INEQUALITY: WHAT CAN BE DONE
There is no shortage of remedies for gross inequality. For example, full information about the Nordic Model societies which enjoy relatively low inequality is freely available for study for all those who care to look. It is quite possible to compile very worthy “to do” lists of remedies, all of which can be expected to have a positive effect in reducing inequality.
Here is a List of Remedies, some from the excellent book, “The Price of Inequality” by Joseph Stiglitz:
- Reform markets to make them fairer
- Radically change the laws on governance to make corporations and financial institutions accountable for their effects on society
- Reform the tax system so that rich corporations and individuals are not able to evade tax and paying their dues to society
- Reform education systems so that it is impossible for the rich and privileged to buy special privileges - and cause all children from all backgrounds to be educated together
- Reduce “corporate welfare”. Stop hidden subsidies for big corporations, dispense with “too big to fail” support for big banks, reduce bias towards privatisation and “sweetheart” contracts for private suppliers, reform the top executive pay system.
- Strengthen employees’ rights to representation, encourage collective bargaining
- Strengthen welfare systems to provide support for the weaker members of society, and provide lifetime support for re-skilling
- Stop predatory corporations from exploiting developing countries
- Stop “pushing” market fundamentalist reforms in developing nations – encourage communitarian and socially responsible strategies
- Take strong action against tax havens. Make offshore havens disclose their actions, take strong international action against leaders in developing countries offshoring wealth
- Take very strong international action against money laundering
- Direct international aid to the intended recipients – bypass corrupt governments
- Provide strong support for aid agencies that work on the ground with deprived people in poorer countries
- Give massive support to the education and development of women in developing and poor countries.
All of these “remedies” are desirable, but what is realistic?
They are also likely to be vilified by Market Fundamentalists and the large numbers of Foundations and Institutes that pump out free market propaganda. Many also go against the interests of rich elites.
So it is highly likely that many reforms in the list will be resisted and blocked by powerful opponents.
Barriers to reform
Inequality is built on massive edifices of power and privilege. Too often, its foundations are corruption and force. It is supported by clandestine national and international networks that launder money, find loopholes in tax law and use tax havens. The narrow word of the law, rather than an ethical interpretation is used to claim that rich and powerful corporations that exploit their staff and customers and undermine communities “have done nothing unlawful”.
Such powerful establishments usually deploy a number of well-known ploys to avoid change that might damage their interests.
“Any influential ‘establishment’, when faced with a threat to its power, has a large number of well-tried stratagems to hand which can be used to deflect, diffuse or diminish the actions of those who might threaten its privileges. In addition to the full range of propaganda tools, which, in the case of large companies and the financial markets, is backed by a whole industry of special interest, lobbying and PR firepower, there are a number of well-tried means of undermining potential critics. Here are two:
One of the most potent stratagems, that has been used by privileged establishments for centuries, is ‘recruitment’ of potentially powerful or threatening outsiders. The corporate/financial markets nexus has been noticeably active in using this approach.
In Britain and the USA, many politicians from most parties have been comprehensively ‘recruited’ through the medium of political subscriptions, consultancies and other “perks”. This has been conclusively proven for both Conservative and New Labour administrations in Britain, and both main parties in the USA. US administrations are believed to be significantly supported by large corporations, especially those in the energy industries. Compliant politicians can expect a comfortable life when they retire, based on directorships and advisory positions.
Feinting and Tactical Concessions.
If it becomes clear that the forces advocating change are very strong and persistent, there are still many stratagems left to establishments. Nearly all of them entail making limited concessions, playing up their significance, whilst working very hard behind the scenes to retain as much influence over future change as possible.
A favourite mechanism for achieving this is self-regulation, which is a usual response to the threat of legislation. Then, in Britain for example, it is usual to appoint a Committee or Commission of enquiry, with a remit to report in months or years, stuffed with ‘safe’ members, often drawn from the very system that is being investigated. In the past, it has not been unknown for the findings of such bodies to be delayed or carefully edited and restricted in their circulation, further diminishing the possibility of serious change.
