I think we're substantially in agreement on what should actually be done, just approaching it from different angles.
You're assuming that borrowing, rather than investment, is necessary. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
Equity is for dudes who know something about what they're getting into. Joe Schmoe should not be investing in equity, inasmuch as he should be investing at all.
You are talking about equity in the form of shares in the deeply inequitable entity known as the Corporation. And yes, that is for consenting adults only.
I'm talking about reinventing equity within a partnership law framework (rather than a company or Trust law framework) simply by dividing revenues and production into proportional shares in flows of production on the one hand, and units redeemable in production on the other.
It's not Rocket Science.
It's a Flight to Simplicity "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
The claim that you can do something better doesn't justify to say everything what happened up to now was bad, though.
And the new ideas should be introduced without declaring all existing structures null and avoid. Der Amerikaner ist die Orchidee unter den MenschenVolker Pispers
I'm not claiming that. I'm just observing people use these new structures because they work, and because they can.
Martin:
And the new ideas should be introduced without declaring all existing structures null and avoid.
Correct.
It's not a matter of either/or, though. These solutions are complementary, and work in the here and now. The Hilton group didn't create a £1bn Capital Partnership in the UK because I suggested it (more's the pity). They did it because it worked, and because they could.
If my suspicion is correct - that partnership structures are in fact optimal - then those enterprises that do not use them will be at a disadvantage to those who do.
Classic emergence.
I think that conventional capitalists will be hoist by their own petard and simply out-competed
Why pay money to a rentier shareholder when you can get your funding from stakeholders? This is what the Cooperative movement call the "Cooperative Advantage", albeit they've been hamstrung by poor legal and financial structures which are essentially genetically modified Companies.
I think we'll find that Profit is inefficient, Martin: sharing surplus value on the other hand, actually works better, I think we'll find.
The proof of that pudding is in the eating. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
Isn't "surplus value" profit, too, and isn't profit the whole purpose of the business? Without even going into any Rand kind of exaggeration, isn't competition and private interest a natural fuel for individualism against cooperative movements? And isn't this all having materialism as ultimate cause?... Sorry for wandering off... Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)
Within a partnershp framework there is no profit and no loss, merely the sharing of value in all its forms - and interest-bearing claims over value issued ex nihilo by credit institutions is not one of them, IMHO. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
Profit and loss are a zero sum. Sharing a surplus is not.
Indeed.
And that pretty much dynamites Adam Smith and Ayn Rand, never mind their followers, right there.
I say society - some might simply call it capitalism. * for lack of a better english word at this late hour Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)
And we know how well that prediction worked out...
Credit institutions... they do provide a service, right. I mean, that's their reason to be. Fee claims on the other hand are a totally different story. Come to think of it, computers look like the main culprit of the financial capitalism going crazy. Before, you needed to work to win an insurance contract, intermediate, provide a financial service. Now it suffices to run billions throught securised networks to earn those fees, and mathematical models to prove there's no risl so no need to collateralize a dime. Aren't we victims of our own fantastic technical prowess, gone completely unmastered? I'm digressing, really just thinking out loud. Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)
While computers have not materially affected the speed with which money can be moved around - speculative runs on currencies only require a phone line and a lax regulatory environment.
The problem is that bankers, brokers, traders and the rest of the speculative cottage industry have been gambling with other people's money. And that the people who were supposed to tar and feather them and run them out of town on a rail when they gambled with other people's money were either obstructed by corrupt politicians or on the take themselves.
That also happened in the 1920s, which is thirty or so years before the first computers.
Finally, the politicians, I suspect, were as corrupted as they were ideologised, and without repeating my former anti-ideology predictions, the finance laissez faire carries a well known name, which is, libertarianism, cousin of anarchism - which is what we live today (and of which of course some fatcats profit, as usual). Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)
Without ubiquitous computers and internet, people could think long term because there was no immediate info available and even less so publicly.
That's a good point and one it's easy to underestimate. People were forced to think long term because there was no alternative.
But that dodn't always make a difference. Bubbles and fraud have always happened, and computers didn't make them more possible.
What computer economics could do is make them more difficult. You can legislate choke points, taxes, delays, stops, tithes and limits on markets which would never be possible with paper.
You can hide paper. But if you mandate total information transparency with full accounting and audit trails, computer economics gives you a reasonable chance of getting that.
It's not trading speed, it's lack of transparency and differential access to intelligence (of both kinds) that create problems.
As to computers, I mean to say I trust the humans' natural speed of reaction. I'm not comfortable going 100 mph and leaving the control to the computer. There's something inherently wrong, to my intuiton, about an industry based on infrastructure which so widely overpasses humans. The best and most solid company, bank or not, can fall and be destroyed in a few minutes of illiquidity, without anyone being able to intervene. This was not possible before. There was a certain inertia and space to things and events before that was leaving us time to ponder and react.
