This is an important question. If austerity \u2013\ninvolving cuts in social security \u2013 is imposed on an economy in recession, the\nresult will be rising unemployment, poverty, inequality and socio-economic\nhardship. If it goes on long enough, social unrest and political change is also\nvery likely to follow. <\/p>\n\n\n\n
Oxfam argue<\/a> that over the past thirty years, wealth and income inequality have both risen to \u201clevels never before seen \u2026 [and] are getting worse\u201d. They conclude that extreme wealth and income inequality are \u201ceconomically inefficient”, \u201cpolitically corrosive\u201d and \u201csocially divisive\u201d. This is because since the wealthy spend a smaller proportion of their income than the less well-off, excessive inequality depresses demand \u2013 with adverse effects on growth. Extreme wealth and inequality can undermine political processes if the wealthy use their position to secure excessive influence. Inequality can also be socially divisive, because the better-off have private access to services that the majority depend upon the state to provide \u2013 and they often lobby for withdrawal of support for those public services. However, the report ends on a more positive note, concluding that wealth and income inequality are \u201cnot inevitable\u201d. <\/p>\n\n\n\n In recent years, even organisations like the IMF\nand the World Economic Forum have recognised the dangers of inequality. In particular,\nthey have both drawn attention to both the high\nand rising inequality caused by austerity, and its damaging effects on both\nsocial cohesion and economic growth.<\/p>\n\n\n\n A 2011 IMF\nresearch paper<\/a> identifies income equality<\/em>\nas by far the most significant factor supporting sustainable economic growth.\nWhile the benefits of lower inequality are shared by most income groups,\nextreme inequality has historically given rise to crises, with the current rise\nbeing \u201cstrikingly similar\u201d to that of the turbulent inter-war years. According\nto the IMF report, \u201cin both cases, there was a boom in the financial sector,\npoor people borrowed a lot, and a huge financial crisis ensued\u201d. The study\nconcludes that \u201cthe recent global economic crisis \u2026 may have resulted, in part\nat least, from the increase in inequality\u201d.<\/p>\n\n\n\n Recent surveys from 2012<\/a> and 2017<\/a> of\nleaders in business, government, academia and NGOs by the World Economic Forum\n(WEF) also point to the potential for extreme inequality to trigger a crisis.\nAssessing the likelihood of fifty global risks during the coming decade \u2013 and\ntheir probable impact \u2013 extreme income disparity topped the list in both. On\nthe basis of these views, the WEF warns of a \u201cpotentially potent combination of\nchronic labor market imbalances, fiscal imbalances and severe income\ndisparity\u201d. It goes on to argue that \u201c[w]hen amplified by extreme demographic\npressures, these conditions could lead to a retrenchment from globalization and\nthe emergence of a new type of critical fragile states \u2013 formerly wealthy\ncountries that descend into a spiral of decay as they become increasingly\nunable to meet their social and fiscal obligations\u201d. <\/p>\n\n\n\n There is good reason for these\nconcerns. Social welfare was originally introduced in many countries due to\ninequality and the appalling conditions in which many were forced to live and\nwork. It was also significantly motivated by concerns about how the\nincreasingly numerous urban poor might react \u2013 especially when they had very\nlittle left to lose and had started to organize themselves. The Russian\nrevolutions of 1905 and 1917 had a powerful influence on policy between the two\nWorld Wars, with many governments keeping at least one eye on the possibility\nof a Communist revolution \u2013 and continuing to do so throughout the Cold War.<\/p>\n\n\n\n However, the collapse of the USSR did not end the need for\nsocial security. The recent cuts to public services, affecting large numbers of\npeople, have inevitably had a disproportionate impact on those who rely upon\nthem the most. During the latter part of the Industrial Revolution and the\nfirst part of the 20th<\/sup> century, it was precisely these sorts of\nconditions that fueled organized industrial and social movements, demands for\npolitical representation, and the birth of both new ideas about the economy and\nsociety and new political parties. Whilst austerity wasn\u2019t the only factor\ndriving these processes, it was certainly a contributor. <\/p>\n\n\n\n It seems that this dynamic is a permanent part of the\n\u201causterity equation\u201d. It is clearly apparent in the movement of the Labour\nParty sharply back to the left, motivated chiefly by those experiencing the\nbrunt of the Coalition and Conservative governments\u2019 austerity measures. It is\nalso evident in the rise of so-called \u201cpopulist\u201d social and political movements\nacross Europe and the United States \u2013 a worrying number of which are far-right\nin nature.<\/p>\n\n\n\n The message therefore seems clear: No one benefits from austerity \u2013 and everyone pays. By contrast, social security and high-quality public services benefit everyone<\/em>, as they help to maintain social, industrial, political and economic stability. Without such stability, some very challenging economic, social and political conditions can emerge \u2013 and surprisingly quickly.<\/p>\n\n\n\n Photo credit: Flickr <\/a><\/em>\/ ilirjan rrumbullaku<\/a>. <\/p>\n","protected":false},"excerpt":{"rendered":" “In recent years, even organisations like the IMF and the World Economic Forum have recognised the dangers of inequality. In particular, they have both drawn attention to both the high and rising inequality caused by austerity, and its damaging effects on both social cohesion and economic 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