5 ms·

A someone who is broadly sympathetic to the idea of labor ownership of the means of production, could I trouble you to explain what's so obvious about the stupi

by vec 9y ago

A someone who is broadly sympathetic to the idea of labor ownership of the means of production, could I trouble you to explain what's so obvious about the stupidity of this plan? Taxes on corporate profits are generally seen as reasonable in the abstract, and they're common all over the world. I could see setting an unusually high tax rate being problematic, but that doesn't appear to be what happened. And it doesn't appear that the state was seizing anything. They were buying up shares off the public market. This doesn't seem more objectionable than any other hostile takeover. If a business owner wants to maintain control of their company then it's trivially easy for them to do so. All they have to do is not explicitly sell it, which is what an IPO is after all. And I'm having trouble seeing where the creeping socialism concerns come in. The end goal, according to the wikipedia page, was that the companies would be owned and operated by their own labor unions, which isn't an uncommon or inherently controversial corporate governance model. The state appears to have merely been facilitating the transfer. With perfect hindsight we can of course see that it didn't work out, but I doubt I would have been able to predict that in advance with any confidence. Would this have been fine if the state used a different taxing model? Would it have been okay if the labor unions managed to do it of their own initiative? Is it that broadening ownership of a corporation is inherently objectionable for some reason? What am I missing?

