Although wealth is generally understood to mean the same as property, we have to be careful as to what form of property we are referring. In a common sense understanding of the term, we all own property. However, when considering property as similar to wealth, we need to make a crucial distinction between forms of property. We can distinguish between consumption property and productive property.
Consumption property is property that we have for personal use - clothes, cars, family homes. Productive property makes money; it is capital and includes factories, farms, stocks and shares. This sort of property produces an income.
Private productive property provides what is called unearned income. It is unearned income that generates wealth, and wealth produces more wealth through reinvestment.
The persistence of massive inequalities in the distribution of wealth is one of the most important features of the capitalist class structure. The key to this persistence is inheritance.
Remember: Two forms of Wealth:
- Consumption Wealth.
- Productive Wealth.
The distribution of wealth in the UK has become more unequal over the past 20 years. The wealth share of the top 5% has increased. This reflects the massive gains in the value of property-based unearned income and the reduction in real terms of the burden of tax falling on the wealthy.
Many of the new wealthy are those paid high salaries with lighter tax burdens. Such people can clearly save more of their income and transform it into productive wealth.
Clearly there is an association between wealth and poverty. Scott (1993; 94) argues that there is a key distinction to be made between the deprivation of the poor and the privilege of the wealthy. The contrasting forms of existence are complementary and both are deviations from the normal life style of the citizen. Thus, the causes of poverty cannot be separated from the causes of wealth. (Scott 1993)
We can distinguish the upper class by identifying the inequalities associated with productive wealth. Inequalities between the middle and working class - although reflected in to some extent in terms of productive wealth - are more easily understood by reference to differential access to market rewards, that is to different levels of financial payment for labour-income levels.
Income - the flow of money. Based on market reward for skills. The ownership of intellectual capital or skills.
Wealth - the store of capital. Obtained via inheritance or accumulation via high salaries.
1. Government policy
The Thatcher administration set in place policies that were bound to increase inequality. The top band of income tax was reduced from 60% to 40%. Tax policy shifted from being progressive to regressive, mainly through indirect taxation such as increases in VAT.
At present in the UK, there is a situation in which there is a switch away from a policy of full employment accompanied by pressure on individuals to secure their own means of private provision of health care and pensions. In such a situation, inequalities in income and job security can play an even more important role in determining an individual's life chances than before. As the polarisation of the labour market continues we see the emergence of work rich and work poor households.
2. The market
It seems that a relatively free market economy encourages inequality.
The UK economy has shifted from industrial to service sector employment. It increased unemployment, insecurity and inequality.
4. The decline of Trade Unions