• Hanover
    9.5k
    The problem is that workers of all stripes are shut out of decisions and in fact have zero input whatsoever on how the profits which they helped generate are divided up.Mikie

    The amount the workers are paid is no more determined by fairness than is the amount the owners are paid nor is a fairness standard used to determine the cost of the good or service.

    It's all supply and demand. The pie maker gets paid what he can get paid based upon the supply of other pie makers and the demand for pie makers. The only way to increase that value beyond market forces is to unionize, which is the equivalent of collaborative price fixing on the part of owners, which would be a similar way for owners to increase their profits.

    This is to say it's not a decision making process that relies upon fairness that determines the price of goods, the price workers will make, and the profits the owners will take, but it's a business decision that will determine the viability of the business and whether it will be able to survive based upon the way all earnings are distributed.

    The person you want making that decision is the most qualified, not some democratic process where everyone gets to weigh in on what they think, regardless of their business knowledge, what to charge for goods and what to pay labor. A pie baker should not be asked to review a market study to determine how salaries are going to be paid. He can, of course, use whatever knowledge he has of the market to negotiate a better salary though.

    The penalty for not properly paying workers is a labor shortage, high turnover, and poorly performing and underqualified workers. If a business can pay a very low wage and create a high quality product and be profitable, that means the workers are getting paid reasonably based upon market forces. The same holds true for the business owner who makes very low profits. He is getting paid reasonably for whatever efforts he's putting in, and the market is responding by offering him little reward.

    A business owner who finds that his labor offers little profit would need to change his market plan, as would a worker who earns a low salary would need to respond by pursuing other career paths. That is, people do have a choice as to what they can earn, and if they truly do not because of limitations beyond their control, the solution is to provide them assistance, not to restructure the entire system just so the underperforming can have a higher salary paid by the employer.
  • frank
    11.9k
    There's a similar list for the United States. Right? Genocide and chattel slavery aren't ancient history, either.Moliere

    The US came into existence in 1776. It was on the back end of both of those crimes.

    If you check your source again, I think you'll find that he or she was assigning blame to Europe, not the US.
  • Mikie
    4.4k
    Well then that's to do, not with the distribution, but the power of the participants to freely negotiate.Isaac

    The distribution is a direct result of the lack of free negotiations— as you know. If the process was more democratic, the distribution would look far different.

    I'm arguing that there is no 'right' way to distribute the profits of a co-operative enterprise, but there is a right amount of freedom to negotiate.Isaac

    When have I argued there’s a “right” number or distribution? I have no clue what that would be. The 90% number seems rather unfair on the surface, but if that was arrived at through free negotiation I wouldn’t have much to say about it.

    I no longer know exactly where the disagreement is.

    Your target is off. It's not the outcome that's at fault, it's the conditions of coercion which lead to such outcomes.Isaac

    Fine. I don’t recall focusing exclusively on the distributional outcomes, but in any case question (3) in the OP was my primary interest.

    There's no profit distribution that's automatically right or wrong, it's about the degree of coercion, the power imbalance in those negotiations. If we removed that, a 90% split to investors could still be right, if that's what everyone freely agreed.Isaac

    Okay then. So why did you ignore my third question?

    Regardless— it’s my OP and so I’m too blame for lack of clarity. Perhaps I should have made my point more clear. Question 1 and 2 are ambiguous and rhetorical.
  • Moliere
    2.6k
    But this simply isn’t true. I may have failed to emphasize this, but while this transfer of profits to shareholders — which has increased these last 40 years — hasn’t been good for workers, it hasn’t been good for businesses either.Mikie

    Fair point.

    Maybe not good for the business as an organization, but if there's a class which controls said organization and they don't particularly care about the health of the business, but rather how much they can extract from it, then that'd explain why those in charge make decisions which are bad for business, even in the Back to the Basics Economics sense.

    But this is just a thought at this point, not an argument. It's just where my mind went.

    Sure. But a particular kind of capitalism— one that is currently choosing to distribute 90% of profits to shareholders. This is the background on which people in states and, more relevant to this thread, corporations operate. It’s a system of beliefs and values.

    Shareholder primacy theory is a major justification for these actions in my view.

