A Definition & Some History
In a comment to my posting, “Economic Democracy: The Basics”, a reader stated that he thought private financing was a basic feature of market economies. I wrote in my reply that I would later post details as to why that assumption is wrong.
A definition is necessary. By “market economy” I mean an economy where goods and services are provided via a market exchange rather than either communal sharing or State distribution.
Market economies were around long before capitalism.
All the way back to ancient Rome there were merchants (Mercatores) as well as markets, such as the famous Forum. It was primarily through these markets and from these merchants that Romans acquired their goods using Imperial coinage for money. But this market economy didn’t operate based on private investment. Though there were financiers (Negotiators) the Roman economy was based on slaves who provided largely agricultural labor, upon trade with other cultures, and on draining the conquered people of their resources.
During the Middle Ages there were also market economies. Goods were sold in the markets of the towns and villages as well as at the annual Fairs. Yet the economy of the Middle Ages wasn’t based on private investment as we know it but largely upon tribute paid vertically between classes and individuals, which were decided by inherited property and social ranking (fief).
In capitalism goods and services are still sold via the market but now there is also a financial market in which shares of economic ownership are bought and sold (i.e. private investment). This financial market dominates capitalism in the way slavery dominated Rome and fief dominated the Middle Ages. Due to its central role in capitalism it gives the appearance that it is the defining feature of market economies. It is upon a closer look that one find’s that it’s clearly not.
While private investment is an essential feature of capitalism it is not an essential feature of market economies.
Coming Soon: Past, Present, and Future Markets
4 comments:
This is true, but it is a good way to make money available for companies. And it also acts to distribute ownership of companies across the population. In that sense, investment allows for a more democratic ownership of the means of production.
Thanks for your comments dr.t.
You're right that private investment pumps a great amount of money into the system. I don’t disagree with you on that. But of course, that doesn't mean there aren't better alternatives, which I plan to explore in future postings.
Also, you’re right that in theory the financial markets are supposed to make it possible for anyone to own some part of the means of production or, to use the term loosely, “democratic ownership”. Yet, when one looks at the reality one finds that ownership is very limited. For example, as of 2001 those households with the top ten percent of net worth owned an enormous eighty five to ninety percent of the marketable wealth (stocks, bonds, trust funds, and business equity).
Again, thank you for your comments.
Perhaps unions need to do more to make sure that their members get stocks in the companies in which they work. Also, almost everyone with a 401K owns stock. Even I own stock (and I'm currently between jobs). Yes, there area few who own much more stock than the rest. One would expect that. But if we want to democratize more, unions need to insist on stock options for their members. We just have to be careful of the next Enron is all.
That’s an excellent idea, Dr. T. In fact, such a plan was proposed by the Swedish unions and socialists in the 1970’s. They wanted to set up “wage-earner funds” that would require some of the profits of corporations to be used to buy up stocks that would be owned by the individual workers. The idea was that over time the workers would gradually acquire enough shares so as obtain control of the corporations. But of course the capitalists killed it and it never happened.
The problem with ESOPs are that while they do receive a small amount of the dividends, which are already legitimately theirs just from their labor, the workers just don't have sufficient amount of stocks to have controlling shares.
Thanks for your comments, Dr. T.
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