Where does inequality come from, and how can we end it?

The richest 1 percent of Australians own more wealth than the bottom 70 percent combined. Far from being the Lucky Country where equality abounds, Australia is in the top half of the most unequal societies in the 35-member Organisation for Economic Cooperation and Development, the rich countries’ club.

The share of wealth in the hands of the 1 percent has risen continuously over the past two decades, while the share of the bottom half has fallen just as remorselessly.

It’s easy to see the reasons. The whole tax system is rigged to favour the rich. Everything from casino and pokies licences to construction contracts for hospitals and highways allows the bosses to fill their pockets with kickbacks all the way down the line. The industrial laws are used to screw the trade unions and prevent workers getting decent wage rises.

Inequality is a curse. It doesn’t mean only a widening gap in income and wealth between the rich and poor. Countries with high rates of inequality have worse social outcomes in health, life expectancy, mental illness, imprisonment rates, obesity and social mobility.

Them and us

That the whole system is geared to the interests of the rich reflects the wider capitalist social order. Inequality of income and wealth is a function of the unequal distribution of social resources that lies at the heart of the capitalist system.

The rich hold their wealth not just in fancy cars and expensive holiday homes. Much more important is their ownership and control over the productive resources – the factories, the office blocks, the mines, the warehouses and the transport and communications systems.

This gives them power over the rest of us because, while they own or control all the means of making everything that is needed to keep our society functioning, we, the working class, have none. This control over the productive resources means that they are more than merely rich; they are capitalists.

As capitalists, they have the power to decide what gets produced and how. Do they invest in weaponry or housing? Do they invest in fossil fuels or renewables? It’s entirely up to them. As capitalists, they have the power to decide whether unemployment goes up or down through their decisions to fire and hire workers.

As capitalists, they have the power to determine whether the economy booms or falls into recession through their decisions to invest or withhold new outlays.

This power also gives them immense influence over the politicians with whom they work so closely. Every prime minister and every treasurer knows that the capitalists have the power to crash the economy if they lack “confidence” in the government. The result is that, while millions of voters cast their ballot every election day, the capitalists rule.

That the rest of us lack any control over the productive resources of society means that we are at the mercy of the capitalists. They make their decisions on the basis of one thing only: making a profit. Human need doesn’t even cross their minds.

Exploitation

Capitalist ownership or control of the productive resources, what Marx called “the means of production”, is central to understanding why, unless it is challenged by workers, inequality gets worse.

The working class has no means of feeding, clothing or housing ourselves other than working for the capitalists. We cannot survive long without a job – and governments in recent decades have made damn sure we can’t depend on social security for long. That makes the working class ripe for exploitation.

Exploitation is commonly thought to refer to contractors on fruit farms paying migrant workers $7 an hour. Or 7-Eleven franchisees hiring international students for $10 flat rate, weekends, evenings and public holidays. But exploitation is more than that; it’s central to how the system runs. Every capitalist is an exploiter; every worker is exploited.

The working class never gets the full fruits of its labour. People work eight or 10 hours a day for the boss, but get the equivalent of what they create in four or five hours – the rest goes into the hands of the capitalist class.

What does this mean in practice? In 2016, the average hourly wage in the private sector in Australia was $34. But the average value of production per employee in the private sector was $61. That means that every hour of every working day, the capitalists extract an average of $27 from each worker they employ. Marx described this as “surplus value”, value produced by the worker over and above the value of their own labour power, their wage. It is the source of all profits “earned” by the capitalists.

Some of the $27 surplus value extracted from the worker by the employer goes in taxes to the government, but not much. Some goes to rent to landlords for offices, warehouses and factories used by the employer, but that’s just a division of spoils within the capitalist class. And some goes to the banks for interest on money borrowed, but, again, this is just money being passed from hand to hand within the capitalist class. The tax man, the landlord and the banker all queue up to get their share of the surplus value produced by the worker; every one of them has an interest in seeing it increased.

All legal

This system of institutionalised robbery of the working class is legal. More than legal – the capitalists are held up as role models for society, prepared to “risk their capital” and “provide jobs for workers”. It’s all hogwash. The only capital they risk is money they’ve robbed from the working class either in this generation or the last – many of their fortunes are inherited.

And “provide jobs for workers”? The labour of workers keeps them in existence, not the other way around. Without workers, the bosses wouldn’t expand their wealth one jot. Just look what happens during strikes. The machinery grinds to a halt and the bosses gnash their teeth and complain how much money they are losing. But what happens if the boss takes a holiday? Nothing: production rolls on as normal.

Capitalism operates to keep this system of wealth extraction rolling over from year to year. There’s no obvious escape from it. An individual worker might put in a claim for an extra $27 an hour so that they get all the fruits of their labour, not just a portion. And we all know what the boss’s response will be to that: “You don’t like it here, go and work somewhere else”. And if the worker does just that, they’ll find just the same theft of their labour at the hands of their new employer.

And no boss can refuse to exploit their workers. If they don’t exploit, they will quickly be undercut by their rivals. The capitalists will happily stab each other in the back if it helps their business.

This competitive pressure to undercut their rivals means that, over time, inequality gets worse. In the dog eat dog world of capitalism, each capitalist enterprise gets bigger as the winners drive out the weaker bosses. The victors then have a still larger pool of workers to exploit and from whom they can further enrich themselves. Those who are driven out of business have to sell their own labour power just like those they once exploited.

Solutions

How can we tackle Australia’s growing problem of inequality? We should start by taxing the rich and big business properly. The increase in the wealth of Australia’s 33 billionaires in 2017 alone – $38 billion – would be enough to cover half of the federal government’s entire outlay on public health.

But simply getting the rich to pay tax doesn’t get to the underlying source of inequality. If we want to push back against inequality, we must push back against exploitation at the point of production. If workers are receiving the equivalent of four or five hours of value created in an eight- or 10-hour working day, workers must strike to force that figure up to seven or eight hours of value.

Putting an end to the grotesque levels of inequality around the world will require taking all the means of production, the very things that give capitalists so much power, into the hands of the working class. We need to socialise ownership of industry. We produce the wealth, and it should be ours to control. That means no more BHPs, no more Commonwealth Banks, no more Woolworths, no more Telstras, but public enterprises instead, controlled by workers’ representatives, which can produce for public need, not private profit and the fortunes of the few.