JoeAltmaier 9y ago
Labor running the company? This fails more often than it succeeds. Bread and circuses are the result, then bankruptcy. Indeed obvious without the use of hindsight.
- vanderZwan 9y ago
  > Bread and circuses are the result I'm not interested in debating the merits or lack thereof of socialism as a system of government, but the "bread and circuses" thing applied to Roman citizens. Unless I was misinformed, the overlap between the people in the Roman empire who were citizens and the people in the Roman empire who were the labour force was very, very small.
  - JoeAltmaier 9y ago
    You get it; pedantry is pointless here. The folks benefitting from a thing will vote themselves money and perks until the place is bankrupt. It takes a different mindset to sign the front of the check, than to sign the back of the check.
    - bomb199 9y ago
      >The folks benefitting from a thing will vote themselves money and perks until the place is bankrupt So, executive boards of companies?
      - pessimizer 9y ago
        Exactly. I tend to criticize plans like this because of their essential similarities to current arrangements, not their differences. The positive aspect is that it introduces democracy into the system (through control by officeholders), if only for the moment that it takes for power to recentralize (as any autonomy that the business has is lost due to patronage appointments from the central government or larger unions.) Maybe this could be prevented by handing control to the union of the workers in a particular company, or a particular location, rather than large unions that cover entire industries.
- namlem 9y ago
  There are lots of successful co-ops though.
  - dllthomas 9y ago
    To be fair, bread is the result of employee ownership of Arizmendi bakeries. I don't see how that's a problem, though.
- larkost 9y ago
  Do you have citations to back that up? A quick search turned up a couple of hits (one old, one relatively recent) that both said that Employee owned businesses performed reasonably well. Certainly not conclusive, but a first stab. https://www.forbes.com/sites/darrendahl/2016/07/19/are-employee-owned-companies-the-best-investment-around/#710c5c0750be https://www.forbes.com/sites/darrendahl/2016/07/19/are-emplo... https://hbr.org/1987/09/how-well-is-employee-ownership-working https://hbr.org/1987/09/how-well-is-employee-ownership-worki...
  - JoeAltmaier 9y ago
    Employee-owned is very different from employee-managed. I recall VW put a single member of labor on their board; it broke the company as other members courted the vote of the uninformed labor rep, giving up perks until labor costs were bankrupting the place. Companies operating in a competitive environment have to be pretty efficient. Optimizing a company for employee benefits is pretty much at odds with that. I know, they will all be more loyal etc. But that's different from lowering product cost and controlling profit margins. You fail to make payroll even one week, the game's over.
    - pessimizer 9y ago
      An anecdotal characterization of the members of a board catering to a single representative of labor on that board isn't a model for what employee managed companies look like. Of course, since labor representation on boards is widespread in Germany, most medium to large German businesses are a good example. I assume the German economy is in tatters. https://en.wikipedia.org/wiki/Codetermination_in_Germany https://en.wikipedia.org/wiki/Codetermination_in_Germany
      - JoeAltmaier 9y ago
        Forgive me for my ignorance. Lets consider what happens when the workers run the company, not when they have some small input. Experienced management is crucial to correct operation. They folks in the mail room, the factory floor, the loading dock are perhaps not going to have the same motivations as someone trained and charged with deciding the future direction of the business? If we presuppose educated and trained labor members who are used in management, well then I guess we have that now? In every company everywhere.
- pseudonom- 9y ago
  This doesn't seem like an accurate assessment: "He finds that codetermination laws are negatively associated with productivity, but profit sharing, worker ownership, and worker participation in decision making are all positively associated with productivity." ---http://library.uniteddiversity.coop/Money_and_Economics/Cooperatives/Worker_Participation_and_Productivity-Meta_Analysis.pdf http://library.uniteddiversity.coop/Money_and_Economics/Coop... "The positive effects are found most uniformly with respect to profit sharing and, to a slightly lesser extent, individual capital (share) ownership and participation in decision-making by workers." ---https://www.sciencedirect.com/science/article/pii/0147596787900400 https://www.sciencedirect.com/science/article/pii/0147596787...
leetcrew 9y ago
> Taxes on corporate profits are generally seen as reasonable in the abstract actually corporate taxes are a pretty controversial topic among economists. it's not considered to be a particularly efficient tax, and it is unclear who ultimately bears the burden of the tax.
- ptaipale 9y ago
  For seeking more information, the keyword is "tax incidence". A starter in Wikipedia: https://en.wikipedia.org/wiki/Tax_incidence https://en.wikipedia.org/wiki/Tax_incidence
thinkloop 9y ago
You're right, not so obvious. I wonder if the guarantee of a hostile takeover is the issue. When companies IPO, they don't expect immediate and systematic attempts of hostile takeover funded by your own money (tax dollars) through the most powerful organization in the area. I wonder if the companies could have pulled a Zuck and kept full control regardless of ownership. But you're right, still not so clear why they would run for the exits, unless the tax to do this was prohibitively high.
garmaine 9y ago
This scheme is backdoor nationalization. OF COURSE the company would flee the country to prevent it.
- vkou 9y ago
  If you don't want to lose control of your company, don't issue public stock. Once you do, and it is bought by someone else, it's not your company anymore. Why does it matter if it was bought by Berkshire-Hathaway, Vanguard, or by the government of Sweeden?
  - garmaine 9y ago
    That's missing the point...
    - vkou 9y ago
      That's because the point seems ideological, without any backing in reason. Why is a government buying a majority of a company's shares on the public markets bad? Why is one man, or an investment firm buying a majority of shares of a company any better? An attack on this is an attack on the concept of public markets. 'Public markets' does a lot of work in this claim. There's an obvious difference between shotgun nationalization, and a hostile stock takeover. It's the difference between armed robbery of a grocery store, and buying a loaf of bread at posted prices. This seems to be a common reaction when market proponents see their own system used against them. (See also: collective baragining on the side of employees vs collective bargaining on the side of management. For some reason, one is bad, but the other one is just the way things are. Management bargains collectively, but we have to bargain against them independently.)
