual profit-maximising decisions.

It would therefore be mistaken to suggest that neo-classical economics ignores the role of the state. Rather, the state acts as an intermediary body whose role lies in its narrow legal activity of providing a framework for market exchange (North 1991). Private individual market exchange with minimal development of redistributive welfare policies provides the idealised form of economy, thus contemporary neo-liberalism seeks to extend markets into areas where previously non-market decision-making predominated. Hence, ‘trickle-down’ economics is the means by which equality is argued to emerge over time, and equality of outcome is the means of assessment of the effectiveness of supply-side measures to address inequality.

Keynesian Market Faialure

In contrast, authors who identify market failures as the cause of the rise of inequality, and its social consequences, place greater emphasis upon state intervention within economies to address deleterious impacts of externalities within markets. Private markets can externalise costs in areas where the price mechanism is either absent or too high to allow for the internalisation of economic activities. Thus, pollution, waste and climate change lie outside the cost structure for private markets and highlight the existence of market failures within economic development (Raworth 2017, Meagher 2020). This Keynesian-influenced literature places a focus upon the developmental nature of state intervention, and replacement of market signals by non-market planning and co-ordination for the resolution of market failures. Ranging from economic liberals such as Beveridge (1967) to post-Marxist Keynesians such as Varoufakis (2016), the state is recognised for the redistributive role it plays. Across governments in the developed world, ranging from politically conservative to social democratic, the broad concept of a ‘social wage’, institutionalising redistributive polices within a system of social security and welfare states, encapsulated these ideas in the post-war settlements (Milward 1992, Alcroft 1993).

This role for the state is itself aimed at further facilitating private markets, generating more rapid growth underpinned by higher levels of government intervention. Importantly, the state then is not simply an institutional body whose role is to deal with market failure, but it is an integral part of the market-based system of production (Krugman 1994: 245–280, Elliott and Atkinson 2016). The state acts to promote innovation, growth and wealth creation. Here, state intervention creates domestic and international frameworks whereby risk can be reduced and managed such that investment, trade and growth can be encouraged. One recent example arises from Mazzucato (2013), who makes the case for an ‘entrepreneurial state’ in which the state is embedded in the resource allocation decision-making underpinning innovation and development. Whereas under neo-classical thought the state sets the rules of the game, within a Keynesian model it provides a safety net for private risk-taking and innovation.

Institutional barriers to development, structural immobility or lack of access to resources are the means by which inequality is constructed by Keynesian approaches, with its negative impact on human development. Rawls (1985) places an emphasis upon the need for redistributive mechanisms to ensure that fairness and justice can remove structural inequalities in order to facilitate an equality of outcomes. Sen (1995), using a human rights-based philosophy, identifies government action as a mechanism through which structural inequality can again be minimised. Equality of opportunity is primarily the means to address inequalities within these Keynesian frameworks, but using remedial measures to address the inequality of outcomes is a necessity of market failure.

Exploitation and Surplus-value Explanations

Structural inequality deriving from the exploitation of human labour, underpinned by a capitalist mode of production, is the focus of attention for Marxist approaches to inequality. Callinicos (2000) considers the inevitability of inequality within an economic system in which exploitation of labour, through the creation of surplus value, is the primary motivation underpinning the economy under capitalism. Both poverty and inequality are inherent consequences of class-based production systems generally, and within capitalism specifically. This is due to labour income being driven as close as possible to the subsistence level that is required for the reproduction of labour power in the pursuit of maximising absolute levels of surplus value generated in the labour process (Marx 1980: 185–226). Thus, while the owners of capital concentrate surplus value under their control, the producers of this surplus value, the working classes, are kept in a state of insecurity and inequality. Structural poverty and inequalities are inherent within this framework, as sections of the workforce are deemed to be disposable within a ‘reserve army of labour’ when opportunities for growth emerge. Therefore, while Keynesian and Marxist ideas both focus upon the structural nature of inequality and poverty, the origins of these structural influences differ, with Keynesian approaches identifying market failure and Marxist approaches identifying the form of class-based exploitation.

