Capitalism: the cause of and solution to all life's problems

[mèþru]

I am aware of the distinction - I have had plenty of debates on theory before and am familiar with a variety of Marxist and anarchist takes.

I still think private property isn't bad, and that private vs personal personal property is a continuum rather than a binary.

[Ares Land]

I think private property is legitimate; the problem isn't that it exists, but that ownership is too concentrated.

About private property, I make the distinction between property and possession - property is defined by title, possession is defined by use. A factory owned by a capitalist is property; a factory owned collectively by the workers who work there is possession. Likewise, an apartment building owned by a landlord is property; an apartment building owned collectively by its tenants is possession.

The problem, I think, lies in intermediate cases. How about owner of small businesses, with a handful of employees? Or people just buying an apartment and renting it out to get a bit of extra money when they retire?

[Ares Land]

Re: private property, a very interesting point Piketty makes is that it's very much a cultural and legal construction.
What 'private property' really consists of is far from 'self-evident'.

He gives two intriguing (and frankly, unsettling) examples.
One is the way private property had to be essentially defined from scratch in France during the Revolution. What existed was a variety of Ancien Régime rights inherited from feudalism, and legislators had to decide which were "feudal" and which were "legitimate". Essentially the distinction was arbitrary. At one point corvée was held to be a legitimate form of rent.
The left in general worships the French Revolution, but it really all worked out in favor of a small rentier class. By 1900 French society was less egalitarian than it had been under the Ancien Régime.

Another example is slavery: when France and Great Britain abolished slavery, landowners were generously compensated for their loss of property. Surprisingly -- or unsurprisingly, I'm not sure -- the consensus view was that it was the normal, decent thing to do.
One of the reasons the Civil War played out as it did is that compensation was economically unfeasible in the United States.

Piketty promises to suggest alternate and better forms of property for our own times later in the book -- I haven't gotten there yet.

[Raphael]

Article 1 of the French Revolution's Declaration of the Rights of Man and of the Citizen said

Men are born and remain free and equal in rights. Social distinctions can be founded only on the common good.

Am I right to read the second sentence between the lines as "The distinction between aristocrats and commoners serves no useful purpose under the common good, and is therefore illegitimate, but the distinction between between rich commoners and poor commoners does serve a useful purpose under the common good, and is therefore legitimate"?

[Ares Land]

That pretty much sums the 19th century and part of the 20th, yes.

I'm pretty sure that article was intended without the cynical subtext. I don't think the Convention legislators were even aware of the jarring contradiction between what they said they'd do and what they did.


(That article and abolition of privileges bit minorities in the ass quite a few times, really. Nobody ever really figured out that in a huge country with the largest population in Europe, maybe the monarchy knew what it was doing when it didn't apply the same laws to all provinces equally...)

[Moose-tache]

I think private property is legitimate; the problem isn't that it exists, but that ownership is too concentrated.

This is a bit like saying "I don't dislike calories in theory, only that they are in my food." In practical terms, you can't have private ownership of the means of production without a concentrating trend. It's one thing to say that ownership is fine on a hypothetical level, but once it is implemented, the dismal facts are unavoidable: for Capitalism to work, capital investments must grow faster than inflation, which generally means that profits from ownership grow faster than wages. Since wealth is also power (that is, after all, the purpose of wealth as opposed to money), the plan of using political power to carve pieces off the rich to feed the poor is extremely vulnerable to internal collapse. Historically economic downturns put these redistributive systems under immense pressure, and we can expect these pressures to increase as we barrel inexorably toward a zero-growth economy. Socialism offers an elegant solution by skipping the whole process, albeit introducing untold new problems in place of the old ones.

[Ares Land]

I think private property is legitimate; the problem isn't that it exists, but that ownership is too concentrated.

This is a bit like saying "I don't dislike calories in theory, only that they are in my food." In practical terms, you can't have private ownership of the means of production without a concentrating trend. It's one thing to say that ownership is fine on a hypothetical level, but once it is implemented, the dismal facts are unavoidable: for Capitalism to work, capital investments must grow faster than inflation, which generally means that profits from ownership grow faster than wages. Since wealth is also power (that is, after all, the purpose of wealth as opposed to money), the plan of using political power to carve pieces off the rich to feed the poor is extremely vulnerable to internal collapse. Historically economic downturns put these redistributive systems under immense pressure, and we can expect these pressures to increase as we barrel inexorably toward a zero-growth economy. Socialism offers an elegant solution by skipping the whole process, albeit introducing untold new problems in place of the old ones.

