99%: How We've Been Screwed and How to Fight Back

By Mark Thomas

A Financial Times Book of the Year.
A clear, readable analysis of the inescapable fact that Generation Y (and subsequent generations) will be poorer than their parents, and how we should pursue other economic paths.

If you are part of the 99% – and there is a 99% chance that you are – then you are one of the first generation in living memory who can expect to be poorer than your parents, even as the economy continues to grow.

And you could be quite a lot poorer. If we continue as we are going, the civilisation we enjoy today will not last until 2050. Buying their own house is a distant dream for most young people; their wages are failing to keep pace with inflation; and more and more people are having to rely on food banks. Our age is one of chronic anxiety.

If the economy is doing so well, how can most people not be doing well? If the pie is growing, why aren't we all getting bigger slices?

This book shows what we, the 99%, can do to end mass impoverishment and build a society worth living in: an age of abundance, in which everyone benefits.

• Language: English
• Publisher: Bloomsbury Publishing
• Release date: Aug 8, 2019
• ISBN: 9781789544527

Mark Thomas

Mark Thomas is the founder and president of Escoute Consulting, an IT governance consultancy focusing on helping enterprises realise benefits through risk and resource optimisation. As a nationally known ITIL and COBIT expert with more than 20 years of professional experience, Mark’s background spans leadership roles from data centre chief information officer (CIO) to management and IT consulting. Mark has led large teams in outsourced IT arrangements, conducted project management office (PMO), service management and governance activities for major project teams, and managed enterprise applications implementations across multiple industries. Mark has an array of industry experience in the healthcare, finance, manufacturing, services, high technology and government verticals. When he’s not travelling, Mark lives with his family in the Kansas City, MO, area and claims to be a ‘certified’ barbeque judge in his spare time.

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Advance Praise for 99%

‘If you are concerned about your future but would never dream of reading a book about the economy… you should read this one!’

Hugh Pym

BBC Health Editor

Former BBC Chief Economics Correspondent

‘Policy-makers face stiff challenges. 99% will help them to navigate the minefield.’

Andrew Harrop

General Secretary of the Fabian Society

‘In the age of Trump, Putin, and Brexit, it is difficult to be an optimist. But 99% opens a route forward – it deserves to be read by all those in a position of influence.’

Sten Scheibye

Former Chairman of Novo Nordisk

‘Structural changes in society risk creating a generation poorer than its parents. 99% clearly sets out both the problem and its solution.’

Fiona Devine

Head of Alliance Manchester Business School and Professor of

Sociology at The University of Manchester

‘Without concerted action, many countries face the prospect of a lost generation. This book will start a movement to prevent that from happening.’

Nicholas Anderson

Chief Executive Officer, Spirax-Sarco Engineering plc

‘Mark’s book provides the story which is likely to drive material regime change in markets. All investors who purport to serve their clients should read it.’

Henry Maxey

Chief Investment Officer, Ruffer LLP

‘Many businesses depend for their long-term health on the continued existence of a thriving middle class. Any executive in such a business should read 99%.’

Ken Lever

Chairman, RPS Group plc and Biffa plc

‘Anyone thinking of studying economics should first read 99%.’

Steve Keen

Professor of Economics at Kingston University

‘99% shows how business can be a force for good in a mixed economy – and the role Government must play to make this happen.’

David Pitt-Watson

Former CEO of Hermes Focus Asset Management

and Visiting Fellow at Cambridge University

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Mass Impoverishment and How We Can End It

MARK E. THOMAS

AN APOLLO BOOK

www.headofzeus.com

First published in the UK in 2019 by Apollo, an imprint of Head of Zeus Ltd

Copyright © Mark Thomas, 2019

The moral right of Mark Thomas to be identified as the author of this work has been asserted in accordance with the Copyright, Designs and Patents Act of 1988.

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior permission of both the copyright owner and the above publisher of this book.

A catalogue record for this book is available from the British Library.

