Digested Read – Spirit Level 6: Future Options

Written By: - Date published: 10:00 am, October 10th, 2010 - 11 comments
Categories: equality - Tags:

Digested Read Digested – What we can do to embrace equality – through society and government.

It won’t take a revolution to achieve greater equality… but it will take a transformation, with a sustained sense of direction and a strong view as to how to achieve the required changes.  To make things more interesting it needs to happen at the same time as we need to transform society onto a more sustainable footing to be able to respond effectively to global warming.

We cannot wait for the government to solve the problem for us, but we should pressure governments to implement policies that will aid equality at the same time.

We also need to remember that the aim is to create a more sociable society – we want to avoid disruption, dislocation, insecurity and fear which will lead to not only a harder populace to change, but probably a backlash.  Rather, we need to convince people that a more equal society not just has room for them, but will offer a more fulfilling life than a society dominated by hierarchy and inequality.

The fact that results of so many studies show better results for the rich as well as the poor in more equal societies definitely helps that goal.  Societies do better with a more income-equal framework, but also individuals do too.  The gifted get more chance to shine, not less, in a more equal society.  Equality does not mean we all become the same.

Politics was once about improving people’s social and emotional wellbeing through changing their economic status.  That seems to have been lost, and people now look to individual means to improve their psychosocial wellbeing.  Politicians meanwhile try and fix each societal problem as if it were in isolation – and this has proved expensive.  If they pulled the levers reducing the inequality and relative deprivation that seem to lie behind so many of these issues, they will no doubt have more success.

Looking at how quickly levels of inequality have changed in recent decades (as above, in Britain), it is clear that we can change things – we can create a society where the quality of life and human relationships is much higher than now.

When governments have really wanted to increase equality, they have been able to.  Usually it has taken an existential crisis to cause that will to appear however – eg World Wars.  In the early 90s the World Bank noticed that much improved equality seemed to be behind the rapid growth in East Asia.  Why was equality improving?  Governments across the region faced various challenges to their legitimacy (from neighbours or internal dissent) and needed to gain popular support.

South Korea and Taiwan carried out extensive land reform.  Indonesia regulated rice and fertiliser prices to raise rural income.  Malaysia had explicit wealth sharing programs.  Hong Kong and Singapore had extensive public housing programs.  Several economies had governments assisted workers co-operatives and small and medium sized enterprises.  Whatever form they took, governments showed they intended to share the benefits of growth.

Japan owes its status as most equal country partly due to the humiliation its establishment suffered from WWII, and partly from a far-sighted constitution drawn up by General MacArthur’s advisers.  An elite is not allowed too far off the leash, and all are paid well – their equality is in income before tax, and their Government social spending is very small as a GDP percentage.  Sweden on the other hand has a very strong tax and benefit system to ensure wealth is redistributed.  Either system has the desired outcomes.

Looking at the reverse, Paul Krugman has done a lot of research into what cause a remarkable rise in inequality in the 1980s, and particularly in the US.  He concludes that it wasn’t market forces, or this would be a general trend in all countries, not a marked shift in some at one point.  It wasn’t the changes in the tax or benefit systems or similar reasons, per se.  Rather it was the rise of the new right, who successfully convinced society about the free market, and then implemented policies of great pay for CEOs and top management, less progressive tax systems and reduced benefits, and greatly reducing the powers of trade unions.

Indeed unionisation and labour representation have a huge difference on inequality.  The USA has only 15% of workers covered by collective agreements – in Europe the average is 70%.  Britain at 35% brings the European average down.  Labour representation at the highest level of company decision-making is the law in many European countries, and 15% of Japanese directors were former trade union officials.  Here there is a much closer and less adverserial relationship between management and unions – no doubt partly facilitated by the unions being involved in company decision making.

Political differences are usually about how to achieve an end goal, rather than disagreements about what the problems are.  Almost all want to live in a happier, healthier, safer society.  So part of the solution is convincing people as to the solution, and creating political will to work on these solutions.  This can be done by all of us.

But there is often a feeling that we don’t pull the strings, that we are not all democratically equal.  The super-rich have set up a hierarchy that creates the income inequalities in a private setting that the government fears to tred.  CEOs in 365 of the largest US companies received well over 500 times as much as their average employee.  That pay gap increased ten-fold in Fortune 500 companies between 1980 and 2007, and is only accelerating.

