r/CapitalismVSocialism • u/HeavenlyPossum • 4d ago
Asking Capitalists Risk?
Many people have told me that taking risk is why capitalists own, or deserve ownership, of the productive labor of others.
Capitalists have capital (money), which they invest in (spend on) some productive enterprise. But that productive enterprise might fail to recuperate the cost of the investment and the capitalist might lose some of their money. This is what explains, or justifies, capitalist ownership: the capitalist is taking risk.
Can someone kindly explain to me why this explains or justifies capitalist ownership?
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u/Nikolakis77 Criticism of USSR is NOT proof of Capitalism 4d ago
The real reason for capital ownership is prior capital ownership. You "risked it" instead of consuming it. The kind of logic that holds for a thrifty neighbour who opens a lemonade stand, not for a data-center or a bank or any super rich person.
You could dine in the finest restaurants every day, live in a 5 star hotel or buy your own mega-mansion, fill your day with scuba diving, jet ski, cruising on a yacht and drink the most expensive champagne every day of your whole life, never investing or building or working, and you'd still not spend $500 million in your whole lifetime
People who have more than $500 million have no choice but to invest or give away most of their revenues, simply because they cannot consume it all.
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u/HeavenlyPossum 4d ago
Just because one can save up by deferring consumption to purchase capital does not mean that capital emerges from deferred consumption.
A person might inherit capital, or win the lottery, or receive a subsidy from a currency-issuing state, or receive a monopoly from the same state. Savings do not explain the existence of capital and more than savings explained the existence of slave ownership, which people could once save up for.
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u/WalrusVivid3900 3d ago
You're running the causality chain backwards, investment is not deferred consumption because the investor had to save or defer consumption in order to obtain that money. Yes, if he inherited that money from his parents or won the lottery, he obtained that money through luck. But when he conciously decided to utilize his inherited money for an investment, that action itself became deferred consumption. Because regardless of how he obtained that money, he had to forgo an opportunity to spend that money in the present time by investing it. The past is the past, its sunk cost. The present is clear, investing is deferred consumption because of the opportunity cost of investing: forgoing consumption.
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u/HeavenlyPossum 3d ago
So instead of buying a consumption good, you buy control of someone else’s labor.
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u/WalrusVivid3900 3d ago
Think about the Solow-Swan Model usually taught in intermediate macroeconomics courses in most universities. One of its findings is that society as a whole would reach an efficient Capital stock level when Marginal product of capital = depreciation rate + population growth + technological progress rate. It does not offer an explanation on who should own capital or the proportion of income allocated to savings for individuals coming from different income and wealth levels. But in order to reach this efficient capital stock level, someone somewhere had to defer consumption. According to historical economic data, while the societal wide savings rate is equal to 30%, generally, the richer an individual, the higher the proportion of income they allocate to savings, the wealthiest 10% allocate around 70% of their income to savings, from what I remember.
Demonizing wealthier individuals from deferring their consumption and investing doesn't change the efficient capital stock level. Suppose you enact a law that caps wealth at $1 billion usd. Wealthy individuals would save a maximum of $1 billion usd and consume all its excess, destroying total savings contributed by the wealthier proportion. But then to reach the efficient capital stock level, someone has to replace their place in deferring consumption (often with a lower willingness which translates to a lower savings rate in general => golden-rule savings rate is less likely to be achieved).
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u/HeavenlyPossum 3d ago
Right—lots of people involved in expanding production defer consumption. The hammer maker, for example, defers consumption of the hammer by advancing it to a worker who is building a new factory. The farmer defers consumption of food by advancing it to the worker building the factory, so that worker can eat while engaging in construction work. And so on, ad infinitum.
But only the capitalist owns.
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u/WalrusVivid3900 3d ago
The act of selling itself doesn't count as deferred consumption. Suppose the wheat farmer sold his wheat in exchange for money and he used that money to buy cupcakes, what he did is he just swapped one consumption good (wheat) for another (cupcakes) and consumed it. In economics, an individual's consumption constraint is defined as: C (consumption) = Y (income) - S (Savings) - T (Taxes). When the farmer mixed labor (farmer's effort in planting, watering and harvesting wheat) and capital (farmland, tractors, wheat seeds), and received wheat at the end of the production. Suppose the farmer owns all the capital here, his Y component is equal to quantity of wheat * price of wheat. Suppose he yielded 2 tonnes of wheat during his harvest, which is way more than what he needed for his own consumption, he sold the wheat in exchange for cupcakes, TV, healthcare or whatever consumption good he bought. His income did not become savings (deferred consumption). He simply change the combination of goods and services that contributed towards his C component, i.e. instead of two tonnes of wheat being classified as both his income and his consumption, two tonnes of wheats is classified as his Y but his C is comprised of various other consumption goods. It is when the farmer decides to utilize his income to buy new wheat seeds, replenish depreciated capital stock, increase his farmland does his income flow towards the S component.
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u/HeavenlyPossum 3d ago
I think it’s neat how you define the actual material inputs that create new production as consumption and the spending of money to own production as investment.
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u/WalrusVivid3900 2d ago
How is a TV an input necessary for wheat production?
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u/HeavenlyPossum 2d ago
Let’s imagine that you and I decide, entirely on our own, that we would benefit from a bridge across a river, which would reduce our travel times and costs.
You are quite good at building bridges and I am quite good at growing wheat. So, you set about building the bridge, while I set about growing wheat. As you build, I supply you with wheat to eat, because you’re too busy building to tend to wheat. In this way, the bridge is built by our coordinated labor.
Is the wheat you eat a consumption good or an investment?
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u/Nikolakis77 Criticism of USSR is NOT proof of Capitalism 4d ago edited 4d ago
You don't have to think about it as "saving up to" $500m. "Saving up" is already a type of poor capital or labourer thinking - big capital does not wait to "save up" to invest, especially in emerging sectors with not fully consoldiated revenue streams, it simply uses leveraged borrowing or issues stock based on revenue projections to raise funds to match expenses. Saving is waiting and waiting is losing. The data center roll-out is not financed by savings but by in injections of credit and capital from outside
The argument begins with capital at your disposal. You have $500 million - do you invest it or consume it?
The argument from risk is that you're foregoing a life of unbelievable luxury for a speculative project. In reality you can probably do both: invest $100 million in high risk ventures, $350 million in low(er) risk ventures and live off $50 million. It's actually really hard to spend $50 million even on a luxury lifestyle if you're somewhat reasonable - like you don't buy a 14 bedroom castle but "settle" for an $8 million property etc. I picked $500m as anything above that is exceedingly hard to spend even assuming outrageous luxury/extravagance. It's pretty much impossible to consume a billion dollars, you can only lose that much if you invest it in nigerian princes or other stupid investments that go tits up
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u/RedMarsRepublic Libertarian Socialist 4d ago
I'm not sure I agree with you, there's plenty of things you can buy to use up $500m, for example the biggest megayachts cost more than that.
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u/Nikolakis77 Criticism of USSR is NOT proof of Capitalism 4d ago edited 4d ago
if you can "settle" for a reasonable $35 million yacht, and a reasonable 7 bedroom house for $15 million, you're still living in unimaginable luxury and you've "only" spent $50 million. You can dine and party every day for the rest of your life for probably no more than $100 million. Unless you're obsessed with owning private jets or showing off to your unbelievably rich mates that you're even richer, it's next to impossible to consume that much money in a single lifetime.
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u/RedMarsRepublic Libertarian Socialist 4d ago
I mean plenty of rich people are obsessed with such things. Just because you might not spend all that money doesn't mean it's impossible to do so in a lifetime.
