Editorials
Christmas 2014: Editorials
How 21st century capitalism is failing us
BMJ 2014; 349 doi: http://dx.doi.org/10.1136/bmj.g7516 (Published 15 December 2014) Cite this as: BMJ 2014;349:g7516- Richard Wilkinson, emeritus professor of social epidemiology1,
- Kate Pickett, professor of epidemiology 2
- Correspondence to: R Wilkinson Richard@RichardWilkinson.net
The popularity of Thomas Piketty’s book Capital1
was perhaps the publishing surprise of the year, but it is paradoxical
for three reasons. Firstly, its 700 academic pages are hardly an
inviting bedside read. Secondly, its appeal was primarily to people
already worried by rising inequality, even though its main argument is
that increasing inequality is built into capitalism and will be hard to
overcome. And, thirdly, for those of us who regard a combination of low
inequality and little or no economic growth as a precondition for
environmental sustainability, Piketty’s message is doubly unwelcome: it
implies that slower economic growth leads to faster rises in inequality.
So could the attraction of this book—its title echoing
Marx’s magnum opus—be that it lays the blame for increasing inequality
firmly at the feet of capitalism rather than suggesting that minor
reforms would solve the problem?
The popularity of Naomi Klein’s latest book, This Changes Everything,2
may stem from the same source. Subtitled “Capitalism vs the Climate,”
it shows how large corporations, particularly fossil fuel companies,
have bought off governments and many environmental groups, watering down
policy proposals, legislation, and international environmental
agreements. Even the much publicised environmental commitments of
several major industrialists have not lived up to their promises. The
upshot is that we have frittered away the little time we had to
substantially reduce carbon emissions so that environmentalists
increasingly believe that we are heading for catastrophic temperature
rises.
The growing trickle of institutions (including the
BMA) disinvesting from fossil fuel companies is a welcome expression of
a desire not to be seen to benefit from profits of the companies
ultimately responsible for carbon emissions. But exactly who owns their
shares and receives their profits makes little difference to the
companies themselves.
Another recent book that launches a major attack on capitalism, this time on health grounds, is Nicholas Freudenberg’s Lethal but Legal.3
He sets out the evidence that the food, alcohol, tobacco, automobile,
pharmaceutical, and gun industries are now the main sources of damage to
public health. And of course, in the endless conflicts between public
and corporate interests, corporations use their huge advertising wealth,
media, and political influence to defend themselves to the hilt. They
pack regulatory systems with people who will defend their interests,
they buy politicians, and continue to maximise the sales of their
products in the face of massive evidence of harm—from obesity,
drunkenness, smoking related disease, environmental damage, and so on.
If
we wanted evidence that the antisocial behaviour of big corporations is
a large political problem, their record on tax evasion provides it.
Estimates of the cost just of corporate tax avoidance to the UK
government vary between £4bn (€5bn; $6bn) and £12bn depending on whether
estimates include things like “legal” profit shifting.4 5 (Loss of tax revenues from all sources is estimated as £34bn upwards.)
In
2008, the US Government Accountability Office reported that 83 of the
country’s biggest 100 corporations had subsidiaries in tax havens.6 The Tax Justice Network reported that 99 of Europe’s largest 100 companies also used tax havens,7
and it estimates that over half of all world trade passes—on
paper—through tax havens in order to avoid or reduce taxation. The
amount of money lost in tax revenue by developing countries far exceeds
all international development aid.8 9
As
well as tax avoidance and the huge sums of money that Klein shows the
fossil fuel industry pours into subverting efforts to reduce carbon
emissions, business and its sophisticated marketing and advertising arms
is hell bent on maximising sales and consumption—even though
consumerism is a big obstacle in the path towards environmental
sustainability.
But consumerism is not simply a
reflection of the desire of business to sell. It is also an expression
of the importance of status competition among consumers. Research shows
that status anxiety is intensified by greater income inequality.7 10 As a result, people in more unequal societies give higher priority to buying status goods.11 They also work longer hours, save less, get into debt more.12 13 14
Inequality makes money even more important as it becomes the key to demonstrating our status and worth to each other.
Democratising business
But
if our future lies in maximising wellbeing rather than economic
activity, we will be aided by what might be called “a convenient truth”15:
rather than benefiting from further economic growth, health and
happiness in rich countries is now better served by improvements in the
quality of social relations and community life.16 17 It looks as if greater equality would reduce consumerism and improve the social environment.
It
should not be beyond the wit of modern societies to ensure that
production is undertaken in the service of the public good, humanity,
and the planet. The obstacle is that large corporations are so powerful
that our democratically elected politicians are afraid to touch them—and
far too afraid to start thinking about alternatives.
The Bureau of Investigative Journalism estimated that in a single year
the British financial services industry spends more than £92m on
lobbying politicians and regulators “in an ‘economic war of attrition’
that has secured a string of policy victories.”18
What this figure would be if other sectors—pharmaceuticals, food
processing, arms, energy, alcohol—were added in is anyone’s guess, but
it certainly compromises the democratic political process.
Could
an extension of democracy into economic life be part of the solution?
More democratic business models include companies owned and controlled
directly or indirectly by some or all of their employees, companies with
varying degrees of employee representation on boards, consumer
cooperatives, mutuals, and credit unions. They include organisations as
different as the London Symphony Orchestra, the Mondragon Cooperatives,
Oxbridge Colleges, John Lewis Partnership and Waitrose, Suma Wholefoods,
Divine Chocolate, Cafe Direct, and, perhaps more informally, Gore-Tex.
Around half the member states of the EU have at least some legal
provision for employee representatives on company boards or remuneration
committees.19
Those
like Germany, with stronger legislation, have had smaller rises in
inequality. Evaluations suggest that more democratic companies not only
have smaller income differences within them but also enjoy higher
productivity.20 21
As well as reducing income inequality, wholly employee owned companies
are also part of the solution to the increasing concentration of capital
ownership which is Piketty’s focus. More democratic business models
would help to disperse capital ownership as well as income from profits.
There is even evidence that more democratic businesses are more
ethical.22 23
Perhaps then our salvation lies in a thoroughgoing democratic transformation of capitalism.
Notes
Cite this as: BMJ 2014;349:g7516
Footnotes
- Competing interests: We have read and understood BMJ policy on declaration of interests and declare both authors are non-executive directors (unpaid) of the Equality Trust.
- Provenance and peer review: Commissioned; not externally peer reviewed.