ISBN (FTPO) 9781789544503

ISBN (E) 9781789544527

Images © Shutterstock

Graphs designed by Jeff Edwards

Head of Zeus Ltd

First Floor East

5–8 Hardwick St

London EC1R 4RG

WWW.HEADOFZEUS.COM

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WHEN DARWIN proposed his Theory of Evolution based on natural selection, it took time to win over the scientific community. Although the general concept of evolution was quickly accepted, the specific mechanism Darwin proposed, natural selection, was not fully accepted by scientists until the 1940s.

The General Theory of Relativity was published in 1915 but not widely accepted until the 1960s.

And it took 359 years after Galileo’s recantation for the Catholic Church to accept that the Earth moves around the Sun.

Clearly, accepting big ideas takes time.

But in the case of this book, we don’t have much time. Our society is on a path towards self-destruction. And at the current rate, by 2050 it will no longer be recognizable.

So, I have an urgent request. Once you have read this book, please pass it on to a friend. Discuss the ideas with your family, with your colleagues, with your friends and acquaintances. And please act on the suggestions in Part Three.

Change will happen if we all play our part – please make sure you play yours.

MET, November 2018

99-percent.org

Table of Contents

Advance Praise for 99%

Title Page

Copyright

Epigraph

How this book came about

Chapter 0: Economics – The Five Things You Need to Know

Thing #1: The economy is the system we have put in place to create and distribute value

Thing #2: Money is critical

Thing #3: Flows and stocks of value are both important to you

Thing #4: Gross Domestic Product is the total flow of value created and available to be consumed

Thing #5: Understanding who receives what value is critical

Part 1: The Burning Platform

Chapter 1: The Age of Anxiety

Where are today’s economic policies taking us?

In the year 2050

The really, really bad news

Failure by the numbers

What this means for you

Is there any good news, then?

Chapter 2: A Tale of Two Systems

The Golden Age of Capitalism

The Age of Market Capitalism

Just the facts

A smaller slice of a bigger pie

Chapter 3: Mass Impoverishment – Coming to a Street Near You

The system is broken

Flatlining

The rising tide of inequality

Mass impoverishment in the UK

Without welfare many working people would not survive

The US and the UK have a particular problem of inequality

Chapter 4: An Alternative Morality

Market fundamentalists have an alternative morality

Market fundamentalists view taxation as theft

Market fundamentalists view normal people as a burden

Market fundamentalists view democracy as tyranny

There is power behind these ideas

Chapter 5: The Fork in the Road

Technology has been advancing quickly

Important new technologies will become mainstream

If we get it right, we can solve many human problems

What happened last time

The next industrial revolution will be worse

We need to rethink the system now to avoid disastrous social outcomes

Chapter 6: Wealth, Power and Freedom

Excessive wealth concentration undermines democracy

How excessive wealth concentration undermines freedom and justice

How the dynamics can be challenged

Chapter 7: Eight Scenarios

Scenario 1: Revolution

Scenario 2: Eat the Rich

Scenario 3: Solidarity and Abundance

Scenario 4: Philanthropy ++

Scenario 5: Accepting Impoverishment

Scenario 6: Sharing Decline

Scenario 7: Neo-Feudalism

Scenario 8: Collapse

Current policy is not directing us towards the desirable outcome

Without more significant policy changes, the future will not be pretty

Part 2: Why We Don’t Act

Chapter 8: Going Post-Fact

Going post-fact is not a new phenomenon

It is not just the less-educated who engage in post-fact discussion

A post-fact world is extremely dangerous

Post-fact politics thrives when a large group are left behind

The elite are waking up to the dangers of a post-fact world

There are powerful incentives to drift to the post-fact end of the spectrum

It is hard to reverse direction

Chapter 9: Myths and Metaphors

Myths are all around but we often take them as fact

Metaphors are often taken literally

Chapter 10: Economic Models

Models and maps must be fit for purpose

Conventional macro-economic models are not fit for purpose

An alternative approach may be possible

We will never achieve great predictive accuracy

Chapter 11: Rhetoric over Reason

The confident repetition of falsehoods

Misdirection

Why the Devil has all the best tunes

The Devil’s Dictionary

Chapter 12: Catch-23 – The Narrative of Unaffordability

Why the narrative is so plausible

An unsound narrative

The dangers of accepting the narrative of unaffordability

Part 3: Building the Future

Chapter 13: Fifty Shades of Capitalism

The spectrum of possibilities

How should we choose?