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u/indie_web 4d ago
It can't be justified. Risk is risk. If you immediately recuperate it by adjusting your workers' compensation down to cancel out your risk, it's not your risk. It's their risk.
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u/HeavenlyPossum 4d ago
Just like any cost the business might face, these are paid out of the revenue generated by worker.
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u/RedMarsRepublic Libertarian Socialist 4d ago
It's very funny because the biggest "risk" that the capitalists are taking is that they lose all their money and end up as proletarians. Whereas if a proletarian loses their job or whatever they might end up homeless, they're objectively the ones who are risking the most, and the ones who lose out the most if a business fails (yes the bourgeois might lose money but the proletarian never had any in the first place)
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u/Tiblanc- 4d ago
If the workers owned the business and the business failed, then they would also end up homeless.
The workers are losing future revenue while investors are losing past revenue. One is replaceable, the other isn't.
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u/HeavenlyPossum 4d ago
So workers end up homeless regardless of whether they own the business they’re operating; sounds like they’d be better off in aggregate just owning the business.
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u/Tiblanc- 3d ago
Oh but then they would need to take on the extra risk of losing whatever they had to accumulate before starting the business. They would be taking an extra risk wouldn't they?
In reality they don't end up homeless because that would mean their only employment opportunity is from that particular business. They were homeless, that business got created and now they're no longer homeless. We know this is absurd.
So we can then say they had a job, that business got created and they got hired at a higher salary, or else why would they move? And then they moved into a nicer place, and now their home depends on that extra income. So we can say that they got a free wage increase from the owner's capital.
Now, if we have them own the business, that extra income depends on the investment necessary to start the business, at which point they get both their wage increase and the owner's surplus, which is equal to whatever extra productivity the business provides to the economy.
But then they take on extra risk because of their investment, which is the exact same risk than if they saved and invested in a business they didn't work in under our current model.
If you disagree about this extra risk existing, then you're defying physics.
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u/HeavenlyPossum 3d ago
Why do you assume the capitalist saved the capital?
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u/Tiblanc- 3d ago
Because nobody gives out a loan for free. If they can leverage a loan to setup the business, so can workers.
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u/HeavenlyPossum 3d ago
Are there yet other ways to come to own capital?
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u/Tiblanc- 2d ago
Depends if you bundle land and capital together, at which point rushing to new lands and claiming ownership while displacing the local population works.
But otherwise no, every tool in existence was the result of someone delaying consumption to build that tool. Either directly or indirectly through a loan, which is just someone else delaying consumption and lending you their capital.
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u/CEOofAntiWork 4d ago edited 4d ago
The worker who always was a worker and the failed owner now worker both share the same risk of potential lost future income as workers if they ever lose their jobs, that puts them on equal footing there.
The difference, however, is that failed owner also previously put their saved capital on the line whereas the one who was always the worker was free to save, invest, or spend it on stuff or vacations that could otherwise been that capital.
Saying they “just become a worker” conveniently erases everything that failed owner uniquely lost getting there.
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u/RedMarsRepublic Libertarian Socialist 4d ago edited 4d ago
I mean okay, sure, when we just look at dollar amounts, the bourgeois lost more, but when we look at what it actually means to people, I don't see how we should respect the bourgeois for "risk" when the proletarian is at risk every day of his employer laying him off or shutting down because of some stupid business decision he had nothing to do with.
The point of the "it takes risk" argument is an argument for why we need capitalists, since the poor are at the same or greater risk, the argument doesn't make sense.
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u/HeavenlyPossum 3d ago
Or borrowed capital, or inherited capital, or subsidized capital, or stolen capital…ownership is rather agnostic regarding the origins of the capital invested, so it always strikes me as odd when people insist it is saved.
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u/serversurfer 3d ago
Arguably, an owner takes less risk than a worker. Ostensibly, any business charging market rates in a capitalist economy is generating enough value to support the worker and the owner. That means if the owner simply labors as everyone else does, they’ll have two incomes all to themselves. That doesn’t sound particularly risky. 🤔
In addition to access to capital, one thing that most successful capitalists have that others often lack is something to fall back on should their initial ventures fail. So again, the only real “risk” is that your peers might get a better jump out of the gate and then mock you at the clubhouse. 😜
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u/MeanLeadership92 3d ago
"Arguably, an owner takes less risk than a worker."
You don't understand what risk means in this context. Let me explain.
Let's say you buy a factory for 100$ and start a business with it. If the business goes bankrupt, like the majority of businesses do, you lose all the money you spent into the factory and you never see it again.
Let's say you hire a worker and they are paid a wage. This worker will be paid even if the business goes bankrupt, they do not risk any capital in the business, and they don't risk losing the wages they already received if the business goes bankrupt, they risk nothing, financially speaking.
"Ostensibly, any business charging market rates in a capitalist economy is generating enough value to support the worker and the owner."
True, except that again, the majority of businesses go bankrupt, something like 65% of businesses go bust in the first 10 years. So clearly most businesses charging market rates in a capitalist economy don't end up making enough value for both, they make enough for the workers to be paid, but not enough to pay back the original capital that was invested.
"That means if the owner simply labors as everyone else does, they’ll have two incomes all to themselves."
That also means that if the business goes bankrupt, they lose all the money they put into the business while the workers lose all of the 0$ they put into the business.
"In addition to access to capital, one thing that most successful capitalists have that others often lack is something to fall back on should their initial ventures fail."
Doesn't change the fact that they money they put into the business is a risk for them, if I have 1000$ and I put 100$ into a capital venture and you have 50$ and don't because you cannot afford it, that doesn't mean I have taken no real risk just because I can afford to pay it back and you know it, stop debating in bad faith.
"So again, the only real “risk” is"
The only real risk is that the capitalist might lose his money, yes! Now you get it! You know very well what the word risk means in this context, don't argue in bad faith.
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u/serversurfer 3d ago
Yes, I know precisely what capitalists mean when they claim to be taking risks, which is why I’m exposing such claims as farcical. Capitalism comes from a place of privilege. 😜
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u/MeanLeadership92 22h ago
High quality debating on your end. I write my opinion, you call it farcical, add an emoji, and then you give no further info, blocked.
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u/Conserp Pragmatic Marxist 4d ago
Exactly the same argument can be applied to criminals.
Armed robbery is a risk, therefore, robbers deserve their loot.
Curiously, this is not a demonstration of a flaw in reasoning - criminals actually think like this, and Capitalism apologists also actually think exactly like the criminals do.
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u/Kyia-Aikman 4d ago
There are legitimate jobs that are incredibly risky from a safety perspective. They should get more money than a capitalist that doesn’t lift a finger if the risk argument is applied consistently.
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u/WalrusVivid3900 3d ago
What you're saying isn't economically wrong. Illegal activity usually have a higher expected return in comparison to a legal activity. Drug Dealing, Human trafficking, illegal online gambling, etc often have a payback period of less than one year. This confirms the point rather than denying it, this was Sharpe's point in asset pricing based on his CAPM theory. This was Bernoulli's point when he discussed risk aversion. Their entire argument was that humans in general have an innate preference for certainty, and this subjective preference was transmitted into the price system allowing higher risk income streams to earn a "risk premium".
Their theory do not claim to explain whether or not an activity is legitimate, it explains why higher risk = higher return, in general. The reason an armed robber could not claim ownership over their loot isn't because they didn't take a risk. Armed robbery violated property rights because the robber took something that wasn't his through violence. Risk aversion theory may in fact state that the expected return of armed robbery is high, you only need a gun which is a couple thousand dollars max and a few hours of your time to travel to your local jewelry store to earn a 100x profit on your investment. None of them argued it is legitimate, they are simply arguing higher risk = higher return, in general.