    I share your thought about capitalism, but I don’t think it’s sufficient to answer the OP questions.
    Mikie

    What?! My very generic Marxist view didn't provide enough details?! :D

    Cool. I don't think I have another answer, though.
  • Mikie
    4.4k
    The problem is that workers of all stripes are shut out of decisions and in fact have zero input whatsoever on how the profits which they helped generate are divided up.
    — Mikie

    The amount the workers are paid is no more determined by fairness than is the amount the owners are paid nor is a fairness standard used to determine the cost of the good or service.
    Hanover

    I never said fairness was the standard or should be the standard.

    I’ll suggest you reread what you quoted. The problem in my view is that the process is undemocratic with workers completely shut out of decision making.

    It's all supply and demand.Hanover

    That’s like saying it’s all “market forces.” A useful cop out for the people who give themselves 90% of the profits. “Sorry— it’s just supply and demand.”

    Completely unconvincing, but certainly pervasive.

    This is to say it's not a decision making process that relies upon fairness that determines the price of goods, the price workers will make, and the profits the owners will take, but it's a business decision that will determine the viability of the business and whether it will be able to survive based upon the way all earnings are distributed.Hanover

    It’s a business decision made by a board of directors acting in the interests of the people who vote them in: major shareholders. Those shareholders end up getting more and more. It has nothing to do with markets or supply and demand. These are decisions made by people. These decisions have also been very different in the past.

    Stock buybacks are a product of market forces, of supply and demand? Or a result of a rule passed by the SEC in 1982? It’s the latter.

    We have a choice between democracy at work or the current arrangement of the “business experts” making all the decisions, and transferring trillions of dollars from the bottom 90% to the top 1% over the last 40 years of “free markets.” I think it’s an easy one.
  • Mikie
    4.4k
    What?! My very generic Marxist view didn't provide enough details?! :DMoliere

    Well you still nailed the broad view! :grin:

    Ultimately you’re right — we can’t have this savage form of capitalism if we don’t have capitalism.
  • ssu
    6.6k
    We had an industrial revolution based on partnerships.Benkei
    That were intended to make a profit.

    What's so bad about that? Profit is someone's salary, and at least workers were justified to get a salary.
  • Benkei
    6.1k
    There's nothing wrong with partnerships wanting to make profit. For-profit corporations are the problem due to limited liability and perpetual nature. The limited liability was originally a gift from the government in return for the chartered entity to perform public works, like building a road, there's no quid pro quo between the government (representing the wider interests of society) and the corporation anymore. Hence, disband them as they are a blight on social structures and a cause of the majority of socio-economic problems.

    Hey, did you know the COP is going to be chaired by an OIL executive? Because that makes total sense.
  • javi2541997
    2.7k
    We had an industrial revolution based on partnerships.Benkei

    It is based on partnerships because most of the states, thus "public administrations" are not effective enough or they hold so much debts that it is impossible to maintain an order in the markets. The state's presence is not necessary for everything. Despite the fact our governments can approve laws to intervene them, the results didn't end up well, for example: Venezuela with a high rate of inflation and zero control in currencies or Argentina, 96 % of inflation and a structure where middle class doesn't even exists.

    We can be agree with the fact that we should not concentrate all the resources in private companies, but this is something about competency not state intervention.
    As @ssu expressed: an important part of the profits from companies go to salaries of the workers who feed their families. The owner or stakeholder doesn't hold "everything". In the other hand, if the state public funds go into bankruptcy, there will be a lot of workers without being paid, like ot happens in Sri Lanka or Pakistan. The public servants of these countries cannot be paid because their countries have been accumulated so much international debt.
  • Benkei
    6.1k
    It is based on partnerships because most of the states, thus "public administrations" are not effective enough or they hold so much debts that it is impossible to maintain an order in the markets. The state's presence is not necessary for everything. Despite the fact our governments can approve laws to intervene them, the results didn't end up well, for example: Venezuela with a high rate of inflation and zero control in currencies or Argentina, 96 % of inflation and a structure where middle class doesn't even exists.javi2541997

    I have no idea what this has to do with what I'm saying. I'm not arguing for governments to do more than to abolish laws allowing incorporation of for-profit entities. (well, as a first step).
  • ssu
    6.6k
    For-profit corporations are the problem due to limited liability and perpetual nature.Benkei
    And what about then government owned companies? At least their owner is perpetual (or acts like it) and there is even less liability.
  • javi2541997
    2.7k
    Ok, let me know if I follow your arguments correctly. You want to avoid the presence of for-profit corporations towards the construction or development of public works such as roads or hospitals because according to your arguments, there is not a "quid pro quo" at all and those entities are just a gift of the government to a few businessmen who make profit thanks to public goods, right?

