There have been hundreds of articles written that analyze, criticize or castigate capitalism for its failure to produce a fair society. Always, these articles are about the symptoms of the problem: the concentration of wealth in the accounts of a few, stagnating wages while cost of living rises, fewer jobs that pay well, higher cost for housing, and a standard of living that has leveled off and even fallen for many. None of these writings has identified the root cause of the problem which is the wrong attribution of ownership by the legal structure supporting the economic system.
As the capitalist network is strung out across the globe the first hook that it hangs from is the notion that whatever resources exist in Nature are free for the taking. Companies that mine the earth for minerals, gold, precious stones and rare elements and those that bring up oil, natural gas and coal believe that these things are ownerless. They sell them in a market and keep the proceeds which, incidentally, are invariably subject to government tax. This exploitation of natural resources happens in almost every country, with the citizens maintaining a government and security apparatus for the territory in which the business operates. If it is considered that every citizen is an equal partner in the preservation of that country, which carries certain duties, then it is logical that each citizen is entitled to an equal share of all that Nature provided within that territory. To put it another way, the citizens own collectively all that Nature provided. Therefore, the materials that are extracted from Nature are not ownerless and the business is obliged to buy out the equity of every citizen before selling the commodity in a market. This should result in a steady revenue stream to every citizen from all the companies that exploit natural resources. To complete the picture, however, it is necessary to point out that some government expenses, such as national defense and general administration, would be equally attributable to every citizen. The resulting transfer of money could be positive or negative depending on the government’s burden, its efficiency and its honesty.
The second hook that the capitalist system hangs from is the notion that everything created by an employee in a business is owned by the business. The logic for this is not easy to discover. It cannot be based on the usual calculation of which party to the creation deserves to own it because no matter what the business owner contributed- not the premises, nor the tools, nor the raw materials, nor the design, nor the fabrication methods- could, in any length of time, produce the creation by themselves. The indispensable factor is the person who was the agent that brought into being what did not exist before and therefore would be the logical owner with the business owner having a commensurate claim on the product. Perhaps the logic is based on the master-servant relationship that is the assumed character of any employment contract. In such a relationship the servant works with things owned by the master to serve the master in all commands. In the twenty first century, when everyone has the same basic status as a human being, there are no masters by station or decree (the military being an arguable exception), only those with authority by mutual agreement. Employment arrangements are, in principle, contracts between beings of equal status despite so many people being awed by the difference in power between themselves as individuals and a large employer. Unlike a master-servant relationship a contract between parties of equal status automatically calls for justice to both, that is, reward according to input. In the matter of ownership of what is created we come back to the calculation stated above: the creator of something owns it while other contributors may have a claim on it. It is a system of dual equity which is quite different from the present equity structure.
The chief implication of the dual equity arrangement is the new basis for compensation. The employer must buy out the equity of the employee before selling the product in a market. In that calculation the price of the product at the factory door will be the primary factor. The present system of paying an employee for his/her time is fiction unless he/she is simply the counterweight on a tilt. Truly, the value of an employee in the workplace is for what he/she really contributes to the value of the product. The new system acknowledges that. Of course, the compensation will also correspond to the amount the employee creates that is of value. This will shock labour unions because they look on employees as a collective and are extremely reluctant to recognize the different production from individual efforts. In the revised system they would have the role of negotiating the value of incremental creations in all job roles as well as negotiating the compensation for worker affiliation and for taking responsibility in the various job roles. If done properly, the payment to every worker would be proportional to what he/she contributes to the value of the business’ products. In the dual equity system those who build factories or other types of businesses put in place premises, with equipment and designs, accounting systems and other assets that enable people to create profitably while the asset owners obtain their share of profits on a fair basis, no less and no more.
These ideas are surely revolutionary. If implemented they would produce a much needed and profound change in the capitalist system. Generally, those who prosper the most would be those who create the most. Yet, there would be return on capital, while including less risk because a corollary of the dual equity system is that the return to both investors and workers would fluctuate with the income of the business. Therefore, workers and the management that is put in place by the investors would probably work together in their common interests to a degree seldom found today. Return on capital would generally be less but more reliable because in a system that is more just all participants will strive for the same end.
Correcting capitalism, which means properly ascribing ownerships, will solve serious social problems. Every person, including even the homeless on the street, will receive a regular income if taxation does not erase it. In the workplace every worker will receive fair remuneration for what he/she contributes to the business. There will be less poverty although it will still exist but will be made up mostly of the lazy and unmotivated. The present method of rectifying wealth disparity by governments redistributing it from the affluent to everybody else will not be needed but efficient government will be. Inefficiency will result in reduced regular payments to the population for their entitlement and they will likely respond forcefully. Those who would lose in this revolution will undoubtedly defend the status quo, ignoring its failures, and maintain that the world is the way it is and people have no real option but to work with it. Others will refer to the old adage that the world is what we make it.
Filed under: Uncategorized | April 25th, 2016