When half of the world’s biggest economies are Trans-National Corporations, concentrating wealth and the means of production into the hands of very few, most of us are left fairly powerless and our democracy looks very thin.

The experiment in State ownership in the Soviet Union didn’t provide a good counter-weight.  The concentration of power into the state led not just to inefficiencies, but corruption and loss of freedoms.

So what are the alternatives, beyond the prior recommendation of stronger (but non-antagonistic) unions?

Co-operatives.  Businesses owned by their employees and possibly their customers (mutuals).

Large non-profit institutions like US electricity utilities, hospitals and universities do very well there, generally providing cheaper services than their for-profit cousins, and greater accountability.  In Britain The Co-operative Bank, with GBP40 billion of assets, is ranked the most corporately responsible company in the UK.  Will Hutton points out that when electricity, gas, water, telephones and railways were nationalised industries in the 1950s and 1960s they outperformed the productivity of the private sector.  They got a bad name once governments raided their profits (TVNZ anyone?) and held down their prices to reduce national inflation.

Co-operatives have tended to lead fair-trade and other moral movements, be more democratic, with better working conditions and have far more equitable pay scales.  They have worked at every scale of business, from a handful to 10s of 1000s of employees.

So what political action needs to be taken?  More progressive tax rates, closed tax loopholes (and business expenses etc) for the rich, possibly even a legislated maximum pay multiple between lowest paid employee and top would all be great short-term solutions, but easily over-turned by a subsequent (National) government.

But setting up incentives towards more equitable companies could be longer lasting.  Tax discounts for democratic employee-ownership would allow us to avoid wealth and power concentrations in either the hands of an elite few, or into the government’s hands.

There are already incentive for employee share-ownership in the US and UK, and many employers take advantage to create incentive schemes.  But those shares often don’t relate to having a say.  It makes a difference, but employee involvement in decision-making has more.

During the Cold War there seemed to develop a view that we couldn’t have freedom and equality.  But this seems to be a fallacy.  Indeed our current situation seems to be denying freedoms through that inequality.  And it is a lack of democracy in the economic sphere that causes it.

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11 comments on “Digested Read – Spirit Level 6: Future Options ”

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  1. Bill 1
    10 October 2010 at 11:10 am

    “…it will take a transformation, with a sustained sense of direction and a strong view as to how to achieve the required changes.”

    In what sense is that not revolution?

    When you talk of highly democratised workplaces (the co-ops and collectives), then here is an implicit acknowledgement that the vertical division of labour has been abolished in such scenarios.
    That’s revolutionary.

    When you that say that “We cannot wait for the government to solve the problem for us…”(by which I assume you mean Social Democratic governance structures), then the implication is that decision making and implementation of decisions made has been pushed down and out to the level of the citizenry.
    That’s revolutionary.

    I don’t understand the fear of, or need to expunge from argument or debate the R word when everything said can only be understood in R word terms.

    Oh. Just one note. Many of the so-called co-operatives you mention are co-operatives in name only. There is only a very minimal voice given to workers or clients/consumers and ‘traditional’ hierarchical management structures are very much maintained.

    Yes, they tend to be less capitalist that other capitalist business models insofar as they try to incorporate a modicum of ethics into their business. Unfortunately, they are subject to transformation driven by very powerful market forces and so and tend to revert to unethical capitalist models over the long term. E.g. Cadbury’s and the other chocolate manufacturers who were set with an express purpose of providing a good life for employees in addition to mere profit. And now Cadbury’s is owned by Craft. And was involved in some very unethical business practices before that ( palm oil and child labour are two that spring to mind)

    • Bunji 1.1
      10 October 2010 at 3:50 pm

      I guess there’s probably a difference between ‘revolutionary’ and ‘revolution’. Revolution implies a marked break, a juncture and dislocation. The authors suggest this might be counter-productive, when the aim is to create a more socialised society. I guess whilst the ideas may be revolutionary, they want to achieve them by a rapid evolution, rather than a revolution…

      And they go into quite a bit of detail about (easily) creating structures where the employees can’t sell out to private investors – and thus creating the Cadbury situation. They mention the similar mass privatisation of mutual insurance and financial companies in the 80s and 90s as well. Similarly they want to encourage the more democratic co-operatives, knowing not all co-ops are created equal. But they are generally on a sliding scale of good (for workers, society and the planet), especially when compared to trans-national corporations.

