Conor here: Murphy deals with the UK in the following post but the details should sound familiar to those in the US and elsewhere.
By Richard Murphy, Emeritus Professor of Accounting Practice at Sheffield University Management School and a director of Tax Research LLP. Originally published at Funding the Future.
Why do we still have poverty? That is a question that was posed to Jeremy Vine and me by Mark Littlewood when we were on air discussing the budget on Wednesday, 26th November. I have discussed the budget on air with Mark and Jeremy for the last 15 years, almost without exception. According to Radio Two, we are the dream team for that process because we never agree with each other, and that’s unsurprising.
Mark Littlewood is the former director of the Institute of Economic Affairs, a right-wing Tufton Street think-tank, and he is now the economic spokesperson for some Tory think-tank which represents Liz Truss.
There is very obviously very little common ground between us, but even so, I was taken aback when Mark Littlewood actually said out loud, ” Surely poverty should be over now, when benefits of £300 plus billion a year have been paid for so long?” It was a staggering question; staggering because what he was clearly trying to do was blame people for being poor, when he must know the economic system that he promotes creates the poverty from which they’re suffering, and he even wanted to blame pensioners for the poverty of the country at large, when they’ve done their job by now.
So, what was this all about? Mark was clearly not really asking a question about poverty because he must know that poverty is a reality for many people living in this country, and it has not been relieved by £300 plus billion worth of benefits a year. And instead, this was a question that sought to transfer the blame for poverty onto those who were receiving benefits rather than those who have exploited them and left them in dire financial circumstances.
Let’s be clear. Forty-five years of antisocial, neoliberal economics have left us with an economy which is designed to extract wealth from people who work. What it does is transfer the profits that they make as a consequence of their efforts to a few, so that wealth is concentrated at the top of the economic system within our society, and economic insecurity is focused on those who have to work for a living and who do not have capital of their own. And this system is designed to discipline workers by threatening them with poverty benefits if anything should go wrong in their lives.
That’s not by chance. This is deliberate. Poverty is actually a policy tool within antisocial neoliberalism. The fear that it drives keeps wages low, and rights right down there as well.
That £300 billion of benefits to which Mark Littlewood referred includes £175 billion, or thereabouts, of state pensions a year. And his question was, “Why are we paying that to people who don’t need it?” He might have been targeting me, after all, I am an old-age pensioner, but I’m also working. But I have paid my national insurance and taxes throughout life, always on the promise that in exchange I would one day get an old-age pension, and I’ve claimed it, and I’m entitled to it, and why not?
But apparently, he doesn’t think that’s the contract I entered into. The state, as far as he is concerned, has no obligation; my only duty is to it.
In addition to that, £175 billion of state pensions, around £35 billion is paid in disability support. And let’s be clear what Mark meant when he questioned why that is paid. He’s questioning whether people are really disabled.
He doesn’t understand that some people actually can’t literally live without financial assistance to provide them with the support that they require, and that isn’t always for disabilities that are visually apparent, of course. There are people with depression. There are people with anxiety. There are people who have autism. There are people who are unable to work because the world of work doesn’t want them because they do, for example, have ADHD. All of these things are literally impediments to people being able to live, work, and survive in our society, and yet he questions why we should pay for the people who suffer them.
And in addition, there’s also £30 billion a year of housing credits paid to landlords, because let’s be clear, if you do benefit from a housing subsidy through the social security system, then it is your landlord who receives the money, and not you. So this is, in effect, a subsidy to landlords.
And on top of that, and to balance up all these numbers, there is, in effect, universal credit, the vast majority of which is paid to people who are in work. Universal Credit is there to provide an effective wage subsidy when employers, large employers in the main – supermarkets and hospitality businesses, but others as well – do not pay wages that are high enough for people to be able to afford to live in the communities where they work.
That is why we have benefit bills.
This is not about providing poverty relief as such; most of this is about protecting wealth.
It’s protecting wealth from the fact that there would otherwise be people, old-age pensioners, living on the streets.
It’s protecting wealth from the claims of those who have disabilities.