My main objection to that is that, to fix the problem that most people don't have (much) access to ownership is to abolish private ownership altogether.
Redistributive systems were put under pressure, but they proved to be at least as stable, if not more stable than the unrestricted capitalism approach. You just need a look at European history before and after WWII...

That said, yeah, social-democracy isn't the magical system that fixes old issue and we should come up with new ideas! My main objection is to the traditional Marxist approach which I find unconvincing.

[Rounin Ryuuji]

Something that has recently occurred to me — investments in stocks can produce hypothetically infinite returns for a finite investment, which is more than faintly absurd. I think it might be interesting if, rather than being able to buy shares in a business in which you are not personally involved, you could instead buy something akin to savings bonds that will either reach maturity after a certain period of time has elapsed, or else after they have paid out a certain amount (to give an arbitrary figure, after five years or a return of 500% on the original investment). Owning actual shares ought to be restricted to those who actually work for or who have founded or retired from a given business. I don't have a very strong plan for how it would be implemented, but I think this might be the beginning of a better way of doing investment, if we must have such a thing at all.

[communistplot]

Something that has recently occurred to me — investments in stocks can produce hypothetically infinite returns for a finite investment, which is more than faintly absurd. I think it might be interesting if, rather than being able to buy shares in a business in which you are not personally involved, you could instead buy something akin to savings bonds that will either reach maturity after a certain period of time has elapsed, or else after they have paid out a certain amount (to give an arbitrary figure, after five years or a return of 500% on the original investment). Owning actual shares ought to be restricted to those who actually work for or who have founded or retired from a given business. I don't have a very strong plan for how it would be implemented, but I think this might be the beginning of a better way of doing investment, if we must have such a thing at all.

if you have the political capital to do that, why not just go communist, this is literally just a more inefficient restating of our aims anyway, which is that ownership should be held by the workers in a given industry or firm democratically.

[Rounin Ryuuji]

Something that has recently occurred to me — investments in stocks can produce hypothetically infinite returns for a finite investment, which is more than faintly absurd. I think it might be interesting if, rather than being able to buy shares in a business in which you are not personally involved, you could instead buy something akin to savings bonds that will either reach maturity after a certain period of time has elapsed, or else after they have paid out a certain amount (to give an arbitrary figure, after five years or a return of 500% on the original investment). Owning actual shares ought to be restricted to those who actually work for or who have founded or retired from a given business. I don't have a very strong plan for how it would be implemented, but I think this might be the beginning of a better way of doing investment, if we must have such a thing at all.

if you have the political capital to do that, why not just go communist, this is literally just a more inefficient restating of our aims anyway, which is that ownership should be held by the workers in a given industry or firm democratically.

I think it's good to experiment with how we would do collective ownership — we could hypothetically simply reserve all stocks for labour, being distributed, or we could use some sort of parliamentary model with elected management, directors, &c., though how effective each might be is a relative unknown — and to have practical ways of implementing it, and of neutering the current system so that it dies a death as peaceful as is possible. I think doing this would be far easier (though not easy) than switching to communism outright, and it might give us some insights into how to achieve such a state (I should also like to see a constitutional monarchy-esque structure for a business, where the founder's power is much reduced, but they still retain some prerogatives). It's also simply a potential improvement on something that already exists that might or might not be useful.

[mèþru]

I actually have pretty similar ideas to Rounin, albeit trade of control of the company is just heavily restricted instead of not allowed and the bonds are dividend paying, they just don't confer shareholder status like normal stock does (which makes them not the same as non-voting stock, which still implies ownership). Regardlss of my version or Rounin, it is capitalism under a Marxian analysis - the founder of a company might not be one of the proletariat, and retired workers running a company are basically ex-proletariat.

The point being that I think that if there is at any point enough poilitical capital to abolish capitalism then there is enough political capital to reform and regulate capitalism to work for the people - not just the rich, not just those who work but for everyone. Then again the benefits of a capitalism without the corporation over communism also equally are benefits of a market-based democratic socialism with some form of private ownership by workers. The difference here being my belief that worker co-ops are not inherently better places to work than any other company. Workers can be as exploitative of each other as any boss, and they don't really have any less incentive to cheat the consumer to raise their revenue - unless if they are not just worker owned, but a worker-consumer co-op. Also there's the fact that the larger the co-op, the more they rely on outside management - similar to CEOs taking over the corporation from shareholders in 80s business cultue. In Venezuela, this lead to nationalisation when socialists found out that there is no actual incentive in a market economy for worker solidarity. But the cost of a non-market society is too much - even pre-Gorbachev Soviet Union had to implement market days where farms sold food privately to reduce starvation.