So, a stream of ineffectual attempts to bring real change can often be presented as a ‘process’, with each non-change being represented as a ‘step’ towards a really significant final result. It is quite accurate to describe the plethora of investigations in Britain into a wide range of social and economic issues repugnant to the rich and powerful interests in this way.
today’s financial and corporate establishments are the inheritors of a long tradition that valued property and money more than people and have had deep experience of keeping real change at bay through a combination of recruitment and tactical withdrawal.
A well-trodden sequence of evasion
If a perceived threat to ‘established’ interests should appear, this is a likely sequence of defensive actions:
*“Having Their Cake” Don Young and Pat Scott. Kogan Page, 2004
- Ignore the potential threat, pretend that it doesn’t exist
- Acknowledge the potential threat, but belittle it as being trivial
- Take it seriously, attempt by all means to counter the threatening party’s case
- Attempt by all means possible to undermine the personal credibility or legitimacy of the threatening party
- Attempt to ‘recruit’, bribe or seduce the threatening parties
- Portray the disastrous consequences of change in the most lurid terms that it is possible to get away with. British magazine ‘Private Eye’ used to parody such defences as ‘Huge Snakes Will Roam the Countryside’!
- Stage a tactical withdrawal, give a little ground, try to maintain privileges, whilst making a big fuss about how much has been given up. Set up a public enquiry, to report in two years. Lobby heavily to evade recommendations
- Threaten to leave the country, taking your money/invaluable expertise with you
- Actually leave the country; go to a place where you will be able to enjoy your privileges in peace. (Becoming a difficult option, especially as such locations can be inconvenient or unpleasant places to live!)
Bringing sustainable reductions in Inequality: The hard facts
Looked at realistically, it is highly unlikely the people and institutions that have the wealth and power will volunteer to change their behaviour unless they perceive a greater force threatening them. And then, they are likely to retreat slowly, giving enough ground to create an illusion of great change without giving up real power.
The simple truth is that real reform will only come about through empowering the mass of people who suffer from gross inequality. And many of them are so distressed and impoverished that it seems almost impossible to rouse them to purposeful action. In other cases, people are so brainwashed with the dream of a “good life” based on consumption that they have ceased to think about how the world might be better. They just want more. In yet other cases, people are seduced by a dream of a perfect society, one in which the founding principles of their nation are constantly reinforced as a great aspiration, despite the fact that current reality is completely different.
Sustainable change can only come about by a combination of restricting the more unpleasant features of banking, commerce and wealth acquisition/protection, and empowering the mass of people to take an active part in self-help and re-building communities.
The key to reform – empowering Society to heal itself
Positive change needs to be gradual, long term and incremental rather than revolutionary. Sustainable change will only come about through extensive active involvement of the wider populace in communities, and smaller commercial and social enterprise.
The key to reform in all societies; poor, developing and developed, has to be the transfer of power from elites to social enterprise, communities and individuals. It is essential that governments should play a vital role in facilitating change. Government plays a role in social market societies – but it does so as a participant and facilitator, acting with other key stakeholders in society.
THE ROLES OF NATIONAL GOVERNMENTS
There are certain strategic issues that cannot be addressed by communities or the market acting alone. Examples are social security and employment policy, taxation, national transport infrastructure, governance and regulation of financial markets, behaviour of corporations towards employees and consumers, education policy, civil and criminal law and national defence.
Some support and initiative is essential from governments. In social market countries, governments’ roles are not in dispute, but even in more unequal, free-market countries, governments have a crucial role to play in initiating and supporting change that will lead to less unequal societies.
What governments could do
Most sensible reforms that would bring immediate benefit to society are beyond the immediate reach of governments in “free” market countries such as Britain and America.
However, any government with a serious concern about the ills besetting society can initiate oblique changes that over time, would have a beneficial effect.
Free the education system to meet the needs of many different participants. Reduce educational privilege.