It’s subsidising rents, and it’s subsidising the profits of large companies that will not pay proper living wages.
All of this is necessary because, despite everything that Mark Littlewood would say about his system of economics, wealth has never trickled down. The promise has been that if only we grow the economy, the wealthy will get wealthier, and everybody will see their wealth rise as a consequence But it hasn’t happened.
Instead, wealth has flooded up. High rents, high interest monopoly profits, including the utility bills for electricity, gas, water, and so on, charged by privatised companies which are in the private sector precisely because of the economic system that he promoted, and which has resulted in massive exploitation of people, have all resulted in a transfer of wealth from people who are struggling on low wages to those who quite simply aren’t, who are wealthy already.
How does poverty persist? It persists through low wages, high rents, high prices, privatisation, cuts to support, and as a consequence of workers being treated as costs by businesses that simply do not care. And let’s be blunt about this; economists who do not care either.
Benefits do, in practice, keep people alive; it’s as basic as that, in most cases, that’s what most of that £300 billion does in some way or other. It makes sure that people who are disabled get carers; people who have insufficient food can afford to put it on their table in front of themselves or their children; and benefits stabilise the economy. And the benefit of that is not going largely to those on the lowest pay, but to those for whom this economy works, who are the wealthy. That is the real situation that we are looking at. The economic system that Mark Littlewood espouses is the cause of the poverty, which he questions.
What would end poverty?
Well, it’s clear raising wages would, and we did have an increase in the minimum wage last week, and that’s good news, but we are nowhere near providing wages that are sufficient for people to live on.
Affordable housing would have a massive impact, but those of a market persuasion, and Mark Littlewood, who believes markets solve all problems, do not believe in providing affordable housing; they’d believe in letting rents run riot, and that is what they would do if he had his way. People would literally not be able to put a roof over their heads.
Better public services would help because we would provide people with the support that they need so they can integrate into society, so they can work, so they do have the support that is necessary.
And of course, workers’ rights would help too because people should have a right to work, even if they do have disabilities, and employers should make accommodations for their needs.
But perhaps most of all, the thing that would make a difference is the thing that would offend Mark Littlewood most, which is the redistribution of income and power within our society.
We should be charging taxes on unearned income. I’ve explained this in the Taxing Wealth Report, which I wrote in 2024. I’ve explained it in my Alternative Budget, which was published this November to coincide with Rachel Reeve’s budget. I have said that we should be taxing income from rents, from dividends, from interest, and from every form of financial exploitation more. And profits earned from monopolies should be subject to regulation to eliminate them and taxation to prevent the harm that they cause. Redistribution is, in other words, justice.
What are the consequences if we do nothing? Growing poverty, weaker democracy, violence and resentment, and social breakdown. We can see all of those things happening now; people are angry, and this is precisely the reason why they’re angry. They’re angry because society is failing them, but someone like Mark Littlewood, whose interests are entrenched with those of the wealthy, can’t see it.
Poverty persists because the economic system that Mark Littlewood promotes, that of antisocial neoliberal capitalism, requires that poverty exists because it’s the basis on which the prosperity of a few is built. Benefits are therefore essential to counter the noxious nature of this system of economic management, which has been subscribed to by every government, whichever its hue, since Margaret Thatcher came to power in 1979 in the UK and Ronald Reagan came to power in the USA in 1980.
There is only one answer to the problem of poverty. That is redistribution, and tax is the most powerful system to deliver that. And so the answer to why we have poverty today is that we don’t tax enough; it is as simple, and it is as straightforward as that.
This doesn’t mean to say we need a wealth tax straightaway. We might need one in the future, but as I stress, look at what I’ve written in the Taxing Wealth Report and in my Alternative Budget in November 2025, and you’ll see there are many simplest solutions than a wealth tax to achieve this goal of redistribution to a level that would be, well, frankly, revolutionary, but revolutionary in the sense that growth would follow. Because if we gave the people who are in poverty more money and cut their costs of living as we should, by eliminating excess rents and excess interest charges and excess monopoly profits, then they could prosper, and bizarrely so too would the wealthy; and that’s the point they don’t understand. They’d rather blame than take part in a process of change that would deliver benefit for everyone, themselves included.
