What comes after the collapse of the austerity project in the UK? Let’s be clear about this – it is a challenge. Along with austerity will go fundamental assumptions and relationships, identities and obligations. Austerity has grown like ivy, its roots digging deep and its foliage smothering all alternatives. Hardly an institutional procedure, resource or relationship is free of its influence. Rip out ivy and a terrible, albeit welcome emptiness is left to fill. I have dealt with some of this in previous Blogs – that we will have to revisit who we are once our enforced economic identities have finally been shown to have failed: we may no longer be ‘stakeholders’, ‘Human Resources’, ‘consumers’, ‘clients’, but people with rights and autonomies and complexities.
One key aspect of the challenge will be a return to the fundamental, democratic issue of where personal wealth ends and common wealth begins – i.e. the calculations we make as we design a tax system as to what counts as of public value. How much of what we earn and own belongs to us, and how much do we hold in trust for the collective. How much of what we once owned collectively do we gift to individuals like Richard Branson. To enter into this I will make an all-too-brief comparison between Costa Rica (my second country) and the UK. What the comparison does along the way is to confuse the overly simplistic distinction between ‘First-World’ and ‘Developing’ countries. We have much to learn.
There was a medical procedure on one of our family – minor surgery – rhinoplasty, actually. We are in Costa Rica visiting my wife’s family, as we do most years. We know and love Costa Rica and we have seen it develop, improve, worsen over the past 30 years. We have watched as the typical meals of ‘gallo pinto’, ‘olla de carne’ and ‘casado’ have retreated to niche retro cafes against the rising wave of chic coffee-bars and foreign-food restaurants. It’s become an expensive country as it falls increasingly into the clutches of the US$ economy.
The surgeon, a man of good reputation and excellent humour, combined skill and aesthetics, but also that important ingredient – wisdom. The operation was over, family were relieved, doctor visibly proud of his work. We made the one-and-a-half-hour, 10kms journey from San José back to Heredia, impressed with the professionalism of this eminent physician.
Costa Rican traffic has immeasurably worsened over the years and air contamination is a serious concern. Public infrastructure struggles to keep up. We laugh at the occasional electricity failures in the village, but we are frustrated at water being cut off. We are dismayed yet again when friends talk of the insurgent Latin American disease of personal violence, and the chronic and corrosive mistrust of the police who remain underpaid, under-trained and underfunded. We rejoice in the new hospital in Heredia, but we are reminded of the still long queues for public medicine – old wine in new bottles.
It was not long before the issue of payment arose in conversations with the doctor – in fact, half way through the first meeting. “My accountant says I have been taking too many credit card payments this year and I’m paying too much tax – so, cash please.”
Costa Rica suffers the same economic inequities as its Latin American neighbours – its Gini Coefficient (World Bank index of inequality) has remained almost unchanged for the past 30 years – a little better than Panama, a little worse than El Salvador (World Bank). It is almost twice the inequality of the UK, but the gap is narrowing as the UK Gini Coefficient worsens year-on-year. Costa Rica’s total tax revenue, in nominal terms, has almost tripled in the past 10 years (OECD.stat), but with the highest rate of progressive income tax at 15% and the total tax-take around 13% of GDP this is a low-tax economy compared with OECD countries which average a tax take of around 34% (the UK hovers near the OECD average). This low tax-take places limits on what can be achieved in the public sphere, even given that Costa Rica spends no money on a standing army compared to the 3% of GDP spent in the UK (around £60bn). But Costa Rica achieves a lot. It has robust social work and child protection services, a universal public health system, a democratically accessible legal system and a highly regulated rule of law, a sophisticated agrarian economy, a robust national banking system and a progressive school system with four fine State universities, including an ‘open university’. Each year, these four universities combine their resources to produce a report, Estado de la Nación (State of the Nation), documenting key demographics such as poverty reduction, employment statistics, health and education and ‘strength of democracy’. The report is presented in a series of open workshops and meetings to stimulate public debate. Costa Rica has its share of public corruption, of course, but, then, in recent years it has shown unusual resolve and sent two widely admired ex-Presidents to jail. There is little of the impunity characteristic of Latin American countries. Costa Rica has its right-wing, too, desperate to dismantle democratic public sectors, of course – but it remains a deeply committed democratic country. This is by no means a Honduras, an El Salvador, a Guatemala where democracy and wealth redistribution are disabled by corruption and violence.
There are, of course, significant wealth differences here from the destitute, the economically humble, and a precarious but growing middle-class to the wealthy: mostly hard working and honourable people. In countries like this you certainly work hard to earn your money – at whatever level. The successful and fortunate live in gated communities with tropical parkland and pools, guards and private roads. Behind these gates, life can be sweet, though sooner or later one has to pass through the gates to return to the chaotic, polluted roads and become just another punter..…getting by. In a purely material sense, you can never quite live in the ‘first world’ in a developing country, not even one as aspirational and advanced in its thinking as Costa Rica.
Personal accumulations of wealth are increasingly encouraged in the UK by generous fiscal policies and are enjoyed by a small minority of the super-wealthy who can evade and even avoid tax relatively easily. Where Costa Rica has a poverty reduction programme, the UK has a poverty expansion programme: stripping welfare benefits, raising taxes on the poor and dismantling the social ‘safety net’.