    Well, if I am correct, who should invest in those public goods? Just the state with public tenders?
  • Benkei
    6.1k
    Governments have always been perpetual, that's their primary nature and not something to be avoided. Government owned companies obviously can't be for-profit because you get the same problem. The role of government is a political question that I'm happy to discuss but not sure we should start on it. Here's two decent articles from a libertarian to avoid the guilt by association people reflexively feel if I'd post something Marcist.
    Attachments
    history of corps (87K)
    history of corps 2 (85K)
  • Benkei
    6.1k
    No, I want to prohibit for-profit corporations in toto. Corporations, eg. entities with limited liability, should only be allowed if they perform a public function but those are still not allowed to make profit. The idea is that the profit is found in the resulting public good that everybody benefits from.
  • javi2541997
    2.7k
    I see, but I am only have one objection on your argument: who will be the responsable of the costs and losses? Everyone?
    Because you are only speaking about profitable entities with limited liability, but what about those who are in bankruptcy?
  • Benkei
    6.1k
    What about it? In my view, partners will be jointly and severally liable for the partnership, which are also those who have a right to the profits. Now we have shareholders with a full right to all the profits and at most potential loss of equity and all the costs related to bankruptcy are externalised to creditors. We see similar effects with statutory limitations on liability for environmental disasters. These are in effect wealth transfers to shareholders.
  • Isaac
    9.4k
    why did you ignore my third question?Mikie

    I didn't have any disagreement with that.

    Question 1 and 2 are ambiguous and rhetorical.Mikie

    Ah, I understand. Then it seems we don't really have a point of disagreement after all. Workers are not currently free to negotiate equally which is what leads to such clearly unfair distribution arrangements and the situation is clearly getting worse.

    So, out of the solutions available, which do you favour? Minimum wage (effectively a legal lower threshold on the distribution arrangement), or Universal Basic Income (removes much of the coercion so that each party is more equal). Or do you have a third option you prefer?
  • ssu
    6.6k
    From the first article:

    Key to a more charitable consideration of Simons is to keep his overriding concern in mind: that an inconvertible fiat money system and the corporate form of the private business organization are inconsistent with classical liberal or libertarian premises. According to Simons, it is the combination of these two institutions which is mainly responsible for some of the more significant negative side effects of modern capitalist practice, like undue cyclical instability and excessive inequality of income and wealth.

    Actually, this is a very interesting thought. But what should be noticed that this isn't about the basic principles of a corporation or company being, but basically also the economic surrounding (biosphere?) and the complex system that modern economies have grown into.

    Yet a widely held view is that the current debt based monetary system with central banks cannot be called a free market as basically any market mechanism correcting excesses like speculative bubbles (which would mean a severe market correction, asset deflation, severely higher interest rates) simply isn't allowed by a system controlled by central banks and in the end governments (and those who control governments). That the price of money, interest, isn't decided by markets is one problem. And the perpetual asset inflation (or hope of) simply works in favor for the traded corporations.

    Simply put it, calling it free market when you have socialization of losses and only profits being privatized isn't free market. A system which needs more and more debt in the long run cannot work. But life can be shorter for the individual perhaps, so why worry.

    Of course, there is the problem of the corporate elite coming to be a class of it's own, especially when mutual funds and other institutional investors play such a dominant role. The Bill Gates or Elon Musk is the oddity, which you can find likely only in an new industry, where the original pioneers still have a role to play. When corporations can own corporations, all power can be (and usually is) with those who officially would just only have basically a similar role as any other worker.