A “one size fits all” education system will not work. The structure of education needs to ensure that the very basic needs of numeracy, literacy and basic social skills are met at an early stage. Thereafter, the system should become very flexible to meet the needs of many different participants, catering equally for practical as well as academically inclined participants.
Ensure that life skills receive proper attention. All participants in education should leave the system knowing how to take care of their economic lives and live in communities; so the system should concentrate on health, social skills and handling money. But particularly, all pupils need intensive experience of critical appraisal – in particular, how to deal with advertising and seductive messages.
Challenge privileged education. No society is likely to be healthy unless children of all classes are educated together and some do not get privileged starts in life. It is not necessary to abolish private education, but it is possible to ensure that a system of privileged education does not receive special concessions such as charitable status – and to work to equalise funding into the public education system.
Create infrastructure as a public good
Leaving the development of housing, national transport, energy and physical infrastructure to the market as happens in the United States and increasingly in Britain, is a recipe for mediocrity and failure. Public health is too precious to sacrifice to the profit motive. Law enforcement and national infrastructure investment is a role that government must take a lead in, acting in collaboration with other agencies. No other institution than national government has the sweep and breadth of perspective to determine overall strategy and the potential to take special pleading into account in a balanced way.
Encourage and initiate collaboration
Unequal societies are marked by competition and often conflict between different stakeholders – and self- centeredness in the populace at large. For example, in the United States, Trade Unions are regularly discriminated against by government and employers, unlike corporations and banks. In Britain, an increasingly unequal society, the balance of power has swung from Big Government after the Second World War, to Big Unions in the 1950’s to 1970’s, and then towards Big Banking and Business from the end of the 1970’s onwards. At no time was the notion of collaborative sharing of influence by key stakeholders mooted as a serious alternative.
A priority for any reform-minded government must be to encourage joint working between major stakeholder groups in the formulation of economic and social policy - and a sense of communal responsibility amongst the wider populace.
This will not be easy, the roots of economic and class warfare are deep, and self-centered consumerism has been vigorously fostered for too long; but the payoff from encouraging wider participation in the community and creating institutional frameworks at regional and national levels would be huge. Persistence and diplomatic skill will be necessary.
Encourage Long-term investment
The origins of stock markets lay in creating a mechanism for channeling investors’ funds into corporations to form the capital that would enable them to invest and grow.
But “investment” markets in free market countries have become centres of speculation, gambling and extreme short-termism. Computer based gambling with company shares has taken skill out of investment. The results are devastating. Massive flows of money in and out of the markets create instability, reward speculators, and convert the human communities that are the essence of corporations into assets to be bought and sold at a whim. A large part of the money that might be used for serious investment is taken into a speculative bubble in which money is manipulated simply to make more money, and never reaches enterprises that need investment to improve and grow.
The effects on society are very negative. Employment has become insecure, capital has captured the lion’s share of value creation, and investment bankers receive enormous fees for supporting, even promoting, mergers and acquisitions. All of this is a major engine of inequality. A few long term investors like Warren Buffett have proved that skilful long term investment supports good companies and actually generates better returns than speculation.
It is within the power of governments to give significant tax incentives to long term investors that hold rather than churn their portfolios – and heavily tax the speculators in order to generate the funds to do so.
The results could be very significant – reducing the massive wealth of financial speculators, reducing the malign impacts of the financial markets and supporting companies that provide well-paid, secure work for employees.
Support and enforce equable tax systems
One of the factors that differentiates most social market countries from free market ones is a strong awareness that tax is a contribution to society as a whole. So all citizens and corporate participants in a society should pay fair dues to support the society that harbours them. The tendency of rich and powerful corporations and individuals to use extensive specialist advice to avoid tax is a betrayal of the societies that sustain them and enable them to live safe and comfortable lives. At least all individuals and corporations that enjoy citizenship or earn income and profit from a nation should be made to pay local tax levels.
Devolve power, encourage small enterprises
It is evident that one of the great faults in unequal societies is that power is concentrated in the hands of a few. In healthier societies, power is shared by many stakeholders. Nordic countries involve trade union, employers’ associations and local government in policy formulation and implementation. Most social market countries have co-determination systems whereby employees share power with management and capital. All social market countries have systems that allow substantial elements of political power to be devolved to regional and local government.
