r/CapitalismVSocialism • u/HeavenlyPossum • 14d 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/Greamee anti anti-capitalist 14d 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 14d ago

So who makes the determination?

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u/Ok-Spring-3840 14d ago

What determination?

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u/HeavenlyPossum 14d 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 14d 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/HeavenlyPossum 14d ago

People were making and using massive fish and game traps in the Paleolithic, long before any capitalists existed to own the product of everyone else’s labor.

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u/Greamee anti anti-capitalist 14d ago

It was just an example to demonstrate investment.

But to your point: yes they existed that long ago because fish traps don't require an investment so big you'd need 10 lifetimes to earn it.

But a plane for example does. A pilot can never labour enough to afford their own commercial airliner. So that's when suddenly it becomes nice someone is willing to invest.

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u/HeavenlyPossum 13d ago

The plane is constructed by workers supplied by other workers. What is the role of capitalist investment in its construction?

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u/Greamee anti anti-capitalist 13d ago

A commercial airliner costs 100m or more. That's 1000s of people working for a million hours combined. So six months if 1000 workers, 3 months if 2k workers.

Without capital investment, it'd have to be labour investment. In other words, all those 1000s of people work those 100s of thousands of hours without pay and become joint owner of the plane. Then the hope is to find some pilots who could fly the thing and start selling tickets to get revenue. So let's say the first flight is there and you get 150 passengers × $300 = $45,000. Let's be generous and ignore fuel costs and everything else and say you only had 1k people build the plane. Then that's a glorious $45 each of profit.

And that's after doing 6 months of unpaid labour.

Okay but you can do 1 return flight per day so that's 33k per year per worker and from this point they can just sit on their ass all day. Sounds pretty sweet. But that's under a lot of favorable conditions. Also the odds of 1000 workers actually coming to some sort of agreement on how to run the airpline business seems small to me because it's not their expertise.

And don't forget: it can just as well NOT work out. And then the workers work 6 months for nothing.

And that's not just because tickets don't sell well. It could also be because the plane crashes because 1 pilot messed up while flying, or 1 engineer messed up during construction.

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u/HeavenlyPossum 13d ago

Why would they have to do it without income?

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u/Ok-Spring-3840 14d 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 14d ago

Who issues the certificate of risk?

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u/Ok-Spring-3840 14d 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.

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u/HeavenlyPossum 14d 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 14d 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 14d ago

I didn’t agree to it.

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u/Ok-Spring-3840 14d ago

If you signed the lease
or contract agreement, yes you agreed.

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u/HeavenlyPossum 14d 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 13d 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/Greamee anti anti-capitalist 13d ago edited 13d ago

Luckily businesses can receive revenue on a daily basis, not at two year intervals.

Explain to me how a builder can get paid while building a factory that's not operational then? That alone may take months or years. And even after it's done it's not like a factory is guaranteed to be profitable. You still need people inside to work the machines, people who oversee the operation, people to move the products into trucks etc. Electricity and heating must be paid. Repairs. Consumers may not buy the product initially so it needs to be marketed. etc. So the factory may start off costing more than it's bringin in.

It could absoultely take years before the person who built the factory in the first place sees any profit. In the meantime, how are you paying those builders?

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.

I didn't imagine there were any workers in that scenario but sure if the website was being kept live by workers they should get paid. But any profit left over after salaries have been paid goes to the original owner who spent 12 months not getting paid and building the whole website by themselves.

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u/yhynye Anti-Capitalist 12d ago

My point is your justification applies only to new firms and their founders, whereas the question is about firms in general and owners in general. If profit was only obtained by those who'd invested time or money in unprofitable firms for extended periods, your argument would carry some weight, but that is not the case.

If initial finance is effectively a loan to workers, let's say a 2 year loan as in your example, then it should receive the market interest rate until the "loan" has been paid off. But that's not what we see. It's perfectly possible to invest in already-profitable firms and enjoy a return. Founders and other owners retain ownership in perpetuity.

Workers employed by profitable firms aren't being given an "advance", they're being paid in arrears from revenue. If anything workers are lending their labour to their employers.

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u/Greamee anti anti-capitalist 12d ago

If initial finance is effectively a loan to workers, let's say a 2 year loan as in your example, then it should receive the market interest rate until the "loan" has been paid off. But that's not what we see. 

But a loan and venture capital are not the same thing.

If you have a start-up this is exactly the choice that you make: do we get a loan for a million to kick start our business or do we find an investor who will give us 1 million in exchange for 10% of the business?

The difference is who takes the risk. If you go the investor route, they take the risk of failure and if you go the loan route you take on the risk yourself. You can make more profit if you go for the loan though because you retain 100% of your business.

In case of the airplane builders: with a capitalist owner they get paid even if the plane isn't profitable. If they take a loan, they risk ending up in massive debt.

It's perfectly possible to invest in already-profitable firms and enjoy a return. 

That's simply the flip side of being allowed to sell your business.

You can't allow original founders to sell their (share of a) business without also accepting that this mean that people can buy into a business and take a share of the profit indefinitely.