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How can all companies be employee owned if you need to invest a lot of capital to start a car factory. Half of the fortune 500 companies are younger then 10 yea

How can all companies be employee owned if you need to invest a lot of capital to start a car factory. Half of the fortune 500 companies are younger then 10 years - starting a company has a high risk on the invested capital. A company is owned by whomever is risking their money to finance it. How is capitalism different from early human tribes? They also needed to work and trade. Things have become much more sophisticated but the basic principles remain. People complain about spending too much time for a company and slaving away - but in earlier times they would have spend way more time on the fields plowing while 4 of their 8 kids died.

dragonwriter 9y ago
> How can all companies be employee owned if you need to invest a lot of capital to start a car factory. Equity isn't the only form of capital investment. > How is capitalism different from early human tribes? Well, lots of ways, including the thing that actually defines capitalism, the particular model of property rights. > They also needed to work and trade. Which is broadly true of every human society, regardless of politico-economic system; such systems differ in the (for instance) distribution of the accumulated benefits of trade, not in it's practical necessity. > Things have become much more sophisticated but the basic principles remain. The basic principles that remain the same are not the features that distinguish politico-economic systems from each other. > People complain about spending too much time for a company and slaving away - but in earlier times they would have spend way more time on the fields plowing while 4 of their 8 kids died. Yes, technology has improved since ancient times, and, in the domain of politico-economic systems even most critics of capitalism would agree that it represents positive progress from feudalism and other earlier politico-economic sysyems.
- dalbasal 9y ago
  An interesting (probably leads nowhere) way of defining this question is in reverse, how would a company that is to be owned by employees going to get started? It's an easier question to answer these days, when many companies are like Google or Facebook. They don't really have "capital assets." No stock to buy or factories to build. Just people that need to pay rent.
- Treegarden 9y ago
  > Equity isn't the only form of capital investment. Someone has to pay for the fixed costs. And its most common that an investor does that. Never said it has to be that way, just that it is common and offers many advantages. > Well, lots of ways, including the thing that actually defines capitalism, the particular model of property rights. Property rights are just an extension to help the underlying basics I wrote about. If you are a tribe you might life in balance with other tribes and you have control over a river (or whatever) and you might even give something comparable to property right to a member of your tribe. But this is all enforced by society. Property rights are the same thing, just more formalized and generalized. Ofc. there is more insecurity in a autocracy, but that because an autocracy is about exploiting others.
  - dragonwriter 9y ago
    > Someone has to pay for the fixed costs. And its most common that an investor does that. Yes, and, again, equity isn't the only form of investment even within the capitalist system (though, obviously, it's often structurally preferred by investors within that system.) So, even granting, for the sake of argument, the need for capital investment to start firms, that does not imply a need for capital, as opposed to labor, ownership of firms. (See, for a large example even embedded within a capitalist economy, the Mondragon Corporation.) > Property rights are just an extension to help the underlying basics That's certainly one of the reasons for formalizing such rights, but “property rights” aren't a special feature of capitalism, what defines capitalism—and this is generally true of each other politico-economic system—is a particular model of property rights. And, yes, in each case they are viewed by defenders of the system to “help” the immutable basic needs of human society.
dalbasal 9y ago
how can all companies be employee owned? Is this rhetorical? I didn't say they could (or couldn't be). If you mean it in a curious way than let's start with 'how can a company...' How is capitalism different from early human tribes? It depends on which capitalism you mean, Marx's or Milton Friedman's. Also which tribe. If early human tribes were like modern ones, they had a lot of different ways of doing things.:) For marx, you could probably stop at "they don't live in cities or work for wages" like they do in capitalist systems. For Friedman's capitalism, they tribesmens affairs are probably dictated by customs and communal nterests, not private interests. Idk, though. It's theoretically possible for ancient human culture to be capitalist under Friedman's definition, if their rules are compatible. Under Marx's it doesn't matter what they do, capitalism is an urban-industrial society.
- Treegarden 9y ago
  My point was more that the basic characteristics of our modern economy (our modern economy = capitalism) also apply to early human societies. Working a profession, cooperating with colleagues and trading goods are inherent human nature. Even if you are a hunter-gather. I wasn't referring to specific theories. My point was more about observing how the world is.
  - dalbasal 9y ago
    Sure. What's universal is universal. But what's the point of defining something as capitalist (or anything) if it applies to every case. Characteristics of capitalism (let's go with the Marxist definition) certainly aren't universal. Not every human economy includes private property, for example. Not every system include a bourgiouse elite, a customary, religious or military elite is more common historicaly.
Avshalom 9y ago
>>How can all companies be employee owned if you need to invest a lot of capital to start a car factory. You go to a bank (or credit union in this instance) with a compelling business plan and a history of success and get a loan. If the company at some point can't make the payments they declare bankruptcy, the company dissolves and the credit union takes ownership of the company's assets (or what ever was used as collateral) which it then sells off. Same as real estate deals the people who take the loan legally own the property unless they fail to pay off the loan, then and only then does the property change hands to the loaner.
- dalbasal 9y ago
  Interesting point, considering a lot of modern finance, where there is often very little investor "risk capital" in the sense implied by the OP. A lot of large infrastructure projects, for example, are funded by loans with very little (or none) equity capital. Risk is borne by the firm, its lenders, or the state. The "owners" are basically they guys who get the deals made. I have no idea if employee-owned companies will be any good. There were examples (eg Egged) in the past that didn't work well. But it's curious to see them taken as an impossibility for reasons like this, that they don't fit inside of a textbook free market example, with all incentives perfectly aligned. Half the companies in the world weren't started this way. How did Russian oligarchs buy all those state companies? Leveraged buyouts. IE, the banks (does this count as the state?) gave them money to buy (or start) them. The more interesting questions are around management. How does an employee owned company work well? Answer that with confidence, and I think everything else is solvable.
  - Avshalom 9y ago
    I don't actually think "how" is even a question at this point. If you poke around wikipedia's (clearly incomplete) list of cooperatives and employee-owned* companies the answer is/has-always-been pretty clearly: just like any other form of company works. *coops however aren't necessarily employee owned-- there's a several models-- and ESOP style employee ownership can be pretty weak from an ownership perspective so in addition to being woefully incomplete the lists should also not be taken at face value.