A priority should be to devolve representative government as close as possible to the people affected and encourage strong participation. This can only be made real if regional and local governments have extensive powers to raise finance and to set up regional, and local and small business investment institutions.
OTHER KEY FACTORS
EMPOWERMENT OF WOMEN
Women play an often invisible role in child rearing and household management, and the skills they gain as a result should be of enormous value in the worlds of work, politics and community development. But it is still the case in many parts of the world that women do not play a full part in government and the management of larger enterprises. They are disadvantaged by religious prejudice, but also by institutional frameworks that discourage womens’ full participation. In Britain, for example, the parliament buildings are described as having the design, décor and facilities of a mens’ club, which is probably valid, as they were designed to be so. Conditions of work, pay, a lack of flexibility in the workplace and often a lack of childcare facilities inhibit women from playing a full role in society. It is very noticeable that in more egalitarian countries such as Sweden, there is equal treatment of men and women who wish to participate in childcare and very extensive networks of support to both sexes alike in the worlds of work and politics. The result is relative equality and full participation of women in society. The effects are to enhance a sense of fairness and encourage collaboration rather than competition and strife.
Priority given to education of women and encouragement to participate in local enterprise is crucial to improvement in developing countries – and aid should as far as possible be directed to the grassroots, favouring womens’ enterprises.
FOSTER THE SPREAD OF SOCIAL ENTERPRISE
Any long term shifts in the balance of power between rich and powerful interests to communities and the populace at large is likely to be best achieved by empowering people and communities to be self-determining. Education is one of the answers, but involvement in community and social enterprise is over the long run, probably the most potent strategy. This is as much the case in developing societies as in the richer, developed world. Social entrepreneurs, who pursue their objectives to create social benefit, rather than profit for investors, are a potent antidote to the self-interest and greed engendered by the financial markets and large corporations funded by stock markets.
Social entrepreneurship is the process of pursuing suitable solutions to social problems. More specifically, social entrepreneurs adopt a mission to create and sustain social value. They pursue opportunities to serve this mission, while continuously adapting and learning. They draw upon appropriate thinking in both the business and nonprofit worlds and operate in all kinds of organizations: large and small; new and old; religious and secular; nonprofit, for-profit, and hybrid. Business entrepreneurs typically measure performance in profit and return, but social entrepreneurs are primarily driven to create a positive return to society. Social entrepreneurship typically furthers broad social, cultural, and environmental goals and is commonly associated with the voluntary and not-for-profit sectors.
A social enterprise is an organization that applies commercial strategies to maximize improvements in human and environmental well-being, rather than maximizing profits for external shareholders. Social enterprises can be structured as a for-profit or non-profit, and may take the form of a co-operative, mutual organization, a disregarded entity, a social business, or a charity organization.
Many commercial enterprises would consider themselves to have social objectives, but commitment to these objectives is motivated by the perception that such commitment will ultimately make the enterprise more financially valuable. Social enterprises differ in that, inversely, they do not aim to offer any benefit to their investors, except where they believe that doing so will ultimately further their capacity to realize their social and environmental goals.
Social Enterprise has a mixed and contested heritage due to its philanthropic roots in the United States, and cooperative roots in the United Kingdom, European Union and Asia. In the US, the term is associated with 'doing charity by doing trade', rather than 'doing charity while doing trade'. In other countries, there is a much stronger emphasis on community organizing, democratic control of capital and mutual principles, rather than philanthropy. In recent years, there has been a rise in the concept of social purpose businesses which pursue social responsibility directly, or raise funds for charitable projects.
Viral Development versus Scaling Up
Some forms of enterprise can benefit from scale; through large organisations and extensive financing.