Chapter 14: The Victimless Revolution

Solidarity and abundance

Why the obstacles may be less than they seem

How the truth can set us free

Chapter 15: The Abundance Manifesto

The key foundation is a well-functioning democracy

We can build a new deal on this foundation

Fact-based policy

Design policy for abundance and solidarity

Invest in the future

Create clean, competitive markets

We have done more difficult things before

Chapter 16: Your Role in the Change

Conclusion

Summary of Part 1

Summary of Part 2

Summary of Part 3

Appendices I–X

Endnotes

Acknowledgements

About the author

An Invitation from the Publisher

‘It is never too late to give up our prejudices. No way of thinking or doing, however ancient, can be trusted without proof.’

Henry David Thoreau

How this book came about

My reason for writing this book is one that I hope will resonate with you. I want to help build a world fit for my children’s generation – and their children – to live in.

In recent years, much as I’d like to believe the opposite, I’ve come to see that the world that we are building may well not be fit for future generations. If I can help to change this, I will – and that’s why I want to share the information I’ve gathered with you so that, together, we can put the world back on track.

Let me explain. When my children were born, I took it for granted that economic progress would ensure that they would have more opportunities and probably become better off than I am. It seemed to me and, I suspect, to many other people at the time, that it was almost a law of nature that each generation would have greater opportunities than the last.

Certainly this was true for my predecessors. None of my grandparents went to university. My father’s father worked for Ford Motor Company, while his wife stayed at home. They had a comfortable middle-class life. My mother’s father was a bookkeeper and his wife was a nurse. They were slightly less comfortable, but not poor.

My parents came of age after the Second World War at a time when, if you were bright and worked hard, you could go to university. They both did – in fact, they met at university – my mother studying history, and my father engineering. As graduates, they had a greater choice of more interesting jobs: my mother as a journalist and as a teacher; and my father in research and development, technical journalism and, ultimately, press relations.

As a result, my parents were better off than my grandparents, just as I am better off than my parents.

Yet today, we are looking at the first generation in living memory who can expect to be poorer than their parents, even as the economy continues to grow.¹

This is unprecedented.

No generation in modern history has been poorer than its parents.

And they could be quite a lot poorer.

It took me a long time to come to this shocking realization. Let me tell you how I came to it. It’s a long story but the really crucial events leading me to write this book happened rapidly in the past few years.

I ran the strategy-consulting practice in a major international consulting firm, working with clients both in the private sector and in government to resolve strategic challenges, and to predict and manage developing trends in the world of business, and more broadly in global affairs. Exploring the future was part of my job.

One of my colleagues ran the defence and security practice. This was a large and successful part of the firm, which dealt with some huge and important public-sector projects. But it didn’t have access to the top-level contacts we enjoyed in my own area. One day, my colleague asked me whether we might be able to work together to build a network of contacts at the most senior level in the defence and security services, and apply the analytical techniques of business strategy to urgent problems of national security.

It wasn’t long before our first test came. In 2011, the Arab Spring erupted. Most Western countries were caught on the hop by a wave of revolutions that swept through the Arab countries. Yes, there were individual specialists within Western governments who had felt that something was brewing, but institutionally, collectively, the West was unprepared. Diplomatic services, armed forces and security services all had to scramble to react, to understand the global ramifications and to develop policy responses – and fast.

The Arab Spring raised some fundamental issues: What would be the impact on the West? Which country was next? How should we react now? I decided to focus on the question of predictability. Should we have been able to predict the Arab Spring?

At one level, the answer is an obvious ‘No.’ The Arab Spring began with the suicide of a hitherto unknown street vendor and erupted into revolts and revolutions in eighteen Middle Eastern nations, of which four led to chaotic regime change. No one, however sophisticated their analysis, could have predicted the sequence of events that unfolded in 2011.

