“Imagining Other”

CSR in Context Chapter 8:

 

INEQUALITIES OF WEALTH AND POWER

 

                                                                                                                                                                                                                                                            Links.

                                                                                                                                                                                                                                                                                                            Updates for CSR       

                                                                                                                                                                                                                                                                                                            Chapter 7: The "Third World"        

                                                                                                                                                                                                                                                                                                            Chapter 9: Remedies and Conclusion

                                                                                                                                                                                                                                                                                                            CSR in Context Contents Page

                                                                                                                                                                                                                                                                                                            Imagining Other Index Page

 

Note: this page was originally written in the 1980s, and updated from time to time until the mid noughties ...

 

I have since compiled a new page of updates: Updates on inequality. This was uploaded in 2012, and reflects the rise of the Occupy movement, which has brought out into the open - especially since the ‘credit crunch’ of 2008 - the vast inequalities between the 99% and the 1%.

 

Inequality is a central issue for socialists, so this page is also relevant in connection with my notes on:

Socialism before Marx, 

Marx,  and 

Socialism since Marx. 

                                                                                                                                                                                                                                                                                                                                                                       

For more recent points on ‘alternatives’ such as worker co-operatives, see: Imagining Other: Alternatives.

 

 

Topics/bookmarks for this page:

absolute poverty                                                 

Berle and Means                                                 

charity     (worker) co-operatives                                 

executive pay                                                      

Galbraith (JK)     gender discrimination                         

Halliburton     happiness                happiness (update)    Hayek (F)        health and safety           health inequality (including mental health/happiness)            HSBC               

income inequalities                                            Iraq     

LETS (Local Exchange Trading Schemes) (and local economies)    lobbying           Lukes (Stephen)

managers' power (“internal”)        managerial class (“external” power)    Michels (Robert)         

neo-liberalism     New Labour                                      

ownership and control (separation of)                  

power (introduction to ‘managers’ power – see above)            private equity   

race     relative poverty                                                

Sampson (Anthony)     social enterprise                         social mobility              

time banks     "trickle down" theory (wealth)     unions     wealth inequalities

 

 

 

Aims and Learning outcomes:

 

To examine the extent and implications of inequality, outlining different viewpoints as to the seriousness, likely causes, and solutions to the phenomenon, with special reference to the role (if any) of business. Students should understand the nature of inequality and the different views on it. Students should be able to come to their own view on what (if anything) business can contribute to lessening inequalities.

 

Summary:

 

1. Why is inequality important to business?

 

(i)   success of a business depends on well-being of its local and national community

(ii)  poverty as a threat to economic and social stability, costs to state (of unemployment, low pay, poor health etc)

(iii) unfairness (wealth or poverty affects opportunities and power...)     

 

2.  The extent of inequality and its "mutually reinforcing" dimensions (definitions):

 

(i)  Inequality of condition: (a) definitions (b) income (c) wealth (d) relative poverty etc (e) health, (f) security

(ii) Inequality of opportunity (social mobility) – issues of class and underclass

(iii) as a result of discrimination (a) gender (b) race (c) age (d) other, e.g. geography

 

3. Inequality and Business?  What business activity may determine:

 

(i)   wage levels & variations, also redundancy, boardroom pay, …

(ii)  prices

(iii) communities’ well-being, (through location decisions)

(iv) employment opportunities (through recruitment policies)

           

4.  Power: definitions, dimensions, “structural power”.

 

(i)  definitions

 

(ii) “Internal” power (i.e. within the firm), of managers and directors (covered already: work process and alienation)

(a) civil liberties and privacy     

(b) bullying and sexual harassment:

(c) whistle blowing:

(d) personnel policies and procedures:

(e) discrimination:

(f) unions:

(g) health and safety:

 

(iii) Managers’ “external” power. (Large corporations’ other kinds of power covered under “environment” and “third world”)

(a) managers' and directors - a "propertied class"?  (i) for, (ii) against

(b) lobbying and influence, revolving door.. 

 

(5) What is to be done about social inequality?

 

(i)   (Rely on business) free market and the 'trickle down effect'

(ii)  (Reform business) enlightened self-interest

(iii) (Regulate business) it is up to government to deal with inequality

(iv) (Replace business) radical approaches: “time banks”, Local Exchange Trading Systems, Workers' co-operatives

 

Appendix: a few illustrative statistics.


 

Chapter  8 Inequalities of wealth, condition and power.

 

Introduction:

 

We will deal with two kinds of inequality: of standard of living (income and wealth etc), and also of power. Needless to say these are “mutually reinforcing”!  Note also that I assume that the main concern when it comes to inequality is with those at the bottom of the pile, so I will often talk of poverty and powerlessness as the main issue.

 

1. Why is inequality important to business?

 

1(i) From the point of view of “enlightened self-interest” a business should surely recognise that its success depends on the well-being of its local and national community. By enlightened self-interest is meant self-interest that considers the interests of others at the same time: doing good for others can be good for you!  The saying “good business is good for business” typifies this outlook. (The expression is analogous to the usage in politics: an enlightened despot is a ruler with absolute power who uses it for the good of the people). A business will not have customers if everyone around is out of work and too poor!

 

1(ii) Another reason for business to be concerned about poverty, is that extremes of poverty can become a threat to economic and social stability. In this country (Toxteth, Brixton) as in others there have been riots whose cause is at least partly anger on the part of the very poor and excluded. Often there has been a racial aspect, since as I note below, race is a factor that can result in poverty or powerlessness.

 

Apart from the direct physical and economic damage that rioting (e.g. looting) can cause, widespread poverty puts costs on to the state, through unemployment pay, loss of wealth generated if too many are unemployed etc. These costs will be passed on in some way, through higher taxes for example. Since poverty can often result in poor health, there are also hidden costs in extra demands on the health service.

 

As an example of how serious such costs can be, the Guardian noted (4/3/05) that 20 years after the miners’ strike the state is still paying the costs!  When a large number of pits closed (the strike was a failed attempt to stop closures from happening) 160,000 men were put out of work; of these, 60,000 are claiming unemployment benefit, and 100,000 are on incapacity benefit. Incidentally, the article also notes that there is a big discrepancy between “official” figures, which make the picture look much less serious, and the likely “real” figures. Similarly there has been discussion of what amount of money would be needed to support workers put out of a job by the closure of Rover Cars. The Work Foundation believes (according to Jane Martinson in The Guardian 25/4/05) that the £150 million earmarked by ministers to find work for or to retrain 5,000 former MG Rover employees will not be enough.

 

1(iii) Whilst both the above points appeal to business’s self-interest, there is also the argument that too much inequality is simply unfair. We like to think (as Tony Blair puts it) that we have equality of opportunity – however, poverty affects opportunities and power... (see below).

 

It seems that at the end of the ‘90s the British people on the whole believed that levels of inequality were too high – a British Social Attitudes Survey in 1996 found that 85% of the population thought that the income gap was too large in this country. Given that the gap has not decreased very much, this should mean that the concern is still there – though public opinion is changeable. Since the Lottery has created more millionaires, attitudes to extreme wealth may have changed, and I personally would not be surprised if less people now think that extremes of wealth are unfair!

 

2. The extent of inequality and its "mutually reinforcing" dimensions (definitions, theoretical perspectives/models, and statistics):

 

2(i) Inequality of Condition:

(a) definitions.