So what do you think? Do you think that the problem we have in this country is poor people, and everything is their fault? Or do you think the problem is our economic system of antisocial neoliberal capitalism? Or is our problem the greed of the wealthy themselves and the politicians who serve their interests?
Thank you, Conor.
Having worked in regulatory policy from 2007 – 16 and the autumn of 2023 and spring of 2024, I have come across many politicians and wannabes and officials, mainly in the UK, but some from the EU, too. Many are sociopaths and feel that, due to where they are, they are the elect, as per Calvinism and, therefore, poverty is the natural state of affairs for (the?) many and undeserving. Some even relish persecuting the poor.
George Osborne was one. Rachel Reeves is another. I met both in late 2009 / early 2010, was puzzled by the technical ability, or lack thereof, of these chancers, their utter lack of empathy and took an immediate dislike to them.
One way of perpetuating poverty at home is to identify with an “other”. The BBC is one of the best at it. Most of the time there’s a report about poverty, social dysfunction, a tragedy like Grenfell etc, someone dark is wheeled out as the victim or an uppity immigrant asking for a pony.
Back to Osborne and Reeves. What are they like? Here you are:
Osborne: https://pastebin.com/adJNdt91. (I know. Not only does Yves host experts like Aurelien, KLG, Ignacio, PK, Revenant, Froghole, Thuto, Michaelmas, Harry and many others, the NC community gets my supermarket tabloid gossip, too.)
Reeves: https://www.disabilitynewsservice.com/anger-after-reeves-tells-benefit-claimants-labour-is-not-for-you/. Reeves and her sister are chummy with and supporters of the eugenicist and former keep fit instructor Kim Leadbeater. Reeves’ parents divorced when she was at school, she was traumatised and feels she has to take out her frustration on the rest of us. Reeves also, she tells us, learnt economics at the kitchen table. It’s no wonder then when, in September, the new governor of the Bank of Mauritius, both Oxford alumni and part of the sistahhood, sought to say hello, not much more, to Reeves in Washington, Reeves avoided and preferred to go around with Channel 4’s Helium Ebrahimi. Unlike Reeves, aka Rachel from complaints, not accounts, the governor has the chops.
I should have added that Littlewood, like Truss, started with the Liberal Party at Oxford. He becames its director-general and a leading light in the neo-liberal and neo-con faction that came to be known as the Orange Book Liberals. That faction plotted the ousting of the late and great Charles Kennedy and prepared the way for the the austerity coalition.
NCers may not be aware that Truss campaigned against the monarchy as a Liberal, including on the BBC. One wonders if that and her election as Tory leader, making her PM, was what killed the late queen. Imagine being QE2 and, having started one’s reign with Churchill, one has to appoint the lettuce.
Thanks.
30 years ago I was preparing a project documenting the various hierarchy levels within financial and economics institutions in the FRG, including students at some typical college up to the CEO of a bank.
My encounters especially with the young gen. were so disappointing and frustrating that I shelved it.
Today 30 years more experienced I might decide differently being more tolerant to those whose views I despise.
The experience stuck however. Later I encountered similiar pathologies among capital city journalists. Sigh…
Thank you.
I worked in Frankfurt regularly when a lobbyist and at Deutsche Bank from 2016 – 21.
First, this essay is a diagnosis and gives a prescription. The question is whether any political will for change remains. “That is redistribution, and tax is the most powerful system to deliver that. And so the answer to why we have poverty today is that we don’t tax enough; it is as simple, and it is as straightforward as that.” No surprise that the main political program, likely the only political program, of the U.S. Republican Party is to cut taxes so as to make the social state wither.
I would like to point to this: “But apparently, he doesn’t think that’s the contract I entered into. The state, as far as he is concerned, has no obligation; my only duty is to it.”
Or as Mussolini put it: “Tutto nello Stato, niente al di fuori dello Stato, nulla contro lo Stato.”