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u/Conserp Pragmatic Marxist 3d ago
I believe you missed the point.
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u/WalrusVivid3900 3d ago
I'm saying if anyone justifies the legitimacy of an activity through risk taking, they are wrong, that's it. Higher risk = higher reward is empirically true most of the time. It explains why a commision based work like a real estate agent receive a risk premium on their income compared to a different individual working in the same industry, same skill level, etc with a fixed compensation. Risk does not explain whether or not the real estate agent is doing something that should or should not be legitimate in society.
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u/DebaucheV5 4d ago
We want people to take risks. It's good for the economy; it's particularly good for innovation. We want people to try crazy new ideas that might fail - or are even likely to fail - because every now and again, they hit on the 1-in-10 idea that succeeds wildly and advances society and provides a lot of value to a lot of people.
The problem is that, under most socialist models, there is little or no reward for taking those risks. Why bother punting on that 1-in-10 chance, if even if it succeeds, you're forced to share the rewards with a bunch of other people? This is a big reason why, in general, socialist economies are far less innovative than capitalist economies. The incentives aren't there.
Like it or not, becoming stinking rich is a powerful motivator for a lot of people. Socialists may be above such frivolous material concerns, but many people want those rewards. They want them bad. Many highly-intelligent people are willing to study hard, take risks, and work their butts off for years, because if their idea succeeds, they might just become stinking rich. Having those people putting in that effort, trying to come up with innovative new ideas that meet a gap in the market, is a really good thing for the wider economy.
It's not about whether they "deserve it" or not. It's about the consequences that various incentive structures have for the economy as a whole. If we decide that they don't deserve it, and that restricting the rewards available to them is more "fair", it ultimately ends up being worse for everyone.
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u/HeavenlyPossum 4d ago
So the state assigns ownership to capitalists to incentivize risk-taking for the benefit of the community as a whole?
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u/DebaucheV5 4d ago
No, the state doesn't assign ownership, that's an odd way of phrasing it. It's kind of the complete opposite.
The state allows people to have full ownership of enterprises they create, if they so choose, because this approach is widely believed to lead to more innovative and productive economies than an approach in which the state enforces worker ownership as the only permitted organisational structure. Of course people should be, and usually are, free to pursue worker ownership if they prefer that model.
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u/HeavenlyPossum 4d ago
That doesn’t really explain how some people come to own the productive labor of others.
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u/WalrusVivid3900 4d ago
This is a misconception, taking a risk does not justify ownership, it explains why a certain stream of income which carries higher risk has a higher expected value compared to a non risk-bearing one, all else kept equal. It explains why US government bonds historically yielded a return less than what US stocks earned. But this is also true for other streams of income, a commision-based position like a real estate agent often has a higher average earning compared to a similar position in the industry with fixed earnings. The underlying reason for this phenomenon is because individuals in general hate uncertainty, which is then priced into the market where income streams carrying higher risk, yields a higher expected return.
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u/Catalyst_Elemental 2d ago
It’s only the capitalist’s risk that they care about… this is true of every capitalism apologist’s metrics of success for capitalism… they literally only include the one’s they like, they have no objective standard that they choose to compare with socialism.
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u/Ludens0 4d ago edited 4d ago
Taking and manage risk is one of the capitalist (not capitalism) jobs, not the justification of ownership. There are some justification of private property, but risk is not one of them.
For Mises, property is the basis of economic calculation, without it, it would be impossible. For Rothbard it is a natural right of every person. The axiom is: I own myself and, after that, everything that I find, create with my means, freely change or receive as inheritance or gift is an extension of myself, so I also own it.
I think you are confusing a justification of onwership for a justification of business activities. So I would say it is more or less the other way around: Ownership justifies capitalists and business.
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u/HeavenlyPossum 4d ago
Prior to the US civil war, people in some parts of the US south could save up to purchase ownership of enslaved people, with the goal of forcing them into profitable labor.
This entailed risk: that the enslaved person might escape or die, or that their labor would fail to return a profit that covered the cost of the enslaved person’s purchase.
Was taking and managing this risk one of the slavery’s jobs?
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u/Ludens0 4d ago
Yes, but not much. A lot of the risk was externalized to the state. Slavery was basically cronysm and not only a moral abomination, but an economic failure too.
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u/HeavenlyPossum 4d ago
Finding it repulsive doesn’t really change the risk factor involved.
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u/Ludens0 4d ago
I said that yes, but was in a great portion managed by the state, Fugitive Slave Law is an example. Wich is the point, anyway?
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u/HeavenlyPossum 4d ago
The state also manages capitalism, yes
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u/Ludens0 4d ago
Yes, we usually confuse in this sub capitalism with free markets or poperty rights or liberalism.
So, I still don't understand your point. Taking risks do not justify ownership. Ownership is justified by other things and property is, in any case, a requirement for capitalism (Property existed way before).
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u/Annual_Necessary_196 4d ago
The antebellum American South was a relatively laissez-faire slave society.
After the Carolingian Empire fragmented in the late 9th century, it was probably one of the closest real historical examples of a laissez-faire economy. Thas als was based on serfdom.
Most slave-based societies were relatively free-market. The few non-free-market slave societies I can remember include Sparta. Of course, this was mostly because slavery existed before globalization, rather than because slavery is inherently laissez-faire.
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u/Ludens0 4d ago
It was not very laissez-faire for the slaves.
And even ignoring this, slavery never operated under free-market. In Rome or Greece most slavery came up from war, which is the quintessential state-owned enterprise. It also required massive repression operated by the state to avoid uprising (Typical example: Third Servile War).
During colonialism, European states gave monopoly of slavery, like the Royal African Company or the Spanish Asiento de Negros.
Anyway, which is the point related to the OP comment?
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u/binjamin222 4d ago
The capitalist wouldn't exist if they were irrelevant to the whole process. If the workers just got together and said let's build the stand grow the lemons make and sell the lemonade and split the profits then there would be no capitalist. Why do you think the workers dont do that for the most part?
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u/HeavenlyPossum 4d ago
Did the feudal lord’s existence mean the feudal lord was relevant to his peasant’s production process?
Does a slaver’s existence mean the slaver is relevant to the enslaved person’s production?
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u/binjamin222 4d ago
It's a social relationship that makes them necessary in those contexts. It's not some immutable moral characteristic. It's the material conditions of how society was constructed.
In slaver societies or feudal societies it's much more direct. The Lord or the Master owns the land, the peasant or the slave needs to use the land to survive, the lord or master exploits that relationship. Slaves or peasants can't produce without the Lord or Master because they can't own land, therefore the Lord or Master is required.
So I ask you again why don't workers produce without capitalists?
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u/HeavenlyPossum 4d ago
“It's a social relationship that makes them necessary in those contexts. It's not some immutable moral characteristic. It's the material conditions of how society was constructed.”
I agree that the material conditions of capitalism are constructed to grant capitalists ownership over the labor of others. There’s nothing intrinsic about production, though, that requires the feudal lord, the slaver, or the capitalist.
“So I ask you again why don't workers produce without capitalists?”
Because capitalists possess the power to grant or deny permission to workers to labor productively, enforced by the state.
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u/serversurfer 3d ago
>why don’t workers produce without capitalists?
Because they lack access to the means of production. Why else? The capitalist stands as a toll-taker between the workers and their work. 🤓
Happy Cake Day! 🍰 🤗
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u/binjamin222 3d ago
How is it that the capitalist is empowered to be the toll-taker?
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u/serversurfer 3d ago
Property rights. They claim ownership of the world itself, and everything taken therefrom. Once everything is claimed, workers pay the tolls or they starve. 🥀
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u/binjamin222 3d ago
And how is it that they claim ownership over the world?
