Social Capitalism – an individual case for change

Traditional capitalism isn’t working. Inequality is growing both in the UK and around the world. Whilst a small minority are earning ever more vast sums of money, the people at the bottom of society are falling faster and faster into poverty. The quality of education and healthcare is decreasing as the population continues to expand yet the funding flatlines, at best. Dangerous levels of climate change are becoming more and more inevitable with every passing report. The number of people who can’t afford to eat is skyrocketing, yet the richest in society continue to get richer. Bonuses and C-Suite salaries become ever more inflated, yet donations to charities are flatlining and stories of tax evasion is never far from a journalist’s finger tips. Our poorest and most wretched brothers and sisters are struggling to survive, yet we scroll past those stories on our iPhone 7s with no more than a fleeting thought. The cause? Capitalism.

Our society is built around selfishness and we are being brought up to yearn an ever more material world. Yes, we need to create a system that rewards success but we also need to reward selflessness. I’m not proposing communism or anything compulsory, instead just an adapted, improved capitalism. A form of social capitalism.

Under this system, the average person could help her fellow people, the economy, and yet receive almost £6000 in tax rebate per year. Who would not see that as an improvement? That is what Social Capitalism is all about.

Too many people are living off coppers

The problem

You only have to read the latest Social Mobility Commission report to see how much our societies’ poorest struggle, and how unequal the world’s opportunities are:

“Britain has a deep social mobility problem. In this annual report we present compelling new evidence that for this generation of young people in particular, it is getting worse not better. Low levels of social mobility are impeding the progress of not only the poorest in our society. We identify four fundamental barriers that are holding back a whole tranche of low- and middle-income families and communities in England: an unfair education system, a two-tier labour market, an imbalanced economy and an unaffordable housing market. Taking down these barriers will require a new, long-term approach. It will also mean challenging some long-held assumptions that have held sway for too long in public policy. There are no easy fixes when it comes to cracking Britain’s social mobility problem. Change will take time. The next decade should be one of deep-seated social reform.”

Further to that, our newspapers and newsfeeds are filled with tales of woe from our education and healthcare services on far too regular a basis. On an international scale, the picture is even less rosy. We keep seeing records being broken for the hottest month and year on record and the latest research shows that we need serious, robust action now to stave off devastation through human-caused climate change. And poverty in the world’s poorest corners is being ignored: 16 million people are on the brink of starvation in East Africa. Half of Ethiopia is starving. More than 800,000 children under 5 are severely malnourished.

But most people and modern society are too focussed on themselves as individuals to really engage with these problems. Is it any surprise that we don’t actually do much to make a difference?

Doesn’t something need to change though, for the sake of our country and for the whole world?

The Solution

A bit like democracy, capitalism has been shown to be the least worst option. It certainly drives innovation and progress, but it inherently means the poorest fall off the bottom of the scale into disease, destitution and death. We’re lucky in the UK, and in the wider, more economically developed world, to have robust social controls in place to stop that from happening: job seekers allowance, free childcare, the NHS.

Up until quite recently, this system has worked, but over the last couple of decades, it has become increasingly obvious that that no longer holds true. As our population increases and the cost of living curves inextricably upwards, Government-funded schemes begin to buckle.

We need a system that encourages people to support each other. If you are on a six figure salary, you are in the richest 0.1% of the world; I wonder how much the average person on that salary does to support others?

I’m proposing an amended, social form of Capitalism. It would be entirely voluntary but would encourage people to look out for each other for mutual benefit. It’s been proven that a feedback loop exists: the more people help others, the more they want to help others. This is simply the first, top-down trigger to action that would lead to wide-reaching, citizen-driven, positive social change.

My proposal is simple: tax rebates for those who help those in most need and the economy so that every party is better off. I’ll go into more detail below, in the Case Study section, but this principle can be shown to work for at least seven areas of society:

  • Volunteering
  • Healthcare
  • Education
  • Charitable Donations
  • Environment Impact
  • Personal Pension Plan
  • Childcare

This work is very preliminary, full of assumptions and based on figures available in the public domain. I simply want to show that another way is possible; not provide the finished answer.

Take a look at this, and let me know what you think. Doesn’t this sound like a better scheme? How would you improve it?