There are often articles and discussion here at Naked Capitalism about what fascism is, now that Mussolini ended up suspended from a gasoline station and Francisco Franco is still dead. What Murphy describes is the modern version of this horror — the all-encompassing state that has no obligation to the citizenry.
Here in Italy, last Saturday, I made a Thanksgiving dinner. During the discussion, I remarked that Italy is lucky in the current deteriorating mess that is the EU, and especially compared to France, Italy, and England, because the Italian constitution of 1948 is a revolutionary document that insists that the state must take care of the citizenry. Two problems: The influence of neoliberalism is so strong that Berlusconi and his aftermath (including the Fratelli d’Italia) spend much time chipping away at the wonderful document. And, the second problem, it isn’t clear that Italy can hold out against the ravages of neoliberalism, U.S. and U.K. colonialism, and German manias.
‘But apparently, he doesn’t think that’s the contract I entered into. The state, as far as he is concerned, has no obligation; my only duty is to it.’
Years ago here in Oz there was an audience debate on pensions. You had some older people saying that they had earned their pensions because they had been paying constant taxes to the government for forty or fifty years. But then this guy who was one of the main debaters said, oh no, that doesn’t count. That all that money had been spent on other stuff over those decades so those older people had no real claim to any money.
However – and you knew that there was going to be a however – here in Oz right after the war a specific tax was introduced to be meant to be set aside for future pension. It was actually marked on pay packets in those years. It was eventually lumped in with ‘general revenue’ after a few years but that money has always been collected. History is a wonderful thing – to those that remember it.
Rising wages would not end poverty, as wages have risen many times in the past few centuries and poverty has always remained in the USA, UK, and elsewhere. The rich always find a way to keep many others in a state of desperation so they need to work to survive.
Every society with a ruling class has always had poverty. Whenever a few people choose the law and choose how it’s enforced, and the rest submissively obey, you wind up with all the same problems – corruption, greed, a few rich and a lot of poor, racism, sexism, child abuse, pollution, and much more. Whether “communist” or “capitalist”, monarchy or authoritarian democracy, so long as a few make the laws and the rest accept their obedience as normal, all these troubles will always persist. History is crystal clear on this.
There are plenty of examples of healthy nations without poverty. They also don’t have discrimination, greed, rich and poor, or unaccountable corrupt leaders. When everyone agrees on their laws and everyone accepts responsibility to stand for what’s right and confront injustice, justice and mutual respect become normal. This is what freedom is actually like.
What most people call “indigenous” or “native” nations, I call healthy nations. When they are or were able to live in traditional times, they show how it’s possible to have whole nations without poverty, without greed or corruption. And it is possible to live this way today. There are even examples out there of Deep Revolutions, where people who were trapped in dictatorships for centuries came together, created a new healthy nation and made respectful laws and held each other to them without any ruling class at all.
It’s my experience Mr. Market can solve some problems such as how to maximize revenue and thus profits. I think to those like Mr. Littlewood that means ‘all’ problems.
If, for a super-simple example, I owned a movie theater with 100 seats and charged $1 per ticket, and as most everybody has $1, the theater will be sold out and my revenue is $100. If the price is raised to $5, I might sell 50 tickets with revenue of $250, or if I raise it to $10 and sell 30 tickets my revenue increases to $300. Above $10 my revenue begins to decrease so that I’ll stick with $10 per ticket.
Obviously, as I raise the price, fewer people can afford the movie but my revenue increases substantially. Housing, food, clothing or most everything you can think of, the free market will maximize revenue. Whether it causes homelessness, hunger, or poverty, few people want to blame the free market.
Moreover, if the rents are too high you won’t have enough money to buy crucial items that others offer such as decent food, shoes, etc.
Some things should be judged as necessary to live a normal life and the cost should not be left to the market to decide.
Thank you for the allegory, Victor Sciamarelli. To continue it further: by allowing the $5 & $10 tickets, people can afford to spend more in other *services* within an *economy*.