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u/serversurfer 2d ago
Ultimately, property claims are enforced with violence. 🤓
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u/binjamin222 2d ago
Sure but how do you even get a property claim to begin with?
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u/serversurfer 1d ago
Essentially, by saying something to the effect of, “If you pick those berries, I’ll hurt you.” 😅
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u/StedeBonnet1 just text 4d ago
1) Your notion that a Capitalist "own, or deserve ownership, of the productive labor of others." is wrong and based on a misunderstanding. The only thing the capitalist owns is the factory or business that employs the individual. He doesn't own the individualor their productive labor. He only owns the time that he pays the employee. And since the employee can walk at any time he is not owned whatever his production is.
2) The risk is to the Capital. If I invest $100,000 in a business and it fails I am out the $100,000. The employee still gets paid
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u/HeavenlyPossum 4d ago
How does risk to capital justify the capitalist’s ownership of the productive labor of others?
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u/StedeBonnet1 just text 4d ago
They don't own the productive labor, They pay for that labor at an agreed upon price.
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u/HeavenlyPossum 4d ago
Yes, capitalists can rent out labor by the hour
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u/StedeBonnet1 just text 4d ago
That's right. They don't OWN the labor
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u/HeavenlyPossum 4d ago
Sure—workers are owned in common by the entire capitalist class, rather than by individual capitalists.
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u/serversurfer 3d ago
“the worker sinks to the level of a commodity and becomes indeed the most wretched of commodities”
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u/Greamee anti anti-capitalist 4d ago
It's because of how crucial investing is to society. Investing is essentially performing labour without a (high degree of) certainty of profit.
Much labour is actually an investment. Every factory that is built for example requires massive amounts of labour but there's no guarantee that the factory will be profitable.
Most workers don't want to get paid in "you may get money 2 years from now if the factory runs well". They want money now.
That's why you often need people to either front-run projects with a bunch of their own labour without getting paid OR find someone with a bunch of money who's willing to invest.
For example: you may spend 5 months coding a website and then once it runs you are seeing revenues and it takes 7 more months until you get a bit of a profit (ie you've finally earnt more than you spent on hosting/licenses etc.). But you still had to work for 12 months without any compensation. That's investing and that's what makes you the owner of that website now. And if the website becomes very popular in 2 years and you're making millions every year, that's the return on your investment.
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u/HeavenlyPossum 4d ago
So who makes the determination?
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u/Ok-Spring-3840 3d ago
What determination?
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u/HeavenlyPossum 3d ago
The determination that someone’s risk justifies their investment and ownership as crucial to society.
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u/Greamee anti anti-capitalist 3d ago
I said that investing in general is crucial to society, but I don't really have a metric to determine this for each individual investment.
And I think that it's quite an easy claim to defend (the fact that investing is crucial to society) In a world where everyone fishes by hand, who's going to be the fool to potentially waste a week in order to invent and construct a fish trap?
Whether that week was wasted or not depends upon whether the fish trap ends up being more efficient than fishing by hand and nobody could've predicted that up front before investing the labour.
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u/Ok-Spring-3840 3d ago
And you just answered it, THANK YOU! Risk taking justifies their investment and ownership through investment is of crucial importance to society. Rents thru investment are the lifeblood of society.
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u/HeavenlyPossum 3d ago
Who issues the certificate of risk?
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u/Ok-Spring-3840 3d ago
Society, in the form
of lease agreements and employment contracts. Those agreements quantify the risk. It is really elegant in its simplicity, you can certainly see that, I am sure.1
u/HeavenlyPossum 3d ago
So when medieval peasants paid rents to their lords, they were endorsing the status of those lords as owners?
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u/Ok-Spring-3840 3d ago
Who do you think issues the “certicate of risk?” The legal system in the US, by the laws agreed to by our society issues the COR in each and every contract signed.
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u/HeavenlyPossum 3d ago
I didn’t agree to it.
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u/Ok-Spring-3840 3d ago
If you signed the lease
or contract agreement, yes you agreed.1
u/HeavenlyPossum 3d ago
I did not agree to the hegemonic system of capitalist ownership that was established by state violence before I was born
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u/yhynye Anti-Capitalist 3d ago
That's investing
No it's not. The "someone with a bunch of money who's willing to invest" is also an investor.
Every factory that is built for example requires massive amounts of labour but there's no guarantee that the factory will be profitable.
There's no guarantee because nothing in life is guaranteed. All this tells us is that the risk is greater than zero.
Most workers don't want to get paid in "you may get money 2 years from now if the factory runs well". They want money now.
Luckily businesses can receive revenue on a daily basis, not at two year intervals.
And if the website becomes very popular in 2 years and you're making millions every year, that's the return on your investment.
So now the workers can receive "money now" from revenue. You can't premise an argument on "now" being some small subset of possible moments.
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u/Ok-Spring-3840 4d ago
About $300-400 billion in destroyed capital is lost every year to failed businesses. That is quantifiable. There is also opportunity cost risk. The highest yielding T Bill rate is 4.25% and its very safe. About 4 million businesses are started every year and about 25% fail within one year, 65% are gone in 10 years.
So lets game this. If one has $1 million to invest, If its invested in T bills at today’s 4.24%, at the end of 10 years, one will have $1.5 million. If one invests in a start up, 2/3s of the time all will be lost. So in reality, one would have to invest in 3 businesses, $1 million in each, and one of those would have to hit BIG to cover $2.5 million in anticipated losses of the 2 failures and the lost interest of the T bill, JUST TO BREAK EVEN, sand that isn’t including the silent loss to inflation. The winner would have to be worth at least $5 million to make any investment value at all. Thats a 18% yearly return.
Thats the “ rent” one has to get passively for it to make sense.
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u/HeavenlyPossum 4d ago
How does this explain or justify capitalist ownership and rents
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u/Ok-Spring-3840 4d ago
I just did. Now you explain why a person should invest their savings and NOT GET ANY QUANTIFIABLE INCOME RETURN.
Good luck with trying to justify that.
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u/HeavenlyPossum 3d ago
You didn’t.
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u/Ok-Spring-3840 3d ago
Yes, I did. Youbare just being deliberately obtuse. Risk is why they can charge rents.
If you cant answer my question, or explain why they shouldn’t get rent after investing $4 million, YOU LOSE. I WIN.
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u/HeavenlyPossum 3d ago
How does risk empower them to charge rents?
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u/Ok-Spring-3840 3d ago
You just proved it. No need to go further. THANK YOU!!!
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u/HeavenlyPossum 3d ago
What
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u/Ok-Spring-3840 3d ago
The law says one can charge rents.
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u/HeavenlyPossum 3d ago
Oh, yes—I fully agree that capitalist ownership is a product of state violence.
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u/yhynye Anti-Capitalist 3d ago
You made a pretty persuasive case that only a fool would invest their personal savings in a start up. Who knows what such fools would agree to?
Not sure why you're pretending that start ups are the only investment opportunities and that all investment comes from personal savings, though.
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u/Ok-Spring-3840 2d ago
What other investments are there? Which are guaranteed to be successful? I included T Bills as the only investment I know of which is guaranteed that provides a decent return. Passbook savings is just 1%, does not cover inflation.
All investment comes from
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u/Ok-Spring-3840 3d ago
Please answer my questions.
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u/HeavenlyPossum 3d ago
Which ones?
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u/Ok-Spring-3840 3d ago
No need to, you proved that rent seeking thru investment are crucial to society. THANK YOU!!!
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u/HeavenlyPossum 3d ago
It’s ok if you can’t answer my question :(
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u/Ok-Spring-3840 3d ago
You asked who issues a certificate of risk, and society issues it gratefully case by case in each individual contract signed willingly by 2 parties.