I wouldn't like to be regulated by a computer btw, who in a second can make the decision that I'm on a terrorist black list and before anyone can do anything, ban me from taking my flight, or throw me in prison (policemen not having the authority to disregard its orders).
And how can you have transparency with such complexity and such volumes of information? Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)
A corporation behaves like a corporation, I guess,
What a corporation is and how it behaves is not set in stone. Society has granted the corporation the privilege of limited liability - it can revoke that privilege, or make changes to how that privilege is exercised.
For example, one could mandate that all entities operating under limited liability had half their board of directors elected in direct, secret elections among their employees, and that these representatives had work conditions as their contractual obligation, rather than fiduciary responsibility towards the shareholders.
and you'll agree finance in 1950 has nothing to do with finance today: phone orders is not AT ALL the same thing as computer software exchanging billions of billions of orders per second worldwide.
Computers misbehaving may crash individual stocks, or even weak currencies, but they do not crash entire economies. That only happens when there is already a bubble or other serious imbalance. And serious imbalances form over months or years, not days or hours, so computerised trading does not materially change our ability to cope with them. That is, and remains, a political question.
The stock ticker was reported in real time on the TV, and before that by wire to your local bank. The time lags we're talking about here are in terms of hours, not days or weeks, nevermind anything recognisable as "long term."
But the stock ticker isn't "information" I hear you say. That's true, of course, but people were treating it like it was. Which, I guess, is not so different from most of the tea-leaf reading and outright garbage that gets passed around by financial analysts soothsayers these days.
I would not mind experimenting something along this line, although we must consider the raw reality: employees change all the time, most of them are not interested in running a company in any way, but care far more about their life besides work, and, most importantly, I'm quite sure democracy would harm innovation, free enterprise, and ultimately the economy and the interest of the public. There is little to gain in submitting, say, ambassador appointments to democratic vote. Or military hierarchy or strategy to soldier vote. Or hospital management to nurse vote. Democracy is not a panacea, even if it is one of the easiest (along with accusations of dictatorship or of corruption) justifications to use in situations when we don't agree with hierarchy decisions.
"What a corporation is and how it behaves is not set in stone"
Of course it isn't, the actual issue concerns (as usual) the definition we intend to give the notion of "corporation": is it a way to create value and make profit, or something else?
"Computers misbehaving may crash individual stocks, or even weak currencies, but they do not crash entire economies"
Not by themselves of course - last time I knew computers did not possess personality yet, or a mind of their own; but they can provide the highway to hell. Computers and internet bring reactions that invite short-termism in. They provide a way to make profit by ways of fees without moving a finger, on an unprecedented scale. They provide a way to move capital on an unprecedented scale, and by this, bring ruin to a company or even a country. Computers and internet provide a way to trade derivative products in ways impossible before, despite all TV tickers financiers would surround themselves with. Computers can provide a means for quants to put into practice hedging models and so bring finance into a whole different age. Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)
employees change all the time,
Umm, no. High employee turnover is a sign of a dysfunctional company. And at any rate, employees may change, but the unions stay - and of course the unions are likely the ones who will end up with most of these votes, on account of them being the ones most likely to run.
most of them are not interested in running a company in any way, but care far more about their life besides work,
The same can be said for stockholders. That's why I'm talking about representative democracy, not direct democracy.
and, most importantly, I'm quite sure democracy would harm innovation, free enterprise, and ultimately the economy and the interest of the public.
Democracy does not seem to have harmed innovation at universities, where employee (and student) democracy has been practised with great success for a long time.
"Free enterprise" is just a content-free buzzword. You can't harm "free enterprise" any more than you can harm "our national spirit."
The economy has been practically destroyed by lack of accountability over the last 30 years. Democracy can't do any worse than MBAs already have.
There is little to gain in submitting, say, ambassador appointments to democratic vote. Or military hierarchy or strategy to soldier vote.
Ambassadors and generals do not make political decisions. Corporate boards make political decisions (they call it something else, but that doesn't make it any less political). If the generals were the ones who decided where and when the country should go to war, then I should very much think that subjecting them to democratic elections would be a good idea.
Or hospital management to nurse vote.
Um, why not? Doctors and nurses know a hell of a lot more about running a hospital than some New Public Management type MBA fresh out of bizniz skool.
Corporations as currently configured do not simply create value - they also expend valuable resources, and distribute value. What I propose to change has less to do with the creation of value than it has to do with the extraction of value from employees (through, for instance, harmful or unpleasant working conditions), and the distribution of value (more to labour, less to capital).
