Wealth creators vs wealth extractors

Keir Starmer talks of wealth creation as his number one mission, but risks missing an opportunity to differentiate between productive and extractive wealth

In an interview with the Times on Friday , Keir Starmer made a play for centre-right voters by arguing that Labour’s “number one mission is wealth creation” and that he is not just “relaxed” about people making money but “doggedly determined” that they should. Despite many calls for Labour to increase taxes on wealth, there’s absolutely no sign of this possibility getting any airtime during the election campaign.

The missed opportunity here (and Will Hutton made a similar argument in yesterday’s Observer about the absence of a positive Labour embrace of 21st-century socialism) is that Labour could largely have their cake and eat it, if they were to form the next government, just as long as they could find the courage to take bold action.

They’re right to worry that the public don’t like ‘bashing the rich’ and see wealth as aspirational. But they’re failing to notice that people are also receptive to arguments that not all wealth is equal. Some wealth is excessive - and some wealth is unfairly earned through rent-seeking and other extractive behaviours that only create wealth for those who are already very wealthy.

If you drew a 2x2 matrix that showed ordinary vs excessive wealth on one axis and productive vs extractive wealth on the other, it seems clear that taking robust action to tackle wealth that falls into the ‘excessive and extractive’ quadrant would not be politically risky. Taxing this wealth (there are plenty of options for how to do this) would be popular with the public and effective at raising much-needed revenues to support public services. And there is plenty of scope to tax wealth in some of the other quadrants, too.

What’s needed is for these reforms to be designed and described in the right way. This is not straightforward, but it’s not rocket science either, and the good news is that there’s an increasingly strong evidence base for how to communicate effectively with the public about wealth inequality, why it’s problematic and what to do about it.

Two excellent roundtable events organised by the International Inequalities Institute at the London School of Economics and the Joseph Rowntree Foundation in May explored the stories that we tell, and the stories that we could tell, about wealth and wealth inequality, and how these relate to public perceptions and attitudes.

These built on a literature review and report that LSE published on attitudes, narratives and framing around wealth inequality, which I wrote about at the time (https://www.faircomment.co.uk/p/telling-different-stories-about-wealth ).

A key insight that emerged from this research is that “the lack of a settled public understanding of what wealth is, what being rich (and very rich) means, and in what circumstances wealth inequality is unfair, provides an opportunity to actively intervene to shape this understanding”.

Here is a quick round-up of some of the key themes that came out of the sessions.

How we talk about wealth matters, and we can differentiate between ‘positive’ and ‘negative’ forms of wealth

Most people think of wealth as something intrinsically positive. Ordinary wealth - in the form of housing, pensions, and savings - allows people to live a good life, gives them and their loved ones (and their descendants) security and protection against risks and uncertainty, and conveys personal success.

This presents some problems for wealth inequality campaigners:

• The meritocratic idea that most wealth is ‘earned’ is difficult to challenge, but the idea that wealth provides security is even more deeply embedded.
• There is a tension between individual and societal views of wealth; some policies, such as Right to Buy, have helped millions of working class households to accumulate wealth, while jeopardising the security and livelihoods of millions of others who lack access to affordable housing as a result.

There are other ways of talking about wealth in a positive light:

• The idea of common wealth explores alternative ways of building community prosperity that are not based on private property ownership, such as public pension systems, collective bargaining, and policies that ensure that everyone can access secure and affordable housing.
• Community wealth building is an approach that influences local economies towards more egalitarian and democratic outcomes, based on policies such as fair employment and procurement practices and alternative ownership models.