 

Note: what I want to stress here is that poverty does not mean simply a shortage of money: the poor tend to have worse health, a shorter life expectancy, poorer education, less of a “voice” in society and politics, less security, less mobility, etc. There are many dimensions to poverty, and each of these “dimensions” reinforces the others:

 

- with less money people tend to buy cheaper less nutritious food, with consequences for their health;

 

- low-paid jobs are often more dangerous and hazardous – and may be more stressful (recent research [source lost] shows that it is lack of control over one’s life and work that creates stress – contrary to “common knowledge” it is not managers who suffer most illness from stress);

 

- with poor health one’s ability to work becomes affected: for low-paid workers, time off means loss of income;

 

- when a child’s parents are unskilled workers on a low income there is not only a lack of expectation that they will get a “good” education, but there may be pressure for the children to start work as soon as possible in order to supplement the family income;

 

- the less educated someone is, the less they participate in social and political affairs – typical “activists” are white, middle-class and middle-aged, and male!  - and the less a social group is able to participate, the less likely it is that they will be able to rectify poor living conditions;

 

- inadequate education may affect health: lack of medical knowledge, coupled with the need to avoid taking time off work, may mean that someone who is ill buys an over-the-counter (OTC) medicine (see the section on the consumer), rather than consulting a doctor – OTC medicine is often inappropriate and doesn’t help cure the illness;

 

- less mobility exacerbates poverty: a social exclusion unit report in 2002, “Making the Connections” (www.socialexclusionunit.gov.uk) pointed out that richer people travel for longer journeys, mainly by car and train, whilst poorer people make fewer journeys, mostly by foot and bus. Poor transport can restrict access to jobs, education, shops and services, social and cultural life. Transport noise and pollution also has a disproportionate effect on the poor. (Tony Grayling, The Guardian 21/5/02).

 

- finally, again contrary to what many believe, you are more likely to be burgled or mugged if you live in a poor area than if you live in a middle-class area; you are yet more likely to be attacked if you are black and poor (source lost, sorry).

 

There are two ways of defining poverty: absolute and relative poverty: when someone does not have the means to provide for their basic needs (food, shelter, clothing) they are “absolutely” poor (of course, the amount one needs to provide for basic needs differs from society to society). On the other hand, if there is a large gap between the richest and the poorest in a society, we speak of “relative” poverty. The latter is more controversial as a definition, and some social scientists would say it is not useful, since someone who is relatively poor in the UK may be much better off than someone who is poor in a poor country. However, from the point of view of “fairness”, relative poverty still seems to me to be a useful concept.

 

I have put together some statistics in the notes that follow. These are just a rather un-organised set of figures, gleaned from the press and from books, but not systematically analysed. Were this a social science course, this would not do! However, for our purposes I hope that it gives a picture of the extent and nature of inequality in the UK.

 

See also Hills (2004) for up-to-date arguments.

 

2(i) Inequality of Condition:

(b) Income

           

There is a high degree of income inequality in Britain, and trends show that whilst the current government has done something to help the poorest, the gap has not been lessened (because the richest are forging ahead faster – much the same phenomenon as with the difference between richest and poorest across the world). There are still 12.4 million people, or 22% of the population, living in poverty according to John Pilger (New Statesman 25/4/05),

 

As an illustration of how far government policy can affect distribution of income and wealth, an OECD report in 1996 (when John Major was the Conservative Prime Minister) showed that the UK was third behind the US and Canada among industrialised countries in the proportion of its workers who are low-paid. Moreover, earnings inequality was growing faster in the UK than in any industrialised country except the USA.

 

If we take into account earnings of top executives, the difference can be extraordinary, with people on the (only recently implemented) minimum wage (around £5 a week) earning a fraction of the millions that these “fat cats” earn. John Pilger, (loc cit) also says that top executives’ pay has risen by 500% under New labour, whilst the average rise in earnings is 45%.

 

There has, I am pleased to say, been some scandal over these payments, particularly when they are “golden farewells” to executives who have done nothing to help the business they are leaving! To give just one example: Rentokil Initial has just dismissed an executive director with a £1.1 million compensation package, and appointed a new one on with a salary of £800,000, shares worth £1.6 million, and bonus arrangements that could add up to £800,000 on top! (Guardian, 30/4/05). However, City investors in Shell have asked for the chief executive’s pay package to be re-drawn because they believe it could lead to his being paid too highly. (Jill Treanor, Guardian 8/3/05)

 

It is also worth stressing (especially given the common belief that welfare fraud is a serious problem), that tax avoidance costs £1 billion. Gordon Brown has said that he will find more than a third of the £2 Billion he needs for extra spending pledged in the budget from tightening the rules on tax avoidance (Paul Murphy, Guardian 25/4/05). Needless to say, proposed legislation to stamp out “deferred subscription agreements, or defeasance structures” has met with opposition from the company executives, who claim that the wording will lead to confusion! (Murphy, loc cit).

 

Some figures:

 

In 2004 the top 10% of the population took home more than the whole of the bottom 50% (John Hills 2004 - reviewed by Heather Stewart, Observer 7/1//04) – though the poorest have been helped by the current government, still inequality is at its greatest since the 1940s

 

1.5 million in UK earned more than £1,500 per week in 2001 – 2

 

23% of population earn less than half national average i.e. 14 million people.

 

Low pay:

Number of employees with gross weekly earnings below Council of Europe's "decency threshold" (£5.75 per hour or £215.50 per week):

1979:   7.8 million =  38.1%

1993:   9.81 mln    =  48.2%

 

Executive pay

 

In 2001:

the head of Logica took home £27 million,

 

the head of Telewest £5.8 million,

 

the head of Reckitt Bensicker’s salary was £756,000, with bonuses of £2,534,000, and options of £5,772,000: Total £9,062,000

(Jill Treanor, Julia Finch, The Independent, 4/10/2002)

 

Polly Toynbee, (Guardian 8/12/04) points out that managers’ salaries have not kept pace with directors’:

 

Incomes Data Services report on top 350 companies:

For every £100 directors received in 1998 they now get £213

For every £100 a manager got in 1998 they now get £127

 

Child poverty rates:

 

% of children in households with incomes below 60% of median:

Finland  6%

UK 24%  (down from 1998 where approx 30%)

 

Update: 05/09/07:

 

The extraordinary level of directors’ pay is causing much comment.

 

Guardian figures suggest that City bonuses are likely to reach £14bn this year, and bonuses and directors’ pay will reach £26bn.  New Statesman (3/9/07) adds: the same sum could give the poorest-paid 20% of British workers an increase of almost £5,000….

 

NS continues: the bottom 20% are what the Joseph Rowntree Foundation calls the “breadline poor”: it includes one in four children, many single-parent families and a disproportionate number of women and black workers.

 

In the City, where 3,000 workers will pick up bonuses of £1m each later this year, cleaners earn the minimum wage of £5.35 an hour (it would take such a cleaner 90 years, working 40 hours a week with no holidays to earn £1 million).

 

Remedies, for the NS, are obvious: higher inflation-linked minimum wage and enforcement of it, transparency so that more people realise the wages paid to different groups, obliging employers not to discriminate on basis of gender (women’s pay is still 17% behind men), and finally: tax… after all, 73% of the population think the gap between high and low earners is too great.

 

See also below, on executive pay and lobbying.

 

2(i) Inequality of Condition

(c) Wealth

 

Wealth, or capital, earns money for those who own it. The very wealthy need do no paid work at all. Wealth can be in land, or other forms of property (housing, buildings, jewellery etc), or in shares, investments etc, or in the ownership of a business.

 

It is worth noting that the gap between those who own most wealth and the poor is far greater than the income gap. The Dutch economist Jan Pen once pointed out that if you were to represent the people of Britain with their height in proportion to their wealth, many would be of negative height (because in debt), and a very few would be over a mile high! (see Donaldson 1975)

 

Housing is one of the most accessible forms of wealth, and in the UK 70% of the population own their own homes. However, we compare unfavourably to other less wealthy European countries (Spain, Greece, Italy: 80%, Hungary 92%)  (according to Malcolm Dean in The Guardian 24/11/04). Note also that inheritance worsens the gap between rich and poor, or at least passes on inequalities: the average Londoner who inherits their parents’ home will get around £250,000 – if your parents live in social housing you get nothing…

 

It has been the case “since records began” that there are a few wealthy people at the top of the pile who share out far more than the large number of people at the bottom. According to Yvette Cooper, minister in the Office of the Deputy PM, (The Guardian [date lost!]) the bottom half of the population owns only 6% of the nation’s wealth.

 

Some figures:

 

From The Guardian ,Oct 2003:

 

2003: bottom 50% owned 1% of wealth

 

1987:

Top 1% of population own 18% of wealth

top 10% own 50%

top 50% own 93%

bottom 50% own 7%

 

1976 bottom 10% owned 12%

 

Britain in 1997 had 16 billionaires – more than ever before – (Sunday Times annual survey of wealth), including, from the top:

 

Joseph Lewis, currency dealer, £3 billion.

