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Inequality is damaging our economy and wealth

John Downie replies to Ivor Tiefenbrun... 

Unfortunately for Ivor Tiefenbrun’s polemic last week, the foundation of his argument just doesn't stack up. The real issue is how inequality has and continues to seriously damage our own and the global economy.

More importantly, it’s damaging to businesses that produce goods and services (the very businesses that Ivor has championed all his life) because it kills off consumer demand, which in case you haven’t noticed, Ivor, has slumped.

As Stewart Lansley argues in his recent book 'The Cost of Inequality – Three Decades of the Super-Rich and the Economy',  if you look at it from a purely economic perspective the 'productive' side of the economy is losing to the 'money' side.

As he compellingly argues, the interests of the ‘main street’ side of the economy where new businesses are started and built, and jobs created, has lost out to the interests of large finance and large corporates. They are now the dominant players.

The reality is that the side we all depend on for economic success - to create real wealth for companies, shareholders and individuals, and to raise living standards - is in dire straits.

It has been bulldozed by a City of London-led economic strategy, where manipulating the financial system itself, and focusing on short-term profits at the expense of shareholders and businesses, is the overriding motivation.

And the present government seems disinclined to rein in the financial and banking system that got us into our current economic disaster.

As Stewart Lansley eloquently illustrates, the economic orthodoxy that says that inequality breeds more efficient and faster growing economies is a myth. Actually, it’s some of the most noxious pile of bull ever peddled by the dismal science of economics.According to Ivor, "the greater the financial success of the few, the more encouraged are the many".

But he couldn't be more wrong as all the evidence shows.

The model of capitalism on which he created his successful business thrived by developing new businesses, by creating new and better products, by innovation and quality but above all by taking a long-term perspective of investing in business. Unfortunately, that model has gone and we desperately need it back.

One thing Ivor and I would possibly agree on is that we need to see a seismic shift - both economic and social in my view. An economic model which only concentrates the rewards of rising prosperity at the very top doesn’t encourage anyone, create real wealth or give everyone the opportunity to prosper.

The biggest danger in all of this is the potentially disastrous consequences of continuing with the current economic model. This is where I totally agree with Stewart Lansley.

If we don’t change a model that lets the richest in society continue to take a bigger and bigger share of the cake, while most people who are on middle and low incomes are getting poorer, we will have all the ingredients for a deep economic and social disaster.

John Downie leads the Public Affairs department of the Scottish Council for Voluntary Organisations, including the policy and research team and the communications and campaigns team. He also chairs the board of one of Scotland’s leading social enterprises – Impact Arts