Intro: Most people agree that income inequality is too extreme and that it needs to be reduced. But by how much?
INEQUALITY remains a major political issue in the world today. Most people agree that inequality is too extreme and needs to be reduced.
In the UK, the income ratio between the richest 0.01 per cent and minimum-wage workers has reached around 150 to one. Within the FTSE 100 firms, pay ratios between CEOs and lower paid workers hover at about 100 to one. Similar inequalities prevail in many other countries, while in the United States the figures are much worse, with pay ratios and disparities sometimes reaching into the thousands.
There is nothing natural or inevitable about extreme inequality. It is the predictable result of an economic system that distributes income based on who owns the means of production and who has the most market power, rather than according to any common-sense principle of labour contribution, human needs or justice.
Inequality corrodes society and poisons democracy, but it is also ecologically dangerous. The wealthiest in society consume an extraordinary amount of energy, resulting in high emissions and making decarbonisation more difficult to achieve. Recent research by Joel Millward-Hopkins published in Nature Communications shows that if we want to ensure decent lives for everyone on the planet, and by decarbonising quickly enough to feasibly achieve the Paris Agreement goals on the climate, we will need to dramatically reduce the purchasing power of the rich, while distributing resources more equitably.
But how much should inequality be reduced? What is an appropriate level of inequality? Millward-Hopkins’ research shows that if we are to ensure that everyone has access to resources necessary for a decent living, then a distribution where the richest consume at most around six times that level would be compatible with achieving climate stability. This may sound radical, but this distribution is very close to what people around the world say is a “fair” level of inequality. In some countries – such as Argentina, Norway and Turkey – people say they want inequality to be even lower, with ratios less than four to one.
People want to live in a society that is fair. This is apparent when we look at public sector pay scales, the closest thing we have to a democratically determined distribution. In major British institutions like the National Health Service (NHS) and within the universities, where unions representing members have a say over pay scales, the gaps between the highest and lowest salary bands rarely exceed five to one. If we correct for career-stage, the gaps are much smaller: the starting salary for a doctor or a lecturer is only about twice as high as that of a cleaner.
NEVER in history have modern societies relied so heavily on secure supplies of electricity. Half a century ago, when the nation was last subjected to major power cuts, the effect was mainly on heating and lighting.
Now, however, the computer revolution has changed that completely.
People shop online, we work online, and much study is also done online. International trade and financial transactions depend entirely on a functioning computer network.
The same is true of everything from the police to the transport system. And a power shutdown or outage of only a few hours, even if scheduled, could do lasting damage.
In the same period, we have grown accustomed to a more or less regular and reliable power supply.
Thanks partly to investments made decades ago, the country still has a significant amount of reliable nuclear-generated electricity, plus a small, dwindling reserve of coal generation.
But both these sources are shrinking, because we have phased out coal for a greener environment and because we have failed to plan effectively to replace ageing nuclear plants. A great deal of our remaining energy now depends on gas, much of it imported.
The revolutionary switch to renewable energy, made in response to global warming and the climate change crisis, has been for some years the main focus of planning and building.
This is excellent when it works, but it is completely dependent on the caprice of weather, or on the simple realities of climate.
Solar power, predictably, is of little use here in winter. Wind power can vanish without warning or can be made unusable because the wind is actually too strong for safe generation. Proud announcements that the country has generated 50 per cent of its power through wind on any given day should be greeted with caution. On a windless day, that figure could be tiny.
Some of these problems are alleviated, but not solved, by connectors from our neighbours.
These can rescue us at awkward moments, but France, for instance, has run into major maintenance problems with its elderly nuclear generators, and winter weather simply increases pressure on scarce resources, everywhere. Up to a point, sudden shortages may be dealt with by paying large consumers to switch off, or by bringing in banks of costly and far-from-green diesel generators.
But the risk of actual power cuts, especially in weather such as we have recently been experiencing, is worryingly high.
We really are not very far away from imposed power cuts in our homes and offices, which – as well as leaving the old and vulnerable in the cold and the dark – will do serious damage to the economy.
So, it is perplexing to find that the Government has been relying on predictions by the Met Office in making its plans and calculations. Not only is the Met Office honest about the difficulty of long-distance forecasting, but winters in the UK can be very severe indeed.
Who knows what we would do if Britain once again faced a relentless long-term freeze such as that of 1962-63, itself the coldest since that of 1895?
Events such as the “Troll of Trondheim” often come with little warning. So do interruptions in supply, hugely important now we are no longer self-sufficient in gas.
The one thing that the Government can do is to be prepared for all eventualities. It has been many months since the poor state of our reserve capacity was revealed. Let us hope that Ministers and officials have not wasted a single second in getting ready.
THE Berlin Wall may have been brought down more than three decades ago, but the grim politics of the Cold War are in danger of returning to Europe.