 

Hans Rausing owner of Tetra, £2.95 bn

 

Sainsbury, £2.5 bn

 

Duke of Westminster, £1.7 bn. (land)

 

Note that 69% of the land is owned by 0.6% of the population,

i.e. 158,000 families live on 41 million acres, and

24 milion on live 4 million acres. (New Statesman 20/4/04)

 

Mittals, steel, 1.5

 

Rothermere 1.2 (newspapers)

 

2(i) Inequality of Condition

(d) relative poverty etc

 

Income ratio of richest to poorest per head in the richest countries: (Freedom 26/7/03):

 

1800: 3:1          1900: 10:1        2000: 60:1

 

Family Expenditure Survey 2002: (Guardian 24/1/02)

 

The richest 10% spent 7 x poorest 10%

i.e. £849 per week  vs. £126.70 – including £187 on leisure

 

% who pay top rate tax: 10%, % of children at private school: 6%

 

2(i) Inequality of Condition

(e) Health

 

Infant Mortality Rates, by Social Class:

(deaths per legitimate live births)

 

1930 - 2:          1978:   1980:   1982:

I:          32        12        10        8.3       fall of a third  (Observer. July 1984)

II:         46                    11

III:        59                    12

IV:       63                    15

V:         80        20        17        15.6     fall of less than a quarter

 

Regional variations (according to wealth of area) in life expectancy:

Belsize Park/Hampstead (male): 79.6

Kilburn/Holborn:                                    69.7  

(Sir Michael Marmot, Prof. at UCL, Guardian 16/02/05)         

 

Update 27/01/07:

 

Inequality and happiness:

 

Oliver James in his new book Affluenza: How to be Successful and Stay Sane (Vermillion 2007) points out that people are more depressed in countries where inequality is highest: people are less depressed in countries like Denmark (even with high taxation!) and are becoming more depressed in Russia, where inequalities are now increasing (e.g. all women used to enjoy dressing to look good: now only those who can afford it are fashion-conscious).

 

Review by William Leith Guardian 27.01.07

 

See also below: happiness update!

 

Update 30/7/2005:

 

Inequality and Health: “The Impact of inequality: How to Make Sick Societies Healthier” by Richard G Wilkinson, Routledge.

 

Notes on a Book Review by Polly Toynbee in the Guardian, 30/7/05:

 

This very important book spells out exactly why social inequality is harmful. The author (says Toynbee) is a professor of social epidemiology and an expert in public health.  Here are some extracts from Toynbee’s review:

 

“However rich a country is, it will be more dysfunctional, violent, sick, and sad if the gap between social classes grows too wide. Poorer countries with fairer wealth distribution are healthier and happier than richer, more unequal nations.

 

Greece, with half the GDP per head, has longer life expectancy than the US, the richest and most unequal country with the lowest life expectancy in the developed world. The people of Harlem live shorter lives than the people of Bangladesh.

 

Social status and respect matter beyond anything, and the psychological damage done by being at the bottom is crippling. A survey of Whitehall civil servants found junior ranks were three times more likely to die in a year than seniors.

 

Homicide rates (and other crimes) track a country’s level of inequality, not its overall wealth.

 

Infant mortality is mainly a result of low-birth weight babies.  … these days small babies are not caused by a bad diet…. It is stress that does it… and poorer mothers are more depressed, with less social support.”

 

Finally, Toynbee points out that for most people pay is a measure of their social status, and those suffering low wages know that “their labour and themselves [my italics] are worth little.”

 

2(i) Inequality of Condition:

(f) security      }  see the Appendix

                                                           

2(ii) Inequality of Opportunity (social mobility)

 

Social mobility is the when people are able to move out of the social class into which they were born. For most people, social mobility is a good thing, in that without it the poor always remain poor, and the rich remain rich, regardless of how hard they work. These days there is much talk of the importance of “equal opportunity” – though different politicians may mean different things by it!

 

Social scientists argue extensively about how far it is possible to increase social mobility, and their views on this depend on how they define class, and in particular whether they believe that someone’s environment and upbringing (“nurture”) or their genetic inheritance (“nature”) makes them intelligent. If we are all born with a certain amount of intelligence, some with a lot, and some with little, it is argued, then there will not be much social mobility, and there is no point in trying to change this.

 

On the whole, the political “right wing” tends to emphasis “nature”, whilst the “left” emphasis “nurture” – so those on the left will have more faith than the right in our ability to change the existing order. In America, the right has argued that blacks are born less intelligent and that this explains their lower economic status, and their greater conviction rate for crime – moreover those who believe this would argue that there is no point in trying to improve the social conditions of blacks because it will make no difference!

 

Of course, even if you do accept that we can do something about the rate of social mobility, there is the question of “what?” – to which the most feasible answer is education. However, given the interaction of the “dimensions” noted above, it would seem to me that – as with so many things – there needs to be a multi-track approach, with health, physical mobility (access to transport – the poor are the main users of buses, the really rich use planes!), housing, crime etc all tackled along with education – and especially nursery care which prepares children for education. (see Polly Toynbee, quoted in the Appendix).

 

We will deal with what (if anything) business can do below, but this list makes it obvious that one would expect government to be the main body to deal with the issue. Labour governments, in this country, have been the ones that have argued the case for better opportunities for the poor (as against the Conservative’s “equal opportunities”) – however, it is remarkable that under the current government, after seven years in office, there is actually less social mobility (as admitted by Alan Milburn, Cabinet Minister, in a speech given last year, according to the Observer 14/11/2004). In April 2005, the findings of research carried out at the LSE on behalf of the Sutton Trust showed that Britain had one of the worst records for social mobility in the developed world, and that Britons were less likely to break free of their social background than in the past (Matthew Taylor, The Guardian 25/4/05).

 

Social mobility – children: (Polly Toynbee Guardian 3/12/04)

 

Britain spends 0.3% of its GDP on under-fives, compare:

Scandinavia: 2.4% (and there birth is no longer destiny)

Sweden: half of nursery carers have three-year degree]

 

In Britain: 95% of children in richest areas get nursery education as against 65% in poorest areas.

 

 

2(iii) Inequality as a result of discrimination

 

There are many ways in which discrimination can affect people:

 

(a) Gender:

Links:              

Political philosophy of feminism

Women’s liberation movement (not completed yet…)

 

Women’s pay, despite equal opportunities legislation, continues to be behind that of men:

 

Update (20.09.07):

 

Average weekly pay of male apprentices: £153, of female apprentices: £113 = a 26% gap according to DfES survey 2005 (Education Guardian 18.09.07)

Most women apprentices are in such areas as: Early years/education; hairdressing; health and social care. These areas pay least (education etc £78, hairdressing £86, best is health and social care at £124).

Least women (3% down to zero!) are found in: engineering, construction, automotive and electro-technical. These areas pay more: up to £160. All bar automotive, at £116, pay more than the trades where women are mainly found.

 

 

Update (27.01.07):

 

A full-time woman worker’s hourly rate of pay is 12.6% less than a full-time male

A part-time woman worker earns 40.2% less (Vicky Frost, Guardian Work p 1, 27.01.07).

 

Next week, following recommendations from the Women and Work Commission, the government will take various measures (scheme to improve quality of part-time jobs, money to advise employers, etc) to try to improve the situation. Katherine Rake, Director of the Fawcett Society asks why all jobs cannot be offered on a flexible basis. Paternity leave is helpful, but raising a family is still seen as a woman’s task.

 

            ****

 

In 1965 the figures were:

Women 18% behind that of men (for full-time workers),

In part-time work, where more women are to be found, the gap is 41%.

 

Women who took time out from their careers (mainly to raise children) can lose out on pension contributions, and those who divorce lose their share of their husbands pension: less than 50% of women can claim the full state pension, as against 92% of men, (figures from Malcolm Dean, The Guardian 6/4/05, quoting Equal Opportunities Commission reports, and the Fawcett Commission).