    While management is the agent for shareholders in the sense of being ultimately appointed by and accountable to them, it is also the agent for the corporation itself.
    After all, in order to manage the corporation’s assets, management must legally represent the corporation as the titleholder to these assets. And because the corporation is an impersonal legal entity, agency for the corporation lends a significant degree of autonomy to the position of management, which is precisely why it has proved so difficult to make shareholder control over management more effective, despite the many legislative measures aimed at enhancing management accountability to shareholders.
  • Mikie
    4.4k
    Workers are not currently free to negotiate equally which is what leads to such clearly unfair distribution arrangements and the situation is clearly getting worse.Isaac

    Yes — well said.

    So, out of the solutions available, which do you favour? Minimum wage (effectively a legal lower threshold on the distribution arrangement), or Universal Basic Income (removes much of the coercion so that each party is more equal). Or do you have a third option you prefer?Isaac

    I’m in favor of those.

    I think there co-op model is a good one. I also like the idea of requiring workers on the board of directors. I think Germany has something to this effect.

    Then there’s the obvious case of stronger labor unions. Repealing stock buybacks and increasing corporate taxes are also low hanging fruit.
  • Benkei
    6.1k
    Fidgetting with knobs and switches isn't going to change what is a structural problem. They're dealing with symptoms and if that's the best on offer then workers will continue to get shafted.
  • Isaac
    9.4k
    I’m in favor of those.

    I think there co-op model is a good one. I also like the idea of requiring workers on the board of directors. I think Germany has something to this effect.

    Then there’s the obvious case of stronger labor unions. Repealing stock buybacks and increasing corporate taxes are also low hanging fruit.
    Mikie

    All moves that would help. So now the more interesting question of what you think is in the way of getting (or, in some cases, keeping) all that? Much of it we've had before and lost, some of it hasn't a hope in hell's chance of becoming law.

    So what's in way do you think?

    Fidgetting with knobs and switches isn't going to change what is a structural problem. They're dealing with symptoms and if that's the best on offer then workers will continue to get shafted.Benkei

    Do you even consider UBI to be in the list of "knobs and switches"? If so, what level of structural re-organisation did you have in mind?
  • Agent Smith
    8.9k
    How to manage the profit (P)

    1. Top up the decent salary of all employees (bonuses, B). How much is decided by the lowest wage and the bonus is a fixed amount.

    2. Earmark a percentage of P - B for growth (R&D, call this R)

    3. What's left, P - (B + R), can be divided unequally as per each person's contribution (C)

    As is relevant, C = P - (B + R)
  • ssu
    6.6k
    If you count with that equation the "decent salary of all employees (bonuses, B)", that is a fixed term cost that cannot be easily change (or then you have to fire people), but P is basically what has happened earlier, not an estimation of the future.

    Hence you are not taking into account the demand side, the buyer or consumer) or competition. Hence too many ceteris paribus assumptions.
  • Agent Smith
    8.9k
    It all depends on the profit made, if it is made at all. I should've put R first. So, intriguingly, there's an order in which you must perform the operations.

    P - R - B = C (Yes) is not the same as P - B - R (No) = C! :chin:

    Most interesting. — Ms. Marple

    Danke for the feedback. I'm zero in economics.
  • Mikie
    4.4k
    Fidgetting with knobs and switches isn't going to change what is a structural problem.Benkei

    I don’t see co ops as “fidgeting with knobs and switches” at all.
  • Mikie
    4.4k
    So now the more interesting question of what you think is in the way of getting (or, in some cases, keeping) all that?Isaac

    Educating, organizing. Collective action. As always. I think strike-ready unions are one way, funding and voting for progressive political candidates is another.

    All of it will take people coming together and acting together. The numbers are on the side of the people, if only they overcome the propaganda and division they’re surrounded by.
  • Isaac
    9.4k


    Absolutely. But...and you can see where I'm going with this... None of those ideas we new. Some have been around since I was a young man, others since the 60s. Some since the 1860s.

    They haven't worked. Either they haven't taken hold, or their opposition has been stronger, or they've just not proven popular.

    So when I ask about methods, I'm really asking if you have any ideas to fix that problem.

    We can unionise, sure. But not enough people want to join unions, they keep getting stiffled by conservative politicians who people keep voting for. Even when they're powerful, they often go through a subsequent period where their power is lost and they loose much of their previous gains.