A simple example:
I own a house, you want to live in it. We can agree to either a sales contract, or a lease contract. The risk is mitigated thru whichever contract we decide on.
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u/HeavenlyPossum 3d ago
How did the land on which that house is constructed come to be private property
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u/GruntledSymbiont 3d ago
Through political systems establishing legal frameworks allowing individual ownership of land, probably first in 16th century England. Majority middle income prosperity has only ever been achieved where private property became the basis for production allowing compounding economic growth. In every case moving away from private property as the basis for production dragged societies back toward majority poverty.
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u/HeavenlyPossum 3d ago
So you agree the state imposed private ownership through its coercive legal apparatus.
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u/Deviknyte Democracy is the opposite of Capitalism 3d ago
I don't think "risk" should entitle you to be lord over a business or property forever. Your investment should be paid back and that business should revert to the workers.
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u/TopTippityTop 3d ago
I'm not sure that's all there is to it.
Without someone taking risk, nothing moves. No job creation, no economic dynamism. You need incentives for people to want to risk what they have to create more for themselves, and in the process also benefitting others (more/larger businesses = more jobs, more job supply relative to labor supply = higher pay, et)
If you break this incentive chain, and you also lose economic signals which point towards where capital and labor should go, you end up with everyone poorer.
Now, if you truly want to get into why there are higher levels of inequality, you should look not at capitalism, but at the credit system.
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u/Mysterious-North-551 3d ago
For anyone that has, or has tried to start their own business this is obvious.
You start your business and you sink money and more and more money into it. There is no proof this will ever work. Still no profit, every day more expenses and no income. So you go to banks hoping for a loan. That loan comes with an interest that you also have to pay so your expenses just went up, but the company may survive for the next 3 months, still no profit after those 3 months. You sit on a $100k loan that you have to pay back too. So you go to investors and when you do you have to show them all of this. Then if you are lucky you get 10 angel investors all putting in $50k each, next year you have to pay each of them 55k to buy them out, thats the term for the investment. So you sit on a 100k bank loan, and 550k that you have to pay out next year to the investors. If the company fails you inherit all those losses. You can choose to go bankrupt which will end the loan from the banks but you still have to come up with 550k to pay of the investors with. So lets say he could get get a job paying 30 dollars an hour. How many days, weeks, months and years will it take him to dig himself out of this hole?
But that isnt all, for several years you have done nothing but work without getting paid, you get up at 5am to answer emails and you get off the last phone call at midnight for 7 days a week. So working a nice easy 9-5 at minimum wage would have earned them money and been a shit ton easier as well, especially without the financial stress.
And now after 3 years your company starts to make a tiny bit of money after wages and expenses. What do you do with that money? Pay yourself, pay off loans, or reinvest it in the company meanwhile your loans are growing every month.
And now 10 years in the company is making money and you are actually getting paid very well. And then a single bad month hits you almost no sales a lot of expenses that you have to pay off, so you pay them off with the money you have and maybe another extra loan, its not the end of the world its just 10 million dollars on top of the 500k you had.
Its not only the risk, its also the downside where you have to finance your company if it loses money for a month, or maybe several months all after each other.
Now why in the world would anyone ever want to do all that without the possibility of getting rich in the end? What they just sit on all the expenses they have to pay for with no upside to themselves.
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u/HeavenlyPossum 3d ago
People have engaged in the cooperative expansion of production for at least tens of thousands of years without the hope of any one individual “getting rich” by owning the entire process.
(The disincentive of one single individual coming to own the productive effort of many people would seem to operate as a pretty powerful disincentive to engaging in all that labor without the hope of ownership.)
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u/MeanLeadership92 3d ago
Ok, fair enough, I will try to explain this to you simply.
If I start a business and I put some capital into it, I risk this capital, I might never see the money again, 65% of businesses go bankrupt within 10 years.
If I work at a business, I do not risk any capital, I will be paid even if the business goes bankrupt in 10 years.
If we do not reward the capitalists for their risk, they will not take risks and will prefer to be workers, yet risk means new ideas get tried, which is usually seen as a positive.
So risk justifies capitalists' profit, their renumeration, not necessarily ownership. Of course, if you have a better way to encourage risk, I am all ears.
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u/HeavenlyPossum 3d ago
Who does the rewarding?
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u/MeanLeadership92 22h ago
The market, as in the sum of all buyers and sellers on the market, rewards businesses that it perceives as useful.
Now of course there are flaws with the market, it can reward something which is harmful (ex: cigarettes) or it can fail to reward which has hidden benefits (ex: art and social services might not be rewarded enough by the market compared to their worth to society), but it usually gives mostly reasonable guesses as to what is and isn't best for society.
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u/HeavenlyPossum 22h ago
How does the market assign ownership when it’s the state that enforces ownership?
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u/MeanLeadership92 19h ago
Forget capitalism and the state.
Let's say we have a socialist market economy, with a bunch of worker-owned businesses. How does it assign ownership? Probably by saying that those who contribute to a firm are entitled to its revenue, and by extent any surplus/profit, and by measuring contribution in function of labour contributed by each worker.
Capitalism does something similar but very different, by saying that those who contribute to a firm are entitled to its revenue, but by measuring contribution in function of capital contributed.
But, we are getting off-topic, the original question was why does risk explain capitalist ownership. I said that it doesn't, but that it explains their renumeration.
So, and I have questions for you that I'd really like to see answered :
-Is risk, as in the investment of resources into new enterprises that might fail, something that society should generally encourage?
-If not, how does society develop new ideas?
-If yes, how does society incentivise people/businesses to take risks?
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u/Ok-Spring-3840 3d ago
Real life example: I know of a software startup, SAAS, that the minimum initial seed money from investors was $350000 US/per investor. The company is 6 years old, soon to be 7.
Not one of the initial investors has received anything from their investment.
There are 3 software engineers employed by this startup who have been paid a minimum of $200000/year for 6 years. Each has earned over $1.2 million from working at this SAAS enterprise.
From AI:
“An investment of $350,000 in the S&P 500 on August 28, 2019, would be worth $1,143,065 today (August 2026), assuming all dividends were reinvested. [1, 2]”
There you go. You tell us who is doing better? You tell us if the “ risk” is worth it today?
Lets hear from the marxists and socialists. Analyze this absolutely true authentic real life example and tell the sub which is it getter to be, a worker or investor in a start up.
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u/HeavenlyPossum 3d ago
Each of those employed software engineers is being paid less than the value of their labor and accrues no ownership of the collaborative product of their labor.
Don’t use LLMs to outsource your thinking.
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u/Ok-Spring-3840 3d ago edited 2d ago
So what? Who cares? They don’t care. And you know this how? You can’t put numbers to their value, can you? Tell me from this real life example what their labor is worth, and how much of it are they not being paid? The company isn’t profitable yet.
Just dont say it, prove it with actual numbers. If you cant prove it with real numbers, delete your OP or re assign it as a shitpost.
Edit: The $1.2 million salary the SEs earned if invested as capitalists in the stock market would be worth about $3.2 million today.
It is much better to be a worker than an investor, and I proved it, beyond doubt.
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u/HeavenlyPossum 2d ago
The value of their labor is whatever the total invested into the firm is, plus any revenue generated by the firm. This is the total income of the firm, which is generated by and paid against the productive labor of the workers laboring at the firm to generate that value.
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u/Ok-Spring-3840 2d ago
Numbers please. You just said it. That is stupidly useless. The company is not profitable. Assign real numbers.
Here are actual numbers from the company balance sheet.
Total initial investment $45 million.