Most companies are small and don't have unions, let alone that unions are not famous as beacons of competence in running companies. The idea itself that employees change while the unions remain sounds like yet another playground for fiefdom infighting.
"the same can be said for stockholders"
Not really, especially when the company is private. I thought you mentioned employees joining in the board of directors, not just sending in some representatives. Besides there is the small issue that owing a company is not quite the same kind of decision entitlement as working for one, I guess - unless we're in a proletarian state; but there would be no private ownership there, so the problem wouldn't be posed.
"Democracy does not seem to have harmed innovation at universities Have I mentioned universities? :) That subject is debatable, for instance I for one don't really believe in student democracy.
"Ambassadors and generals do not make political decisions" Of course not, that was precisely my point - a company does not make political decisions, but tactical and strategical ones in order to win market share. Just like in the case of rentiers, we should distinguish mammoth companies, particularly multinationals, and the xillions of small companies which provide most of the value and employ, I think, the most.
"Doctors and nurses know a hell of a lot more about running a hospital than some New Public Management type MBA fresh out of bizniz skool"
Employees do know a lot about how a hospital works, but that's not quite the same thing as running it, or voting someone to run it. We agree that a diploma, no matter how brilliant, does not automatically mean real life competence. I do have some doubts about the principle of economical management schools, just like I have some about political management schools (especially the French ones). You can put this problem about most of the finance corps anyway - experts in investment banking, hedge funds and other analysts with little exposure to what actually happens in the company they help dismantle.
"they also expend valuable resources, and distribute value"
True. I don't see how working conditions would give rights over the management of the company though. Improving conditions is a different matter. The distribution issue is normally said to be a matter of negotiation on the job market. I argued once that this is often skewed in favour of employers - except top positions or niche jobs. Maybe salaries should be completely regulated, as in, a percentage (fixed or mobile) of the benefits, negotiated by unions for each industry and job level. Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)
Most [publicly traded] companies are small [citation needed] and don't have unions [citation needed], let alone that unions are not famous as beacons of competence in running companies.
They don't have to be famous beacons of competence at running companies. They just have to be better than your average MBA. Which isn't saying all that much.
Not really, especially when the company is private.
You mentioned earlier that you owned stock. When was the last time you voted at a general assembly, or attended a meeting at the board of directors in any of the companies you held stocks in?
I thought you mentioned employees joining in the board of directors, not just sending in some representatives.
Union reps are normally employees themselves.
Besides there is the small issue that owing a company is not quite the same kind of decision entitlement as working for one,
Why not? The "owners" supply only money, and they only supply it once. The workers supply labour, and they supply it every day. Why shouldn't the workers have as much say in the running of the company as the "owners?"
Of course not, that was precisely my point - a company does not make political decisions, but tactical and strategical ones in order to win market share.
In which alternate universe does that not involve political decisions?
Just like in the case of rentiers, we should distinguish mammoth companies, particularly multinationals, and the xillions of small companies which provide most of the value and employ, I think, the most.
Small companies are not publicly traded, and usually do not benefit from limited liability, so my proposed reform would not apply to them.
The distribution issue is normally said to be a matter of negotiation on the job market. I argued once that this is often skewed in favour of employers - except top positions or niche jobs. Maybe salaries should be completely regulated, as in, a percentage (fixed or mobile) of the benefits, negotiated by unions for each industry and job level.
That's certainly one way of doing it. I'm not sure it's necessary to go quite that far, though. I think much could be achieved simply by enshrining the right to organise, strike and blockade, and making union busting punishable by very serious fines (to the tune of a perceptible percentage of gross revenues). But that's mostly because I believe that the local union rep has a better handle on what should be done in a specific company than parliament does.
"Besides there is the small issue that owing a company is not quite the same kind of decision entitlement as working for one (me)
Why not? (you)
Simplifying, the idea of the nanny having a say in how I run my house strikes me as a bit odd :) I know that's not at all what you propose, but it's a matter of principle nonetheless: to me, the right to own property and the right to speak freely go before everything else, and any kind of adjustment you would bring to the society, these two should not be trespassed, under no circumstance. There is no capitalism and no freedom without these two. When I built a house, bought a car, or set up a company, I am not ready to and I think it fundamentally wrong to discuss the issue of ownership and decision making. I don't even think this is a matter of rightwing vs leftwing, but of a fundamental human right as important as any other. Beyond appropriate work conditions and equitable pay, it is for the individual and the state to assume - be it social security, medical insurance, retirement insurance or pension system, and so on. The state can of course levy taxes, exactly when and how it sees fit, and regulate the job market and the economical environment as it pleases, as long as it doesn't infringe on my own fundamental rights as an individual(exceptional situations aside). Social inequalities should be tackled, but not serve as a motivation to step upon fundamental rights, and this applies to any such right. Workforce can under no circumstance be considered as a merchandise, but enterprises are hardly meant as social care entities, and regulation should be limited to work conditions and the job market - the rest is for the society to provide (and we're all part of the society, so this is not a matter of protecting the property of the rich and powerful, but dealing with it without stepping upon principles). This is why I'd be ready to accept any kind of remuneration cap, remuneration incentive regulation, particularly via fiscal tools, in short, any kind of sharing into the profit. The issue of ownership and decision making though is a whole different thing. Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)
I'm pretty sure our bone of contention starts and ends here:
I think that's an astute observation, even if I disagree with you on whether it's a left-right issue.
