Bernie Wants You to Own More of the Means of Production

Source: Jacobin 10.14.2019  Bernie Wants You to Own More of the Means of Production

Bernie Sanders released a proposal today that would gradually shift 20 percent of corporate equity into funds owned and controlled by the workers in each company. The plan, which would apply to all publicly-traded companies and large closely-held companies, would move 2 percent of corporate stock into worker funds each year for a decade. Once the shares are transferred into the funds, workers would begin receiving dividends and have the ability to exercise the voting rights of the shares, including the right to vote on corporate board elections and on shareholder resolutions.

Sanders’s plan is by far the most radical worker ownership proposal put forward by a presidential candidate in recent memory. By last count, the market value of publicly-traded domestic companies stood at $35.6 trillion. This means that the Sanders plan would shift at least $7.1 trillion of corporate equity into worker funds by gradually diluting the value of previously-issued corporate stock.

Those who stand to “lose” from the proposal are the incumbent owners of corporate equity, which are overwhelmingly affluent people. At present, the top 10 percent of families own around 86.4 percent of corporate equities and mutual fund shares, with the top one percent owning 52 percent by themselves. Closely-held businesses, which will also be affected by the scheme if they are large enough, have similarly concentrated ownership, with the top 10 percent of families owning 87.5 percent of private business equity and the top one percent of families owning 57.5 percent of it.

Of course, these incumbent owners will not actually lose anything in an absolute sense. The average historical return of the US stock market has been 9.8 percent per year, while the average return of the last 10 years has been just over 13 percent. The effect of the two percent share issuances is to knock the total rate of return down by two percentage points, meaning that incumbent owners still get richer year-over-year, just less so than they would absent the Sanders plan.

The Sanders proposal largely mirrors an idea first presented by Mathew Lawrence that was recently adopted by Jeremy Corbyn and the UK Labour Party. In the Labour Party version of the plan, large UK corporations are required to transfer one percent of corporate equity into “Inclusive Ownership Funds” (IOFs) for ten years, which would effectively shift 10 percent of corporate equity into worker funds. As in Sanders’s plan, UK workers would receive dividends from the IOFs and exercise the voting rights of the equity owned by the funds.

Both the Sanders and Corbyn plans are rooted in a longer market socialist tradition most commonly associated with the Swedish labor movement and Swedish labor economist Rudolf Meidner. Meidner’s 1978 book laid out a plan that would have used similar share issuances (often called “share levies” or “scrip taxes”) to gradually bring Swedish corporations under the ownership of sector funds controlled by unions and communities. A policy based on Meidner’s plan was successfully implemented in the 1980s but the unrelated electoral defeat of the Swedish Social Democratic Party in the 1991 elections caused the policy to be scrapped before reaching its full potential.

Labour’s economic policies: can socialists support them? – from here to there

This blog presents a view of what socialism would be like by explaining how capitalism works. Ian Wright is British and his examples focus on Britain, but thinking about capitalism and socialism is international. You may not agree with this analysis, but you will be stimulated by it. JEB

Criteria for judgement

To judge the 2017 [Labour Party] manifesto we first should reflect on what it means for a economic policy to be essentially pro-socialist or pro-capitalist.

In theory, the crucial difference between these two political ideologies can be reduced to something extremely simple.

Socialists oppose capitalist exploitation, which occurs when production is organised in firms that have two classes of members: those that own it — and take profit — and those that work for it — and take a wage. Capitalist property rights allow the owners to distribute the firm’s profit to themselves regardless of whether they supply any capital or labour to production.

Yes, owners typically supply initial capital to get businesses started. But initial investments are always eventually paid off, if firms are viable.

And yes, owners may continue to supply their labour in management roles. But supplying labour need only be compensated by a wage, not profit.

The crucial point is that capitalist owners take profits merely in virtue of paper ownership (i.e. by fiat encoded in legal property rights). We can see this especially clearly where firms are entirely profitable and self-financing with absentee owners who extract profits.

But, as we all know, profit is created by actually doing some work, not by simply owning. The very same firm output, which gets sold in the market for a profit, could be produced without the input of capitalist owners and without compensating them.

So capitalists get something for nothing. They get profit for contributing zero to production. And an important consequence of this social fact is that a worker’s wage is never a fair exchange for the value they create.

In summary, under capitalist property rights, workers make, while capitalists take.

Source: Labour’s economic policies: can socialists support them? – from here to there