Which then allows more people working in those *services* to afford tickets, & hopefully you’ll be able to open an even larger theatre (& astronomical returns). Unfortunately the *economy* seems focused on quick extraction rather than any investment.
Alternate theory; all the large theatres are already up and this is the way, since nothing of substance is ever shown. Too much $ sloshing around in petty retirement funds keeps Mr Market ebullient, & it’s the only game in town.
Looks like that when our elites read that quote ‘The poor you will always have with you’ that they took it as a mission statement. Of course there are all sorts of profits to be made off the poor. Back in the late 90s I read an article how in the 80s some of America’s biggest corporations like General Electric wanted to get into finance more. And when they took a hard look at America’s poor back then realized how much money passed through their hands and how much could be made off of them. I’m sure that the increase of poor people since then was just a coincidence.
Thank you, Rev.
I worked with GE Capital during the 2008 crisis. That finance house could only exist as a regulatory arbitrage. It did not surprise me when one of its main lobbyists joined Barclays. Good riddance to bad rubbish.
“They’re angry because society is failing them, but someone like Mark Littlewood, whose interests are entrenched with those of the wealthy, can’t see it.”
Wrong. It’s not because Littlewood can’t see it but because he won’t see it.
It’s all performative which is why it’s lasted 15 years. Very few people trust the beeb nowadays because they understand how “news” and “current affairs” are presented as debates and not as discussions. Discussions can be informative and that is one of the reasons youtube has a use other than the joy of watching cat videos and tourists impressions of Russia and China. (As an aside, either Moscow and Beijing have the greatest PR strategies ever-developed and are prepared to pay vast sums to get so many foreign visitors to post a series of travel vlogs or one off video presentations extolling the virtues of both of these civilisational states, or the kids with phones are doing it off their own bat because they want to tell folks back home that China and Russia exist in an alternative reality to that floating around the minds of the failing and flailing politicians in the Collective Worst.)
There is no absolute poverty in the UK today. Certainly not like the poverty recorded by Dickens and Willian Booth in the 19th century. However there is relative poverty. This is defined as having an income of less than 60% of the median income. Since the median income is an average then it will always be likely that some people’s income will fall below the 60% level.
This is a defined term in official statistics in the UK. You do not get to make up your own nomenclature.
The UK also has thousands “sleeping rough” which is consistent with desperation given the not hospitable climate.
https://www.bigissue.com/news/housing/rough-sleeping-statistics-2024-homelessness/
We spent a fair amount of time back in Soc 101 discussing the difference – and relevance – of “absolute” poverty vs. “relative” poverty.
That said, I realize that in the past almost-half-century definitions may have shifted or been usurped for other purposes.
“Liberals” like myself simply do not go down to Bedrock for a “gay old time” any more…. ;-)
None of which addresses the question of “what to do about poverty, whether relative or absolute?”
Sorry, billb, but ‘median’ and ‘average’ are two different statistical measures. Median is the point at the very middle of a spread while average is taking the totality of the spread and dividing it by the number of participants.
Capitalism rules and is solely responsible for the way the world is today,. It did everything to ensure socialism ended, including sending 3.8 million Nazi and other various fascist Axis forces into the U.S.S.R.in a war of extermination and destruction — total, terrible, merciless. It will now proceed to take the world who knows where.
The trick of neoliberalism is in part the propensity for perhaps polite plunder, “I get more so you get less.” In another view, the big weakness of the neoliberal order is that it encourages parasitism, parasites being an organism that lives off a host while convincing the host that it is beneficial. People who depend on ‘unearned income’ are essentially parasites, and when there are too many parasites, the economy falters and might even die. [Michael Hudson, KILLING THE HOST]
Can the world produce all the food, housing, healthcare, education, leisure for everyone on this planet at present? Is the good life possible for all were we not competing, fighting, wasting resources? Have we reached the state of development where universal development is in reach? These questions bother me as climate disasters near and commentators don’t include them in their discussions of Ukraine, Gaza, Taiwan and other conflicts.
There is not enough gold on this planet at present in order to make a golden toilet for everyone that yearns for it.