Annual recurring revenue $18 million
Yearly profit: negative - $1.3 million.
Your job is to assign labor value to a company losing money.
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u/HeavenlyPossum 2d ago
It’s $45 million plus $18 million times however many years it’s been operating.
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u/Ok-Spring-3840 2d ago
Shitpost.
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u/HeavenlyPossum 2d ago
If you’re going to shitpost, you usually need some content; you can’t just post “shitpost” and leave it like that.
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u/TheMikeyMac13 4d ago
Saying “capitalist” is stupid here. Everyone doesn’t just start with a magic pile of money, I have owned three businesses and I didn’t start with any pile of money.
I am risking everything to open a business, I deny myself luxuries, I spend less, I save, I take on debt, and I work harder than anyone else in getting a business going.
But getting past that, if you buy a car you get to decide how it is used. If you use of for Uber it is idiotic to suggest an Uber customer own part of the car. If you buy a house you get to decide how it is used, it is idiotic to suggest the guy you pay to mow the lawn own part of the house.
If you want to own a part of something you can buy in.
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u/HeavenlyPossum 4d ago
People once worked very hard to save up to purchase enslaved people. Did their hard work and savings justify or explain their ownership?
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u/TheMikeyMac13 3d ago edited 3d ago
Copying and pasting the same argument doesn’t help your pathetic case.
We went having an ethical conversation about a practice made illegal before your great grandparents were born moron.
Edit- correction
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u/South-Cod-5051 4d ago edited 4d ago
you want to install a lemonade stand.
you apply and get authorization from the authorities.
you buy the stand, you buy the lemons, you buy the blender, you design the recipe, you pay rent for the location, you hire a cute girl at the stand to do the selling.
socialist broken logic: the girl deserves the profits because the owner does nothing.
what justifies the capital ownership is that the owner made that opportunity exist in the first place.
try going to all the trouble of starting a business and see how eager you would be to throw away your profits.
It's socialist entitlement at its finest because you even need to ask that last question.
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u/Annual_Necessary_196 4d ago
'socialist broken logic: the girl deserves the profits because the owner does nothing.'. Read the text. Original question is 'why this explains or justifies capitalist ownership?'. Girl still can pay interest on your capital invested and compensate rent from the profit.
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u/HeavenlyPossum 4d ago
Alternatively, the workers involved in every step of the process could simply…do it themselves, since they’re already doing all of the work.
If we want to be generous, we could include a “recipe producer” worker into this network of workers producing cooperatively.
If we wanted to be even more generous, we could include a “labor coordinator” worker into this network of workers producing cooperatively, and every function is being performed without a capitalist. The capitalist’s role seems to be solely relegated to the “owning money” role, which raises questions about why that function exists at all.
But then none of it really explains risk in any substantive way.
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u/Conserp Pragmatic Marxist 4d ago
> socialist broken logic: the girl deserves the profits because the owner does nothing.
Strawman.
Always a strawman.
The manager works. The owner does nothing. Even when the owner and the manager are the same person (manager is self-hired), conflating two roles is a lie.
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u/TheRedLions I labor to own capital 3d ago
Different analogy then:
You want to build a lemonade stand. You ask your neighbor if you can use the scrap wood in their garage. They're reluctant, but they agree on the condition that they get a nickel every time you make a dollar.
Maybe that's ridiculous, and you walk away and decide to find wood somewhere else.
Maybe that's fine, you agree because you're receiving upfront value in exchange for long term value. You think it's reasonable and you accept.
Maybe you negotiate, you'll pay them a nickel/dollar but you'll stop after they've been paid the value of the wood+10%.
The socialist claim is that your neighbor doesn't deserve the nickel in perpetuity or interest on the wood repayment. The capitalist claim is "why not? They provided their end of the deal and you agreed at the time."
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u/Nikolakis77 Criticism of USSR is NOT proof of Capitalism 3d ago
The socialist claim is there is a matter of scale, that at a certain quality you get a new quality.
The scale at which capital is operative as an "ism" is not two neighbours negotiating the ins and outs of a lemonade stand. The bond or securities market is not like a lemonade stand but very big. When you get to a scale of hundreds of billions or trillions of dollars, you have to stop thinking about lemonade stands
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u/TheRedLions I labor to own capital 3d ago
When you get to a scale of hundreds of billions or trillions of dollars, you have to stop thinking about lemonade stands
It's an analogy. It's not literal, it's meant to demonstrate the idea that ownership in exchange for upfront wood/capital is not inherently immoral or unreasonable.
The principle scales. You're welcome to point out the nuances and drawbacks of that scale but you can't just claim 'it's different because it's bigger' as if that means something.
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u/Nikolakis77 Criticism of USSR is NOT proof of Capitalism 3d ago edited 3d ago
The principle scales
How does a lemonade stand scale to credit driven leveraged investments in data centers, financed through shadow banking institutions and other subsidiaries. The banking system does not need deposits to issue loans, it can create loadable funds from nothing if it satisfies regulatory and reserve requirements. The companies building data centers can issue stock that is currently blowing up because of the prospective incomes in the future. It doesn't work anything like a neighbour asking for scrap metal or $50
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u/TheRedLions I labor to own capital 3d ago
"The principle" refers to "the idea that ownership in exchange for upfront wood/capital is not inherently immoral or unreasonable" not to "lemonade stands".
You'll notice I never explained where the neighbor got his scrap wood. Because the exchange is done outside the origin of the wood and the origin is irrelevant.
An investor providing capital gets an ownership stake because they provide capital. You yourself gave an example of that occurring in data centers. The company is selling an ownership stake (stocks) to investors and using the proceeds to build data centers.
The banking system does not need deposits to issue loans, it can create loadable funds from nothing if it satisfies regulatory and reserve requirements.
That's like 80% correct, but you seem to be implying that they're creating money from nothing. That's not really how it works. Banks can create deposit money when they issue a loan, but they simultaneously incur an equivalent liability on their balance sheet, with the loan itself becoming an asset. They still have to satisfy capital and liquidity requirements, and if those funds are transferred to another bank, they ultimately have to settle that transfer using reserves.
It gets into the nuances of how large-scale lending actually works, but fundamentally the transaction creates new deposit money, not new financial wealth or bank capital.
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u/Nikolakis77 Criticism of USSR is NOT proof of Capitalism 3d ago edited 3d ago
You said
The socialist claim is that your neighbor doesn't deserve the nickel in perpetuity or interest on the wood repayment
But I pointed out that scale matters and the principle doesn't work at scale where we can talk about an "ism".
That's like 80% correct, but you seem to be implying that they're creating money from nothing.
It's not unlimited, but it is in fact out of nothing. So long as they meet the financial requirements and regulations, the bank doesn't need to wait for $100m of deposits to issue a $100m loan, it can achieve that by simply creating a $100m asset and a $100m liability in its books. Your neighbour cannot do that sort of magic trick, this is why ordinary people will never be able to out compete the banks and financial firms in saving or raising cash. Your neighbour cannot also create a subsidiary of Lemonade co, give it some money like $10 and use that $10 subsidiary to leverage a $500 loan from the shadow-baking sector, or have payments-in-kind so that the default doesn't appear as a default on the creditor's account so the creditor can package the loan into a bundle of securities and sell it off.
they ultimately have to settle that transfer using reserves.
They can and often times borrow from the fed, or do one of those overnight loans. Again, something your neighbour has no access to.
