The Spirit Level: Why Greater Equality Makes Societies Stronger (38 page)

Co-operatives and employee buy-outs have often originated as responses to desperate circumstances in which traditional systems of ownership and management have failed. Employees have used them to avoid closures and unemployment in the most difficult market circumstances. Even then they have sometimes succeeded beyond expectations – as did Tower Colliery in South Wales when, in 1995, miners used their redundancy money to buy the pit and ran it successfully until the coal was worked out thirteen years later. Many fully employee-owned companies have a proud record. Examples include, or have included, the London Symphony Orchestra, Carl Zeiss, United Airlines, Gore-tex, the Polaroid Corporation, and the John Lewis Partnership (one of Britain’s most successful retailers with 68,000 employee-partners and annual sales of £6.4bn). In the USA, among the largest majority employee-owned companies are Publix Supermarkets, Hy-vee Supermarkets, Science Applications International Corporation (SAIC), the international engineering and construction company CH2M Hill and Tribune which, among other media operations, publishes the
Los Angeles Times
and
Chicago Tribune
. These companies average 55,000 employees each.

One of the best-known co-operative groups is the Mondragon Corporation in the Basque region of Spain. Over half a century it has developed into a group of over 120 employee-owned co-operatives with 40,000 worker-owners and sales of $4.8 billion US dollars. Mondragon co-operatives are twice as profitable as other Spanish firms and have the highest labour productivity in the country.
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It is hard to explain some of the successes unless a combination of ownership and participation does indeed have the potential to improve productivity by reducing the conflict of interests.

For most of the employed population it is at work that they interact most closely with people other than family and have the potential to feel part of a community. In Chapter 3 we saw evidence of the huge rises in anxiety which have taken place over the last fifty or so years as community life has weakened under the impact of growing geographical and social mobility. While greater equality is associated with more cohesive communities and higher levels of trust (see Chapter 4) and so may be expected to improve life in residential neighbourhoods, in the near future we are unlikely to regain the benefits of the very close-knit residential communities of the past.

But at work there is the potential for people to find a nucleus of friendships and to feel valued. This potential is usually undermined by the hierarchical stratification of people into various gradations of order-givers and order-takers, which ensure that employees act not as a community, but as property, brought together and used to earn a return on other people’s capital. One of us recently visited two small companies soon after they had been bought by their employees. When staff were asked what difference it had made, the first thing office staff in both companies said in reply was that, when they went on to the shop floor, ‘people look you in the eye’. Under the old system, eye contact had been avoided.

Employee-ownership has the advantage of increasing equality specifically by extending liberty and democracy. It is bottom-up rather than top-down. Although we don’t know what scale of income differences people would think fair, it seems likely that they might agree that the chief executive of the company they work for should be paid a salary several times as big as their own – maybe three, or perhaps even ten, times as big. But it is unlikely that they would say several hundred times as big. Indeed, such huge differentials can probably only be maintained by denying any measure of economic democracy.

As long as the employee-owned sector remains only a small part of the whole economy, it cannot use very different pay scales from other companies. If employee-owned companies paid junior workers more than other companies, and the most senior staff less, then the junior staff would never leave and senior ones would be harder to recruit. However, as the employee-owned sector became larger, people’s norms and values about what are appropriate rates of pay for different jobs, and what differentials are acceptable, would change. We might at least move towards the norms of the public and non-profit sector. And if there was no longer a set of hugely wealthy private sector bosses inviting comparisons and making people think such salaries could be justified, the non-profit sector might itself become more egalitarian. Perhaps it is time we moved away from a world in which people regard maximizing personal gains as a laudable aim in life.

David Erdal, former chair of the Tullis Russell Group and Director of the Baxi Partnership, once studied the effects of employment in co-operatives on the communities in which they were situated.
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He compared three towns in northern Italy: Imola, which has 25 per cent of its workforce employed in co-operatives, Faenza, where 16 per cent work in co-operatives, and Sassuolo where there are no co-operatives. On the basis of rather a small survey and low response rates, he concluded that health, education, crime and social participation were all better in the towns with a larger proportion of the population employed in co-operatives.

As a way of creating a more egalitarian society, employee-ownership and control have many advantages. First, it enables a process of social emancipation as people become members of a team. Second, it puts the scale of earning differentials ultimately under democratic control: if the body of employees want big income differentials they could choose to keep them. Third, it involves a very substantial redistribution of wealth from external shareholders to employees and a simultaneous redistribution of the income from that wealth. In this context, that is a particularly important advantage. Fourth, it improves productivity and so has a competitive advantage. Fifth, it increases the likelihood that people will regain the experience of being part of a community. And sixth, it is likely to improve sociability in the wider society. The real reward however, is not simply to have a few employee-owned companies in a society still dominated by a hierarchical ideology and status-seeking, but to have a society of people freer of those divisions. And that can only be achieved by a sustained campaign over several decades.

Rather than being compatible with just one system of management and work organization, employee-ownership is highly flexible. It merely puts ultimate authority in the hands of employees to develop whatever systems they find work best. This enables systems to evolve to suit any situation. Systems of work teams, of directors elected for longer or shorter periods, of departmental representatives, of company trustees, of anything from weekly to annual company meetings, could all be tried from place to place. Power could be delegated, or exercised directly by the body of voting employees. Gradually people would learn the strengths and weaknesses of different structures and what forms of democracy best fitted the public and private sectors and how to represent the interests of consumers and local communities.