      So I don’t think there’s much to disagree with actually! (other than my over-summarising…)

      • Bill 1.1.1
        10 October 2010 at 10:06 pm

        I don’t think of revolution as a marked break and the imposition of a new order.

        Historically, such a dynamic merely indicates the ushering in of a new elite, ie a transference of power occurring within upper echelons of a given social order or the capture of those echelons…eg the so-called Russian Revolution.

        Revolution is, or should be indistinguishable from democracy insofar as both are, or should be, marked by a constantly unfolding/evolving set of processes.

        I would opine that the contemporary sham that constitutes and informs our ideas of democracy (and the aspirations that are necessarily limited by that orthodox understanding of democracy) is unmasked by the inability to inextricably marry the concepts of democracy and revolution.

        Minus the sham, they become indistinguishable. Or put another way, the mark of our sham of democracy is the inability of our democracy to embrace revolutionary aspirations.

        Our disagreements are subtle but not insubstantial.

      • Bill 1.1.2
        10 October 2010 at 10:22 pm

        A point worth reiterating is that the Cadbury and Fry’s and other ethical company models are doomed because they are subject to market forces.

        You can have all the regulation you want in place to protect their integrity, but the historical record shows that market driven political shifts will always tend to erode whatever protections are in place.

        The initial incarnation of Cadbury et al was at least as socially aware as what the spirit level might advocate. And those companies (their social ethic) are gone and the market environment is immeasurably more rapacious than it was when they were initially brought into being.

        If they could not survive an evolving market, they (or any emulation of them) cannot be expected to flourish in a market that is so much more evolved and set today than it was back then.

        The problem is not so much as what we attempt within the constraints of the market so much as that we limit our endeavours to be within the constraints of the market

  3. M 3
    10 October 2010 at 1:44 pm

    Dave

    Thanks for the link – I have downloaded two of his two-hour mp3 lectures but it’s cool to have the video – he also has a BBC Hardtalk interview on YT about why capitalism must ultimately fail.

    I think for many people it’s innate that they feel the need to hoist themselves up just that little bit higher than their fellow wo/man so they can feel like they’re winners. From the guy who has to eat bake beans all the time to fund his flash car habit to women who feel they need to wear all their wealth on their backs and feet to feel they’re acceptable in society’s eyes or to attract a man. Make no mistake, I like attractive apparel but realised a long time ago there has to be a time when you have to say when.

    Personally I don’t think that there is job worth more than 200K and that would have to be for a top brain surgeon. Over the past 30 years salaries have crept up for the so-called top dogs and for a lot of these top job holders they don’t really do anything that benefits society as a whole – there is just so much wankerism out there. This is not economic envy as I don’t think materialism pays much in the way of dividends and I know that what passes for the good life will be coming to an end shortly with peak oil just waiting for the curtain to fall down and I find it difficult to be friends with people who are so out of touch with the impending crises we are all about to undergo. I should imagine that there will be a great deal of weeping and gnashing of teeth from the mandarins who are going to fall a long, long way and many will simply make a quick exit either via the noose or will make their final purchase of razor blades and draw a bath.

    Equality will only come once we’ve hit rock bottom in much the same it was during the first Great Depression (I believe we’re in GD2) where at first people were pretty selfish and mean but then came to understand the enormity of what the Depression really meant in that it was a massive transfer or wealth upwards to a very small group and started to be more co-operative – same thing really during WWII as far as co-operation goes.

    • Bored 3.1
      10 October 2010 at 2:39 pm

      In between times you can be gauranteed you and I will be asked to be more productive and “work harder”. Always a good one that, the real question is “work harder for whom”?

  4. dave brown 4
    10 October 2010 at 3:28 pm

    RSA animate deals with Harvey’s arguments about human nature, ‘greed’ and ‘selfishness’.

  5. Benjamin B. 5
    10 October 2010 at 7:58 pm

    To understand how inequality comes about, I can only recommend The Shock Doctrine. Eye opener. The Spirit Level may be next …

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