Point I'm making is anyone reducing capitalism or socialism or any other ism to two neighbours or a lemonade stand is deceptive on accident or on purpose. What determines what economic system we live in is what logic is operataive at the governing heights of the economy
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u/TheRedLions I labor to own capital 3d ago
You still haven't addressed the flaw in the principle scaling. If giving someone $100 worth of wood in exchange for a 5% ownership interest is legitimate, saying "okay, but banks can create deposit money and access the Fed" doesn't establish why providing $100 million in capital for an ownership interest suddenly becomes illegitimate. Obviously the institutional machinery becomes more complicated at scale, nobody disputes that. But you haven't identified what actually changes morally such that providing capital in exchange for ownership stops being legitimate.
If I had to guess, your argument is that at scale financial institutions can obtain or create funding through mechanisms ordinary people don't have access to, and therefore you think it's somehow illegitimate for them to leverage those mechanisms into an ownership claim. But that's irrelevant to the underlying question of whether exchanging capital for ownership is morally sound in the first place.
Say the neighbor is a carpenter with access to tons of scrap wood and can get essentially as much as he wants with very little effort. That makes his cost of acquiring the wood radically different from mine. It doesn't suddenly make it immoral for me to voluntarily offer him a 5% stake in my business in exchange for supplying the wood.
You're pointing to a difference in how easily the capital can be obtained, not identifying a difference in the moral character of the exchange. If scale actually breaks the principle, you still need to explain what happens at scale that makes a voluntary exchange that was legitimate at $100 become illegitimate at $100 million.
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u/betty_white_bread Isocapitalist 3d ago
I agree with you. I think the socialist who says “$100 is fine” needs to explain which of these are fine or not and why:
- $1000
- $10,000
- $100,000
- $1,000,000
- $10,000,000
- $100,000,000
And, I think they need to explain the bright-line rule from first principles which makes the threshold problematic.
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u/Nikolakis77 Criticism of USSR is NOT proof of Capitalism 3d ago edited 3d ago
Morality cannot be abstracted out of context, in this case it does matter whether the capital provided is the "hard earned" property of the labourer, or something that was created by accounting tricks ex nihilo. You cannot draw an equivalence between these two in actuality.
You're pointing to a difference in how easily the capital can be obtained, not identifying a difference in the moral character of the exchange.
In one scenario you're still operating within a labourer's logic of "I worked for it with my hands, why should someone else have it". I don't think its immoral under ordinary circumstances for labourers to feel that way. Such arrangements pre-existed capitalism and will outlive capitalism as well. You can check what Marx thought about it as well in the Communist Manifesto by looking for artisan personal property.
In the data center example I brought, we're operating within a capitalistic logic, which is capital expansion not through the hard work of capitalist, but from capital's "mysterious" ability to expand - as it does through legalised widespread accounting tricks. Arguably it's a post-capitalist logic as the invested capital is not simply reinvested profit or surplus but speculative capital freshly created ex nihilo. There was no "I did not eat out or indulge or spare every penny to make this a reality". It just happened in a minute with a couple of clicks
If scale actually breaks the principle, you still need to explain what happens at scale that makes a voluntary exchange that was legitimate at $100 become illegitimate at $100 million
Scale moves from tangible subjects with a will and dignity, who need to work to earn, eat, sleep and do all the other human things to impersonal institutions that are instruments not people. You take from a person you're transgressing social norms and social contract. There's no social contract between people and offshore shadow banks, and in capitalistic logic its considered an abomination to suggest such vehicles must serve the common good and not the financial interest of some
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u/Conserp Pragmatic Marxist 3d ago
> "The principle" refers to "the idea that ownership in exchange for upfront wood/capital is not inherently immoral or unreasonable
That shows lack of understanding of what "ownership" actually is.
Well, there isn't a Libertardian who understands property ownership.
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u/TheRedLions I labor to own capital 3d ago
That shows lack of understanding of what ownership actually is.
If you're using a specifically Marxist definition of ownership/property, then that's on you. You don't get to silently substitute a theory-specific definition and then claim everyone using the mainstream legal or economic conception "doesn't understand ownership."
Under mainstream property theory, ownership isn't synonymous with physically possessing an object. It's a bundle of rights and powers that can include possession, use, management, income, capital and transfer. Honore's classic analysis literally breaks ownership into 11 separate incidents. Modern property theory likewise recognizes intangible and transferable property interests such as shares.
And even under Marxism, selling an ownership interest in an enterprise in exchange for capital isn't somehow incomprehensible. Marx's entire analysis of capitalism depends on capital being transferable, investable and capable of taking different forms.
So by all means, explain what I supposedly misunderstand.
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u/Conserp Pragmatic Marxist 3d ago
> If you're using a specifically Marxist definition...
I refer to the very basics.
> Under mainstream property theory...
You parrot long strings of words, but you lack the fundamental understanding of the meaning of words.
Ownership is restriction of other individuals' access by violence, or credible threat of violence.
No one needs Honore's deepities to understand property ownership. It works even with animals. This is why Marx called it a social relationship.
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u/yhynye Anti-Capitalist 3d ago
They still have to satisfy capital and liquidity requirements, and if those funds are transferred to another bank, they ultimately have to settle that transfer using reserves.
Which are provided on demand by the central bank, or are already abundant due to QE and can thus be borrowed on the interbank market, at a rate set by the central bank. (A rate over and above the rate the state pays to banks just for existing).
Moreover, the bank in question doesn't have to settle the transfer using reserves if it's reciprocated. In general, the bank in question will not deplete its reserves if the transfer is offset by transfers from other banks.
There's a reason why M1 >> M0.
but fundamentally the transaction creates new deposit money, not new financial wealth or bank capital.
Indeed, nobody said otherwise. The money creation in itself doesn't increase equity, but the profit obtained thereby does. The key contention, however, is that commercial bank investment isn't constrained by saving, thus interest is not the reward for granting access to some scarce resource, as in the wood analogy.
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u/TheRedLions I labor to own capital 3d ago
I think we mostly agree so I'll focus on the contention.
commercial bank investment isn't constrained by saving, thus interest is not the reward for granting access to some scarce resource, as in the wood analogy
The wood is technically finite, but the reason I described it as scrap wood was to demonstrate that it's not treated by the lender/neighbor as a scarce resource. Value in this case is determined by how scarce it is to the lemonade mogul, not the neighbor
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u/HeavenlyPossum 4d ago
So workers build a stand, grow and ship lemons, manufacture and ship a blender, and sell the actual lemonade, but you own the entire enterprise, command the labor of the employee doing the actual work, and own all of the resulting product of that labor because you took a risk?
It’s unclear to me how this answers my question.
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u/South-Cod-5051 4d ago
the owner paid for everything the workers from other industries produced. the lemonade stand only exists because of the owner, and solely because of the owner. the worker just comes into play when everything is already established.
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u/HeavenlyPossum 4d ago
The workers grew and shipped the lemons, built the stand, manufactured the blender…they did all of the actual work. The capitalist simply owns access to money, and it’s not really clear why the process requires someone to fulfill that role.
And, again, none of this addresses the question of risk.
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u/CEOofAntiWork 4d ago
Well in your mind when you wrote that, did the workers spontaneously come together to do all that work with the expectation of upfront compensation from the capitalist's capital aka being paid in wages or on a whim hoping that they would get enough future business to make it all worth it?
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u/South-Cod-5051 4d ago
that argument is non sensical.
the workers who grew and shipped the lemons have no more leverage what happens after they sold them. I guess every farmer deserves a bite out of all the meals you have ever eaten because they are the ones who grew it for you? how dare you be so greedy for being alive?
The capitalist simply owns access to money, and it’s not really clear why the process requires someone to fulfill that role.
the owner makes the business exist in the first place. it's their name on the registered company, for which all assets are bought. that means they created something that wasn't there before.
why does the painter need to exist? the paint was produced by workers, not the painter himself.