Marxists’ focus of attention in addressing inequality then lies with the agency available to the working-class producers of surplus value, in the form of class conflict. Greater equality arises from the diffusion of working-class self-organisation rather than the diffusion of innovation within the neo-classical Kuznets framework. The decline of labour’s agency and power in the form of collective action under globalisation underpins the rise of inequality in the last quarter of the twentieth century in the period of neo-liberalism (Roberts 2016). Competition for accumulation of surplus value therefore creates the necessity for exploitation of the working class, and inevitable class-based conflict emerges in the distribution of surplus value, whether this concerns the wage rate directly or questions of a wider social wage (Shaikh 2016: 638–676).

Why More Equal Societies Almost Always Do Better

Wilkinson and Pickett (2009) provided the most widely known evidence linking income inequality with its wider social implications. They highlighted the consistent social gradient between national levels of income inequality and a diverse range of social and health inequalities. Whether this was levels of addiction, interpersonal violence, imprisonment rates, life expectancy, infant mortality or obesity, they demonstrated a consistent correlation between levels of income inequality and levels of social and health problems. A linkage between economic and social dislocation and income inequality was drawn, with trust, anxiety and socio-evaluative comparison central to an explanation of human wellbeing. Wilkinson and Pickett (2019) then developed this linkage, further highlighting that inequality and social hierarchy increase recognition of inferiority and a social sense of lack of value for individuals, leading to higher levels of stress hormones, evidenced by cortisone levels, in the human body. Higher stress, and thus higher cortisone levels, acts as a means of biological transmission by which social conditions impact upon individual biology, leading to worsening health and social outcomes (Wilkinson and Pickett 2009: 31–45). Importantly, for Wilkinson and Pickett these outcomes varied across economies, based upon their relative levels of collectivism and individualism, and affected those at the top of the hierarchy as well as the bottom. They concluded that the negative impact of inequality could be identified throughout the population relative to more equal societies.

Patrimonial Capitalism and Elephant Curves

Much of the discussion above is encapsulated in contemporary debates over the origins and patterns of income inequality that have occurred from the last quarter of the twentieth century onwards. Income has grown at a very rapid pace for those at the very top of the income distribution. Piketty’s (2014) extensive study on the structural concentration of wealth leading to rising inequality is a starting point for this. From the 1980s onwards, the proportion of total income concentrated in the personal ownership of the top income decile returned to pre-First World War levels (Piketty 2014: 1–35). By the twenty-first century, the wealthiest 10% of the population was increasingly a relatively homogenous layer in society. This was constituted by an increasingly elitist layer identifiable as senior managers, business owners and entrepreneurs in the private sector, or doctors, senior government officials or barristers in the public sector, which was able to separate itself from the rest of society through private provision for health, education and housing etc. (Piketty 2014: 279–300). Above these groupings, however, and occupying the richest 1% of the population, lay a still more stable grouping whose position was reliant upon income from inherited wealth and rent rather than labour. The highest income percentile are beneficiaries of the rise of financial capitalism and the rent they derive through the ownership of financial assets, stocks, shares and partnerships (Piketty 2014: 301–303). Piketty thus refers to a concept of ‘patrimonial capitalism’ to explain this emergence and dominance of these structural inequalities at the top of the income distribution.

Milanovic (2016) identified the emergence of an ‘elephant curve’ depicting inequality globally spanning an era of two decades from 1988 (see Figure 1.1). For Milanovic, the trunk of an elephant rising exponentially was representative of the rapid increase in income for the wealthiest 5% of the income distribution. This group, and even more so the top 1%, represented a new global elite that gained 40% increases in income in the final two decades of the twentieth century (Financial Times, 14 April 2016). Milanovic’s explanation identifies deindustrialisation, increas...