    We could take collective action, but that requires people to collect with, and there aren't enough. Most can't be bothered and, again people keep voting for governments like mine here in the UK who have just passed a law making collective action much more difficult.

    We could educate people about their bad voting habits, their lacklustre political involvement. But out of all of them, that's the one I'd put in the 'been around since 1860' camp, and things haven't got better. They've got worse. So if education is the answer, at the very least we're doing it wrong.

    So is there a fix?
  • Mikie
    4.4k
    Absolutely. But...and you can see where I'm going with this... None of those ideas we new. Some have been around since I was a young man, others since the 60s. Some since the 1860s.Isaac

    It’s a tale as old as time. No doubt.

    They haven't worked. Either they haven't taken hold, or their opposition has been stronger, or they've just not proven popular.Isaac

    Well that depends. You said yourself things were better in some eras. I think that’s true. I also think organizing has been successful— social movements are a good example. Civil rights, women’s rights, etc.

    I think we’ve regressed in the economic sphere.

    I don’t see an alternative. There’s revolution, of course…but those are hit or miss as well.

    Anyway— I don’t pretend to have all the answers. Maybe there’s something I’m overlooking. I’m all ears.

    But not enough people want to join unionsIsaac

    That’s changing as we speak. At least in the states.

    We could take collective action, but that requires people to collect with, and there aren't enough.Isaac

    There’s plenty of people. The task is to get them together. Easier said than done, of course. There are parallels with other social interactions: becoming friends with people— not always easy; just try to get them all together to do something (even something fun) — a very difficult task, at least for me. People have jobs, kids, pets, health issues, appointments, lack of money, other plans, or else they’re too exhausted from all of it to make the effort. I’m in that position myself often enough.

    If something like meeting people, making friends, and gathering with them is this difficult, then getting people to unionize or canvas or protest or boycott or strike — or even hold a meeting about any of it — is extremely hard.

    But that’s the task, and I don’t see another way forward.

    I will say that local government involvement is extremely important and worth doing. Mostly the various town or city committees are run by volunteering retirees and almost no one pays any attention or attends any of the meetings. But it’s an easy way to start doing something. Everyone lives in a town or city.

    Likewise everyone who isn’t unemployed or running a business themselves works for a company. There’s a chance to change that company’s practices from within. Working for a smaller non-profit, I’ve had the opportunity to talk directly with the president just from an email sent to the Human Resources department, and it contributed in changing various policies (not just me— it was other input and factors as well). Discussing unionizing with coworkers has also (slowly) gauged interest in having a vote.

    This is all anecdotal and small, but I bring it up because 99% of the time, this is it. This is the work. Just talking to people. Showing up. Speaking up. Learning how to communicate. Learning about how government and business functions, thinking about power and how institutions are structured, educating oneself about the socioeconomic system one’s currently living in, etc.

    Point is, there’s nothing too small. I don’t know of any other way to bring people together or to affect changes.
  • Mikie
    4.4k
    The breakdown of these figures exposes how on a global basis, extreme wealth is accumulated not by innovating or increasing production, but by taking advantage of rising prices and exploiting labour. In this effort, wealthy people are enabled by lack of regulation and taxation. The result is a bonanza of plunder with no sheriff in town.

    This has been happening for a while, but the pandemic accelerated the trend. Rich people benefited from everything – every positive intervention from the state and negative impact of the crisis somehow still ended up increasing their wealth. They benefited from rising costs by using them as an alibi to charge higher-than-inflation prices, then distributing the rewards as dividends instead of higher wages. Food and energy corporations made a killing, making $306bn in windfall profits in 2022, then distributing 84% to shareholders.

    https://apple.news/AabXb9PPQSoC0Ne-qu75mVQ
  • Isaac
    9.4k
    the pandemic accelerated the trend. Rich people benefited from everything – every positive intervention from the state and negative impact of the crisis somehow still ended up increasing their wealth.

    "Somehow"?

    It just so happened to turn out that the policies of the most compromised governments we've ever had, enriched the exact industries which spend most on lobbying them. What a coincidence!

    How lucky the rich and powerful are, things just keep happening by chance to turn out in their favor.
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