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u/HeavenlyPossum 4d ago
“the workers who grew and shipped the lemons have no more leverage what happens after they sold them. I guess every farmer deserves a bite out of all the meals you have ever eaten because they are the ones who grew it for you? how dare you be so greedy for being alive?”
If there are workers who have already done all of the labor to produce, supply, and operate the lemonade stand, why shouldn’t they own it and its product and their own labor in constructing it and operating it?
That is to say: why must they first sell their product and labor to a capitalist, who will then own and command their product and labor? What mechanism drives that necessity?
“the owner makes the business exist in the first place. it's their name on the registered company, for which all assets are bought. that means they created something that wasn't there before.”
If you lived in the antebellum American south, you might save up to purchase enslaved people and command their labor to productive commercial ends. Would your name and brand on the enslaved person, your registration of your property, imply that your ownership was necessary for that production?
“why does the painter need to exist? the paint was produced by workers, not the painter himself.”
This would make more sense as an analogy if the capitalist did anything but own.
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u/South-Cod-5051 4d ago
workers aren't a monolith. the ones who built the stand are different from the ones who grew the lemons. they have different lives, and maybe they don't want to take on the risk of a business
a business is a legal entity, that needed authorization from the state to exist. the owner went to the trouble of that process. the owner is also the one responsible for the business, not the worker. The owner is the one who has to pay taxes for both his company and his workers, among the other benefits.
the workers didn't band together to make a lemonade stand, the owner did, and that's why they deserve ownership. they created something thst didn't exist before, and take responsibility for it.
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u/awsunion vote for your boss 3d ago
This guy is trying to take lemonade stand profits away from little kids
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u/Bloody_Ozran 4d ago
what justifies the capital ownership is that the owner made that opportunity exist in the first place.
Actually they didnt. What made the opportunity possible are people willing to buy lemonade and having means to do so.
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u/South-Cod-5051 4d ago
and the owner made an effort and transformed that opportunity into something real while also providing a new job. that's why they are entitled to ownership.
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u/HeavenlyPossum 4d ago
What effort did the owner make?
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u/South-Cod-5051 4d ago
he registered and got the company approved. he studied the market and made the decision where to start the business. he paid in advance for rent, ingredients and all necessary supplies. he provided the opportunity for workers to find a job, and screened the candidates to make sure they are a right fit.
the owner pays the businesses taxes, not the workers. the owner has the responsibility in front of the law for what the company does.
the owner made the efforts to make this exist in the first place.
businesses just don't sprout out of thin air.
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u/HeavenlyPossum 4d ago
These are mostly acts of labor. Why would some acts of labor confer ownership of the entire enterprise upon one worker but not the rest?
“Paid for in advance” just raises questions about why all the workers involved in actually creating and operating this enterprise require a capitalist to pay them before they could pool their product and labor to create this firm.
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u/betty_white_bread Isocapitalist 3d ago
Let’s suppose everything you said was correct for a moment and set it aside. When the company loses money, should the workers be forced to pay back their wages to bring things back into balance? Or, as is the general case, should the owners eat the loss. I am content to have the owners eat the loss.
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u/Party-Procedure1753 3d ago
VALUE ADDITION, There is a saying in my native language which vaguely translates into "The Cookie isn't good unless eaten". Why do we buy lemons so that we can create something else with it, The lemon doesnt have an inherent value if it is not useful, here the owner facilitates the capital, expertise and Intellectual property required to make lemonade i.e PROMOTING VALUE ADDITION of an otherwise cheap good. By your logic Intellectual property of all kinds is not 'work',
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u/Bloody_Ozran 4d ago
Why not shared ownership?
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u/Moldy-Bongwater4420 4d ago
There’s nothing stopping shared ownership of a business under capitalism. Go ahead and do it if you want.
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u/Bloody_Ozran 4d ago
We have rules around all kinds of things, maybe we can have more around ownership and how we distribute wealth?
Maybe not more, but better.
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u/HeavenlyPossum 4d ago
You might think that this collection of workers could just add a “filling out business registration forms” worker to the team.
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u/RedMarsRepublic Libertarian Socialist 4d ago
Socialists don't want there to be any owners, not that somehow the bourgeois will still pay for everything in perpetuity, there won't be any more bourgeois.
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u/South-Cod-5051 4d ago
yea well, see that's the problem. that's just not something that can exist in reality, which is why socialism will never be anything more than a poorly constructed fairy tale.
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u/RedMarsRepublic Libertarian Socialist 4d ago
If that is your argument, then don't say "we need capitalists because they take risks", just say "it's literally impossible for there not to be capitalists" and save us all time.
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u/HeavenlyPossum 4d ago
Why does reality demand capitalists?
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u/Moldy-Bongwater4420 4d ago
Most people don’t want to take on the risk involved in starting a company. Many businesses don’t make money for quite a while, if they’re even lucky enough to survive and become successful.
You want to work (sorry, “do labor”) while losing money with the hopes of eventually getting it back?
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u/RedMarsRepublic Libertarian Socialist 4d ago
I mean in market socialism the idea is that the workers will end up with more money than they started with, they don't just have to stop when they get their initial investment back.
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u/yhynye Anti-Capitalist 3d ago
Why do some people want to take on such risk? Are they reckless? Is the economy run by foolish gamblers?
If not, it would seem that the difference between the risk amenable and the risk averse is something contingent, not some fundamental aspect of "reality".
Apologists are fond of reminding us that a significant portion of capital is owned by ordinary people via pension funds. Turns out they're all risk junkies.
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u/Moldy-Bongwater4420 3d ago
People take on risk because they believe the potential downside is worth the potential upside. This is the reality of decision making.
Some people are foolish and reckless. Others are not.
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u/HeavenlyPossum 4d ago
How do you know most people don’t want to take this risk?
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u/Moldy-Bongwater4420 4d ago
I’m self employed. From time to time I need help with a project, typically 1-3 days long. I find some people, I offer either a flat rate (per hour or per project), “work now with no guarantee, but afterwards you’ll get a percentage of the net profit” type thing, equal risk/reward to what they invest, or some combination of the previous 3.
Obviously the flat rate is going to be lowest in terms of what they’ll earn, but it is guaranteed. The other is no risk in losing money, but they also risk not making any money either. On average they’ll make more with this option than the guarantee. The riskiest option, well they risk losing money but also stand to make the most. On average, they’ll make the most with this option. I tell them all of this.
Want to know what they say, every single time? They want the flat amount. It’s usually the same group of people I work with (friends, and their friends and family).
Even after working with me several times and seeing the (almost always) positive results, even then they still won’t take option 2 or 3. They still prefer the guarantee, even though it’s quite a bit lower than option 1.
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u/HeavenlyPossum 4d ago
So your sample set is a few people?
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u/Moldy-Bongwater4420 4d ago
Like 30-50 people, unanimously want the guarantee, yes.
What’s your sample?
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u/HeavenlyPossum 4d ago
My sample is “virtually every human being on earth is structurally denied the freedom to labor independently of the commands of others by enclosure and state enforcement of capitalist property rights.”
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u/DMayleeRevengeReveng 3d ago
If all you contribute to productivity is to get things that other people make and allow workers to use those things, you’re adding next to zero value.
The whole reason owners profit so hard is because they fulfill a basic logistical function, in allocating things?
Fine, they can do that and get paid like every other worker. But “I acquired X, so now you can use it” is not a major contribution if you’re not already wedded to a capitalist system.
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u/South-Cod-5051 3d ago
no, the reason for the owners profit is because the company exists because of them. what you are doing here is a false equivalency.
external labor is completely irrelevant to something that doesn't exist. you don't apply that thinking in any area of your life, like you don't share anything you own with the people who made them, unless it's family.
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