It’s time to rewrite the rules of economics to end the growing chasm of inequality

The debate taking place between the snow-topped peaks of Davos this week will be dominated by one issue and one issue alone, the surge in inequality. In a democracy, anger isn’t abstract. As both the vote for Brexit and the election of Donald Trump show, it turns up on polling day.

In the US, new research shows that in the rust-belt states an incredible 40% of those born in 1980 are worse off than their parents. Here in the UK the gender pay gap still looms large – and as the Institute for Fiscal Studies revealed, there has been a four-fold increase in the number of men in low-paid, part-time work over the last 20 years. This represents a stark betrayal of the implicit intergenerational contract of the postwar years – that each successive generation would be better off than the preceding one. And that betrayal is by no means confined to the post-industrial interior of the US; it is in danger of becoming the social and economic condition of our age.

For years, we’ve known that what you earn depends on what you learn, and the access to education and training that makes possible such learning. While wages for the highly skilled, such as graduates, have been flat since 2008, a degree remains the key determinant of a middle-class income. Thanks to Thomas Piketty and his colleagues, we also know that today’s kings are asset owners, not wage earners. Our combination of hyper-loose monetary policy and tight fiscal policy means that the asset-rich get richer while the asset-and-income-poor get battered.

If you’re lucky enough to own a house or shares or pension rights, you’ve done well since 2010: the stock market is up 40%; house prices are up by over a quarter; and the “triple lock” on pensions in the UK will have channelled more than £33bn extra to those with pension rights by 2020. Yet those on tax credits have seen their incomes fall precipitously while, of course, benefiting not at all from asset-price inflation; needless to say, they have little if any pension rights to protect.

Other leading economists, such as Robert Reich, Joseph Stiglitz and Jason Furman, have shown categorically that the rules by which current economic policy is made are simply not delivering private job creation, rising wages or the taxes needed for a flourishing society. And that’s why it’s time to rewrite those rules. We don’t need a new account of widening inequality; what we need are new solutions and the actions to put them in place.

That is why we are seeking to launch a new kind of debate in the hope of finding a new kind of consensus. The sooner we find it, the sooner we can reject once and for all the tired and increasingly flawed orthodoxy of shareholder value and trickle-down economics that took shape with such force nearly 50 years ago. That’s why parliamentarians and Sheffield Political Economy Research Institute have joined forces to broker new solutions – bringing together leading thinkers in politics, academia, business, finance, trade unions, churches and civil society – to pinpoint what needs to change and how.

In her Brexit speech at Lancaster House this week, the prime minister spoke of her determination “to build a stronger economy and a fairer society by embracing genuine economic and social reform”. It was an echo of her message outside 10 Downing Street last July. Left and right now agree the status quo is not an option – and that’s why we aim to unite reformers across the political spectrum through an all-party group on inclusive growth, to ensure together that the reality of change matches the rhetoric of change.

We’re fast approaching the 10th anniversary of the greatest crash in economic history. That’s long enough to have figured out how to do things better. After a year none of us are keen to remember, it’s time to get down to work.

• This piece was co-written by Professor Colin Hay, co-director of the Sheffield Political Economy Research Institute