Thoughts on The Spirit Level lectures – The big battle ahead – bringing democracy to our economy

By   /   May 25, 2014  /   17 Comments

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Last week I attended the three lectures at Auckland University by the authors of The Spirit Level, Richard Wilkinson and Kate Pickett – both university professors from the UK.

 

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Last week I attended the three lectures at Auckland University by the authors of The Spirit Level, Richard Wilkinson and Kate Pickett – both university professors from the UK.

Their book has fired up the debate about income inequality and its impact has been such that right wing think tanks representing the 1% have feverishly tried to counter the book’s message – that countries where incomes are spread more evenly consistently do better than less unequal countries.

Needless to say New Zealand scores very high in income inequality (measured by how much more the top 20% earn than the bottom 20%) and also highly amongst the social problems which arise from it – educational underachievement, drug abuse, violent crime, mental health problems, child mortality etc

Their analysis hits the mark in the way it not only describes the relationship between income inequality and social problems but also uses the latest international research to explain why income inequality with its associated social stress and anxiety worsens a whole raft of social problems.

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For me the third lecture on Friday was the highlight because the presenters went beyond describing and analyzing the problem – something we’ve all done too much of – to focus on solutions.

They covered not just the taxation changes needed but a wider range of more radical economic changes which will be essential if we are to leave our descendents with something to live for and a planet able to survive its most destructive generation.

Richard Wilkinson said we must “bring democracy into the economy” which he described as transforming our companies from “pieces of private property” to “communities”.

This would mean companies running along democratic lines with all workers having input into decision-making at all levels. Work would become more enjoyable and less stressful and the obscene pay rates high up in companies would become a thing of the past.

He said if a company were to transfer 2% of its shares to its workers each year then within 25 years the workers would be the majority voice – and why not?

Why shouldn’t workers benefit from the work they do rather than have private shareholders gaining unearned wealth at their expense?

There are of course many successful co-operatives around the world which are centred on workers and their communities first rather than the greed of shareholders.

What the authors didn’t address directly however was the enormous struggle it will be to achieve this. The wealthy will never give up their unearned incomes or their effective control of our major political parties without one hell of a fight but it’s a fight New Zealand workers and workers globally will have to be up for.

If you haven’t read The Spirit Level then I suggest you get a copy from your local library or buy the latest edition online.

It’s an important read.

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17 Comments

  1. Peter says:

    Along with the authors of the Spirit Level there are many other economists – Stiglitz, Krugman, Reich for example – who have all been saying pretty much the same thing – historical evidence suggests that redistributive economies are more stable, have stronger growth for longer and fewer social problems.
    More recently French economist Pikkety has thrown a ‘big cat among the pigeons’ and warned us that without re-enactment of post second world war economic policies (highly progressive taxes and major public service investment) our economies will return to some sort of feudal oligarchy.
    Is it possible that this thinking will bring about a major political shift and a consensus on the importance of a governments role in wealth redistribution?
    Does the current NZ National government represent the first sign of this shift with it’s recent raids into the lefts policy territory?
    Will Tony Abbots government be able to implement even half of the brutal retrenchment they are proposing in Australia? Unlikely – people are waking up and starting to recognize – once again – what unconstrained capitalism is all about.

  2. countryboy says:

    Well done John Minto .

    Did they say why it is that we acquiesce to not having a heavily subsidised public transport rail infrastructure . Did they mention their dismay at how Pig Muldoon pulled up many branch lines to hand road transport to his mates ? Did he need a Swiss bank account to hide the bribes ? How about free , but for essential maintenance , electricity ? Heavily subsidised communications systems ? Health ? Welfare ? Dental ? LPG ? Forestry products ? Housing ? Education ? Fish ? Foods ? Wool products ? And lets not forget ‘ them ‘ effectively exporting our best young hearts and minds to our agricultural competitors , the Australians . To better compete with us over here ! Think about that for a moment will you ?
    We have a vastly wealthy country , there are only just over 4 million of us and yet we’re on the bones of our arses ? Did they have an answer for that question ? I don’t want to hear how to sidle around the lies and deceit they throw our way any more . I don’t want to hear one more word about how we might , in some way make do . I don’t want to hear about how we might try and compromise with the corporations who rudely prosper from the blood , sweat and tears of my whanau and my whanau’s whanau . I don’t want excuses , I don’t want compromise . I want my stuff and things BACK ! And I want to see those who brokered those deals go to fucking prison ! Is that so much to ask ?
    We shouldn’t be talking about how to make do . We should be talking about setting trial dates as ‘ they ‘ languish in Mt Eden with their victims .

  3. Mike@nz says:

    What does he mean by “bring democracy into the economy”?

    We already have democratic elections, a political system based around MMP, one of the most comprehensive state funded welfare nets in the developed world and democratically elected health representatives, school boards and local government councillors to name a few.

    Democracy is based on the premise that the majority rules and to claim that democracy is not working because you don’t agree with the majority is just plain childish. One of the problems with a democracy is ‘one person, one vote’. This can often mean that it is just as easy to pass a law against murder as it is to pass a law against painting your house white.

    Just remember it was democracy that brought us the self interest minority political parties represented on this blog. Learn to live with the system or accept servitude under a dictatorship.

    • Stuart Munro says:

      The economy is presently controlled by a corrupt, lazy, and dysfunctional oligarchy. If they were competent businessmen they would not need to steal state assets.

      You can always tell if you’re part of a democracy – the government is doing what the people want. The Key government is only formally democratic – it uses democratic procedures to pursue an undemocratic agenda.

    • Mike@NZ – you seem to be equating a pluralistic political system with corporate governance.

      Why you do so is a mystery to me as there are very few similarities between the two systems.

      Which, of course, is the whole point of the need to democratise the economy.