But the way I see it, nobody forces companies to be publicly traded and benefit from limited liability. If the companies' owners think that the demands that society places upon them in return for these privileges are too onerous, they are perfectly free to withdraw the company from the Exchange, as provided for by the applicable rules.
More generally, I don't think that property scales. I have nothing against the corner-store owner with two employees deciding how he wants to run his business - he doesn't have notably more bargaining power than his employees do individually. But when a company spans an entire country and employs hundreds of people... then it becomes a political entity, as much as a commercial one. And then different rules apply. Or ought to apply.
It's no longer purely a private concern. The mythology that it should be a private concern, irrespective of social and political influence, is one of the flawed neo-feudal cornerstones of the rightwing edifice.
I wonder if even rightwingers still claim that, regarding multinationals and other giant companies.
Yes. Unfortunately, they do.
Now, if you'll excuse me, I have to go take a shower.
It remains that even from a rightwing point of view, monopolies and multinationals are an obvious obstacle to healthy competition. I mean, either you're a freemarketeer, or you're not.
I would think so too. But apparently I'm wrong, at least according to several people I know whose credentials as "right-wingers" I have no reason to doubt (their sanity, yes, but not their political leanings).
There exists an unfortunately influential ideology in some right-wing circles that says that regulation of transnational companies is a greater imposition on personal liberty than permitting these transnational companies to run wild. The same doctrine also states that the "free" in "free market" means "free from government intervention," but does not say anything about freedom from exercise of monopoly power (the Austrian school of thought [I use the term loosely] even deny that monopolies can exercise power).
I wonder if the circles circulating this doctrine would exist elsewhere than the United States. Due to many factors, the idea that the state is "bad" in principle is unfortunately almost cosubstantial with the US. Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)
I know that's not at all what you propose, but it's a matter of principle nonetheless: to me, the right to own property and the right to speak freely go before everything else, and any kind of adjustment you would bring to the society, these two should not be trespassed, under no circumstance.
I agree that we should have the right to exclusive occupation of land.
But IMHO land is a Commons to which no-one has absolute rights of ownership and those exercising this privilege of exclusive occupation should compensate those they exclude ie the rest of Society.
So I agree with the principle that taxes should be levied on privilege, not people, and therefore advocate a tax on land rental values or "Location benefit levy"
Other privileges, such as exclusive use of non-renewables, or the privilege of limitation of liability, should also be taxed, and taxes on profits and earned income should be abolished. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
Some dudes know what's going on "under the hood," and are thereby capable of judging what it's reasonable to pay for a certain fraction of the use value of an enterprise.
Other dudes haven't the first clue, nor the time, energy or inclination to get it. They need an instrument that pays out a fixed amount of value every month, and is collateralised by some real, tangible assets, with a reasonably easy to assess value.
And then you have all the possible configurations in-between.
Most traders seem to be chartists and statisticians who try to pull value out of noise, completely detached from fundamentals. If you don't mind the odd pratfall, even a very simple strategy like momentum investing will put you ahead of the market average.
Knowing about widgets is largely unnecessary. And that's very much the problem - one corporation becomes much like another, and functionally interchangeable. Every so often there will be some noise about a market sector being unusually good or unusually bad, but in principle trading is based on the fact that not only are inputs and outputs irrelevant, but that a tiny collection of abstracted numbers defines the value and health of the company.
Social costs and social value don't figure. Future prospects don't figure unless analysts comment on them. Specifics figure even less.
There's a fundamental fracture line there between the real economy and investment/speculation.
Seriously, though, they can play these games because they're gambling with other people's money - Joe Schmoe does not have enough money to reasonably diversify his holdings in order to pull profit from noise. In a reasonably run economy, that kind of wealth concentrations would be broken up, because they are hazardous to democracy. So in a reasonably run economy, you can't run hedge funds.
Sure.
You can be inside the box, sharing revenues; outside the box on a fixed amount, or both.
It's entirely configurable, because in an "Open Corporate" LLP you start with a blank sheet of paper. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
Creditary Economics
where the Gang8 analysis is pretty good in many ways. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