      - garmaine 9y ago
        That's not what's going on here. The government is saying: "give us Xkr" and then turning around and buying shares of the company. That's a two step process, but collapse the steps together and it's the same as the government saying "give us X shares of the company," which is nationalization -- the government taking control (even fractional control) of a company by force. If nothing else, company officers and the board have an obligation to shareholders, which would would not want to see their shares diluted in that way. So no, it is not surprising that companies decided to relocate to jurisdictions that were not about to nationalize them.
dumbfounder 9y ago
It is not obviously stupid that labor running the company is a bad thing. I think it is a bad thing in most cases, but I can understand the debate. What IS stupid is thinking that companies will stick around while their control gets transferred away (from those controlling it). If a company wants to transfer control to its employees, it will do that. If a company doesn't (almost all of them) it will leave. That seems pretty darn obvious to me.
- vec 9y ago
  But didn't they already voluntarily transfer control away by issuing stock? Isn't that what stock is? The CEO doesn't own a publicly traded company, the shareholders do. And if they don't think a sale is a good idea they can just not sell their shares at the offered stock price. I'm being a bit intentionally naive, but I don't understand who the "they" is that is supposed to have a valid worry about losing control.
goty2 9y ago
It wasn't necessarily stupid. But probably ahead of its time. Today, when it is probably too late to do anything, a lot of people are talking about the risks with automation and need for basic income. And that is essentially what it was, to take the increased profits of automation and put them in a sovereign wealth fund for wider distribution without creating inflation.
fetbaffe 9y ago
Version that was introduced in 1982 was a water downed version of the original plan, the Social democrats lost an election because of the original plan in 1976 against the popular opposition leader and farmer Thorbjörn Fälldin. Fälldin broke a 40 year long social democratic rule. Fälldin described the plan as DDR style economics with the subsequent removing of personal freedoms. Original plan was to create funds to would buy up more than the majority of the stock of all major companies in Sweden, all controlled by the labour unions. That would have been de facto socialism. Why? Because the labour unions was married with the political power, the Social democrats. Biggest labour union of them all, LO, controlled Social democrats with funding and forced memberships. All political power and economic power in one entity would have been very dangerous. After controlling the major companies in Sweden, they would have of course continued with the non-public companies, because the main goal of Löntagarfonder was to create equal salaries between high profit companies and low profit companies. Taxing profits in moderation is not breach against democratic principles, but using the companies own money to take ownership over it is. Right to run your own company was established already in 1864 in Sweden. Löntagarfonder was a direct opposition to that. https://en.wikipedia.org/wiki/Decree_of_Extended_Freedom_of_Trade_(Sweden) https://en.wikipedia.org/wiki/Decree_of_Extended_Freedom_of_... There is nothing wrong with worker ownership if the workers create it by themselves, taking other peoples work is not okay.
- goty2 9y ago
  > After controlling the major companies in Sweden, they would have of course continued with the non-public companies, because the main goal of Löntagarfonder was to create equal salaries between high profit companies and low profit companies. No, that was the "solidarity in wages" policy which was already implemented. It was this policy that made successful companies make excess profits. Those profits were supposed to go to "Löntagarfonderna".
  - fetbaffe 9y ago
    Your are absolutely right, goal of löntagarfonder was increased worker control and workers do work at non-public companies as well.
- 9y ago
adrianmonk 9y ago
OK, it "doesn't seem more objectionable than any other hostile takeover". Fine, but why put up with any hostile takeover at all if you can just leave?
stale2002 9y ago
The problem with socialists policies like this is not necessarily the high taxes or the hostile takeover aspect of it. The issue is the intent. When socialists start doing stuff like this, it is clear what the long term goal is. The long term goal is to take the means of production from those who have it, though whatever politically palpable means necessary. Sure, they start off doing a voluntary stock buyout program, but what happens when that program inevitably fails? (perhaps because it takes way to long to takeover a company, or merely that the company owners refuse to sell) Will the socialists come to the conclusion that their socialist policy didn't work and reverse it? No. What happens when socialism fails is that the socialists conclude that they didn't go far ENOUGH and then they double down on their mistakes. In this situation, "doubling down" would be increasing the tax, forcing the owners to sell at a given price, and eventually straight up confiscation of the business. When people in the government start yelling about how they want to take the means of production, even voluntarily, the proper response is to run away as fast as possible, and take your means of production with you, before they make it illegal to do so.
- vec 9y ago
  Looks to me like the Swedish people did, in fact, come to the conclusion their socialist policy didn't work and reversed it via the normal political process. According to the wiki, the Social Democrats retook power three years later and didn't attempt to reintroduce it. That looks to me like pretty compelling historical evidence against the hypothesis that socialist experiments must necessarily slide down the slippery slope to full-on communism.
  - goty2 9y ago
    If anything the Nordic model and social democracy has failed not because it turned into communism, but because it only takes one government to undermine the system and privatize everything. Sweden today is liberal to the extent that it is regularly featured as an example in The Economist on how to privatize more things in the UK.
ThrustVectoring 9y ago
Corporate tax profits are pretty silly. Profits are an accounting fiction, the residue left over after paying expenses. It's far too easily controlled - add one fully-owned foreign subsidiary for paying IP licensing fees, and your domestic profits evaporate and turn into foreign ones. The taxes that do make sense are ones that are much more difficult to avoid: 1. Land-value 2. Sale of registered securities 3. Sales tax or VAT 4. Personal income tax 5. Estate tax