Case Study

Our objective here should be to maximise the benefit to society, both economically and philanthropically, by incentivising the donor. To do that, let’s meet our average Briton: she (yes, there are about 960,000 more women) is 40 years old, has 1.7 children and earns £26,500 pre-tax per year (Office For National Statistics, n.d.); let’s call her Jennifer (most popular baby’s name in 1977).

Show your working: you can find the spreadsheet behind these figures and will all the references here: STWE Social Capitalism Workings - Individual I’ve had to make lots of assumptions here, but I hope this proves the concept.

Volunteering

Let’s assume that Jennifer, like most of the UK, doesn’t do any formal volunteering. Yet volunteering can have a tremendous impact. Volunteers save lives, they save livelihoods, and they can also save the Government money.

An entry-level Police Constable or a paramedic makes the world a safer place and saves lives and is paid about £29,000, but Special Constables work for free. St John Ambulance provides emergency ambulances to the NHS with volunteer staff to subsidise the NHS. Yes, some volunteering doesn’t save the Government money directly, but let’s begin by incentivising volunteering that does. Every hour of a paramedic or Constable’s time costs the Government £14.12; money that could be split with a volunteer.

Studies have also shown that regular volunteering can increase working productivity by 12%; an increase desperately needed by the UK economy at the moment. If we assume that ‘regular volunteering’ means an hour a week (very achievable for most people), then each hour volunteering would increase their contribution to the GDP by £2.42. A small but not insignificant increase.

Under this new proposed social capitalism, if Jennifer were to start volunteering an hour a week, she would take home more than a scientifically-proven boost in happiness, a feeling of pride from having made a difference, but also £413.47 extra per year – a figure equal to the Government’s gain each year too. £413.47, or £8.27 per hour – not a bad rate and enough for quite a nice holiday too!

Jennifer’s Gain: £413.47

Government’s Gain: £413.47

Healthcare

The NHS is creaking at the seams. Waiting times are out of control and people are dying as a result. So is the problem here that there is too little funding? That’s a political answer, not a logical one.

There is either too little supply or too much demand, and demand is only going to continue to increase with a rising and aging population and more life-saving treatments. The problem then is simple: there are too many people in the system – too many patients. What would happen if we reduced the size of a waiting list by 10%?

To do that, the Government should be incentivising healthy eating and healthy lifestyles. The statistics aren’t readily available for inclusion here, but if regular exercise reduces people’s NHS bill, why not offer a tax rebate on gym memberships?

Here though, let’s look at the other end of the scheme: private healthcare. As a 40 year old with only 2 GP visits, Jennifer will cost the NHS £1358 this year. However, BUPA offers comprehensive healthcare for just £600. If you earn £26,500, how can you justify not having private healthcare for £50 a month, knowing that doing so could save lives? The NHS should be free for all at the point of treatment, but that doesn’t mean that we all should use it.

On top of this, consider the waiting times. Let’s assume that Jennifer is reasonably healthy and only has one treatment in her 40s that will put her out of work, or 0.1 this year. Comparing an 18 week NHS waiting time with the average private waiting time of only 2 weeks, Jennifer will also be productive for an additional 56 working hours: equivalent of £549.78 compared to Statutory Sick Pay.

Again, if we apply a 50% tax rebate here:

Jennifer’s Gain: £628.78

Government’s Gain: £679.00

Charitable Donations

I’ve talked about this before – charities do fantastic work and we should be donating to them. Some do more good than others, and we should all bear that in mind. Did you know, though, that the Government’s Department for International Development donate using our tax money?

Giving to some charities could save the Government money then. For example, we could donate to DEC, which reduces the need for DfID to do so, or to organisations such as St John Ambulance, who provide emergency ambulances and paramedics to the NHS, reducing the number of paid staff required. There are equally some charities that would not save the Government any money, so this is a spectrum.

For ease, let’s assume that our friend Jennifer donates to St John Ambulance, or another ‘maximum impact’ charity. Earning the average wage of £26,500, she also realises that she is in the top 2.8% of richest people in the world, thanks to GiveWell.org, and decides to give a post-tax donation of 10%. (I’m also assuming here that Jennifer isn’t paying off any Government loans etc, so that GiftAid increases her post-tax donation by the equivalent amount she lost before it reached her).

