Building The New Democracy of Wealth

Remarks to the Progressive Policy Institute

Washington, D.C.

Wednesday, April 17, 2024

Taylor, thank you for that kind introduction and it’s an absolute honor to join you today. I wanted to drop by to share some ideas, explore potential collaboration on this agenda in the months to come, but above all, to say thank you.

Fifteen years ago, I arrived in Washington to meet with Jared Bernstein, then leading the vice president’s middle-class task force. That was my first exposure to the extensive research agenda that PPI had helped author. I returned home and asked Gordon Brown and Alistair Darling if we might set up something similar. While they weren’t keen on something quite as high profile, we did establish a team at the Treasury to explore the issue. Within months, they confirmed that Britain too had begun to experience a challenge facing what we came to call the squeezed middle. We have you to thank for helping us zero in on key ways our economy had stopped working as hard as we wanted for working people.

Let me make three quick points to kickstart the debate today - about why wealth, why now, and crucially, what the solutions look like. Because make no mistake, ten years on from Piketty’s great book “Capital,” it’s solutions we need. Not simply ideas that people will like on social media, but ideas that people will vote for in an election.

So, why wealth?

We have an American president to thank for the insight. Eighty years ago at Soldier Field, President Roosevelt laid out the logic: “the well-being of the entire nation,” he said, “is synonymous with the well-being of each and every one of its citizens.” Roosevelt explained that for freedom to mean anything in the post-war world, it needed a guarantee. A guarantee of “security.” So I take the argument to its logical next step: There is no freedom without security. But there is no security without wealth. It’s wealth that secures the risk appetite and resilience that allows open societies like ours to keep moving forward.

That’s why it’s not enough to fret about the threat of dire states and ignore the peril of dire straits - the monster which is misfortune and the ogre that is private power.

Second, why now? Because we’re at a tipping point. The inequality of wealth is so great that it threatens both the stability of our politics and economics for the rest of this century.

Remember, the places where wealth has not advanced in line with national averages are the places that voted for President Trump, Brexit, Le Pen, and the far-right in Scandinavia. So we now know wealth inequality is bad for stable politics.

But wealth inequality threatens market economies too, because extreme wealth inevitably spills over into the political system and funds the kind of rent-seeking behavior that is the death of new entrepreneurs, along with technopolies that destroy competition and the kind of deregulation that fosters financial bubbles, which when they burst, hurt the poor far more than the rich. And once inequality sets in, it inevitably creates societies that are poor, corrupt, and stagnant.

Yet as bad as things are today, they’re about to get worse. Nothing is forever, including the baby boomers. And as they shuffle off this mortal coil, they bequeath to their heirs here in the US $70 trillion. Now some will inherit care bills, but others will inherit fortunes. So it’s obvious that if we do nothing, Gen Z is set to become the most unequal generation for half a century. And that’s rocket fuel for populist politics and a bonfire for the market economy.

So what do we do about it? Your solutions will be different from ours, but the policy framework might be the same. It’s the framework offered by James Meade back in the 1960s. Meade explained that if you care about wealth inequality, you have to worry about four things: income, savings from income, returns on savings, and the tax you pay.

And that takes me to a five-point plan - because every politician needs a five-point plan.

First, we need a modern supply-side strategy to foster the growth of good jobs. It’s essentially innovation economics. If we want to live better than others, we have to be smarter than others. And that takes more investment in industries and jobs of the future.

Second, we have to raise returns to labor. But one way to do that is with a civic capitalism that harnesses the power of pension savers and makes it easier for them to mobilize their savings into firms providing good work, not indulging in a race to the bottom on labor standards.

Third, a system of universal basic capital would allow us to create and then link housing capital, knowledge capital, and pension capital. Today, the way we help people save into these systems is a mess. And the huge ‘fiscal welfare’ we have in the system rewards those who already have assets, not those who have none.

Crucially, I argue for a £10,000 dividend for every young person paid from a new sovereign wealth fund. Eighty countries around the world have built them. They earn about 8% a year - a rate of return far higher than that enjoyed by poorer savers. Giving young people a special dividend to help build a deposit for a home is a powerful way to help democratize access to the best returns available in life.

And finally, we could build these funds much faster if we restored fairness to the tax system. I don’t know how many people here have read Rishi Sunak’s tax return? It wouldn’t take you long. It’s just a page. And what it shows is that on an income of £2 million, the prime minister pays just 23% tax at a time when one in five taxpayers is paying 40%.

So there you have it: Good jobs. Civic capitalism. Universal basic capital. A commonwealth fund, built with a tax code that reflects our moral code.

Put it together, and it’s a recipe for restoring an old ideal that inspired thinkers from Aristotle to Adam Smith to John Rawls. It inspired revolutionaries from Tom Paine to Thomas Jefferson. It’s an ideal that’s due for a renaissance: not simply a wealthy democracy, but a democracy of wealth. You never know. People might actually vote for it.

Ends.