[Rounin Ryuuji]

I actually have pretty similar ideas to Rounin, albeit trade of control of the company is just heavily restricted instead of not allowed and the bonds are dividend paying, they just don't confer shareholder status like normal stock does (which makes them not the same as non-voting stock, which still implies ownership). Regardlss of my version or Rounin, it is capitalism under a Marxian analysis - the founder of a company might not be one of the proletariat, and retired workers running a company are basically ex-proletariat.

It was actually the hypothetically infinite nature of dividends that bothered me more than that stocks do imply ownership of the company (though both are, now that you raise it, important points.

(This is perhaps a bit pedantic, but is nevertheless a great point of amusement to me — Rounin or Rōnin — Nih. 浪人 or ろうにん — means either "samurai without a master" or "unemployed person" — the Ryuuji part is actually the... name — Nih. 龍二 or りゅうじ, also possibly Romanised "Ryūji", something like "Second Dragon" in meaning. I've been calling myself essentially "Unemployed Ryuuji" since March, for reasons that are probably immediately evident.)

The point being that I think that if there is at any point enough poilitical capital to abolish capitalism then there is enough political capital to reform and regulate capitalism to work for the people - not just the rich, not just those who work but for everyone. Then again the benefits of a capitalism without the corporation over communism also equally are benefits of a market-based democratic socialism with some form of private ownership by workers. The difference here being my belief that worker co-ops are not inherently better places to work than any other company. Workers can be as exploitative of each other as any boss, and they don't really have any less incentive to cheat the consumer to raise their revenue - unless if they are not just worker owned, but a worker-consumer co-op.

I hadn't considered the possibility of a worker-consumer cooperative, but I like the idea — I really do.

Also there's the fact that the larger the co-op, the more they rely on outside management - similar to CEOs taking over the corporation from shareholders in 80s business cultu[r]e. In Venezuela, this lead to nationalisation when socialists found out that there is no actual incentive in a market economy for worker solidarity. But the cost of a non-market society is too much - even pre-Gorbachev Soviet Union had to implement market days where farms sold food privately to reduce starvation.

Things getting too big can be, in itself, a problem, but if there's demand for something, one needs greater capacity to produce it. I wonder if there couldn't be some sort of licensing programme whereby small publishers license books for print, small factories schematics, &c. &c.; or would this, perhaps, be too complicated...?

[mèþru]

I think that big companies are a necessity of the modern world due to their ability to make things cheaper by economies of scale, and because some products are only found in some select areas that need global and cheap redistribution (such as rare metals used in computers). The question is how big can we allow them to get and what regulations can prevent them from buying out or outcompeting every small business.

I think the infinite nature of dividends is a good thing. One of the big benefits of market economies is the greater capacity for growing wealth. If the pie grows bigger and we don't allow all the gains to go to a select few, in the long-term everyone is better off than a completely equal but stagnating economy. Under a command economy, total wealth can only grow by production - and since wealth can be reinvested in improving production this means command economies have lower potential for innovation (that said, potential is not the same as what is actually done. Just because market economies have higher potential for innovation doesn't mean they can't squander the opportunity and innovate less)

The key is that returns on investment cannot be allowed to accumulate in private hands indefinitely, or else there is little benefit to most people from a growing economy. The government must constantly redistribute wealth - every billionaire is a policy failure.

[Ares Land]

Something that has recently occurred to me — investments in stocks can produce hypothetically infinite returns for a finite investment, which is more than faintly absurd. I think it might be interesting if, rather than being able to buy shares in a business in which you are not personally involved, you could instead buy something akin to savings bonds that will either reach maturity after a certain period of time has elapsed, or else after they have paid out a certain amount (to give an arbitrary figure, after five years or a return of 500% on the original investment). Owning actual shares ought to be restricted to those who actually work for or who have founded or retired from a given business. I don't have a very strong plan for how it would be implemented, but I think this might be the beginning of a better way of doing investment, if we must have such a thing at all.

if you have the political capital to do that, why not just go communist, this is literally just a more inefficient restating of our aims anyway, which is that ownership should be held by the workers in a given industry or firm democratically.

Investment is an exchange: you provide a certain amount to someone to finance a venture, which is potentially risky. Besides, while you own the shares, your money is tied up in company assets and you can't use it otherwise. In exchange, you get a payment.

You keep getting a return on investment, because your money keep being unavailable as long as you own the shares, and because the venture keeps being risky. (Any company could fail or lose much of its worth.)