 

 

Only 12% of the top wage earners are women (and no change over 4 yrs): i.e. over £100K 

 

(Guardian 4/12/04: Jobs and Money):

 

Pensions for women: average retirement income for women is just over half that of men

One in four single women at retirement live in poverty

Fewer women than men are in company pension schemes

 

(From EOC seminar): 18% pay gap between FT male and female workers, (34 years after Equal Pay Act) – for PT is 41% gap!!

 

- women graduates within 5 years of graduation are getting 15% less than men in same jobs

 

- only 9% of executive and non-executive directors of top 100 UK companies are women; last year 32 FTSE 100 companies had no female director. 

 

2(iii) Discrimination:

(b) Race:

 

Ethnic minorities are still discriminated against in employment – as a report from the Ethnic Minorities task Force found (as reported by Gaby Hinsliff, The Observer 21/11/04): while £19,552 was the average wage for white employees, it was £18,044 on average for all ethnic minority workers, £12,220 for Bangladeshis and not much more for African and Caribbean workers with similar qualifications. Poverty rates are highest among some of our ethnic minorities, and as noted above, you are more likely to be a victim of mugging or burglary if you are black.

 

Race Update:

 

Social anthropologist Gillian Evans, in Educational failure and Working Class White Children in Britain (Macmillan 2006) shows how complex the question of ethnicity is: in some areas, white working class boys have a worse educational record than black boys. This seems to be because of their class position, and she notes that they also feel they do not have a recognised (white) “way of life” (whereas black boys’ lack of achievement is explained in terms of their ethnicity and not so much in terms of their class). Yet, she notes that the simple explanation of “problem families” is not accurate: many of the low achievers had “good”, often strict families, and in one of her cases the boy had a sister who was doing extremely well. The crucial factor seems to be that the boys are expected to get the respect of their peers, standing up to intimidation and violence, in a street and gang culture, a process they then extend to school. The boys cannot then be seen to be “good” at school…. !!!  Girls on the other hand are expected to “play in” at home alongside their mothers.  (So much for the “end of gender distinctions” in modern society! 

 

2(iii) Discrimination

(c) Age

 

Age is another factor: the elderly need better heating, at a time in their lives when they can no longer afford it – as many as 30,000 elderly people die each year because of cold weather, according to Friends of the Earth, citing the Acheson inquiry (1998). On a less extreme note, there is a growing “digital divide” between young and old: use of computers is more widespread among the better-off (incomes over £37,000 a year) and the young (over 50s are much less likely to use a computer) (figures from Maggie Brown, The Guardian 25/4/05, quoting recent research by the Oxford Internet Institute).

 

(d) other factors:

 

Even geography – where you happen to be born – can affect your life chances: Hackney, Newham and Tower Hamlets are all among the most deprived boroughs in the country. In the 10 Thames Gateway boroughs, 20% of housing is below minimum standards, and in five of these boroughs the figure is 60%.

 

In Northern Ireland, Government research found that around 38% of children were living in poverty, and wage rates are 25% less than the rest of Europe according to the northern Ireland Anti-Poverty Network (Mary O’Hara, Guardian 24/11/04).

 

3. Inequality and Business?

 

3(i) Although, as stated, much of the responsibility for dealing with social inequality lies with government, and much social inequality is perpetuated from generation to generation, we need to remember that business does play a part in reinforcing inequalities, and may even create some.

 

Thus, although businesses will claim that they have to obey whatever the market pressures are, there is surely some room for discretion and manoeuvre over wage levels, for example, and the pay of top executives is generally agreed (outside of the boardrooms, and even sometimes inside!) to be excessive.

 

The role of trades unions is often forgotten here: were there no contact between workers doing the same job in different companies, or different parts of the country, there would be much more variation than there is. Trades unions have always stood for parity – the same rate of pay for the same job.

 

It is at the top of the firm that most discretion lies, and I have already referred to the scandal of “fat cats” – directors and others whose pay is many times that of their employees. Senior management must also take responsibility for those occasions when firms go out of business. I am not ignoring macro-level economic factors, of course, but to the workers it too often seems that not enough initiative or imagination was shown by their managers when things started going less well. At times, managements have been guilty of incompetence and malpractice that has resulted in the closure of businesses and the loss of jobs.

 

3(ii) Again, in theory it is the market, and the laws of supply and demand, that determine prices – and yet we know that businesses collude to set price levels: the law cannot prevent all cartels or all artificial price rises.

 

3(iii) Perhaps the most obvious way in which businesses may affect the social and economic well-being of the public is through decisions over location. It is only too tempting, when an area gets into a state of decline (say through closure of a major local employer, or the end of a whole type of work, as in the docks) for employers to shift their operations elsewhere. Unfortunately these moves only exacerbate the decline.

 

The government will assist in regeneration projects – as in Docklands – but the danger is that these projects will attract better-off outsiders to replace the locals – as in Docklands!

 

Nevertheless, difficult though it might be, a business that really cares about its social responsibility must try to find ways of helping to raise the level of an area rather than contributing to its decline.

 

3(iv) Finally, given what we have noted about discrimination, it is clearly essential that businesses do not discriminate in any way in their recruitment and employment policies. In the past, especially in America, there has been discussion of “positive discrimination” – a bias towards the recruitment of workers from an otherwise excluded category, in order to redress the balance. There has also been a “backlash” against these policies, a backlash which uses not only arguments of “unfairness” but which sometimes draws on the “nature/nurture” disagreement referred to.

 

4. Power.

 

(i) Definitions of terms.

 

The basic definition of power is “the ability to get something done”. (So, for example, an engine has power, and it is measured by how much “work” it can do – how fast it will drive your car etc). In human affairs, we usually mean “the ability to get others to do what you want”.

 

However, there are different ways of getting people to do as you want – for example if an expert (say a doctor) tells you that you should do something (take some medicine, have an operation) you will usually do it without much questioning, and without saying that the expert has power over you. This ability we call “authority” – it is a kind of legitimate power, accepted by those over whom it is exercised, for thought-out reasons. Authority may also be exercised as a result of reasoned persuasion.

 

We might argue that to make a better distinction between power and authority we should say that power is “the ability to get something done even if there is resistance” – or that it is “the ability to overcome resistance”. To overcome resistance usually requires either some kind of coercion or force, or some kind of manipulation. When people are manipulated they are either not conscious of how they have been persuaded, or they have been given false or misleading information as a basis for their decision. The result is that they do something that the other person wants, even though they would not have done so had they been fully aware and informed – and what they are persuaded to do is almost certainly not in their interests.

 

There is here a controversial idea, as to whether someone can know what is in someone else’s best interest. The idea is controversial because if we say we can know someone else’s interest (even when they disagree), then are we not putting ourselves in the same position as the person who manipulates others? The answer to this has to be that we must be able to show the person concerned that they have a false idea of their interests, and we have to be able to do this in a reasoned way.

 

This last point is a variation on what a social scientist, Stephen Lukes, wrote, about the different “dimensions” of power (1974). He used this idea to suggest that people have “objective” interests – which may be quite different from their “subjective” interests (what they think their interests are), and this aspect created much controversy, partly for the reason given.

 

However, Lukes made another point which is widely accepted now: power can be exercised without people being aware of it, simply by not “putting it on the agenda”. This might be quite literally the case, when in a meeting some important item is excluded by the organisers without the rest of the meeting knowing about it. (This is a clear form of manipulation). Or it might occur in a more subtle, and wider form, in society: I have mentioned the “invisibility” of the third world – and to give another example, for a long time the question of the inclusion of women in politics was never even talked about, even by the most thoughtful political philosophers – since it was simply assumed (“common sense”) that women had no part to play in politics.

 

Finally, and of particular relevance to business, we need to note that power can be exercised by institutions, laws, customs, and other “impersonal” forces. I would call this “structural power”. When people are caught up in a particular kind of social structure – for example a social class – they behave (usually!) in a largely predictable way (certain accent, dress, manners, interests). They do this because of the power the structure has over them. (Incidentally it is not because they have a certain accent that they belong to a certain class – that is putting it the wrong way round!). The recent discussion about “institutional racism” goes along similar lines: a policeman may behave in a racist manner not because anyone has told him/her to – or because he/she thinks it is right – but because the organisation for which he works is permeated by unspoken racism – racism of which the people in the organisation may not be aware.

