Income Inequality? There IS a solution…

soapbox1

In the light of the recent Davos gathering of shadowy elites, it seemed pertinent to get on topic. If you’ve been paying attention at all recently, you know how fucked up shit really is re: income inequality. It’s not even just that such a massive gap exist between the top 1% and the rest of us. It’s that the situation is literally worse than it’s been for almost 100 years – you know, that time just after the Victorian era, just after a world war. And it isn’t as if it’s just slowly been getting worse – inequality actually decreased rapidly between 1928 and 1942, then remained at a low level until ’79. Only since 1979 has it blown the fuck up. It’s no surprise that this rise coincides with the wholesale deregulation of financial markets and industry, the globalisation project and mass privatization of public services and a number of other market liberalisation policies.You could say, “Well, correlation isn’t causation”, and you’d be right. Except that the mechanisms by which it affects income inequality are so self-evident. Except that the main opponents of measures that could reform the system are so patently members of the 1% that has most benefited from the ‘free’-market, trickle-down economic model.

Paper after paper has been written detailing research which shows that inequality of income is a major factor in a veritable litany of societal health indicators – health, violent crime, poverty, education – the list goes on. Richard Wilkinson, in his lecture and TED presentation, shows correlation after correlation involving all manner of effects pertaining to quality of life. The book he co-authored with Kate Pickett (The Spirit level) makes it abundantly clear that tackling income inequality should be the stand-out focus of our efforts to improve the human, and environmental, condition. It’s sad that we humans have to go to such lengths to point something out that really is the most obvious damn thing in the world.

The financial collapse was only the clearest of a fuckpile of warning signs that the system wasn’t working for the vast majority and yet it seems like we’re going to plough on regardless. It goes to failings in our political system, economic philosophy and, more generally, our humanity. It’s downright demotivating, actually. But by contrasting the differences between ourselves and the countries with the consistently highest levels of equality (that’s Sweden, Finland, Japan etc., by the way) we can see, from the data, the primacy of income inequality as a driver of undesirable societal health outcomes – and the potential solutions. In the most dramatic demonstration of inequality’s causative nature (as regards negative societal health), Wilkinson and Pickett show that the wealth of a society in GDP has no correlation to outcomes such as life expectancy, child well-being, mental illness, prison populations and any number of other indicators, whilst inequality has a stunningly clear relationship.

I don’t want to bore the crap out of you with data points and figures – we’ve all seen them and you can check the links I’ve provided in this article if you wish to find out more, and I suggest you do that. What I do want to do is ask the question, what can we do to rectify this? Is this just the way the world works? Is capitalism incapable of providing equality?

"No, I think you'll find it's 'cos poor people are lazy bastards"

“No, I think you’ll find it’s ‘cos poor people are lazy bastards”

The knee-jerk reaction of many on the left is that it is capitalism itself which is the problem, or the profit motive, or some conflation of the two. To them, nothing less than total revolution and destruction of the capitalist oligarchic system of ‘the oppressor’ can save us. There are, to my mind, a few glaring problems with this: Firstly, it ignores history. Revolution, it would seem, hasn’t been very effective at instituting the changes that sparked the revolutions in the first place. In addition, revolutions, even when they do ‘work’, can take years to return to any kind of equilibrium. We’ve spent 400 years working on market democracy and I don’t personally want to smash it the fuck up just to spend another 400 years working out a new system that is far from guaranteed to work. Secondly, the destruction of capitalism leaves open a fundamentally important question: What the hell do we replace it with? This is an argument that has been levelled at anti-capitalists for some time, and with good reason; none of their suggestions could happen without the aforementioned revolutions and the attendant disruption and, having never been tried, it is far from assured that they would even work.

And so, what are we to do? Well, there IS an answer. It doesn’t require the overthrow of anything. It doesn’t advocate any kind of destruction. It doesn’t hope forlornly for some kind of fluffy ‘mass- awakening’ or inexplicable consciousness transformation.

It’s called economic democracy.