by vec 9y ago

JoeAltmaier 9y ago

Labor running the company? This fails more often than it succeeds. Bread and circuses are the result, then bankruptcy. Indeed obvious without the use of hindsight.

vanderZwan 9y ago
> Bread and circuses are the result I'm not interested in debating the merits or lack thereof of socialism as a system of government, but the "bread and circuses" thing applied to Roman citizens. Unless I was misinformed, the overlap between the people in the Roman empire who were citizens and the people in the Roman empire who were the labour force was very, very small.
- JoeAltmaier 9y ago
  You get it; pedantry is pointless here. The folks benefitting from a thing will vote themselves money and perks until the place is bankrupt. It takes a different mindset to sign the front of the check, than to sign the back of the check.
  - bomb199 9y ago
    >The folks benefitting from a thing will vote themselves money and perks until the place is bankrupt So, executive boards of companies?
    - pessimizer 9y ago
      Exactly. I tend to criticize plans like this because of their essential similarities to current arrangements, not their differences. The positive aspect is that it introduces democracy into the system (through control by officeholders), if only for the moment that it takes for power to recentralize (as any autonomy that the business has is lost due to patronage appointments from the central government or larger unions.) Maybe this could be prevented by handing control to the union of the workers in a particular company, or a particular location, rather than large unions that cover entire industries.
namlem 9y ago
There are lots of successful co-ops though.
- dllthomas 9y ago
  To be fair, bread is the result of employee ownership of Arizmendi bakeries. I don't see how that's a problem, though.
larkost 9y ago
Do you have citations to back that up? A quick search turned up a couple of hits (one old, one relatively recent) that both said that Employee owned businesses performed reasonably well. Certainly not conclusive, but a first stab. https://www.forbes.com/sites/darrendahl/2016/07/19/are-employee-owned-companies-the-best-investment-around/#710c5c0750be https://www.forbes.com/sites/darrendahl/2016/07/19/are-emplo... https://hbr.org/1987/09/how-well-is-employee-ownership-working https://hbr.org/1987/09/how-well-is-employee-ownership-worki...
- JoeAltmaier 9y ago
  Employee-owned is very different from employee-managed. I recall VW put a single member of labor on their board; it broke the company as other members courted the vote of the uninformed labor rep, giving up perks until labor costs were bankrupting the place. Companies operating in a competitive environment have to be pretty efficient. Optimizing a company for employee benefits is pretty much at odds with that. I know, they will all be more loyal etc. But that's different from lowering product cost and controlling profit margins. You fail to make payroll even one week, the game's over.
  - pessimizer 9y ago
    An anecdotal characterization of the members of a board catering to a single representative of labor on that board isn't a model for what employee managed companies look like. Of course, since labor representation on boards is widespread in Germany, most medium to large German businesses are a good example. I assume the German economy is in tatters. https://en.wikipedia.org/wiki/Codetermination_in_Germany https://en.wikipedia.org/wiki/Codetermination_in_Germany
    - JoeAltmaier 9y ago
      Forgive me for my ignorance. Lets consider what happens when the workers run the company, not when they have some small input. Experienced management is crucial to correct operation. They folks in the mail room, the factory floor, the loading dock are perhaps not going to have the same motivations as someone trained and charged with deciding the future direction of the business? If we presuppose educated and trained labor members who are used in management, well then I guess we have that now? In every company everywhere.
pseudonom- 9y ago
This doesn't seem like an accurate assessment: "He finds that codetermination laws are negatively associated with productivity, but profit sharing, worker ownership, and worker participation in decision making are all positively associated with productivity." ---http://library.uniteddiversity.coop/Money_and_Economics/Cooperatives/Worker_Participation_and_Productivity-Meta_Analysis.pdf http://library.uniteddiversity.coop/Money_and_Economics/Coop... "The positive effects are found most uniformly with respect to profit sharing and, to a slightly lesser extent, individual capital (share) ownership and participation in decision-making by workers." ---https://www.sciencedirect.com/science/article/pii/0147596787900400 https://www.sciencedirect.com/science/article/pii/0147596787...