 

The discussion in management literature about “corporate culture” also deals with this phenomenon – and in business ethics this has been an important issue: a worker or manager may often do something unethical, or irresponsible, simply because it is expected in the organisation that things are done this way (for references see my chapter The Social Politics of Business Ethics).

 

4(ii) Managers’ “internal” power 

 

We have already dealt with issues concerning the work process, and alienation (see the worker topic). We also noted that there were issues to do with internal policies that could lead to excessive use of power by managers – such as:

 

(a) Civil liberties and privacy: how much information about an employee does an employer or manager have a right to get? There have been cases of management insisting on knowing about the health of their employees, and then employees finding they were shunned because they were HIV positive. (see Shaw and Barry, 2004, ch 7; chapters 8 & 9 deal with the next few issues). Managers need to be able to distinguish between knowledge that is essential for carrying out the business, and the employee’s right to a private life.

 

(b) Bullying and sexual harassment: this can occur either amongst workers or between managers and employees. Clear policy guidelines are needed, and the trades unions can play an important part if they are involved. Sometimes guidelines on dealing with bullying and harassment are included in statements of disciplinary policy and procedures.

 

(c) Whistle blowing: (see the brief overview in Frederick (1992) ch 13, and

a more thorough discussion by Davis in Shaw and Barry (2004) ch 8). This is a crucial issue when dealing with SRB: there have been many instances where a worker has become uneasy about something at their place of work, they have tried to raise the issue with management, and nothing has been done. In the end, their only recourse is to “go public” – that is, to “blow the whistle” on the practices. Angela Peek, in ed. Davies (1997), argues that “ethical organisations legitimately require and must create improved channels for whistle-blowing”. However, she also points out that the consequences for the whistleblower may be unpleasant: in a US survey, of 87 individuals who had blown the whistle on corruption, abuse, waste, fraud and safety violations, all but one suffered retaliation: “most lost their jobs, 17% lost their homes, 15% were divorced, and 10% attempted suicide”.

 

(d) Personnel policies and procedures: to avoid reinforcing the kind of inequalities described above, businesses should ensure they have fair policies and procedures in place for: promotion, disciplinary and grievance procedures, wages etc.

 

(e) Discrimination: Business should ensure, in its recruitment policies, that they do not discriminate on grounds of race, sex, disability etc. Discussion in America, where the Supreme Court makes rulings on such issues, often revolves around “affirmative action”, that is, action to redress the balance that has been tilted against disadvantaged groups. Businesses in America are required to show how they are ensuring that no groups are under-represented in employment. This has become a contentious issue, and Shaw and Barry (2004) trace the legal history and set out moral arguments on each side. (You are referred to their discussion for further detail).

 

(f) Unions:

 

There are several issues facing employers and managers with regard to trades unions. There is the question as to whether they should be recognised, and involved in working towards better working conditions etc, or whether they are nothing but trouble! There is even a danger that trade unionists will face discrimination because of their activities (though this is against the law).

 

In order fully to understand the role of unions it would be necessary to look into the history of their growth and their struggles. Here I will simply say that workers have had to fight for the right to organise into unions (at one stage in British history, the Combination Acts made it illegal for workers even to talk to each other about their conditions and wages!). The law has for some time recognised the right to strike, and unions have been immune to prosecution (e.g. for loss of earnings by a company in the event of a strike). This seems to me to result from the recognition that the employer/worker relationship is not balanced in terms of power, or in terms of control over resources. The ability to employ others gives someone a certain kind of power, which those who can only offer themselves to be employed do not have. Moreover, as we have seen, it is frequently the case that, when a business fails, the workers find that they have nothing, but the owners/employers can walk away with capital and start up again when the circumstances allow. 

 

This historical recognition of the necessity for unions as a counter-balance to the employers’ power, was undermined by Mrs Thatcher’s government, when, after a period of severe industrial disputes in the late ‘60s and early ‘70s, it had become widely believed (in the press and in Conservative circles) that unions had “too much power”. Of course, from the unions’ point of view this was ludicrous: they were being restricted, by the government, to making limited wage demands - £6 per week at one stage - and this was as a result of conditions imposed by the IMF, when the government went to them for a loan! Also, it seemed wrong to be accused of having too much power when, even though many unions wanted to do something about social conditions, such as poverty and the plight of pensioners, there was nothing beyond campaigning that they could do. In fact the unions felt powerless!

 

Since that time, legislation has not abolished the right to strike, but it has restricted it with conditions (ballots, lists of members, notice of intention to ballot etc); it is no longer legal to go on strike for other than your own concerns (i.e. not in solidarity with other workers); picketing can only involve restricted numbers of people; the closed shop is only allowed if management agree to it, etc. Union membership has declined – partly as a result of changing patterns of work, but also in part because workers feel unions do not serve the defensive purpose they used to.

 

What is not often appreciated is that many managers find trades unions to be useful to them: they have a channel of communication with the workers collectively, they can deal with elected officials and not an uncontrollable mass of workers – in fact they can even use union leaders to cool down more militant workers!

 

In brief, there is, as I see it, an ongoing power struggle between unions and employers (with the government intervening from time to time, usually on the side of the employers). Some (neo-liberals) would argue that unions are a barrier to bringing about more equality (since they represent a “distortion” of market forces). Others feel that this struggle is part of a wider conflict aimed at bringing about more social equality.

 

See also: Chapter 4

 

(g) Health and safety:

 

This is another area where the law now recognises the rights and responsibilities of both sides (employers/managers and workers) and gives both powers to oversee health and safety issues. The 1974 HASAWA. (Health and Safety At Work Act) defines these responsibilities, and outlines broad procedures (which include health and safety committees with trade union involvement). Before the Act it was only too easy for managers and employers to avoid responsibility – and yet industrial accidents and deaths are a major cause for concern.

 

Some would say that the law has not gone far enough in constraining management, since there is still no offence of “corporate manslaughter”. George Monbiot (www.monbiot.com) points out that eight years have passed since the government said it would introduce an offence of corporate killing – during which time there have been 5,000 workplace deaths (at least 2 per day!). A bill has now been introduced, but it is too late for it to be passed during this parliament. Moreover, as Monbiot sees it, the bill has been “gutted”: directors themselves will not be prosecuted (only “companies” can be found guilty!), and “no new burdens [will] be placed on companies which already comply with health and safety legislation.” Thus, still, no one will be prosecuted for the Piper Alpha explosion, the sinking of the Herald of free Enterprise or the Southall rail crash.

 

 

4(iii) Managers’ “external” power:

 

I have discussed the power of large companies in relation to the third world. Here I would like to touch on the vexed question of the social and political power of managers and directors of companies.

 

Managers' and directors - a "ruling class"?

 

4(iii) (a) The case for there being such power:

 

Many writers (e.g. Anthony Sampson 1992) have commented on the restricted social background of British managers. For many individuals from well-to-do backgrounds, a public school education and an Oxbridge degree – often in “Classics” (Latin, Greek, Ancient History) has been a good route to a senior managerial position in industry.

 

In the UK we do not have the same respect for technical or managerial knowledge that there is in, say France (where the Ecole Normale Superieure prepares managers), and we have an exaggerated respect for the “old”, traditional forms of education. There are also of course personal links between those who study (or teach) at these schools and those already managing industry, together with the leading political figures – since the latter came up by the same route! We still speak of the “old school tie” that brings powerful people together. Sampson calls this select group of people with social, political and cultural power the “establishment”. He also notes (though he does not make as much of it as some) that these people have in common their comparatively wealthy status.

 

Others such as Galbraith (1966) have written of a powerful “technostructure”, that is, groups of managers with different skills and knowledge (legal, financial, HR, marketing) who come together to direct large companies and who consequently have an influence over the economy and perhaps over politics

 

 

lobbying and influence, also movement of personnel between business and politics – the “revolving door..”  

 

It has long been maintained (Mills 1956) that there are connections, in developed countries, between those who hold power in business or commerce, and those who hold political or even military power.

 

What is remarkable about the present day (early 21st century) is the extent to which this picture is being reinforced, for example by “New Labour” - and especially in America since the invasion of Iraq.  See below, on Halliburton.