But as the team conducted its analysis, we uncovered some very clear – and very worrying – problems shared by the countries which were hit by the Arab Spring. Of the four problems common to these countries – economic hardship, lack of a democratic safety-valve, ethnic or sectarian divisions and oppressive laws and policing – the one which grabbed my attention was economic hardship.

And the real shock came when we carried out the same analysis for other countries. I had been aware that rising inequality was an issue in the West, but it was not until our analysis was complete that I realized the extent of the problem.

We found that the continuation of current trends in economic inequality posed an existential threat to civilization in several major Western countries. Included in that list were the US and the UK. Our conclusion was terrifying.

If we carry on as we are going, the civilization we enjoy today will not last until 2050.

The early signs are already here. In 2017, we read that the economy was booming² and stock markets were at an all-time high³, yet at the same time we heard that wages were not keeping pace with inflation⁴ and food-banks had more ‘customers’ than ever before.⁵

If the economy is doing so well, how can most people not be doing well? If the pie is growing, why aren’t we all getting bigger slices? If we are so well-off, why is our children’s generation set to be the first in living memory to be worse-off than its predecessors? If you’ve read this far, you’ll see the logical disconnect here straight away. And if you’re like me, you’ll want to know what you can do to change this state of affairs.

The emergence of mass impoverishment

Over the following chapters I’m going to use the phrase ‘mass impoverishment’ fairly frequently. This is a phrase I’ve coined to describe the state of affairs that could become the new normal if we don’t initiate a course-correction fairly soon. Briefly put, it’s the process by which, even as the pie continues to grow, most people find themselves forced to accept ever smaller slices.

If mass impoverishment continues at current rates, most Americans will be living in or near poverty before 2050. In fact, the world in 2050 will be unrecognizable to the average person living in the West today. If you have children, their world in 2050 will not be the one you share with them now. We’ll explore this further in Chapter One.

But that dystopian future in 2050 isn’t inevitable. If we take a step back and question some of our assumptions about the basics of making, taking and sharing wealth, we see that there are alternative options to explore. A sceptic might say that most countries do a worse job for their populations than the US and the UK, and this is true, but there are quite a few which consistently do better – in terms of poverty rates, wage growth, social mobility and overall life satisfaction. We can learn from these countries.

We can also learn from our own history – it wasn’t so long ago that we were experiencing a ‘Golden Age of Capitalism’ – the period after the Second World War in which most developed countries, including the US and the UK, experienced an economic miracle. It is still quite possible for us to create a similar period of prosperity. Where children can again expect to become wealthier than their parents. Where they contribute more to society and take a firm hand in determining the world’s future.

If you are already thinking that a lot of what this book tells you is hard to believe, then I sympathize. A few years ago, I would have said the same. It flies in the face of what you will hear from many politicians or read in your newspapers.

But the facts are out there – and they tell a clear story. The official statistics paint a much less rosy picture than most politicians. While researching and writing this book, my motto has been trust the facts; distrust the opinions. So why on earth should you believe me? You shouldn’t – at least not just because you read it here. In these pages, and on the website where more details are given, you’ll find the data and the tools with which to make your own informed, independent, reasonable judgement, based on the facts.

By the time you finish reading, I hope that you will not only see the world in a different way but also have confidence that the facts are on your side, that a new Golden Age of Abundance is attainable – and that, if we act now, we can leave behind a better world for those who follow.

CHAPTER 0

Economics – The Five Things You Need to Know

Money is not the only answer but it makes a difference.

Barack Obama

Maybe you have never read a book on the economy. Perhaps it has never interested you, or perhaps you thought that it was too complicated to understand. Actually, I believe that if you have the ability to follow top-level sport, you have the ability to understand all you need to know about economics.

If you already know the definition of GDP and are familiar with all the main measures of inequality, you can safely skip this chapter and get stuck into Part 1, where the story begins. If not, this chapter will give you the tools you need to understand what is happening (economically) to you and to the rest of society.

