There is a certain perverse irony – a certain instructive encapsulation of the UK’s political economy – in the fact that, as the country once again returns to clapping for our carers, to the consternation, it should be noted, of many of those on the frontline, the chief executives of FTSE 100 companies have already earned in these first few, chaotic days of 2021 considerably more than a worker on the average wage will through the entirety of the year.
We know this thanks to valuable work from the High Pay Centre – whose work on the staggering pay ratios in FTSE 100 companies was the focus of a recent piece for this publication. On average, FTSE 100 CEOs have to work 34 hours to earn £31,461 – the annual median wage for full-time workers in the UK. In other words, by 5.30pm of Wednesday just gone, they will have already accrued more cash than half of UK workers will this year – and this figure will continue to skyrocket, moving inexorably towards £3.6m: the average income for FTSE 100 chief executives.
This is staggering, albeit unsurprising stuff. The Thatcherite political economic revolution unshackled CEO pay at the same time as it crushed organised labour: CEOs in the early 1980s earned around 20 times average pay; at the turn of the millennium they raked in about 50 times average pay; now, as the High Pay Centre’s recent, aforementioned report shows, they bring in around 120 times what the average worker earns.
These figures are important both politically and pedagogically. For many of the younger left, radicalised at Millbank, and for those recently politicised through austerity, the pro-rentier policies of the government through this crisis and in the years leading up to it, and a decade of stagnating wages, interminable crises, and generalised precarity, this political-economic settlement is all they have known. As such, it is important to stress the historical contingency of these kinds of absurd levels of remuneration.
In a recent piece for Tribune, I discussed the uniqueness – the unique awfulness – of Britain’s political and media ecology. Naturally, and relatedly, this reaches out to and is related to the prevailing models within the economic domain. The changes Thatcherism introduced have had remarkable success in transforming Britain’s political economy from one resembling, of course with a number of key differences, some of the more egalitarian societies in Scandinavia during the ’70s, to an increasingly untrammelled, albeit more parochial, version of America, absent, however, the levels of research and development and innovation found across the pond.
While staggering levels of inequality are not solely Anglo-Saxon economic phenomena, they are arguably at their most extreme here and in the US. Indeed, in a chapter on CEO pay in Contemporary Capitalism and its Crises, the economist Robert Boyer notes that while a finance-led economic nexus – what the authors characterise as a social structure of accumulation – is most prevalent in the US, the UK is hot on its heels: “this explains why the United States and to some extent the UK economies were the most severely struck by the 2007-2008 crises. They are more than typical boom and recession adjustments, since they display most of the features of a structural crisis.”
Indeed, despite the ballooning incomes of CEOs in the UK, the US remains the preeminent example of the kind of corporate enrichment flagged up by the High Pay Centre: a 2019 report from the Economic Policy Institute paints the picture starkly; since 1978, typical worker compensation in the US has increased by 11.9%, while CEO compensation has grown by 940% – considerably outstripping stock market growth.
Understanding the strategy which was progressed in fomenting this situation is a necessary precondition for formulating economic and imaginative approaches to constrain and reverse these trends. As such, it is useful here to turn to two valuable papers from 2020 – research by Alexander Pepper and Paul Willman on intra-firm inequality; and an economics working paper from Erik Bengtsson, Enrico Rubolino, and Daniel Waldenström, attempting to discern what factors determine the capital share – the proportion of national income going to capital – in economies over the long run.
What is apparent in the work of Pepper and Willman is the way in which democratic control and governance – even within firms – were removed in the ’80s. As they note, the process through which pay was awarded and determined for chief executives itself became financialised in this era:
“Until the early 1980s, internal company processes defined pay: CEOs and other senior executives were largely paid in the form of salaries which were determined according to internal job evaluation processes… [b]y the late 1980s, the remuneration of top executives had been decoupled from all-employee pay and linked instead to external asset (i.e., stock market) prices.”
In turn, the work of Bengtsson, Rubolino, and Waldenström is instructive in reiterating the significance of the changes wrought by Thatcherism: in fact, in their methodology they utilise the Trade Union Act of 1984 as the preeminent example of an attack on organised labour to the benefit of capital. What their analysis suggests – comparing capital shares in the UK with capital shares in a “synthetic” UK where this act did not occur – is that the capital share of income was increased by 5% while trade union density fell by 10%.
Where does all this leave the left? Certainly, there is the need – buttressed by statistics, data, and analyses such as those presented in this piece – to make the case that these levels of inequality are egregious, outrageous, and economically destructive. Perhaps more important, however, is the need – particularly as we move into the as-yet inchoate post-Covid conjuncture – to retain a recognition of the historical contingency which has enabled and exacerbated these inequalities. As the great writer Ursula K. Le Guin put it: “We live in capitalism. Its power seems inescapable. So did the divine right of kings.”
A project that benefits the very richest in society yet commands a stable 40% of support in the United Kingdom is nothing new – between 1900 and 1945, the Conservative Party never received less than 38% of the vote. Our task, therefore, is not just to deeply understand and analyse the contemporary constellation of this project, but to search for and seek to expose the fissures and fragilities within it.