However, to ensure that the number of employee-owned workplaces increases, it is essential that they are constituted – as they easily can be – in ways which prevent employees from selling their companies back to external shareholders. Although most are adequately protected, there have also been cases of sell-outs in which companies have been lost to employee-ownership and control.

As a means of transforming our societies, employee-ownership has the advantage that it can (and does) exist side by side with conventional business structures. New and old forms of business can coexist: with the right legal support and tax incentives the transformation of society can start straight away. It enables us to embark on a fundamental transformation of our society through an orderly transition, making the new society grow within the old. Governments can give additional incentives and support to encourage employee share-ownership. Companies might be required to transfer a proportion of shares each year, and retiring owners might sometimes be willing to pass their companies to employees.

Although employee-owned and controlled industry need not involve local community and consumer representatives on the governing body, that is a fault which can easily be remedied. It might also be said in opposition to employee-ownership, that it does nothing about the basic amorality of the market. The desire to earn a bigger profit would still lead companies to act in anti-social ways, however they were controlled. As well as some highly ethical companies operating in the market supporting fair trade, the environment, giving to local communities, etc., there are, at the same time, also companies trying to expand markets for tobacco in the developing world in the sure knowledge that they will cause millions of extra deaths. There are companies which have caused needless deaths by encouraging mothers in developing countries to buy powdered baby milk instead of breast feeding, despite lack of access to clean water or basic hygiene. There are others which continue to destroy ecosystems, land and water supplies, to exploit mineral resources where governments are too weak or corrupt to stand up to them, and still others use their patents to prevent life-saving drugs being sold at affordable prices in poorer countries.

There are reasons to think that employee-owned companies might maintain higher standards of morality even with the profit motive. In conventional employment people are specifically hired to work for purposes which are not their own. They are paid to use their expertise to whatever purpose their employer chooses. You might disagree with the purpose to which your work is being put, you might not even know what the purpose is, but you are not employed to have opinions about such things and certainly not to express them. Such issues are not your concern. If you are hired to advise on how your company can expand its markets, improve profits, avoid press attention, the chances are that you are not being asked for an ethical opinion. You are hired to put your expertise to work to serve someone else’s purpose. Not only are the purposes not your responsibility, but as an employee you are likely to feel absolved from responsibility for them. This is why people have so often disclaimed responsibility for what they were doing by saying that they were ‘only carrying out orders’. The famous Milgram experiments showed that we have such a strong tendency to obey authority that it can result in us doing some pretty awful things. In what was presented as a ‘learning’ experiment, Milgram showed that people were willing to deliver what they believed were not only very painful, but also life-threatening electric shocks to a learning partner whenever the partner gave the wrong answer to a question. They did this at the request of a man in a white coat conducting the experiment, despite hearing what they thought were the screams caused by the shocks they delivered.
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However, within a framework of employee-ownership and control, people specifically regain ownership and control of the purposes of their work. If, for instance, you get to know that some aspect of a design or manufacturing process is harming children’s health, you would want to change it and would probably start by finding out what colleagues thought about it. There would not be the same pressure to keep your doubts to yourself. Nor would you be able to shrug it off, dismissing it as none of your business. Neither would you fear that your job would be in jeopardy if you raised awkward questions. Although employee-owned firms would not be above all anti-social behaviour, it is likely that they would succeed in making it at least a little less common.

FREEDOM AND EQUALITY

The idea that we can’t have both liberty and equality seems to have emerged during the Cold War. What the state-owned economies of Eastern Europe and the Soviet Union seemed to show was that greater equality could only be gained at the expense of freedom. An important ideological cost of the Cold War was that America gave up its historical commitment to equality. For the first Americans, as for Tom Paine, you couldn’t have true liberty without equality. Without one you could not have the other. Slavery, as the simultaneous denial of both, proved that rule. Equality was the bastion against arbitrary power. This was expressed in the historical demand for ‘No taxation without representation’, and ‘No legislation without representation’. The American Declaration of Independence says that all men are born equal and endowed with liberty as an inalienable right, just as the French revolutionaries demanded liberty, equality, fraternity.

The complementarity of liberty and equality has been proclaimed in the writings of many democratic thinkers, including the social philosopher L. T. Hobhouse, who believed that liberty depended, in all its domains, on equality – equality before the law, equality of opportunity, equality of parties to a contract.
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Employee-ownership provides a way of increasing liberty and equality together.

RUNNING WITH THE TECHNOLOGICAL TIDE

In her book,
The Weightless World
, Diane Coyle points out that although people in most industrialized countries experienced something like a twentyfold increase in their real incomes during the twentieth century, the weight of all that was produced at the end of the century was roughly the same as it had been at the beginning.
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She also says that the average weight of one dollar’s worth of US exports (adjusted for inflation) fell by a half between 1990 and 1996. While the trend towards ‘weightlessness’ is partly a reflection of the growth of the service sector and the ‘knowledge’ economy, it is also a reflection of changing technology and the trend towards miniaturization. That so much of modern consumption is actually lighter on the use of material resources than it was, is presumably good news for the environment. But the underlying nature of the changes contributing to weightlessness may also have important implications for equality.