The more economically equal societies achieve this equality with wildly different methods: In Japan, income disparity is lower, in large part because the culture encourages promotion from the lower ranks into the upper echelons, meaning that the managers have a better understanding of how to motivate the workers and take smaller salaries themselves. In Sweden, and many other northern European nations, there is large income disparity, but this is corrected through high taxation and generous state benefits and services. As I have argued before, it isn’t method that matters, it is whether the implementation of the method results in the desired outcome. The incisive amongst you may have noticed that, while Sweden and Japan take different paths to income equality (which could be described as Big government and Small government respectively, to use contemporary libertarian terminology), their methods are NOT mutually exclusive. One can, and arguably should, do both at the same time.

chart_income_inequality.top_

Economic democracy is a bloody massive subject to cover, and I would encourage anyone interested to research the concept, but in the interests of brevity I will address some of it’s fundamental axioms:

1. Worker self-management: This means, ultimately, taking the power out of the hands of shareholders. When workers have a stake in the company for which they work, they are incentivised to a) be more productive, b) make decisions that benefit the company itself and c) create an environment that is beneficial for themselves. In this system, the worker is no longer employed by a firm, rather they are members of the firm. This goes to what I mentioned earlier about Japan.

2. Social control of investment: Currently, investment capital is controlled by the private banks and corporations. I shouldn’t need to point out how utterly fucking useless they were at helping combat the financial crisis – with money that was created from nothing and given to them for free for the specific purpose of re-investing in the economy. No, they just kept the cash and told us all to go swivel. Social control of investment would mean funds collected through taxation being redistributed to the economy through publicly owned investment banks. This removes the ability of private organisations to restrict the money supply and artificially maintain the wealth gap. It also provides the basis for public services and welfare.

3. The market economy: In a similar way to the ‘free market’, prices are largely determined by supply and demand, as opposed to government regulation. This is necessary to prevent the kind of authoritarianism that is engendered by centralized planning a-la-Soviet Union, and provides the incentive for businesses to be efficient through competition.

"Quite right, George. Maggie told me when I changed her adult diapers"

“Quite right, George. Maggie told me when I changed her adult diapers”

As you should be able to see, although there are some pretty significant structural changes required before this kind of system can be implemented, there is no prerequisite for any kind of sweeping revolution. These things can be achieved gradually, incrementally. There is however one important condition: Our governments must act in accordance with the interests of the populace. Ah, shit, that’s not really the case, is it? Well then, my friends, here we have stage one in the plan for economic democracy – eliminating the influence of moneyed interests on our politics. How we accomplish that is a question for another day…

Please, please, go out and find out about all of this yourselves, stop feeling hopeless and disenfranchised. Realise that there is a way out, and cynicism and apathy isn’t it. Change is ours to be had, and is eminently achievable. If we don’t do it, we’ll have no-one but ourselves to blame.

With that, I leave you with an awesome observation from activist and unionist Allan Engler:

“When economic democracy – a world of human equality, democracy and cooperation – is the alternative, capitalism will no longer be seen as a lesser evil. When the working class, not a revolutionary party, is the agency of social transformation, change will be based on workplace organization, community mobilizations and democratic political action. The goal will be to transform capitalism into economic democracy through gains and reforms that improve living conditions while methodically replacing wealth-holders’ entitlement with human entitlement, capitalist ownership with community ownership and master-servant relations with workplace democracy.”

You just gotta love it.

13 thoughts on “Income Inequality? There IS a solution…

  1. Reading this has given me more food for thought, thank you!
    I have been impressed with the John Lewis Partnership where worker self-management is practiced. I have always believed that if we as employees have a stake in our place of work, it naturally evokes motivation, increasing productivity thus adding an overall sense of achievement all round….by the reaping of the rewards. I will certainly explore the concept of economic democracy!

      • I came across the John Lewis way through my clients. I don’t profess to have an indepth knowledge but the following sums the background…hope it helps…:-)
        The Origins:
        John Speden Lewis took over full ownership of the company from his father in 1928, and drew up the constitution and trust settlement which are still in force today. He thought it morally wrong that his family should take over 50% of the profits from the business, and instead championed a more sustainable capitalism, which, with some prescience, he called the Third Way.

        His business ethic demanded genuine partnership for all – managers and managed – and a strong belief in the common good. He described the purpose of this partnership as ‘the happiness of members through their worthwhile and satisfying employment in a successful business’.

        Andy outlined the advantages of this mutually beneficial model, noting firstly that there are no external shareholders involved. This means that John Lewis can do what is best for all its partners and the long-term health of the business, and is not beholden to the City. In addition, there is no conflict of interest between the various parts of the business. Through an elected Council, management are held to account across the company and the common good is upheld.

      • Thanks for that, it’s genuinely interesting. It doess sound like it’s a good distance toward what I was talking about with Economic Democracy – giving the workers a stake in the company, changing the worker-employer relationship, so that we are no longer wage-labourers (slaves?), but are instead members.