leetcrew 9y ago

> Taxes on corporate profits are generally seen as reasonable in the abstract actually corporate taxes are a pretty controversial topic among economists. it's not considered to be a particularly efficient tax, and it is unclear who ultimately bears the burden of the tax.

ptaipale 9y ago
For seeking more information, the keyword is "tax incidence". A starter in Wikipedia: https://en.wikipedia.org/wiki/Tax_incidence https://en.wikipedia.org/wiki/Tax_incidence

thinkloop 9y ago

You're right, not so obvious. I wonder if the guarantee of a hostile takeover is the issue. When companies IPO, they don't expect immediate and systematic attempts of hostile takeover funded by your own money (tax dollars) through the most powerful organization in the area. I wonder if the companies could have pulled a Zuck and kept full control regardless of ownership. But you're right, still not so clear why they would run for the exits, unless the tax to do this was prohibitively high.

garmaine 9y ago

This scheme is backdoor nationalization. OF COURSE the company would flee the country to prevent it.

vkou 9y ago
If you don't want to lose control of your company, don't issue public stock. Once you do, and it is bought by someone else, it's not your company anymore. Why does it matter if it was bought by Berkshire-Hathaway, Vanguard, or by the government of Sweeden?
- garmaine 9y ago
  That's missing the point...
  - vkou 9y ago
    That's because the point seems ideological, without any backing in reason. Why is a government buying a majority of a company's shares on the public markets bad? Why is one man, or an investment firm buying a majority of shares of a company any better? An attack on this is an attack on the concept of public markets. 'Public markets' does a lot of work in this claim. There's an obvious difference between shotgun nationalization, and a hostile stock takeover. It's the difference between armed robbery of a grocery store, and buying a loaf of bread at posted prices. This seems to be a common reaction when market proponents see their own system used against them. (See also: collective baragining on the side of employees vs collective bargaining on the side of management. For some reason, one is bad, but the other one is just the way things are. Management bargains collectively, but we have to bargain against them independently.)
    - garmaine 9y ago
      That's not what's going on here. The government is saying: "give us Xkr" and then turning around and buying shares of the company. That's a two step process, but collapse the steps together and it's the same as the government saying "give us X shares of the company," which is nationalization -- the government taking control (even fractional control) of a company by force. If nothing else, company officers and the board have an obligation to shareholders, which would would not want to see their shares diluted in that way. So no, it is not surprising that companies decided to relocate to jurisdictions that were not about to nationalize them.

dumbfounder 9y ago

It is not obviously stupid that labor running the company is a bad thing. I think it is a bad thing in most cases, but I can understand the debate. What IS stupid is thinking that companies will stick around while their control gets transferred away (from those controlling it). If a company wants to transfer control to its employees, it will do that. If a company doesn't (almost all of them) it will leave. That seems pretty darn obvious to me.

vec 9y ago
But didn't they already voluntarily transfer control away by issuing stock? Isn't that what stock is? The CEO doesn't own a publicly traded company, the shareholders do. And if they don't think a sale is a good idea they can just not sell their shares at the offered stock price. I'm being a bit intentionally naive, but I don't understand who the "they" is that is supposed to have a valid worry about losing control.

goty2 9y ago

It wasn't necessarily stupid. But probably ahead of its time. Today, when it is probably too late to do anything, a lot of people are talking about the risks with automation and need for basic income. And that is essentially what it was, to take the increased profits of automation and put them in a sovereign wealth fund for wider distribution without creating inflation.