One consequence of Rounin's proposal is that, essentially, once the share - bond expires, it's essentially worthless to the investor. Which means, I think, that it's uneconomical to invest unless you have a guarantee that you'll get more than your money back before the expiration date. This would lead investors to disproportionaly choose exceedingly safe ventures, and to demand higher dividends that they currently do. Which doesn't mean it couldn't work! We'd just need to check the numbers.

With the communist solution, the problem is, what happens if the workers needs to set up a factory, or just extra equipment or assets? Where do they get the necessary money (I dare not ask 'capital')? Who will provide the money, and what will be demanded in return?
(Again, that doesn't mean it's impossible! But we need answers to these questions, and not leave them for after the proletarian revolution.)

How shares and investments work is another area where the answer is obvious, but really isn't.
Another example grabbed from Piketty: we assume that the system is one share-one vote, and that whoever owns more than 50% of the shares controls the company. That was indeed debated in the early days of capitalism: in fact many companies run on the one person - one vote principle.

Another unasked question is why do investors get to control the company at all? I've said before that in a planned economy, the central planner doesn't know anything about how products are made and which well sell. Well, the same argument applies to private companies, really.
For instance, the main shareholders for Pfizer are investment funds. Investment bankers are very competent people, I'm sure, but I don't think they know a thing about making vaccine, or selling pharmaceuticals. And if they worry about the company being badly run, they got dividends to compensate the risk.
But I don't want to be that radical: I'd suggest instead a fair arrangement where both workers and investors get equal decision power, with a tie-breaking vote for a public authority or a customers representatives' group.

On that last bit, I actually believe that the idea of workers owning the company doesn't go far enough. Regarding insulin, I think patients with diabetes are in a pretty good position to know how much they need it and plenty of legitimacy to decide how much gets produced and how.
And if customers had been represented on the board of banking institutions, I'm pretty sure we wouldn't have been so scared of bank runs back in 2008. Not necessarily customers, by the way: I think the residents of Pripiat would have liked a say on how the local power plant was run...

[Raphael]

Another example grabbed from Piketty: we assume that the system is one share-one vote, and that whoever owns more than 50% of the shares controls the company. That was indeed debated in the early days of capitalism: in fact many companies run on the one person - one vote principle.

This is not really related to any of your major points, but a minor nitpick: I've heard that, at least in the USA, there are laws preventing 50-percent-plus-one of the shareholders from doing things that (supposedly) hurt the interests of all shareholders.

[Rounin Ryuuji]

Investment is an exchange: you provide a certain amount to someone to finance a venture, which is potentially risky. Besides, while you own the shares, your money is tied up in company assets and you can't use it otherwise. In exchange, you get a payment.

Yes, however, the infinite nature of the payment is the thing with which I take issue.

You keep getting a return on investment, because your money keep being unavailable as long as you own the shares, and because the venture keeps being risky. (Any company could fail or lose much of its worth.)

You can hypothetically earn more than you originally invested, my objective is at least in part to prevent this from becoming a hypothetically infinite return on a finite amount of money.

One consequence of Rounin's proposal is that, essentially, once the share - bond expires, it's essentially worthless to the investor. Which means, I think, that it's uneconomical to invest unless you have a guarantee that you'll get more than your money back before the expiration date. This would lead investors to disproportionaly choose exceedingly safe ventures, and to demand higher dividends that they currently do. Which doesn't mean it couldn't work! We'd just need to check the numbers.

I probably ought to have mentioned this before, but I was picturing the bonds having a rather low rate of return, but a long maturity, modelled somewhat on the bonds issued by the British Government in the Eighteenth Century; these were regarded as a prudent investment for inherited money (one often talks of having so many pounds a year in Austen novels, for one, from the investment of such things), such that they do not quickly expire; like bonds, I would also expect them to be issued in quite low denominations, so that people could invest small amounts in several at once. One can still trade in them, of course, but they (1) do not imply a share of ownership in a company; and (2) are not infinite.

As far as risk goes, with smaller denominations, people would certainly put larger amounts into surer ventures, but this would also probably have the effect of encouraging people to buy American and Swiss Government Bonds, potentially increasing revenue without raising taxes, and enabling some form of State investment programme (possibly with business bonds chosen at random, perhaps with a certain number per capita per region of the country), to encourage the growth of small and innovative enterprises. Of course, the effect is on some level going to make investment in them less valuable, but this is a feature, not a bug, in my mind — it makes it harder for the wealthy to simply skim money, and I do not (clearly) approve of any purely monetary investment yielding hypothetically infinite returns.