But there are also opportunities to highlight negative forms of wealth (or ways in which wealth is accumulated, or consequences of high levels of wealth inequality):

• Terms like ‘extreme wealth’ (wealth beyond what is needed for comfort or security) can help to start conversations about the costs and consequences of excessive wealth accumulation. There is increasing evidence that extreme wealth has huge societal costs - damaging the environment, limiting opportunity, mobility and growth, corrupting our media, undermining democracy and reducing social cohesion.
• The literature review suggests that highlighting a lack of reciprocity or cooperation from the wealthy could counter the meritocratic narrative. The idea of wealth being ‘hoarded’ rather than productively invested has the potential to resonate with people (‘idle wealth’).
• Focusing on the source of the wealth is helpful (as our own research in 2023 showed). Making the case that some forms of wealth come from unfair extraction (and from ownership or economic rents), or from unearned sources like inheritance, rather than from productive activity and hard work, can be effective.
• Talking about who controls wealth (as distinct from who owns it) might also be a fruitful avenue to explore, given that a small number of people control a huge majority of the assets in our highly financialised economy.

Narratives and prior beliefs are hugely important in shaping perceptions of, and opinions about, wealth inequality?

Although the gap between those with and without wealth in the UK is rising, levels of concern about the wealth gap are not rising in tandem. Reasons for this include:

• The fact that many more people in the UK today own wealth, in the form of housing and pensions, than was the case 100 years ago (even if many do not)
• The persistent strength of belief in meritocracy across social classes, leading many people to believe that wealth and other forms of inequality are deserved (reinforced endlessly by the media, politicians, and popular culture)

Belief in meritocracy can cause people to justify the existing system and prevent people from realising the full extent of inequality, recognising where and how it is unfair, and believing that it is the role of government’s job to tackle inequality.

As a result, popular support for redistribution through the tax system remains lower than might be expected (which is both a cause and effect of the fact that mainstream UK political parties rarely make the positive case for redistribution). This is compounded by a shift in the ‘social meaning’ of redistribution away from ‘transformative’ redistribution (to change the underlying economic structures) towards ‘affirmative’ redistribution (to address economic disadvantage through, for example, crowdfunding).

People often hold contradictory views, for example being anti-inequality at the same time as being anti-redistribution (with wealth seen as being deserved if self-made but undeserving if inherited). Insecurity and a lack of trust in the state to provide a safety net make people reluctant to support redistribution, as they feel that they need to hold onto their money to secure their own future and that of their children.

What to do? Some suggestions included:

• Creating and popularising narratives that create a positive vision of an alternative future with good public services, challenge the meritocratic belief system, and make people feel safe enough to support redistribution
• Making it clear that the economy has been designed by human decisions rather than immutable natural laws, and that human decisions can reshape it, while also clearly identifying who has designed today’s economy in their own interests
• ‘Unpacking’ wealth accumulation processes, rather than talking in abstract terms about inequality, to make the issue more relatable (for example, by leading with particular audiences on specific arguments about how certain types of wealth are accumulated and who by, and the consequences for the rest of us)
• Deploying narratives that problematise the current system, raise the reputational cost of inaction, and make clear the risks of doing nothing to tackle inequality
• Leaning into existing beliefs in fair opportunity and fair process to show how extreme inequality undermines these principles and has little to to do with merit
• Working with successful and influential people who already recognise the need to tackle the structural drivers of inequality to bring a broader range of voices into the public debate to argue that reducing inequality is in everyone’s interests
• Building on growing unease about the negative consequences of wealth inequality and the inevitability that it will grow over the coming decades due to unequal inheritances being passed down to younger generations
• Navigating tightropes such as balancing individual agency with systemic issues, promoting positive solutions while highlighting problems, avoiding triggering fatalism, using storytelling alongside evidence, and balancing economic and moral arguments

Deepening the Opportunity Mission: change of date

Now that a general election has been called for 4 July, we will be publishing our report on Deepening the Opportunity Mission slightly later than originally planned, on 9 July.

The report will discuss why the next government needs to tackle inequality before they can make real progress on the opportunity mission, what kinds of policy goals might be useful in orientating government policy towards tackling inequality as a result, and how to work across government to make progress on tackling inequalities as part of a wider shift to mission-driven government and working practices.

We’ll be running a webinar on 9 July to discuss the report’s recommendations, featuring Melanie Field, the report’s author, alongside Hamida Ali at the Future Governance Forum, Emma Norris at the Institute for Government, and James Plunkett at Nesta. You can register for the webinar here .

Register for the webinar