Political and Economic Theory Thread

[GratefulPoke]

Honestly, I did not get around to writing a response the other day when I planned to do so and since then have had life events that impact my response.

You did a nice job laying out the options with your feelings shining through a bit as expected.

Ideally, I'd love to see market capitalism work perfectly. The problem is the money seems to tilt toward capital and with money comes power and with power comes favoritism. If it completely worked, there would be no reason to have to break up monopolies because the balance of power between labor/capital and the market forces would prevent the monopoly from forming, or at least from lasting. But, that has not been the case in history.
Social Democracy is the most active in trying to prevent this power shift therefore is my favorite, but I accept it is also flawed.

There are three issues I see with basically all of the others except state capitalism which is a non-starter.
1. There is no evidence they can work. Unlike capitalism which has existed in some forms now going on centuries, the others are all basically failed experiments or unproven theories. The Law of Unintended Consequences reigns in those areas.
2. They can have the same power imbalances that are the flaw of capitalism. If the workers elect a "Trump" to run the company. Or, the government pushes worker rights too far. Or, any number of potential issues similar problems could ensue.
3. The same issue that is the problem with capitalism, the concentration of wealth and power in the few, is also its magic. I'm retiring from my primary job this month. I found out this week that I will no longer have my other job that that I had planned to continue. My options are one, go back to work for someone in an ER which I will not do. Two, go ahead and fully retire and have a little less luxurious retirement than I had planned. Or three, I have had some business ideas that I had considered and I could go ahead and start.

But, the business will take capital. If I do that, I'm looking at sinking 10-20% of my retirement nest egg in to get it off the ground. Maybe higher the way prices have been. Let's say the business does amazing and we end up with 20 employees. Should I have a 1/20 vote on the business given I created it, risked myself and put all the work in to make it so that others could just show up and start working? If it fails, are any of the other workers going to chip in to make me whole on my investment?

If we were in an economy where that was the case, no way would I consider that. Taking the risk to start a business without the potential reward to myself and my family just isn't worth it and the other options would win. Even if there was some sort of public funding (which would also give power to those running the funding) and all I risked was the significant time, stress, and effort, I don't know if I would do it at this point in my life.

Thanks. I appreciate your thoughtful response and sharing the 3 hurdles you see with economic alternatives. There are a few more thoughts on these concerns.

1) For economic democracy/market socialism, while we don't have an example of more than half of an economy comprised of such entities, there is evidence that employee owned businesses can work and we have examples of them working in our current economy. The majority of the same principles apply.
2) No system is perfect, but some systems are more resilient than others. As a rule, the more horizontal the power structure and the more power is separated, the harder it is for a trump like dictator type to run roughshod. While in a theoretical sense, I agree, workers rights could be taken too far, but do we have prose examples of this happening? Plus, since market mechanisms are still in place, if the business was run terribly, it would fail and be restructured or closed.
3) I like this personal example a lot. You have the capital to start a business now, but 30 years ago you would likely not have had it. The vast majority of people do not have enough capital to start a business as things stand. In economic democracy, more people would have the means to start a business since there would be far less wealth stratification, plus more business loans would be available to entrepreneurs to start one via public banking. Would you still be less prone to start a new venture if instead of the risk being solely on your shoulders, the risk was shared by a few other people also? It probably would make ownership conversations easier, especially if you decided to scale it to a medium or large business.

There is a number of misconceptions about entrepreneurialism and how it would function in a market socialist economy. Small businesses (the definition on this varies by source, but for this purpose, under 50 employees) and how they run would not change much. A graduated approach to businesses that reach certain size and revenue levels to have employee ownership and profit sharing requirements would help this out significantly. If an individual put up the majority of capital to start the business, that could be "bought back" over time using those profits by employees through profit sharing or a loan from a public bank. This is very similar to how many US employee owned businesses got to that point. It is just hard for the workers to get the capital in the first place, this system would help immensely with that.

 

[steross]

3) I like this personal example a lot. You have the capital to start a business now, but 30 years ago you would likely not have had it. The vast majority of people do not have enough capital to start a business as things stand. In economic democracy, more people would have the means to start a business since there would be far less wealth stratification, plus more business loans would be available to entrepreneurs to start one via public banking. Would you still be less prone to start a new venture if instead of the risk being solely on your shoulders, the risk was shared by a few other people also? It probably would make ownership conversations easier, especially if you decided to scale it to a medium or large business.

There is a number of misconceptions about entrepreneurialism and how it would function in a market socialist economy. Small businesses (the definition on this varies by source, but for this purpose, under 50 employees) and how they run would not change much. A graduated approach to businesses that reach certain size and revenue levels to have employee ownership and profit sharing requirements would help this out significantly. If an individual put up the majority of capital to start the business, that could be "bought back" over time using those profits by employees through profit sharing or a loan from a public bank. This is very similar to how many US employee owned businesses got to that point. It is just hard for the workers to get the capital in the first place, this system would help immensely with that.

I have more monetary capital and less human capital. If what is happening now in health care had occurred when I was a little younger, I'm pretty sure I would have jumped on this idea. Tougher sell now.

What you are saying could work. But I think there would have to be more governmental incentives for the owners and not just the stick of rules that take their business. The idea that if you create a business and it does really well, you have to share the profits with the employees so they can use the profits to buy back the capital you had put in is going to be a tough sell. We would find that businesses just stop growing to avoid that outcome.

I could see a concept where public companies are employee-owned. But, the shift to employee-owned should reward the entrepreneurs, not just with return of capital. A concept where the owner(s) were paid off in a tax-limited or tax-free way so that the employees could buy-out the owner at a level similar to what they would get at IPO or private sale would be better.

Have you ever started a business? I've only done very small ones and even that was stressful in ways that just do not happen with employment. There would have to remain a significant financial incentive for this. If not, this could be massively destructive to the creation of businesses, jobs, and inventions.