      Even without bringing corporations into the discussion, for a moment, one example of a lack of democracy in the economy is the secretive nature of the Trans Pacific Partnership Agreement (TPPA) negotiations. The text of the negotiated document is known by governments; by bureaucrats; and by corporations. But not by us, the people.

      If the proposed TPPA was such a fine thing – why is it known to governments, bureaucrats, and corporations – but not by us, the People? Why hide it?

      That is one example of a lack of democracy in the economy.

    • e-clectic says:

      Learn to live with the system or accept servitude under a dictatorship.

      Learn to accept the servitude of living under the patina of a democracy that masquerades as “the system”.

  4. dave brown says:

    Trouble with academics is that they are always 30 years late.
    Even then they are just recycling age old debates.
    For an analysis of the causes of inequality like the wave that hit NZ in the 1980s under the Labour Party watch the Rogercomic slide show.
    https://www.facebook.com/photo.php?fbid=1949770896882&set=a.1949769616850.2100256.1020893687&type=3&theater

  5. Marc says:

    “Richard Wilkinson said we must “bring democracy into the economy” which he described as transforming our companies from “pieces of private property” to “communities”.”

    And therein lies a major challenge or problem for New Zealand.

    The vast majority of New Zealand businesses are small to medium size, and I remember that most of them are small operations of less than 6 or 8 staff (including supervisors and managers).

    New Zealand has only a few sizable enterprises, where you have dozens or hundreds or more workers employed.

    There are even within larger holding corporations or companies franchises, where individual operations are run by small operators, who employ their own staff.

    Most if not almost all the operators and owners will resolutely oppose any real “democratisation” of their businesses, as they do not want to share responsibilities and benefits, and as they would not trust letting any of their staff have too much input.

    While there has in the late 1980s to mid 1990s been a clear and substantial development of a wealth and income gap between the better off and less well off, this gap has “stabilised”, but is of course continuing to exist.

    Yet differences in New Zealand are overall not quite as dramatic as for instance in the UK or USA. Only a few New Zealanders are top listers on the global wealth and income lists, and some have shifted a lot of their wealth overseas.

    The present inequality does show more in the growing gap in asset ownership, between those able to own one or more residential, and in some cases also shares in other properties, and those not able to afford this. Home ownership is as low as it has not been for many decades. So we have a fair few upper middle class members managed to expand ownership of homes, for retirement investment or whatever purposes, while the number of renters has increased, who in many cases will never be able to afford their own four walls.

    Some middle class people also own shares in companies, and some are self employed. As most businesses are not that large by international comparison, the ones doing well will never view themselves as that rich, but in comparison to the bottom of society they are.

    It is mainly in large companies where CEOs earn mega bucks and these companies and enterprises are small in numbers here.

    Once when much of economic and other activity was run in the form of state departments and corporations, the economy of New Zealand may have appeared more “democratic”, but with the privatisation, closure of factories, and with off-shoring, and with contracting out services, also with labour law “liberalisation”, the power of workers and unions has faded.

    The only short term “democratisation” of the economy here can only happen by voting left of centre, which would enable a government to reverse some adverse developments, and “re-democratise” the economy and society.

    That would also include re-establishing good, robust public broadcasting, which would enable the informing and education of the public, to better understand the value and benefits of more collectively owned and managed operations across the board.

    So this election is crucial, as otherwise things will only become more encrusted, and hard to change.

  6. BEATINGTHEBOKS says:

    The economy in NZ is already democratized any one who wants to can start their own business or engage in profitable commerce (just like dotcom).

    • e-clectic says:

      Sure anyone can start a business – that’s a freedom we have in NZ. “Democratised” is another matter, run your startup under the same assumptions as Chorus or South Canterbury Finance and see how well you get on.

    • Aaron says:

      Nice way to undermine your argument by using one of the richest people in the country as an example of what ‘anyone’ can do. One dollar = one vote is how our democracy actually works

    • Stuart Munro says:

      Because of the way industries are regulated here, small initiatives really struggle. Pre-1980s, NZ fishermen were predominatly small independent owner operated and delivered wealth comparable with a small farm. Since the advent of the QMS, fishing has declined, and become concentrated into fewer and larger hands. The unfortunate thing is that the small operator was the more biologically sustainable model. Many smaller businesses suffer from regulations that impose extra cost layers unless you have a lawyer on staff.

      It’s unfortunate because smaller operators are more innovative, and artisanal operations, which tend to deliver better outcomes from similar resources, tend to be suppressed.

  7. Mark says:

    The Spirit Level – aka the Communist Manifesto.

    Disgusting.

    • Marc says:

      Ignorance knows no limits when it comes to some, who do not even understand what the study is about.

  8. Rosa19 says:

    I like workers investing in companies they work for, but it can have its downside – when companies go under or reduce staff, workers lose incomes, and may lose part of their retirement savings.

  9. Joceje says:

    Well said John. Nz keep forgetting that the basis of our economy is a cooperative, that’s why dairy farmers are collectively doing well.
    It’s just they will not let anyone else share

  10. Brett says:

    One assumption reportedly made by the Professors immediately runs into commercial reality – that “any company” could transfer 2% of its shares to workers over an assumed life-span of 25 years. How many companies in NZ, large conglomerates aside, actually last even ten years? I don’t know the data, but I understand there is a high degree of ‘churn’ in any free-market economy. Logically, in order to ensure some kind of long-term stasis sufficient to enable stable share-transfers of this nature, then there would have to be massive re-regulation and protection of the NZ economy – back to the 1960s/1970s level, high tariffs and all the associated economic inefficiencies. Hard to imagine any voting consumer born since 1984 deciding to unilaterally raise the prices of (almost) everything they purchase.