Costa Rica is busy trying to expand public action and the social safety net, while the UK politicians are anxious for their shrinkage. Let’s take a single, but radical example for reinforcing democracy. The UK is currently looking seriously at escaping its human rights accountabilities as part of Brexit – escaping the oversight of the European Convention on Human Rights, for example, and refusing to incorporate the full range of workers’ rights enshrined in EU regulations. Meanwhile, in Costa Rica, the Constitutional Court (the ‘Sala Cuarta’) is accessible for any citizen to appeal against the contravention of their basic rights, including violations by institutions. You don’t need a lawyer, you can e-mail a complaint – over lunch, one judge told me to write a complaint on a napkin, hand it to him, and I’d be in! The Sala Cuarta travels the country mounting workshops for communities and institutions on the range of violations it adjudges.
The country comparison raises questions about what wealth means – or, more specifically, the comparison between personal and collective wealth. In both countries, one feels wealthy in an immediate sense in that gated community, driving a high-end car, sending your kids to an elite school. But what if we were to say that real wealth is to be enjoyed by the individual, but not immediately accessible to the individual: walking safely on even pavements and breathing reasonably fresh air, feeling reassured to see a police officer who says ‘good morning’, having a public health system that is better than the private system (even with longer waiting times), having an efficient public transport system and a stable infrastructure for gas, electricity and water? That real wealth is having such relatively low levels of poverty that social crime is reduced and barely a threat? Those things long enjoyed in the UK and still aspired to in Costa Rica? If this were true, how much of your personal wealth would you give up to enjoy these common-wealth benefits? It is, after all, a trade-off. The question underlies all our calculations about how much tax we are willing to pay.
In fact, all these things are threatened in the UK as the austerity project strips away the social, collective wealth of our society by reducing tax and starving both the poor and public services of resources. We switch to the alternative argument that wealth means your individual, personal capacity to buy your way out of the hum-drum, and into safety, security and inter-generational wellbeing through inheritance. We see the effects of the shift in value from collective to personal wealth as the UK begins to force the wealthy classes into our own gated communities or off-shore lives: rising threats and suffering from mental health, homelessness and widening desperation, decaying infrastructure, diminishing population health and the resurgence of poverty diseases, the retrenchment of public services to core necessities and the rising cost of privatised services owing to the withdrawal of subsidy from a failing public sector and the resurgence of monopoly capitalism.
In the UK, as we follow the monetarist ideology of reducing taxation and stoke resentment at the State which is supposedly greedy for our hard-earned income, we redefine wealth as that held by individuals and erode the common wealth. Of course, such resentment is pointless and wrong – the State is us and, as Thomas Paine argued, cannot have any material interest independent of ours. But we also expose a possible argument that is carefully hidden behind those common economic narratives based on individual acquisition: that there is no such thing as personal wealth. All money, says this argument, is the product of common effort and all individual efforts contribute to collective riches – sometimes with reasonable individual rewards. There is only ‘common wealth’. This is not a communist argument – it was espoused in more or less these terms by Adam Smith and Jeremy Bentham. Here is the radical version of the argument that ‘we are all in this together’ – that each of us is and can only ever be one member of a collective, benefiting from it as we nurture it. The core of the argument is less about wealth accumulation, more about fairness and justice in its distribution, and here the arguments are fierce.
Those who accumulate wealth often insist that it’s theirs to keep – and pass on to family. In the UK we have a progressive income and inheritance tax system to even things out a little, to ensure that some of what you earn belongs to the collective, but even these have been eroded in the past 40 years, as we have reduced progressive income tax and replaced it with regressive sales tax (VAT) and reduced inheritance taxes. The top, marginal rate of income tax in the UK is now 45% – as Thatcher came to power the top marginal rate was 83%, the next, 60%. In fact, the UK Gini Coefficient shows a higher index of inequality after taxation than before! The UK now proclaims loudly that wealth is, indeed, personal. ‘Police budgets? Here’s £50 back – go make yourself secure!’
Here’s an illustrative example of what no personal wealth means, taken from the tiny, hidden niche of the university. There are a few individuals fortunate enough to benefit from the competitive-individualist economy of the modern university to accumulate research income and savings – often large amounts (I have had colleagues sitting on six-figure sums in personal research accounts). These are often ‘surpluses’ or second-salary payments from research grants and awards – often used for honourable and legitimate purposes, though subject to the whims and preferences of the individual, not the collective interest. But once earned, I always argued that the bulk of those savings should be available for all – especially to support those many denied the opportunity to enter into the lucrative research market – those confined to teaching. The few earn their research wealth on the backs of those many who create the secure economic base for them. But ‘freedom to earn = obligation to distribute’, was my position. Not all, but most research income in a university is wealth for the defence and nourishment of the collective.
In the same way, a proportion of the money many have locked up in homes and cars and designer clothing can be argued is money held in trust for the collective – but which happens to have been annexed by individuals. That proportion is determined by the tax take. So long as a country has an income tax system, at whatever level, it declaims that personal wealth is limited to a given fraction of the common wealth – and we argue about what that fraction should be. In fact, it is modern ethics that asserts that the more money one has, the more the obligation to share it intensifies. At the same time, the more that is annexed by an individual, the less is that individual’s own share of the common wealth. In the university, competitive individualism does, indeed, lead to individuals with large accumulations of cash – but sometimes those same individuals work in departments doomed for closure through lack of collective income.
In the end, tax avoidance – either through that doctor’s personal accountancy or as a result of expanding fiscal permissions in the UK – is a strategy and a temptation that is understandable but it is, in the long-term, self-defeating. It’s so much more painfully transparent in countries like Costa Rica. The less tax you pay the more congested and dangerous are the roads, the longer the queues for services. But make no mistake: the very same applies to the UK, and it is becoming just as transparent.