With a rebate of 50% then;

Jennifer’s Loss: £993.75

Government’s Gain: £993.75

Unlike the other sections, Jennifer is giving away a sizeable amount of her income. The idea of donating though is that you are making a real, tangible difference to people’s lives, even saving them. Paying people to donate is nonsense, but instead Social Capitalism incentivises giving and makes that impact less financially painful.

If Jennifer wanted to reinvest that rebate until her total net loss was 10% of her income, then she would end up doubling her donation and her impact, whilst the Government ends up saving the equivalent of £1987.50. Everybody wins!

Environment Impact

“There’s one issue that will define the contours of this century more dramatically than any other, and that is the urgent threat of a changing climate”

- Barack Obama

Month on month, we consistently here of record temperatures across the globe. In fact, 2016 was the hottest year globally since records began in 1880. The vast majority of the scientific community believe that we are causing this world-wide problem, and yet we still seem slow to act. If we don’t curb our emissions now, most ecosystems will be at risk of extinction, famines will become epidemic, violent weather storms will batter communities and people will die.

To slow this rate, governments have signed the record Paris Deal, and the UK has pledged to cut its emissions by 40% by 2030. But what can we do as individuals?

By looking at the amount of money spent on avoiding climate change by the Government and the targets, we can estimate that it costs £36.83 to reduce emissions by one metric tonne. This can be achieved in lots of ways. For example, reducing the average private mileage by 50% would save 2.35 metric tonnes every year, as well as saving money for the driver. Although this is difficult to measure, it wouldn’t be impossible; just think of the smart meters in people’s homes but applied to cars.

Another environment impact to consider is the devastation caused by landfill waste, as well as the energy and resources required to create all that waste in the first place. The Government could be rewarding people by cutting waste, or even going Zero Waste.

So how would Jennifer benefit if she reduced her private mileage by 50%, saved an extra metric tonne of emissions through common sense energy conservation, and managed to go zero waste for a year? Working with a 50% rebate;

Jennifer’s Gain: £956.87

Government’s Gain: £58.59

Childcare

This one’s quite simple: the Government spends vast amounts of money on free childcare, but not everyone takes them up on the offer. There is also considerable evidence to show that children who receive more parental care are brighter and do better at school.

If Jennifer worked flexibly and covered, say, 5 hours of childcare herself (or shared them with her partner) per week and the Government applied a 50% rebate;

Jennifer’s Gain: £1350.18

Government’s Gain: £1350.18

More research needs to be done in this area in particular. There could be further benefits including increases in productivity due to parental happiness, or child intelligence, and equally there could be a negative economic impact from parents working more flexibly. There may well be an impact on children depending on the quality of their parents’ care. However, this information is currently not readily available and so assumptions have had to be made.


Conclusion

We have shown that through just five simple areas, large Government savings can be made, our average ‘Jennifer’ can receive significant tax rebates, and, most importantly, that society can benefit greatly for minimal disruption.

By considering volunteering, healthcare, education, donations and environmental impact, Jennifer would be able to save a total of £5969.59 with Government savings of £5329.81.

In this piece, I’ve focussed mainly on the financial implications because that’s the incentive and constraint for most people. We shouldn’t forget the social impact inherent though. Whilst it’s hard to quantify how many people a voluntary paramedic would save in an hour, it’s clear to see that volunteering as a paramedic would save lives. The personal impact of taking advantage of private healthcare is best demonstrated at scale. People die whilst waiting for treatment in the NHS. If 5% of the population bought private healthcare, an average patient’s waiting times on the NHS would drop by over a week. That could, without doubt, save lives. If people across the country halved their private mileage and reduced their emissions by another 1.5 tonnes, the UK would be carbon neutral by 2030.

There are many other areas that could be included too, depending on people’s circumstances. For example, if Jennifer could afford the average £13k to send her child to independent school, she and the Government could save £2620.29 and £2828.57 respectively. Or if she was able to contribute more than £3k to a private pension (the equivalent of a state pension), then she could receive a significant rebate for every investment over that, whilst the Government would benefit by reducing the need to provide benefits when she retires. Social enterprises are eligible for some tax relief, but why not us, their customers? These are just three examples of further options, but the list goes on.

This system of social capitalism works purely on the basis of incentivising people to do good. There are lots of assumptions at play here and clearly a lot more work needed to produce numbers that stand up to scrutiny but the conclusion is clear: the current system isn’t working, but there is an alternative.

 

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