 

                                                                                                           

Update: 7/11/2005:

 

Managers’ and Executives’ lifestyles, compared to those of Government Ministers: 

a new twist to Robert Michels’s “iron law of oligarchy?

 

Nick Cohen in The Observer 6/11/05 discusses “New Labour’s love of all things rich and metropolitan”. He argues that we need to understand the distribution of wealth and income in modern Britain if we are to make any sense of the way that leading figures in “New Labour” (Blunkett in particular) have been tempted by the “plutocratic culture” of the likes of Kimberly Quinn. On the face of it, it would have seemed unlikely that a “working class Labour minister from Sheffield” would want to have anything to do with such people!

 

However, Cohen points out, ministers in this government consult and are lobbied by executives who are not only fantastically rich, but whose income has been rising far more rapidly than that of their employees. Whilst the average worker’s pay in the 350 largest companies in Britain rose by 3.5% in the 12 months until June 2005, these companies’ executives’ pay (including bonuses and perks) rose by an average of 18.1% in the same period.  (Figures from the annual survey by Income Data Services published at the end of October 2005).

 

“Nearly half of all senior executives made more than £1 million, with eight directors on packages of £5 million-plus.”

 

In comparison, the Prime Minister received £183,932, for a job which in theory is surely more important than any single business executive… Cabinet Ministers earn less than media personalities and presenters such as Andrew Marr and John Humphries (£150,000 each), Huw Edwards (£250,000) and Fiona Bruce (£400,000)!! 

 

Robert Michels pointed out (in the 1930s) how social democratic politicians and trade union leaders who were in negotiation with “captains of industry” tended to move closer towards their points of view and ways of thinking (leaving behind the views of the workers they were supposed to be representing). 

Now it seems we have not only a rapprochement of ideas, but an attempt to ape lifestyles as well!!

 

Mind you, as Cohen points out, Blair, Blunkett and Co. have some way to go before they catch up with the Quinns, (Kimberley publishes the Spectator, her husband Stephen publishes Vogue) who live in a £2m Mayfair house. Stephen Quinn apparently resents being called rich… And I note in a recent edition of Essex Magazine (that I browsed through in my osteopath’s waiting room) that there are at least 50 millionaires living in Essex.

 

As Cohen notes, finally, where has the healthy suspicion of the rich, that used to be typical of Labour stalwarts, gone?

 

Update: 05/09/2007:  

 

As Alex Brummer points out (NS 03/09/07), new PM Brown is on friendly terms with Sir Ronald Cohen, a big Labour donor, who happens to be the founder of the private equity “industry” in Britain. More seriously, Brown has recruited to his Business Council one Damon Buffini (also noted as a good role model for blacks) who played a part in the private equity takeover of the AA, with its attendant losses of jobs and services.

 

Update: 05/06/2013:

 

Seamus Milne has an excellent article on the ‘revolving door colonisation of public life’:

http://www.guardian.co.uk/commentisfree/2013/jun/04/corporate-britain-corrupt-lobbying-revolving-door

 

4(iii) (b) the case against:

 

Against the argument that those who own industry form a privileged group, it is said that there has been a “separation of ownership and control” (Berle and Means first formulated this idea in 1932), and more recently that with wider share ownership (9.2 million owners in 1992) there is more democratic control over business. 

 

On the other hand, the proportion of shares owned by individuals is not large - only 20% - so this, together with the dispersal of shares amongst them, means that they can hardly exercise much power or control. In fact most shares are now owned by financial institutions – which suggests that those in control of these are likely to have most power.

 

It is also pointed out that managers and directors often own substantial numbers of shares – as we saw with the discussion of “fat cats” above. In addition, when we look at who owns which blocks of shares, and who sits on which boards, we find a series of “interlocking directorships”, whereby power is concentrated in the hands of a relatively small number of individuals.

 

 

                                    ****************************

Further comment:

 

The evidence for promoting less inequality seems, to me, irrefutable, and the main implication here is that government needs to address the issue of low pay and excessive inequality.

 

However, as I argue in the CRS course, businesses play an important part when they decide on pay levels, when they move away from poorer areas, when they reward their executives with obscene sums of money, and simply by promoting the market competitive philosophy.

 

Some would argue that since money does not necessarily promote happiness, income and wealth inequality do not matter. This is similar to the old argument that “The rich man in his castle, the poor man at the gate” are all created by God, as the now out-of-favour Christian hymn put it. Or, as Adam Smith said, the beggar sitting in the sun by the highway has a sense of security that a rich and powerful monarch lacks….

 

But my view is that this argument is mainly a sophisticated (in the worst sense of the word!) way for the better off to avoid actually doing anything to redress the balance. It is usually accompanied (as we saw in chapter 3 with Adam Smith) by arguments in favour of the market and competition. No surprise – see the update on the third world – that in Niger there is plenty of food in the markets, but the hungry cannot afford it. Those who have food to sell would rather export it where they can get a better price!

 

I would argue that, clearly it is not money as such, but how much you get in relation to those around you, and the sense of recognition that you get, that causes happiness or - more likely, of course, - unhappiness (since, in any society, only a few can ever be significantly richer than others).  Putting it another way, as the study of (presumably all reasonably well-paid) civil servants above shows, money is not likely bring you happiness so long as someone else has more than you. What is important is status and respect.

 

 

The story of Halliburton in Iraq

 

A very quick check, via Google reveals the following:

 

In 2001 a UPI story, published in the Washington Post, reveals that whilst Dick Cheney (now US Vice-President) was chair and chief executive officer of Halliburton, and before the invasion of Iraq (March 2003), it had two contracts (under the oil-for-food programme) with Iraq, worth $73 million. These are bound to have led to funds reaching Saddam Hussein. (Cheney resigned from Halliburton in August of 2000, retaining millions in shares, but promising to donate any profits from these to charity).

 

Cheney denied any such deals at first, saying that they had deals with Libya and Iran (!) but not Iraq. When it was pointed out that the deals were done through two subsidiaries, and French (!) affiliates, he denied knowledge of the deals. After the invasion, Halliburton was given – without having to bid for it – a contract to help in the repair and operation of the damaged oil fields in Iraq.

 

By May 2003 the company was actually operating oil fields. (BBC news). The contract was at the time said to be worth $7 billion over two years. In May 2004 it is revealed that the contract was negotiated with the Vice President’s assistance.

 

(Meanwhile, in February of the same year, Halliburton had been criticised for over-charging the US government for supplying food to troops in the Middle East. The government says Halliburton’s accounts only explain less than half of their financial position).

 

By February 2005, again in the Washington post, we find that the deals Halliburton has made in Iraq are so far worth $9.6 billion.

 

Links on Halliburton: see also: Chapter 6 the environment, and Chapter 7 the third world.

 

5. What is to be done about social inequality?

 

(i) (Rely on business)

 

The right wing, especially the neo-liberal, viewpoint is that we must leave the market alone. From this viewpoint, (mostly nowadays described as neo-liberalism, but “Thatcherism” also subscribed to these views) interfering with the market causes problems:

 

- giving more power to government to direct the economy results in a lack of freedom (Hayek1944); thus, this viewpoint is strongly opposed to state-directed socialism, which it regards as tantamount to slavery

 

- also government spending leads to inflation (according to the monetarist view)

 

- another reason why any “distortions” of the market are a bad thing is that those who can influence government will get their way, and the powerless will be left out.

 

“Liberalism” has argued, ever since Adam Smith (see the earlier lectures), that when wealth is generated it cannot be consumed by the rich alone, but will 'trickle down’ to the rest of society (e.g. through the creation of jobs, the production of more goods to be consumed, and as a result of investment). Modern proponents of this view call themselves neo-liberals.

 

Government, then, in neo-liberal theory, should have only a negative or minimal role in the economy. What a government should do is to encourage growth and innovation, reduce taxation as an incentive to the rich, and remove barriers to the free movement of labour.

