I wrote an article several days ago about my fears for the New Zealand economy in light of the real and substantial challenges that we face this year. The more I reflect on this, the more I begin to question the economic situation as it currently exists in New Zealand and where we are headed. Those of us lucky enough to have been born in the Western World live in the most prosperous age that Human Civilisation has ever known. There is more than enough money and resources for everyone in the Western World to live a comfortable, and enjoyable life. Yet, even within our prosperous societies there exists massive disparities between the rich and the poor. Recent Statistics NZ data estimates our GDP at $132 billion (approximately $32,000 per person) yet, as this article shows, 70% of our total wealth is concentrated in the top 20% of the population. Anthony Hubbard, reviewing The Spirit Level in the Sunday Star Times back in January discovered that New Zealand has the 6th highest income inequality in the OECD. The impact on society of such high levels of inequality is damaging. He cites a damning passage which argues that unequal societies place ”a high value on acquiring money and possessions, looking good in the eyes of others and wanting to be famous. These kinds of values place us at greater risk of depression, anxiety, substance abuse and personality disorder…”
It is clear to many that the current situation is unsustainable. Without systemic change, inequality will worsen and the gains of the last century could be reversed. Last year I wrote an article on an idea that has the potential to change the world. The concept of fluid shares, to briefly recap, advocates the equal distribution of wages throughout an organisation from the CEO to the cleaners. It recognises that everyone employed by an organisation plays a crucial role in the success of that organisation, and brings a level of equality to employee remuneration sadly lacking in today’s corporate world. Let’s look at an example:
Fluid Shares Revisited
Company A employs 15 people – A CEO, four supervisors, and ten shop-floor workers. The CEO earns $500,000 a year; the supervisors $100,000; and the shop-floor workers $40,000. The CEO drives a BMW, lives in a multi-million dollar home and sends his kids to private schools. The shop-floor workers have a car made in the last century and spend all their available money on food and clothing for their children. The total wage bill for Company A totals $1.3 million
Company A then decides to implement fluid shares. It cut is wage bill to $1.2 million and now each employee earns $80,000 each year. Ten workers have seen their incomes double, providing much-needed financial security for themselves and their families. Four workers have experienced a small drop in salary, but still enjoy an enjoyable life, while only one employee (the CEO) has experienced a substantial drop in income. He decided to leave the company. The managers grumbled but eventually conceded that the scheme had some merit and, being in the midst of a recession, decided that a pay cut was better than being unemployed. The shop-floor workers went home to their families with a sense of pride and optimism that they had never felt before.
Of course, attracting qualified people to take the position of CEO was a problem. Many other companies in the industry offer much higher salaries than Company A and many people who had the requisite experience for the job refused to work for only $80,000 a year when they could be earning $500,000. The owners quickly realised that most people in upper management are only interested in one thing – money. The industry, the product, and the people were secondary considerations. Their business would only flourish when the person in charge cared first and foremost about the business and not the pay cheque. In a world full of highly intelligent people, finding someone who believed in a more equitable distribution of wealth and opportunity was not a problem.
Communal Capitalism
Do not get me wrong, I am not advocating for a massive, state-driven, redistribution of wealth. The key tenet for the success of fluid shares is that it is driven by the owners of a company, and therefore has by-in from them, and their employees. It only works when everyone is on the same page and working towards creating a prosperous company where everybody benefits from that prosperity – not just those at the top. Yes, it is communal – it is based around the idea that society benefits when everyone benefits. But at its heart are the very capitalistic ideas of free enterprise, free association, and individual effort. Each member of the team knows that they will prosper only if the business prospers, so the incentive for productivity is maintained. What this example does illustrate is that, at least in the Western World, there is plenty of wealth for everyone.