In one sense, economics is complicated. Nobody in the world understands the economy to the extent that they can accurately predict its future course. As Simon Wren-Lewis, Oxford Professor of Economics, put it:¹

Macroeconomic forecasts produced with macroeconomic models tend to be little better than intelligent guesswork. That is not an opinion – it is a fact. It is a fact because for decades many reputable and long-standing model-based forecasters have looked at their past errors, and that is what they find.

Of course, that’s true of football and baseball, as well. Nobody in the world understands them well enough to predict next year’s winner of the FA Cup or the World Series. But that doesn’t stop fans from having a detailed grasp of current and past performance.

And economics is the same. Although it may be difficult to predict the future of the economy, you don’t need to be a genius to understand the past and present. As with sport, you just need to understand the score line. Once you understand the scoring system, you can see who is winning and who is losing.

If you follow me through this chapter and come to understand a few basic concepts, you can see for yourself what is working and what is not. And who is benefitting, and who is not. If the economy is not working for you – and in the US and the UK it is not working for most people – it is important that you understand why.

And you don’t need to be an Oxford don to understand that economics can be more confusing at times than it needs to be. In fact, what I’m going to show you in this chapter is exactly that you can understand basic, essential economics no matter your background or interests – that you deserve to understand the concepts I’m about to explain to you and that you owe it to yourself to make sure you do.

When you hear politicians talking about the economy, some of what they say is accurate. But much of it is either misleading – facts presented out of context to convey the wrong impression – or simply false. The same thing is true of journalists, and even more so of social media pundits. This chapter will give you the tools you need to sift fact from fiction. And you need to know the difference, or you may find that you have just voted to impoverish your own family.

There are five things you really need to know.

Thing #1: The economy is the system we have put in place to create and distribute value

When Picasso took a collection of paints and some canvas stretched over a wooden frame and produced an artistic masterpiece, he created value. The paint and canvas already had some value to start with but the value of the painting Picasso produced is far higher than the value of the inputs (paint/canvas). This is one form of value creation.

For a more conventional example, think about a farmer who produces corn, eggs and milk. A miller adds value to the corn by producing flour. A dairy adds value to the milk by producing butter. Lastly, a baker adds value to the flour, eggs and butter by creating a cake. The cake is more valuable than the corn, eggs and milk that went into it. This is another form of value creation.

The value that has been created is shared between the participants in the value creation process: the farmer receives income for the corn, eggs and milk; the dairy pays for the milk and receives income for the butter; the miller pays for the corn and receives income for the flour; the baker pays for the flour, eggs and butter and receives income for the cake. In this way, a chain of activities carried out by a series of different participants has created the value of the cake and distributed that value among themselves. This is a system of value creation and distribution.

The economy as a whole is a much larger and more complex system of value creation and distribution, but the principle is the same.

Thing #2: Money is critical

In the economic system in place today, money plays a critical role. It allows us to move beyond bartering and the exchange of goods and services. When the dairy pays for the milk, it pays money (and not, for example, butter). When the miller pays for the corn, she pays money (and not bags of flour). When the baker pays for the flour, eggs and butter, he pays money. Economists would say that money acts as a ‘medium of exchange’ in these transactions.

It also acts as a ‘unit of account’: if we want to say how much value each has exchanged, the fact that all the transactions took place using money enables us to measure the value (in any unit of currency we wish).

There is a third function of money – it can act as a ‘store of value’: if I like, I can keep some money in the bank or under my mattress to spend later.

The money that we use today is known as a fiat currency, from the Latin word meaning let it be. The fiat money system has been in place since the early 1970s. Before that, the dollar, sterling and most other currencies were backed by gold. This was the ‘gold standard’ according to which a dollar or a pound could be converted into gold on demand. In 1971, Richard Nixon ended dollar convertibility into gold.² A dollar today has value only because the US government says it has value, because there is a legal duty to pay taxes in dollars and therefore – if for no other reason – people need them,