With the communist solution, the problem is, what happens if the workers needs to set up a factory, or just extra equipment or assets? Where do they get the necessary money (I dare not ask 'capital')? Who will provide the money, and what will be demanded in return?
(Again, that doesn't mean it's impossible! But we need answers to these questions, and not leave them for after the proletarian revolution.)

I had once an idea that local governments might maintain productive machinery, and everybody would hypothetically be able to access it; there would presumably be allocations of money and resources based on applications to some central body, presumably the treasury, but we would need to make sure it operated efficiently, and that measures for accountability and transparency were in place.

Another unasked question is why do investors get to control the company at all? I've said before that in a planned economy, the central planner doesn't know anything about how products are made and which well sell. Well, the same argument applies to private companies, really.

I clearly don't think they ought to. That you have money to invest doesn't make you somehow competent to make decisions affecting the lives and livelihoods of a huge number of people, nor to judge what is best for the consumer (though they may or may not be well-intentioned if they do try to intervene on either point).

For instance, the main shareholders for Pfizer are investment funds. Investment bankers are very competent people, I'm sure, but I don't think they know a thing about making vaccine, or selling pharmaceuticals. And if they worry about the company being badly run, they got dividends to compensate the risk.
But I don't want to be that radical: I'd suggest instead a fair arrangement where both workers and investors get equal decision power, with a tie-breaking vote for a public authority or a customers representatives' group.

I think that's a little too generous to the investors, unless investment becomes so widespread that most ordinary people are in some manner involved with it. For now, it seems like a tool of control of the Capitalist class, which needs to be hamstrung.

On that last bit, I actually believe that the idea of workers owning the company doesn't go far enough. If you need insulin, I think patients with diabetes are in a pretty good position to know how much they need it and plenty of legitimacy to decide how much gets produced and how.

And if customers had been represented on the board of banking institutions, I'm pretty sure we wouldn't have been so scared of bank runs back in 2008. Not necessarily customers, by the way: I think the residents of Pripiat would have liked a say on how the local power plant was run...

Both of these, I like.

[zompist]

or lose much of its worth.)
On that last bit, I actually believe that the idea of workers owning the company doesn't go far enough. Regarding insulin, I think patients with diabetes are in a pretty good position to know how much they need it and plenty of legitimacy to decide how much gets produced and how.
And if customers had been represented on the board of banking institutions, I'm pretty sure we wouldn't have been so scared of bank runs back in 2008. Not necessarily customers, by the way: I think the residents of Pripiat would have liked a say on how the local power plant was run...

A useful word here is "stakeholder". There was a lot of talk about this in around the 1970s: that companies should be run by a combination of management, workers, customers, and the local community. What the balance should be is a can of worms!

In Germany, large companies must have workers as 1/3 or 1/2 the corporate board, depending on the industry and the size of the firm. My understanding is that this helps, but the owners have ways around it. It may not be coincidental that Germany has retained a robust manufacturing sector when other countries have outsourced most of it.

[Raphael]

It may not be coincidental that Germany has retained a robust manufacturing sector when other countries have outsourced most of it.

It might have helped that among the few things Germany does still seem to export is industrial machinery - so if Very Big Enterprises Inc. opens a factory in, say, China, a lot of the machines in that factory might still come from Germany. Or at least that used to be the case; I don't know if it still is.

[Moose-tache]

I doubt that blocking the emigration of capital necessarily has much to do with high employment in manufacturing. In the US, if you passed a law saying that manufacturing couldn't move overseas, every factory would just switch to 100% automation. It's hard for a machine to out-perform an Indonesian woman making blue jeans. But a broken down claw machine would be more cost-effective than an American factory worker with their $24,800 average salary (plus benefits and legal rights in some states). And even if Germany's employment success was the result of organized, vested labour, that tells us nothing about how to keep labour organized and vested. The US once had very powerful labor unions. Now a typical factory worker has to wait for Harry Potter to give them a set of clothes.

I know I harp on the US a lot as an example of what can go wrong in Capitalism, and there seems to be a general attitude in this thread of "Oh, who cares? Look at Belgium. They're doing all right!" I think the US is sort of the canary in the coal mine of Capitalism. Whatever goes wrong there, should be at the top of the crisis report for any other capitalist country.

[Travis B.]

I am open to worker-consumer co-ops as a way of making sure that co-ops serve the interests of consumers rather than just the interests of the workers. This still does not solve the issue of how do we prevent co-ops from having all the externalities that capitalist enterprises have, which is why even worker-consumer co-ops need democratic regulation so they do not run rough-shod over the interests of people who neither are the enterprises' workers nor their consumers.