 

Critics of this point of view say that:

 

- inequalities have increased the more “free” the market; experiments in countries like Chile, and the former USSR, have demonstrated this (Chile’s President Pinochet – the man who tortured and threw his opponents out of planes over the sea – was economically guided by monetarist Milton Friedman – you will remember him as the man who said that social responsibility is a subversive doctrine, and the only business of business is to make profits for shareholders…)

 

- it is not possible to make labour as freely mobile as capital (especially across national boundaries)

 

- workers can only have better mobility if their standard of living is raised

 

- in practice, government protects state interests, and that means usually the interests of the most powerful and wealthy in society

 

- and of course there is the traditional socialist view that some services such as health and education can only be effectively provided by the state (incidentally, Adam Smith agreed with this!), and that when market forces are introduced you get a two-tier service.

 

Other (perhaps more rhetorical!) arguments might be:

 

- if more money through tax cuts is an incentive to the rich, why is more money through better pay not an incentive to the poor?

 

- the wealthy in fact are less generous than the poor, (source lost, sorry) so the “trickle down” theory is false.

 

(ii) (Reform business)

 

(a) ‘Ethical business’

Much of the discussion of Social Responsibility of Business operates from this viewpoint. The practical steps proposed vary from measures that are easy for a business (such as donating to charity), to creating new forms of capitalist enterprise (such as Body Shop). All would suggest that they are doing something to help the poor and least well off. What many of these positions amount to is what I have called enlightened self-interest, since they argue that less inequality helps business.

 

I have noted some of the questions surrounding the Body Shop and other “ethical businesses” in earlier lectures. Whilst not doubting their good intentions (see Anita Roddick’s 1991 book), it is clear that their impact is not huge. The public is much more aware now of social responsibility issues, and “ethical consumption” has increased. However, the question is: how much does this amount to in relation to the scale of the problems that have been described in these notes?

 

Other examples of what I call the “reformist” approach include the much milder activities of Business in the Community, which primarily amount to corporate giving.

 

Business in the Community (BIC), together with The Guardian, publishes an annual survey of what businesses in the FTSE 100 give to charity – in money and in kind. Giving in kind includes managers’ and employees’ voluntary donation of time, to help voluntary organisations to run more effectively, and to help improve the local environment. 

 

This survey also helps to examine “how far the idea and the practice of CSR has developed”. The report for 2004 points out the following:

 

-          the average donation to good causes of the FTSE top 100 in 2003 – 4 was 0.97% of their pre-tax profits (BIC aim is 1% minimum)

            - the value of donations was £872 million, which was 7% up on the previous year (cash was £643 million)

            - 34 companies gave 1% or more – 14 gave 0.1% or less

            - charities (the voluntary sector) receive 4.3% of their income from business (i.e. the private sector), 36.6% from the

                        general public, 37% from government contracts.

            - total voluntary sector income : £20.8 billion

            - total government spending: £450 billion (which is almost half the value of the whole UK economy: £1.011

            billion)

            - the public thinks that charities get 24% of their income from business (5 - 6 times the real amount)

            - 43% of the public think that only a few large companies are doing all they can to be more responsible

            - 82% said that most companies try to get away with as much as they can!

 

It is often difficult to distinguish such “giving” from commercial opportunism: GSK is noted in the above report as having given its products away (in America) – in a context that sounds very much like marketing, and was not counted as philanthropy by the compliers of the report. A similar example of self-interested corporate care arose with General Electric (again in the USA) where it undertook a campaign to improve awareness of breast cancer. What might not immediately have been obvious was that GE make the equipment to screen for breast cancer.

 

(b) Workers on the boards: see csr3 history part 2

 

(iii) (Regulate business)

 

I do not need to say much here, since this position (held by socialists and social democrats, and some in business!) argues that it is primarily up to government to deal with inequality. This can be done through redistributive taxation, and government assistance to the poor.

 

Where government interacts with business to help deal with poverty and inequality, this would take the form of tax credits as incentives to help business to set up in a poor area. Alternatively, government works in partnership with private enterprise through such bodies as the LDDC (London Docklands Development Committee) and other development agencies. The key question for critics here is: who is running the show? When business is involved, development may go in directions that firstly help the business and only secondly, if at all, help the poor local community. This was the problem with the LDDC: the kind of businesses that wanted to move into the area (IT, media) were not suitable for local people, the housing was far too expensive, and local people were not helped.

 

In 2003 an interesting confrontation took place (as reported by Nick Cohen, The observer 19/10/2003 – see www.observer.co.uk/comment): a cleaner employed by OCS, to whom HSBC (“your local bank”) had contracted out the cleaning, spoke at HSBC’s annual meeting at Canary Wharf on 30th May. He asked the executive chairman, Sir John Bond, to review the cleaners’ contract, under which he was paid £5 an hour. The trade unions, and a group of local churchmen who support the cleaners in an alliance of east end charities called Telco, believe that to live in London the minimum wage should be supplemented, and made up to £6.50 an hour. The chairman – whose salary is a mere £1.88 million – expressed surprise that his bank – profits $6.88 billion - was being criticised for not being socially responsible: after all it had a good reputation for giving to charities and deserving causes. Sir John explained that he could not improve the cleaners’ pay, as if he did, all the banks low-paid workers (such as call centre staff in India) would want it – and then where would the bank be?

 

I have also mentioned the sheer cost of trying to provide jobs and support in area where a large firm (MG Rover) or a whole trade or industry (printing, the docks, shipbuilding, steel!!) has collapsed. Given these kind of difficulties, some have proposed that workers’ co-operatives (see below) are the best solution – however, when a co-operative is set up as a result of a business becoming unviable it starts off with an enormous disadvantage!

 

More recently the government has operated Private Finance Initiatives, arguing that a mix of private capital and public management can avoid the problems of either pure private enterprise or pure state ownership. However, this has proved very controversial, and critics say that the result is usually two-tier services (in education and health especially).

 

(iv) (Replace business)

 

“Revolution”

This viewpoint again includes a spectrum of positions. At one end of the spectrum are views such as revolutionary socialism, or anarchism, where it is argued that the whole society must be changed. This view would argue that “islands” of alternative practices cannot exist for long in the midst of an unchanged (capitalist) economy.

 

“Co-operatives”

The most common view, it seems to me, is at the other end of the spectrum, where new kinds of business are set up which, as it were, “build the new society in the shell of the old” (this saying comes form the radical American workers who formed the Industrial Workers of the World – IWW, or “Wobblies” – in order for the workers to take over industry from the inside).  I have written about workers' co-operatives in lecture 1, section 5 (d). The crucial point about them, as regards the issue of inequality, is their (near) egalitarianism: co-operatives work on the basis of a very small ratio of highest to lowest salaries; and their structure means shared responsibility and shared power. Of course, they do have to compete, but since their objective is usually a social one, and not simply growth and increased profits for shareholders, then they are happy to remain steady at a given size and level of economic activity.

 

“Social Enterprise

 

In some ways this new kind of business is similar to co-operatives, since profits are put back into the business – and, by definition, their purpose is “social” – for the good of the community or to meet a particular social need (e.g. for a deprived section of society). For example, Hackney Community Transport claims that it is one of the most effective bus services in London. It started in 1982, as a group travel service to community and voluntary groups – now it employs 320 people, and is a multi-million pound company. (The Observer, 24/10/2004) It offers family-friendly shifts so workers can deal with family commitments, and it provides services to people with disabilities and learning difficulties.

 

Other social enterprise companies provide fostering services, run wind farms, provide energy-efficient heating and insulation, or in the case of Cafedirect sell fair trade coffee. As there is little experience of overseeing or co-ordinating these businesses it is difficult, says Jonathan Bland, originator of the concept, and chief executive of the Social Enterprise Coalition, to tell how many there are in existence, but on estimate is that there are around 5,000 (in Britain) – and it is possible that 6% of the working population is in businesses that plough their profits back into the community (Heather Connon, Observer, loc cit).

 

UPDATE: 

 

Social Enterprise:                                                                                             

 

Update 2: December 2006:

 

From: Passion in Action, by Mira Katbamna, EducationGuardian Higher, 12/12/06.

 

The School of Social Enterprise saw 20 of its students graduate last week.  SSE is the brainchild of Michael Young (who also helped to set up the Open University, and Which? Magazine) – he believed that the challenge facing social entrepreneurs was not a “deficit … in hard skills, like business planning or financial management, but in terms of people’s confidence and behaviours.”

