I’ve just started Michael Carolan’s new book, Cheaponomics, and he begins with a provocative thought – socialism has two sides. When we usually talk about socialism, we’re talking about ways of organising our economics and politics so that everybody in society benefits. But Carolan suggests the benefits aren’t the only thing that can be socialized. Costs can be socialized too.
- Take Supermarket A. It functions as a cooperative, collectively owned by its staff and customers. Decisions are made democratically and profits are shared across the membership.
- Supermarket B is run by a corporation that is seeking to pare costs to the minimum in order to maximize shareholder value. It outsources production overseas, and pays low wages.
In Carolan’s thought experiment, both have a socialist dynamic. The first is the more traditional kind, the second a sort of upside-down version. The corporate model is socializing the costs, rather than the benefits. The low wages they pay force staff to sign up for government benefits in order to keep food on the table, a form of stealth subsidy to the supermarket. Who pays for those benefits? Taxpayers. The supermarket has kept its wage bill low and the shareholders reap the rewards, while the cost of paying a low wage is redistributed out across millions of ordinary people through their taxes.
What’s interesting about this perspective is that it opens up corporate ethics to a Conservative mindset. Those that see themselves as pro-business and pro-freedom are usually vehemently against taxation. But “when you socialize costs you necessitate higher taxes, either for present and/or future generations” says Carolan. “In the end, someone has to pay for those costs.”
Incidentally, there are real life examples to those supermarkets. The British chain Waitrose is owned by its staff, who each received an average bonus of £2,225 this year as their share of trading profits. On the other hand, Carolan cites a study that found that California taxpayers spend $86 million a year paying for healthcare, housing and food stamps for Walmart’s 44,000 under-paid employees in the state.