Co-operative Capitalism - Reasserting Our Humanity Through Co-operation - An Updated Summary8/19/2021 The website was created in April 2016. The following is an updated summary:- Co-operative Capitalism - Reasserting our humanity through co-operation – an updated summary The co-operative capitalism concept creates a common bond for all employees, the common bond being entitlement to a co-operation payment at the end of a successful financial year. Co-operation payments are a second tier, not guaranteed, level of remuneration. Our first tier of remuneration is our standard employment remuneration which is already in place for all employees. It is a prerequisite that an employee’s standard remuneration must be at a fair and equitable level. Entitlement to co-operation payments is incremental up to a maximum of four qualifying units graduated on years of service but it is the same for ALL employees, including senior executives. The transparency of applying entitlements is conducive to create a team culture and trust in the framework and a talking point between all employees. The important differing aspect of co-operation payments is that they are not an individual performance bonus; it is a cooperative culture common bond - the cement that binds the co-operative team together. It is proposed that in time a government will allow for annual co-operation payments to be recorded separately from PAYE on Tax returns and will be taxed at a fixed low tax rate for ALL employees, regardless of their current tax rate on PAYE. By taxing co-operation payments at a fixed low rate for ALL employees, the government will be encouraging teamwork and cooperative cultures in participating workplaces, and thereby dramatically improving productivity. This will not result in a reduction of tax revenue as there will be a phased introduction accompanied by increased productivity and profitability. The framework can be applied to any workplace of more than three employees and has a constraint that an employee’s co-operative payments can not exceed 20% of standard employee remuneration. Progressive management teams embarking on a co-operative capitalism framework will see employees as employee co-partners in success as distinct from investor partners in success. This framework creates a climate where employees are more involved in the workings of capitalism and the common bond of co-operation payments ensures that they act as a teamwork community and not as property brought together and used to earn a return on other people’s capital. Not only is a new form of capitalism more inclusive, but arising from more widespread adoption of the framework, the ensuing social cohesion will beneficially impact on health, happiness and hope and, in my opinion, more social cohesion would counter the detrimental alienating outcome of neo liberal capitalism, more social cohesion will also be beneficial in policy imperatives for combating climate change. The co-operative capitalism concept has been supported in recent times by American research findings on human motivation as detailed in Daniel Pink’s book ‘Drive’ [1] published in 2009 by Riverhead. Daniel Pink’s book ‘Drive’ [1] - an international bestseller, looks into the science of motivation and particularly the dynamics of extrinsic and intrinsic motivators. Pink asserts that the robust research findings show that when it comes to motivation, there’s a gap between what science knows and what business does. Our current business operating system which is built around external, carrot-and-stick motivators - doesn’t work and often does harm often giving high levels of employee disengagement detrimentally impacting on productivity. We need an upgrade. And the science shows the way. Summarising research findings the new approach has three essential elements: Autonomy – The desire to direct our own lives Mastery – Our urge to get better and better at something that matters. Purpose – Our yearning to do what we do in the service of something larger than ourselves. The importance of ‘purpose’ as a motivator has proven itself repeatedly, and its power has changed the course of history. The significance and power of this latter research finding has not been fully grasped and utilised by economic and social policy makers in our modern times. In contrast the push for deregulation and unfettered markets that drove the establishment of neo-liberal capitalism in the early nineties facilitated extremes of greed and self-serving, often resulting in the wanton disregard for the welfare of others. Whilst deregulation has been hugely beneficial to a minority, millions have suffered the consequences, particularly from the global financial crisis. From Daniel Pink’s book Drive [1] ‘The research shows that the secret to high performance isn't our biological (survival) drive or our seeking-reward-and-avoiding-punishment (carrot and stick) drive (which has been essential to economic progress around the world for the past two centuries), but our third drive - our deep-seated desire to direct our own lives, to extend and expand our abilities and to live a life of purpose, to have a purpose greater than ourselves.’ ‘This is one of the most robust findings in social science – and also one of the most ignored. Despite the work of a few skilled and passionate popularisers – in particular, Alfie Kohn, whose prescient 1993 book “Punished by Rewards”, lays out a devastating indictment of extrinsic incentives – and yet we persist in trying to motivate people this way.’ Economic theory is traditionally based on the assumption that human behaviour could be explained largely by an inherent tendency to maximise self-interest, and yet we have evolved successfully by being collaborative and being part of something larger than ourselves is an even more effective motivator than self-interest. Daniel Pink comments – ‘Motivational research findings are highlighting the mismatch between what science knows and what business does. Our basic nature is to be curious and self-directed i.e. autonomous. The opposite of autonomy is control. Control leads to compliance; autonomy leads to engagement. And this distinction leads to the second element – mastery, the desire to get better and better at something that matters. Autonomous people working toward mastery perform at very high levels. The most deeply motivated people, however, not to mention those who are most productive and satisfied, hitch their desires to a cause larger than themselves.’ With purpose as motivator productivity, worker engagement, and work satisfaction go up while personnel turnover goes down. The traditional rewards, using money as a motivator are not always as effective as we think. On the contrary, intrinsic motivators are much stronger and more efficient, and should be used as the foundation of how we run our businesses. ‘The capitalist world is at an evolutionary turning point. Maybe the old carrot and stick approach can be replaced with a collaborative co-operative capitalism which still encourages entrepreneurs and wealth creation.’ Daniel Pink suggests that maybe we can reassert our humanity and change the world. The ‘carrots and sticks’ model worked well in the era of industrialisation. Because human work in factories was easy to measure, it was easy to see how work policies changed productivity. Pay a person more per widget they make, and that person will crank out more widgets. These extrinsic (or external) rewards work for routine tasks. But in the new information economy, this model is now outdated. The new economy requires thinking skills – creativity, collaboration, long term thinking. But research suggests extrinsic rewards harm all these qualities.
Comments on Capitalism. Regardless of the origins of capitalism, it is a human construct that has been allowed to evolve to a point where the very benefits of capitalism in its infancy have now been eroded as detailed in the website Blog Post ‘Commentaries on the Failings of Capitalism’ dated 24th April 2019 (Co-operative capitalism Blog Posts), we are also seeing high levels of employee disengagement, high levels of social alienation (The sense of not feeling a part of a collective goal or hopeful social vision), increased inequality and more widespread stress and use of depression medication. Thomas Piketty’s book ‘Capitalism the Twenty First Century’ published following the World Financial Crisis 2008 questioned the myth at the very heart of American life – that capitalism improves the quality of life for everyone. This is just not so, says Piketty, and he makes his case in a clear and rigorous manner that debunks everything that capitalists believe about the ethical status of making money, he also argued that we may well find that the 21st century will be a century of greater inequality, and therefore greater social discord, than the 19th century. Piketty stated that current trends in capitalism are creating increases in inequality that are unsustainable. Sometimes we can be so embroiled in how things are that it limits our vision to other possibilities. This relatively small refinement to capitalism called ‘Co-operative Capitalism’ is far more inclusive for all employees and yet still retains free enterprise and wealth creation for entrepreneurs. What entrepreneur or investor would not want all employees working actively together for the success of their employing enterprise? During the coronovirus crisis there has been a growing worldwide consensus along the lines of ‘Let’s not go back to normal’. Examples :- https://www.newsroom.co.nz/2020/03/26/1098460/lets-never-return-to-normal and, https://world-news-monitor.com/climate/2020/03/27/greener-more-equal-economy-must-emerge-after-impact-of-coronavirus-experts-say/ and calls for a more caring form of capitalism https://evolution-institute.org/evolving-a-more-nurturing-capitalism-a-new-powell-memo/ https://medium.com/iipp-blog/capitalism-done-right-a-co-operative-system-to-solve-human-problems-25d2ca91e9a5 https://www.theguardian.com/business/2020/sep/16/we-must-use-the-covid-crisis-to-reshape-our-society-and-economy https://www.nzherald.co.nz/business/covid-19-coronavirus-paul-conway-now-is-the-time-to-build-a-better-new-zealand-economy/GA3DURBLLSTRQDDZIT6LZYMFWE/ https://www.theguardian.com/commentisfree/2019/mar/18/ending-climate-change-end-capitalism https://www.nytimes.com/2021/01/26/opinion/us-capitalism-socialism.html?smid=em-share These sentiments from around the world in response to the coronovirus crisis when coupled with the following quote from Albert Einstein, ‘In the midst of every crisis, lies great opportunity’, leads me to suggest that these times give us the opportunity for an evolutionary step in capitalism. An evolutionary step that retains the benefits of capitalism i.e. free enterprise and wealth creation, but is more inclusive, encouraging more employee engagement in workplaces, and as the concept becomes more widespread bringing about more social cohesion. The co-operative capitalism