Employee ownership is the solution for the new capitalism

HandshakePersonally I am just greedy as you are – I will be always on the lookout for earning more money. My motives are equally simple – being able to afford a better lifestyle. Economists have proven over the years that the ideal threshold of salary for an average person is MORE. The richer you get, the bar of expenses moves up. If at some point you can afford to buy a luxury yacht, then you will have to spend money on it’s upkeep. Our capitalistic society is built on the premise that every person has the chance to become fabulously wealthy. You only need to work hard and success will follow, right?

The income statistics don’t reflect that. Average income of the top 1% of earners in the most developed western countries – the USA and the UK has risen in the past 30 years by 4000%. In comparison, the average income in those countries simply followed inflation (which acts as the model for monetary growth in the global economy). Therefore the average income has risen 300% in the same period of time. When this information has filtered into the mainstream knowledge, it spurred unrest coupled with the global recession. We have all witnessed peaceful protests i.e. the occupy movement, but also violent riots where regular citizens looted businesses and destroyed private property. Nothing warrants illegal behaviour, but one can understand the actions of some of these people, when they are one one hand told by their managers that they can’t have more money or that their jobs will become redundant and on the other that salaries of CEO’s have been hitting record highs. You can’t but think where the money for potential new jobs is going to… This justification only is based on how our brains are wired, not how the justice system works. We are in fact hard wired for detecting fairness. Whether or not the high salaries are justifiable in terms of business results, the person at the bottom of the ranks might not feel so. They are treated as a resource and a cost, and an entire class of employees have been created to manage those resources – the Human Resources.

Shall we move on from capitalism to it’s direct rival – communism. Oh, wait, that failed with a bang… and even though it did, our governments seem to be quite happy to continue spending tax money on benefits. In the UK, 60% of the population is in some form subsidised by the remaining 40%. But is it fair for the government to play the role of Robin Hood?

In the past, when people were tied to the land and were not able to raise above their social rank, Robin was the only viable option if the rich used force against the poor to keep them poor. If today we are free to earn as much as we are worth it, how is it that more people aren’t as wealthy?

I’d like to suggest that the problem lies is in what is the perceived role of an average person in the modern society: a consumer. Our two basic roles in society are: worker for the company making stuff and the consumer who drives the sales of that stuff. Without the mass consumer there would be no mass economy and without the worker, there wouldn’t be any income to be spent by the consumers. And here is where the system fails. The worker is treated as a cost and therefore the employer expends resources to minimise these costs. For large global corporations this often means manufacturing goods in countries with cheap labour, like Asia at the moment and selling to wealthier countries, like the UK. But if jobs keep leaving the country and profits are unequally divided with the top earners making 40 – 400 times more than the average employees, soon there won’t be a market to sell to. None can expect a person making 400 times more than average to buy 400 pairs of trousers or support 400 restaurants.

The answer to this problem does not lie in taking more from the people who earn lots of money, but creating models of income that allow regular workers to earn more and build a financial future that helps them weather economic storms like the recent recession. There is a model of business ownership that often goes under the general public radar. This is the Employee Owned Business. The most prominent examples are the John Lewis Partnership and Waitrose, but there are many other, and the numbers are growing. This ownership model is simply an alternative exit strategy for a successful business owner. A business rarely starts as a cooperative, although these have been around for a very long time now. Usually it is a vision of one person and a creation of a few founding directors. Once the business matures, they may seek ways to capitalise on the new value of the business and sell it on to new owners; a bank, an investment fund. They can float the business on a stock exchange or sell it to management (an MBO). In all of those cases the employees who were key in creating this value are left behind and none of them will gain anything apart from their negotiated salaries. They are expendable and can be substituted with a new person at any time. There are laws of course to protect employees, but it is a constant legal and political battle that will never create a fair situation for both parties. The only solution to ending this quarrel is helping more people become business owners. Capitalism is not a bad system, but we don’t have enough capitalists. If we are groomed to be workers and consumers from a very young age, none of us can be expected to start a new successful business, but we all know how to do our jobs. Machine operators can still operate machines, whilst sales people still can bring in new business. By simply shifting the ownership, we suddenly create a situation in which the low earner doesn’t need a benefit boost from the government because profits from the business are sufficient. More money to spend means a healthier economy, and keeping some of the profits in a fund provides a healthy payout at the end of the employee’s time at the company.

We need more Friar Tucks, who can make the mead and keep their profits. Robin will help with negotiating better tax rates with Prince John for those who want to buy their work places.

If you’re interested in learning more about the benefits of employee ownership, or enquire on how to sell a business to its employees, a good place to start is the Employee Ownership Association

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