Exploring solutions to inequality

Diversity FiguresThe good news is, we are told, that the recession is officially over.

However, unlike the nursery stories we were taught as children, everyone will not live happily ever after.

There is good evidence to show that the so called ‘credit crunch’ has created a very divided society in this country.

Increasingly there are those who possess wealth through inheritance and access to decent education. However, unfortunately, there are a significant number, possibly millions, for whom any hope of gaining access to even moderate wealth through education or jobs is becoming a forlorn prospect.

Last week I wrote about the housing crisis that currently afflicts us.

Booming property prices, especially in London, means that Margaret Thatcher’s philosophy of a property-owning democracy is one that precludes many whose jobs are so poorly paid as to mean that ‘making ends meet’ is a constant struggle.

Tom Clark who together with Anthony Heath published Hard Times: The Divisive Toll of the Economic Slump a couple of months ago, wrote in last week’s Guardian what he found when carrying out research for this book.

They discovered that in many parts of the country, including here in the Midlands, economic insecurity caused by zero hour contracts, ‘perma-temping’ and under-employment together with self employment has led to a sense of constant anxiety.

And the Trades Union Congress has just published a report which suggests that the job prospects of those who are young and workers with low-skills has seriously deteriorated.

Apparently, according to this report, young people not in education are now more likely to be out of a job than those workers aged 50-64.

Changes to pensions may have played their part in ensuring that people who may have retired early, therefore creating opportunities for bringing newcomers, remain in employment much longer than previously.

But as we all know, even being in employment does not mean that you are able to keep pace with the cost of bills that in recent years have risen faster than pay.

A major exception, however, are senior managers, especially executives, whose remuneration packages in recent times have often increased at rates that are eye-watering for the rest of us.

The justification for this is that unless such executive are paid wages that most of us would consider to like winning the lottery, any organisation whether they be profit-making businesses or public organisations, will not enjoy success.

The managers who enjoy such high pay consider this to be fair because, as the L’Orêal advert used to suggest, they convince themselves worth it.

Whilst the easiest way to guarantee success is to sell more – certainly in the case of high street businesses – it is all-too-tempting to achieve ‘acceptable’ rates of return on invested capital or efficiency in resources employed by simply reducing worker numbers by using casualised labour or reducing pay.

In his book Capital the French economist Thomas Piketty takes issue with the belief that very high rewards for executives expands the pool of talent and enterprise thereby increasing social justice.

Rather, Piketty contends, the contrary pertains and inequality increases through collusion between executives and their custodians (boards). This, he asserts, simply creates further inequality manifested by what he terms ‘meritocratic extremism’:

“The world may come to combine the worst of two past worlds: both very large inequality of inherited wealth and very high wage inequalities justified in terms of merit and productivity . . . Meritocratic extremism can thus lead to a race between supermanagers and rentiers [those deriving income from their investment], to the detriment of those who are neither.”

All of this is well known.

The real challenge is in making a difference.

Sadly, it seems examples of those willing to take a lead are extremely rare.

In class I present the Brazilian company Semco which is based in Sao Paulo and led by Ricardo Semler.

Semco is a wonderful example of a truly democratic business that exists to make money.

Semler, the Harvard-educated son of Austrian immigrants believed that there had to be a better way to run his business than the traditional hierarchical approach in which workers feel they have no say and are controlled by managers.

Though he dispensed with managers and relinquished control, the benefits of enabling workers to become directly involved in what goes on and how things are done has demonstrably shown to have produced increased commercial success.

In this country the best example is the John Lewis Partnership in which all employees are given a say and, significantly, a slice of the profits.

There might  have been another exemplar in the case of the Murphy Construction group whose green vans will be familiar when passing civil engineering jobs such as road repairs.

Sadly, an attempt by Caroline Murphy, daughter of founder John, to turn Murphy into a workers’ cooperative was rejected by other board members including her mother and two brothers who believed that handing over control to the 3,500 workers was not a strategy they could support.

Caroline’s belief in the wisdom of allowing Murphy workers to have greater democracy through the ability to vote on key strategic decisions, to have their share of income increased through pay and shares was one that was inspired by a visit to Spanish workers’ cooperative, Mondragon.

The Mondragon Corporation was founded by a young Catholic priest Father Jose Maria Arizmendiarrita in Mondragón, which is in the Basque region, in the 1950s and based on the principles of humanism, solidarity and participation which he considered to be essential to his religion.

Given the role of Catholicism in supporting Franco’s dictatorship this was a brave move.

If you look at its website, Mondragon states that it is “one of the leading business groups in Spain, working at home and expanding significantly abroad”

Further it explains, Mondragon operates in a number of sectors including industry, finance and retail and with the desire to increase knowledge and education through “autonomous and independent cooperatives” which are explicitly participatory.

In a world that is still recovering from the effects of the global financial crisis and which, we should not forget was caused by a system that was based on increasing inequality through the worst aspects of rampant capitalism and greed there surely must be a better way to do business in the future?

This is precisely what Warwick university-based economist Robert Skidelsky argued recently when he argued that “We may be witnessing the beginning of the end of the neo-liberal capitalist consensus that has prevailed throughout the west since the 1980s – and that many claim led to the economic disaster of 2008-2009.”

Moreover, as Sir Winston Churchill also claimed, “The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.”

The trouble is I fear that Skidelsky is too optimistic about the potential for change and the instincts of our leaders, in politics and business, is simply allow the recreation of a system that has caused so much chaos and misery in recent years.

As the cliché goes, the rich get richer and, I guess, you know the rest!




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