- 18 Feb 2013 12:14
#14175860
The institutions of capitalism are merely those of private property and voluntary interaction. As such, capitalism (as a system) merely allows private ownership of the means of production - it doesn't require it.
As a voluntary system it allows people to trade at arms-length from each other. People are still free to exchange gifts, but, in order for them to fully enjoy the efficiency of large-scale economic cooperation, and given human nature, arms-length trading is very common (though not universal).
As a voluntary system with protected property rights, it allows private ownership of the means of production, but certainly doesn't require it. Co-ops and sole proprietorships are possible and, indeed, exist, though not as commonly as ordinary corporations.
Going back to capital, it is nothing but savings invested in productive enterprises. The savings could have been spent on consumption goods. That would have been perfectly legitimate. But by investing their savings in productive enterprises, savers are helping all other members of society, by making longer (but more efficient) production processes possible.
In a free market (i.e. a voluntary society), the various factors of production (land, labour and capital) are bid by entrepreneurs competing to produce products with the hope and expectation that consumers will favour them. The relative price of land, labour and capital depends on the degree to which they contribute to the production process, as well as their relative scarcity.
Capital is one of the three legs. It isn't inherently privileged in the capitalist system, but neither is it inherently suppressed.
When left-leaning people talk about capitalists, they seem to confuse three separate functions which may or may not coincide in the same person:
1. A saver who wishes to invest his savings in a productive process
2. An entrepreneur who identifies and attempts to exploit inefficiencies in the market
3. A manager who directs the day-to-day labour of employees
The classic capitalist combines all three. But in modern society, such concurrence isn't dominant. In fact, it primarily exists in relatively small businesses. More commonly, the three functions combine as follows:
1. Savings are routed towards productive enterprises through financial intermediaries such as banks, hedge funds, private equity funds, venture capital funds, pension funds and mutual funds. Neither the original saver nor (in most cases) even the consolidator plays a significant role in directing the enterprise. In many cases, capital is injected as a debt (rather than equity), and the capital owner plays no role unless and until bankruptcy ensues. The ultimate savers/capitalists are often workers themselves.
2. Entrepreneurship is present at all levels of production, but is most obvious when a business is first brought into existence. The entrepreneur is also the founder of the business. He may or may not provide some of the start-up capital, and while typically playing an important initial role in management, often takes a back-seat later as the company matures. The founder typically retains some equity in the firm, and as such is a part capitalist, but most capital comes from the outside. In many cases, the entrepreneur is a former worker himself.
3. Managerial responsibilities are typically filled by hired hands. Managers at all levels may exhibit some entrepreneurial behaviour, though they are often restricted to mere bureaucratic "follow the rules" function. Senior managers may retain or be awarded some equity, and thus become part capitalists. Lower-level managers are often recently-promoted workers.
I am not sure how the Marxist narrative fits this
"Capital" doesn't seek consumers. Capital is merely savings invested in a productive enterprise. Productive enterprises, however funded, often indeed seek consumers. In fact, that process (whereby productive enterprises seek consumers) is illustrative of the power of the latter. They have to be sought/tempted/persuaded by businesses. They have the power.
anticlimacus wrote:Capitalism is a socio-economic system within which the means of production are privitized for the creation of profit and which is generated by capital accumulation.
The institutions of capitalism are merely those of private property and voluntary interaction. As such, capitalism (as a system) merely allows private ownership of the means of production - it doesn't require it.
As a voluntary system it allows people to trade at arms-length from each other. People are still free to exchange gifts, but, in order for them to fully enjoy the efficiency of large-scale economic cooperation, and given human nature, arms-length trading is very common (though not universal).
As a voluntary system with protected property rights, it allows private ownership of the means of production, but certainly doesn't require it. Co-ops and sole proprietorships are possible and, indeed, exist, though not as commonly as ordinary corporations.
Going back to capital, it is nothing but savings invested in productive enterprises. The savings could have been spent on consumption goods. That would have been perfectly legitimate. But by investing their savings in productive enterprises, savers are helping all other members of society, by making longer (but more efficient) production processes possible.
In a free market (i.e. a voluntary society), the various factors of production (land, labour and capital) are bid by entrepreneurs competing to produce products with the hope and expectation that consumers will favour them. The relative price of land, labour and capital depends on the degree to which they contribute to the production process, as well as their relative scarcity.
Capital is one of the three legs. It isn't inherently privileged in the capitalist system, but neither is it inherently suppressed.
When left-leaning people talk about capitalists, they seem to confuse three separate functions which may or may not coincide in the same person:
1. A saver who wishes to invest his savings in a productive process
2. An entrepreneur who identifies and attempts to exploit inefficiencies in the market
3. A manager who directs the day-to-day labour of employees
The classic capitalist combines all three. But in modern society, such concurrence isn't dominant. In fact, it primarily exists in relatively small businesses. More commonly, the three functions combine as follows:
1. Savings are routed towards productive enterprises through financial intermediaries such as banks, hedge funds, private equity funds, venture capital funds, pension funds and mutual funds. Neither the original saver nor (in most cases) even the consolidator plays a significant role in directing the enterprise. In many cases, capital is injected as a debt (rather than equity), and the capital owner plays no role unless and until bankruptcy ensues. The ultimate savers/capitalists are often workers themselves.
2. Entrepreneurship is present at all levels of production, but is most obvious when a business is first brought into existence. The entrepreneur is also the founder of the business. He may or may not provide some of the start-up capital, and while typically playing an important initial role in management, often takes a back-seat later as the company matures. The founder typically retains some equity in the firm, and as such is a part capitalist, but most capital comes from the outside. In many cases, the entrepreneur is a former worker himself.
3. Managerial responsibilities are typically filled by hired hands. Managers at all levels may exhibit some entrepreneurial behaviour, though they are often restricted to mere bureaucratic "follow the rules" function. Senior managers may retain or be awarded some equity, and thus become part capitalists. Lower-level managers are often recently-promoted workers.
I am not sure how the Marxist narrative fits this
As if capital never seeks consumers!?
"Capital" doesn't seek consumers. Capital is merely savings invested in a productive enterprise. Productive enterprises, however funded, often indeed seek consumers. In fact, that process (whereby productive enterprises seek consumers) is illustrative of the power of the latter. They have to be sought/tempted/persuaded by businesses. They have the power.
Free men are not equal and equal men are not free.
Government is not the solution. Government is the problem.
Government is not the solution. Government is the problem.