fetbaffe 9y ago

Version that was introduced in 1982 was a water downed version of the original plan, the Social democrats lost an election because of the original plan in 1976 against the popular opposition leader and farmer Thorbjörn Fälldin. Fälldin broke a 40 year long social democratic rule. Fälldin described the plan as DDR style economics with the subsequent removing of personal freedoms. Original plan was to create funds to would buy up more than the majority of the stock of all major companies in Sweden, all controlled by the labour unions. That would have been de facto socialism. Why? Because the labour unions was married with the political power, the Social democrats. Biggest labour union of them all, LO, controlled Social democrats with funding and forced memberships. All political power and economic power in one entity would have been very dangerous. After controlling the major companies in Sweden, they would have of course continued with the non-public companies, because the main goal of Löntagarfonder was to create equal salaries between high profit companies and low profit companies. Taxing profits in moderation is not breach against democratic principles, but using the companies own money to take ownership over it is. Right to run your own company was established already in 1864 in Sweden. Löntagarfonder was a direct opposition to that. https://en.wikipedia.org/wiki/Decree_of_Extended_Freedom_of_Trade_(Sweden) https://en.wikipedia.org/wiki/Decree_of_Extended_Freedom_of_... There is nothing wrong with worker ownership if the workers create it by themselves, taking other peoples work is not okay.

goty2 9y ago
> After controlling the major companies in Sweden, they would have of course continued with the non-public companies, because the main goal of Löntagarfonder was to create equal salaries between high profit companies and low profit companies. No, that was the "solidarity in wages" policy which was already implemented. It was this policy that made successful companies make excess profits. Those profits were supposed to go to "Löntagarfonderna".
- fetbaffe 9y ago
  Your are absolutely right, goal of löntagarfonder was increased worker control and workers do work at non-public companies as well.
9y ago

adrianmonk 9y ago

OK, it "doesn't seem more objectionable than any other hostile takeover". Fine, but why put up with any hostile takeover at all if you can just leave?

stale2002 9y ago

The problem with socialists policies like this is not necessarily the high taxes or the hostile takeover aspect of it. The issue is the intent. When socialists start doing stuff like this, it is clear what the long term goal is. The long term goal is to take the means of production from those who have it, though whatever politically palpable means necessary. Sure, they start off doing a voluntary stock buyout program, but what happens when that program inevitably fails? (perhaps because it takes way to long to takeover a company, or merely that the company owners refuse to sell) Will the socialists come to the conclusion that their socialist policy didn't work and reverse it? No. What happens when socialism fails is that the socialists conclude that they didn't go far ENOUGH and then they double down on their mistakes. In this situation, "doubling down" would be increasing the tax, forcing the owners to sell at a given price, and eventually straight up confiscation of the business. When people in the government start yelling about how they want to take the means of production, even voluntarily, the proper response is to run away as fast as possible, and take your means of production with you, before they make it illegal to do so.

vec 9y ago
Looks to me like the Swedish people did, in fact, come to the conclusion their socialist policy didn't work and reversed it via the normal political process. According to the wiki, the Social Democrats retook power three years later and didn't attempt to reintroduce it. That looks to me like pretty compelling historical evidence against the hypothesis that socialist experiments must necessarily slide down the slippery slope to full-on communism.
- goty2 9y ago
  If anything the Nordic model and social democracy has failed not because it turned into communism, but because it only takes one government to undermine the system and privatize everything. Sweden today is liberal to the extent that it is regularly featured as an example in The Economist on how to privatize more things in the UK.

ThrustVectoring 9y ago

Corporate tax profits are pretty silly. Profits are an accounting fiction, the residue left over after paying expenses. It's far too easily controlled - add one fully-owned foreign subsidiary for paying IP licensing fees, and your domestic profits evaporate and turn into foreign ones. The taxes that do make sense are ones that are much more difficult to avoid: 1. Land-value 2. Sale of registered securities 3. Sales tax or VAT 4. Personal income tax 5. Estate tax