But social enterprise tends to spread virally – through many initiatives in many places. The best way to spread good examples is often not by “scaling up” through forming larger and larger organisations, despite the fact that this approach has been advocated by many. However, they forget the advantages of human scale, the commitment that comes from intimate involvement in tackling problems that they are close to, and the fact that wider impact can come from practical learning by doing and networking. Too often, the advocates of “scaling up” are repeating the mistakes of the profit-seeking sector, where many huge corporations are underperforming through losing touch with customers and staff.
The formation of networks and learning opportunities through them can work very effectively and over time spread beneficial activity widely. Those concerned at the national level often dismiss individually driven and highly particular initiatives as being a pin-prick. This however fails to understand that these small beginnings can have large-scale consequences which amount to a major change in attitudes, levels of trust and community effectiveness.
Implications for wider society – Creating Social Capital – Shifting from Contracts to Trust
The World Bank ranks Social Capital as an essential ingredient in healthy and prosperous societies. The essential ingredient in creating social capital is Trust.
Research has identified two types of social capital – bonding and bridging. Bonding social capital is typified by the links between people of similar backgrounds, interests and beliefs. In some societies, there is also a willingness to understand wider interests that link groups in a wider context – that of a whole Society. In these cases, there is a willingness to trust people with different interests and to give up a modicum of narrow interest for the good of others and society as a whole.
The Nordic countries are rated as being collaborative societies with relatively high levels of trust across different stakeholders and interest groups. The results have been shown to be impressive.
On the other hand, free-market countries like Britain and the United States seem to rate high in bonding social capital, but levels of trust between different stakeholders and in most institutions seems to be decreasing. This has serious effects when it comes to mobilising broad strategies to bring about social and economic change. Professor Onora O’Neill points out that trust is a high order human attribute which tends to reduce transaction costs to a minimum. It leads to strong relationships that provide support and create greater sharing of rights and responsibilities and wider emotional rewards. In other words trust matters because it is both satisfying and remarkably efficient.
Social Enterprise and Social Capital
Social enterprise can be seen in a wider context, where a great many discrete bottom-up initiatives can be seen as part of a wider “movement” of people, mainly in the not-for-profit sector, but also extending to funders. The career motivation and values-base of many of these is directed towards making a better society which places trust at its very heart, recognising this not only as the essential glue that makes a society worth living in, but which needs to be recognised as a higher-order human feature that provides the means of highly efficient and effective transactions. Such a momentous change cannot come about overnight. Many countries have been moving for in a direction that builds systems of contract, detailed target setting and financially focused reward. These contractual relationships create and illusion of control and objectivity, but their effect is to erode relationships and to attack the very basis of human trust. Trust is a vital currency in any healthy society. Nevertheless, we trust one another far (and particularly our institutions) less than we did, especially those one-time solid institutions, big business, banks and politicians.
Social enterprise has become a rapidly growing phenomenon across the world.
There is now a multiplicity of organisations promoting social enterprise across the world. The World Bank and the United Nations are active in the developing world, whilst Ashoka supports social enterprise in 36 countries across the world. The Skoll Foundation sponsors international events supporting social enterprise and the School for Social Entrepreneurs is growing across the world from an initial London base. The Grameen Bank provides “micro-finance” for enterprise in poorer communities. Its values have come under attack, mainly from neo-liberal sources.
The British example
In Britain, social enterprise is the fastest growing sector of the economy. There are over 80,0000 social enterprises in Britain:
- Their turnover is estimated to be £25 billion
- In 2012, 58% of social enterprises grew compared with 28% of mainstream small and medium-sized businesses.
- They employ about one million people, with approximately the same number of volunteers
- The sector is growing rapidly. The rate of social enterprise business start-ups is now more than three times that of small and medium commercial enterprises (SMEs). One in seven of all social enterprises in the UK is a start-up (2011).
- 39% of all social enterprises are working in the most deprived communities in the UK, in comparison to 13% of SMEs
- The directors and managers of social enterprises are much more likely to be diverse than for all other businesses. They employ high numbers of women, young people and people from minority communities
- Social enterprises are highly likely to reinvest and draw staff from the communities they serve.