common bond concept just makes darned good sense from every angle whether it be economically, socially and politically. The company wins, management becomes easier, employees win and investors win. There may, however, be a detracting opinion from top company executives no longer finding it easy to give themselves outrageously inflated bonuses. History shows us that any attempt to change the status quo becomes an interminably long struggle, regardless of how obvious the logic or the need for change. For example, many people were outspoken against slavery in the 1760’s, yet it was not until 1833 that the Abolishment of Slavery Act was passed in the British Parliament and in the end it is Wilberforce and his parliamentary colleagues that history has credited with the achievement. Any attempt to refine capitalism will, on that basis, take aeons and will not occur until long after I have passed but, nevertheless, I have to express my conviction and the sound logic of this concept. The website details the potential benefits of the co-operative capitalism framework :- http://www.co-operativecapitalism.com/blog-posts/benefits-of-a-co-operative-workplace-culture In addition to improved productivity, profitability and social cohesion there are other advantages from this framework. A Finance Minister will have a mechanism of encouraging co-operation by reducing the co-operation payment tax level whilst incrementally increasing PAYE tax if fiscally prudent to do so. The framework may also be utilised to encourage a collective effort against climate change. Any co-operative capitalism business that reduces its carbon footprint during a financial year can earn an additional tax reduction on the employee’s co-operation payments. The presentation of the web site is persuasive toward business by predicting improved productivity and profitability, the wider more important goals however, are social. I can see that Karl Marx was correct in predicting that capitalism would create an increase in alienation. His comments were more in relation to increased industrialisation and the breakup of trades into divisions of labour but there has also been an effect socially. Why is it that in an age of higher standards of living that we have such high levels of anti-depressant drug use and high levels of suicide? A quote from George Bernard Shaw is very apt "Some people see the world as it is and ask 'Why?'. Others see the world as it could be and ask 'Why not?'. '' There is the possibility of a very simple no cost framework with no downside, but masses of potential upside both economically and socially. In the initial years of business there may not be sufficient profit to allocate an amount to the co-operation payment level for employees, but employees will be accruing co-operation qualifying units through their employment years of service and therefore will benefit in profitable years. The significant research “Profit Sharing and Profitability” – (subtitled – How Profit Sharing Promotes Success) Messrs Bell and Hanson concluded that a co-operation culture within a workplace can improve profit by up to 40% and improved investor returns of 78%. Following successful years, a Board of Directors have an additional consideration when deciding on the allocation of profits, i.e. when considering the amount to distribute for each co-operation qualifying unit, they must at least maintain the ongoing synergetic contribution of all employees. This framework creates a climate where employees are more involved in the workings of capitalism and the common bond of co-operative capitalism ensures that they act as a teamwork community not as property brought together and used to earn a return on other people’s capital. Maybe in the future there are progressive management teams that would adopt this framework and the more traditional management teams continue as they are, but I foresee that the most capable employees will choose to be employed with progressive management teams. The companies that make the best use of their human capital will be the most successful companies. Daniel Pink’s book ‘Drive’ was published in 2009. He suggested that maybe we can reassert our humanity and change the world, it was a response to the research findings on human motivation and that the findings could rejuvenate business. Mankind has now had to contend with the spread of the coronavirus worldwide and furthermore the latest IPCC report on climate change has highlighted a more urgent crisis affecting all life’s support systems. We have far more reasons now to be reasserting our humanity. The co-operative capitalism framework has universal application and is a minor refinement to capitalism that will create more social cohesiveness. There have only been two criticisms of the concept, both have been addressed in the prior blog Co-operative capitalism Blog Posts which suggested spreading the load of combatting climate change amongst people everywhere. Is it possible, that if promoted well, that a minor evolutionary step in capitalism could be one way of uniting people in combatting climate change? There will be those who label this concept ‘socialist’ and others that see a smart capitalism. What entrepreneur would not want all employees motivated for the success of the business? Companies that learn how to make the most of their human capital are likely to be the winners. References [1] Daniel Pink ‘Drive’ published by Riverhead Hardcover 2009
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