  2. Where to start.
    #1 – Raise the minimum wage to $17.00 a hour.
    #2 – Raise Capital gains back up to 35%.
    #3 – Do away with ‘carried interest’ deduction.
    #4 – Do away with fossil fuel subsidies.
    #5 – Cut military spending in half.
    #6 – Take the newly unemployed military (highly trained) and put them to work building roads, schools, clinics, etc using the $350-500 Billion in savings from cutting the military as the investment.
    #7 – ‘Borrow’ another $2 – $3 Trillion as more investment. Small business loans and infrastructure.
    #1,6 & 7 puts money into the pockets of the middle class. They will spend it which in turn will create more jobs and so on and so on.
    Ta Da!!
    A SUPPLY SIDE economy.
    No more trickle down.
    #2,3 & 4 slows down the wasted ‘investment’ in Demand Side economics and slows the ‘trickle up’ economy.
    #5 is just the beginning of where we need to start wrapping our heads around the concept that we can’t impose our will and values on any one else because we ARE just 1 member of the Global Economy and World.
    And finally, once people are important, #8 – turn our political process over to strictly public financing.
    We have to get back to electing people that represent us and not special interests, the wealthy and corporations.

    • OOoohhhh! Sounding dangerously Keynesian there, fatherkane! I thought the Keynesian had been eradicated by Ayn Rand’s minions decades ago!

      I’m so glad to hear those words issuing forth from an American… so many folks seem still to be convinced of a discredited ‘free’ market. If your government really believed in Hayek’s free market thesis, then they would’ve just let the banks fail and let the market correct itself, but then that’s not what their ‘donors’ pay the politicians to do.

      I’m lock-step with you on all the points you made, with one significant difference, which goes to point #8: There is still some democracy left at the state level in the US, and you need to use that to force through a constitutional amendment to a) repeal corporate person-hood and b) keep money out of politics (i.e. repeal Citizens United).

      Without that, your democracy will remain bought-off at every level, and none of the other changes will be possible. I’d be interested in what you think of that being, as I am, not an american…

  3. I really don’t think that a Constitutional Amendment from the State level is possible.
    First, the process has to start in the US Congress and that, in our divided Nation is not going to happen.
    It does become a matter of which comes first, the chicken or the egg.
    If we attempt to repeal Citizen United, it will never pass the Courts or get enough legislative support because of course our Representatives owe their very jobs to the wealthy and corporate interests.
    So no legislation would pass.
    I think the best hope is to get the most we can for the middle class.
    As we grow and become the political block we can and should be in this Country, then we can make inroads into influence peddling.

  4. And there are hundreds of those sites lulling people into believing that if enough people sign their petition, Congress will HAVE to listen.
    There are two ways to amend the Constitution and neither are going to happen again with our Nations so divided.
    And having a ‘Constitutional Convention’?
    Is there anyone who isn’t drunk, drugged or suffering from a mental illness that WANTS people like Ted Cruz, Louie Gorhmert, Rand Paul, Sarah Palin to be the ones voting on changes to our Constitution?

    ——————
    ‘The Amendment Process’

    ‘There are essentially two ways spelled out in the Constitution for how to propose an amendment. One has never been used’.

    ‘The first method is for a bill to pass both houses of the legislature, by a two-thirds majority in each. Once the bill has passed both houses, it goes on to the states. This is the route taken by all current amendments. Because of some long outstanding amendments, such as the 27th, Congress will normally put a time limit (typically seven years) for the bill to be approved as an amendment (for example, see the 21st and 22nd)’.

    ‘The second method prescribed is for a Constitutional Convention to be called by two-thirds of the legislatures of the States, and for that Convention to propose one or more amendments. These amendments are then sent to the states to be approved by three-fourths of the legislatures or conventions. This route has never been taken, and there is discussion in political science circles about just how such a convention would be convened, and what kind of changes it would bring about’.

    ‘Regardless of which of the two proposal routes is taken, the amendment must be ratified, or approved, by three-fourths of states’.
    @ : http://www.usconstitution.net/constam.html

      • We work on raising a middle class. The poor get (as they can) benefits from the social contract as long as Republicans don’t keep cutting it. The wealthy get the benefits form all the influence peddling.
        The middle class is left to pay for both ends of a burning candle.
        So back to my original reply.
        Invest in the structures that employ the middle class.
        Once we are actually living and not just surviving, assert our political will.

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