With characteristic ruthlessness, Russian president Vladimir Putin is exploiting the energy crisis to bully his neighbours, strengthen his autocracy and intimidate the West.
His chosen weapon in this renewed campaign of hostility is Russia’s control of gas supplies: the vast gas-fields and the export pipelines that bring them directly to market.
This infrastructure, often legacy assets from the Soviet empire, give the Russian president enormous political and economic leverage in his quest for ever-greater domination of the region.
Russia’s capacity to manipulate the British and European energy markets for geopolitical ends has been dramatically illustrated during the turmoil of recent days and weeks. As the price of gas contracts soared by 40 per cent in just 24 hours last week, Gazprom, Russia’s state-backed monopoly exporter of pipeline gas, was accused of flexing its muscles by both restricting supplies to Europe and keeping its European underground storage facilities at deliberately low levels.
The sense of Russian control was further reinforced when it took just a few words from Putin himself to bring an immediate fall in gas prices.
Revelling in his position as the ultimate ringmaster and wire-puller, he said with a hint of blackmail that supplies could be increased. “This speculative craze doesn’t do us any good,” he said, adding that Europe’s leaders should “settle with Gazprom and talk it over”.
RELIANCE
PUTIN might be behaving like a mafia boss in charge of a protection racket, but British and European governments have for years disastrously played into his hands with misguided, short-term policy decisions.
To be fair, the EU has taken some steps to break the Russian stranglehold, by building new international pipelines, breaking the Kremlin’s east-west transit monopoly, and by introducing drastic reforms of the energy market that have unravelled the corrupt, exploitative business model.
Europe has also pioneered the import of liquified natural gas (LNG) from destinations such as Qatar.
Yet Europe has been increasing its reliance on supplies from outside the continent by running down its own domestic energy industries. So far, renewables have not made up the gap, especially in recent months when the wind has not been blowing.
In Britain, the problem is particularly acute because we are one of Europe’s largest gas users, while we have massively reduced gas production from the rich fields of the North Sea and Irish Sea over the past 20 years.
Nor have we made use of the vast reserves of shale gas that exist across the country, even though such resources have recently made America “energy independent” once more.
Instead, Britain has exacerbated its energy vulnerability by depending on just-in-time imports from pipelines and seaborne cargoes.
In a particular act of folly, the Tory Government in 2017 decided to close the huge storage facility on the Yorkshire coast connected to the Rough gas field, believing both that supplies of LNG would always be plentiful and also because the energy companies believed that limiting storage would boost prices and thereby profits.
Some four years later, the step has backfired catastrophically, leaving us at the mercy of Putin.
Indeed, our entire energy strategy has been marked by stinginess, wishful thinking and downright complacency.
By manipulating energy markets, Putin’s immediate objective could not be clearer: he wants to pressurise Europe into approving immediately the operation of Gazprom’s controversial £8.1 billion Nord Stream 2 pipeline.
Now completed, this runs into Germany along the seabed of the Baltic Sea and bypasses Ukraine, in whose eastern regions Russia has been fighting a proxy war since 2014.
Critics say Nord Stream 2 will give too much influence to Russia over regional supplies and their prices.
But crucially, the project is backed by Germany, which puts cheap reliable supplies of Russian gas ahead of the security interests of its east European neighbours. US President Joe Biden’s administration, desperate to repair the damage done to relations with Europe under Donald Trump, has dropped American objections to the scheme.
The result is that Russia can now hold Ukraine and other Eastern European states to ransom. The Kremlin could shut down their gas without having to cut off the rest of Europe. In effect, one group of nations will be played off against the other in a fearful system of divide and rule, with Russia in command.
As Yuriy Vitrenko, the chief executive of Ukrainian energy giant Naftogaz, put it last week: “Moscow is withholding gas supplies in order to coerce Europe into accepting Nord Stream 2. Russia’s actions are the epitome of gas weaponisation. Anyone who refuses to acknowledge what Moscow is doing, especially when it does this so blatantly, is sending a dangerous message to the Russians that they can use gas to blackmail Europe and get away with it.”
TRAGEDY
GIVEN all this, it is almost inevitable that Ukraine will soon be plunged into another security crisis, perhaps even greater than the one that led to the annexation of Crimea in 2014. The fallout would be disastrous, especially in view of the fragility of Europe’s post-Covid economies.
The implications of Russia’s energy strength are brutal, leaving us relentlessly on the defensive. If, for example, Russia invaded Estonia, would NATO respond if Putin threatened to cut off Europe’s gas? The only way to break free from the shackles of energy dependency is to develop our own resources and means of storage.
In the 1970s, Western reliance on Middle Eastern oil created an era of regional conflict and economic crisis.
If today, the same were to happen because of our reliance on Russian gas, that too would be a tragedy.
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