Monday, 27 June 2011

How Co-operatives Narrow The Gap

Bill Kerry, co-director of The Equality Trust, provides a provocative guest blog for Co-operatives Fortnight on how co-operatives help narrow the gap between rich and poor:

The evidence we provide at The Equality Trust shows that when comparing economically advanced countries, those with greater equality of incomes (a narrower gap between rich and poor) suffer far fewer health and social problems than more unequal countries. They also have higher levels of trust, community participation and social cohesion. Looking across many different issues ranging from mental illness to obesity and from imprisonment to social mobility, we can see that more equal countries such as Japan and the Scandinavian countries have anywhere between two and ten times better outcomes than more unequal countries such as the UK or Portugal. The UK clearly has much to gain from reducing inequality.

High levels of income inequality leads to high levels of health and social problems by increasing social distances and damaging the quality of relations between us. People who live in unequal countries consider their own social position more often because there are greater differences in status. They are more likely to suffer prolonged stress through the processes of social comparison, because the chances of feeling looked down upon and disrespected are much greater. Chronic stress is extremely bad for health and damages personal relationships - and the feeling of being disrespected can often be the trigger for violence.

In attempting to reduce the harm caused by inequality it is important to look at the underlying economic arrangements that exist within a society, since they are largely what determine the distribution of income. There is a great deal of evidence from academic studies, such as The Spirit Level by Richard Wilkinson and Kate Pickett, that more democratic economic forms such as co-operatives tend to promote narrower spreads of income between highest and lowest paid employees. They do this by virtue of their democratic structure and processes of accountability. As Wilkinson and Pickett point out, vast pay differentials of the sort often found in private shareholder-owned companies can probably only exist because of the lack of such democracy and accountability.

Another key advantage of co-operatives and other forms of economic democracy is that they institutionalise and embed norms of equality within our economy for the long term. Whereas governments come and go and policies on tax and spending are changed, co-operatives and other democratic economic forms comprise an enduring and growing sector of our society that cannot simply be undone by changes in government. Not only do co-operatives have a major part to play in making UK society more equal, they are here for the long haul and they provide a living, breathing example of the alternative economic model that we can look to for inspiration.

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