 

The businesses coached by the school have an 85% success rate – they provide employment for 4/5 people each. Examples:

 

-          Progress Community Gardening Projects, with three schools in Lambeth, gets children growing organic produce, to help them deal with their emotions and improve their educational outcomes

-          A parents’ group at a primary school in south London, run by Girda Niles, who as a lone parent in a difficult economic position wanted to do something that would provide her with employment but also sustainably to help her community, and to make best use of regeneration money – what the New Economics Foundation calls “plugging the leaks”.

 

 

Update : 13/11/2005:

 

From report by Nick Mathiason, Observer Business, 13/11/2005.

 

Nurses have joined doctors and dentists in forming employee-owned companies, which could sell services to the NHS.

 

In Surrey, nearly 800 nurses and therapists have joined together to form Central Surrey Health. Those involved (e.g. Tricia McGregor, a speech and language therapy manager at Surrey Health Authority) say that they will be better value for money than private business, because of their “can-do culture” and the fact that they will be led by clinicians rather than administrators.

 

In Hanwell, West London, a team of nurses now run a surgery covering 4,000 patients. The group has set up a not-for-profit enterprise, guided by ECT, an organisation which promotes social enterprise. The benefits are that doctors are free of responsibility for managing a business, and the nurses can deal with minor complaints and allocate patients to the most appropriate doctor.

 

However, two difficulties face these approaches:

- there seems to be a bias towards giving such work to mainstream businesses, and the government needs to back social enterprise more strongly

- the new organisation Central Surrey Health is concerned that it must be able to NHS pension rights.

 

For further updates on social enterprises, see: inequality: updates (not completed yet…). 

 

“Time Banks and Local Exchange Trading Schemes” (see websites in references)

 

There are some other very interesting initiatives that I would like to finish this section with, and these are aimed especially at those who are the most deprived: they include “Time Banks” and “Local Exchange Trading Systems”. These organisations start from the premise that ways must be found of using the skills of the least well-off, and doing so in a way that will not perpetuate the inequalities of society, where such skills are not valued. The main problem, then, is the role of money – since some goods and skills are given a high money value, and others have little or no value.

 

In a Time Bank, or LETS, the “currency” is time (though some LETS schemes have invented an alternative currency): and the most important feature is that one hour of anyone’s time is worth the same amount of anyone else’s. On this basis a “banking” and exchange system is set up, with a data base, listing the many different services available.

 

Members are prepared to donate their time and to be entitled to payment in the form of someone else’s time. This way, skills such as child-minding, housework, visiting the elderly or the sick, etc, which are not highly valued in our society get full recognition. It is not a coincidence that these are mainly tasks traditionally carried out by women – their lack of value is a good indication of the lack of status given to women generally.

 

Local economies:

Ecologist Jan 2009 Take Action section has pieces on John Bird’s ‘Wedge Card’ – a loyalty card which supports local shops and helps the local community to cohere. Other ideas include: Community Supported Agriculture: communities actively support local growers, of which there are approx. 30 in the country, see www.cuco.org.uk. Also alternative currencies, e.g. the Lewes pound – some 125 traders are signed up – working with NEF on a second phase to introduce higher denomination notes, see www.thelewespound.org

 

Totnes also has local money, based on money from the previous era. Stroud has an Exchange, converted by Stroud Common Wealth for social enterprises and is working on plans for a local economy. (The LETS scheme that had been set up failed, because the Treasury wouldn’t allow tax exemption, and the DHSS cut benefits.) The new economy is likely to follow the model of Chiemgau (Bavaria, 2003) Stroud Community Assets is also being set up so people can borrow small amounts of money regularly.

 

In Argentina, after the financial crisis/collapse of 2001, people in Buenos Aires used a local currency called the arbol (tree), which soon became a significant means of exchange.

 

See also Ecologist Nov 2008: Molly Scott Cato and Martin Large write on ‘the common wealth’: Robert Owen, 150 years ago, experimented with money that reflected his labour theory of value ((value of goods should be equivalent to the labour invested in their manufacture). He did this before his work on co-operatives. In 1830 he set up an Equitable labour Exchange, where the medium of exchange was ‘labour notes’ – denominated in four hours, and goods were exchanged for the number of hours they took to make. Perhaps a thousand artisans were involved in the Exchange.

 

The Robert Owen Credit Union in Powys follows his ideas. A small community is involved, building a trust that is not possible in global financial institutions.

See also (copied to): Imagining Other - Alternatives and: Social Movements Today.

 

(End)

Inequalities - indicative reading (ee also: Booklist on CSR):

 

Cautes, D.: Running the Country, Hodder & Stoughton/OU 1995 – who are the most powerful people in Britain?

Crompton, R.:  Class and Stratification - an introduction to current debates, Polity Press, Cambridge 1993

Davies, ed. Peter W.F. (1997): Current Issues in Business Ethics, Routledge – has an excellent chapter on whistle-blowing

Donaldson, P (1975) Economics of the Real World, Penguin – the book that launched my interest in social responsibility of

            business!!

Ethical Performance, Dunstans Publishing, PO Box 590, 8 New Street, St Dunstans, Canterbury CT2 8GF - 

            www.ethicalperformance.com

The Giving List – The Guardian www.SocietyGuardian.co.uk and Directory of Social Change www.dsc.org.uk

Galbraith, J.K. (1966?) The New Industrial State, Pelican

Goldthorpe, J, and Erikson, R (1997) The Constant Flux: a study of social mobility in industrial societies, Clarendon, Oxford

Haralambos, M: Sociology - Themes and Perspectives (1985) - ch. 3 gives clear summaries of the different theoretical

            perspectives on power (pluralism, elitism, class theory) ch. 4 is on poverty

Hayek, F von (1944) The Road to Serfdom – a classic anti-socialist, pro-free market text, republished: Univ. of Chicago 1994

Hills, J (ed) (2004, A More Equal Society?  New labour, Poverty (etc), Policy Press

Lister, R (2004), Poverty, Polity Press – Lister is Prof. of Social Policy at Loughborough University

Lukes, S (1974), Power, a Radical View, London

Mills, C. Wright, (1956), The Power Elite, Oxford Press

Moran, M.: Politics and Society in Britain, Macmillan 1985 (reference to OECD Report, main author Prof. Tony Atkinson, Cmnd

            7679)

Reid, I. - Social Class Differences in Britain: Life-chances and Life-styles, Fontana 1989

Roddick, A (1991) Body and Soul – a personal account of the establishment of the Body Shop, seems honest, but might be

            biased!

Sampson A.: The Essential Anatomy of Britain (1992) - dated, but readable account of power and inequality in Britain, from

            point of view that there exists a dominant British "establishment"

Saunders, P (1990), Social Class and Stratification, Routledge

Schumacher E.F.: Small is Beautiful (1973) - an account of economics "as if people matter", advocating smaller industrial

            units so that workers can exercise control

Shaw & Barry, (2004), Moral Issues in Business, Wadsworth/Thomson

Townsend, P.: Poverty in the U.K., Allen Lane 1979 - detailed evidence from an expert who believes serious poverty still

            exists

Westergaard, J. & Resler, H.: Class in a Capitalist Society, Pelican 1975 – a Marxist view: poverty, poor health/education,

            powerlessness are all linked

Whitehead, M.: Inequalities in Health  [the Black Report], Penguin 1992 – specifically deals with the failure of the health

            Service to benefit all (the "middle class" gains most).

 

Websites:

www.ethicalperformance.com - Dunstans Publishing, PO Box 590, 8 New Street, St Dunstans, Canterbury CT2 8GF - 

The Giving List, see The Guardian www.SocietyGuardian.co.uk

 

                                                                                                                        Links.

                                                                                                                                   

                                                                                                                        Back to: Top of the Document

 

                                                                                                                        Back to: Chapter 7: The "Third World"

                                                                                                                                   

                                                                                                                        On to:    Chapter 9: Remedies and Conclusion

 

                                                                                                                        Back to: CSR in Context Contents Page

 

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