dragonwriter 9y ago

> How can all companies be employee owned if you need to invest a lot of capital to start a car factory. Equity isn't the only form of capital investment. > How is capitalism different from early human tribes? Well, lots of ways, including the thing that actually defines capitalism, the particular model of property rights. > They also needed to work and trade. Which is broadly true of every human society, regardless of politico-economic system; such systems differ in the (for instance) distribution of the accumulated benefits of trade, not in it's practical necessity. > Things have become much more sophisticated but the basic principles remain. The basic principles that remain the same are not the features that distinguish politico-economic systems from each other. > People complain about spending too much time for a company and slaving away - but in earlier times they would have spend way more time on the fields plowing while 4 of their 8 kids died. Yes, technology has improved since ancient times, and, in the domain of politico-economic systems even most critics of capitalism would agree that it represents positive progress from feudalism and other earlier politico-economic sysyems.

dalbasal 9y ago
An interesting (probably leads nowhere) way of defining this question is in reverse, how would a company that is to be owned by employees going to get started? It's an easier question to answer these days, when many companies are like Google or Facebook. They don't really have "capital assets." No stock to buy or factories to build. Just people that need to pay rent.
Treegarden 9y ago
> Equity isn't the only form of capital investment. Someone has to pay for the fixed costs. And its most common that an investor does that. Never said it has to be that way, just that it is common and offers many advantages. > Well, lots of ways, including the thing that actually defines capitalism, the particular model of property rights. Property rights are just an extension to help the underlying basics I wrote about. If you are a tribe you might life in balance with other tribes and you have control over a river (or whatever) and you might even give something comparable to property right to a member of your tribe. But this is all enforced by society. Property rights are the same thing, just more formalized and generalized. Ofc. there is more insecurity in a autocracy, but that because an autocracy is about exploiting others.
- dragonwriter 9y ago
  > Someone has to pay for the fixed costs. And its most common that an investor does that. Yes, and, again, equity isn't the only form of investment even within the capitalist system (though, obviously, it's often structurally preferred by investors within that system.) So, even granting, for the sake of argument, the need for capital investment to start firms, that does not imply a need for capital, as opposed to labor, ownership of firms. (See, for a large example even embedded within a capitalist economy, the Mondragon Corporation.) > Property rights are just an extension to help the underlying basics That's certainly one of the reasons for formalizing such rights, but “property rights” aren't a special feature of capitalism, what defines capitalism—and this is generally true of each other politico-economic system—is a particular model of property rights. And, yes, in each case they are viewed by defenders of the system to “help” the immutable basic needs of human society.

dalbasal 9y ago

how can all companies be employee owned? Is this rhetorical? I didn't say they could (or couldn't be). If you mean it in a curious way than let's start with 'how can a company...' How is capitalism different from early human tribes? It depends on which capitalism you mean, Marx's or Milton Friedman's. Also which tribe. If early human tribes were like modern ones, they had a lot of different ways of doing things.:) For marx, you could probably stop at "they don't live in cities or work for wages" like they do in capitalist systems. For Friedman's capitalism, they tribesmens affairs are probably dictated by customs and communal nterests, not private interests. Idk, though. It's theoretically possible for ancient human culture to be capitalist under Friedman's definition, if their rules are compatible. Under Marx's it doesn't matter what they do, capitalism is an urban-industrial society.

Treegarden 9y ago
My point was more that the basic characteristics of our modern economy (our modern economy = capitalism) also apply to early human societies. Working a profession, cooperating with colleagues and trading goods are inherent human nature. Even if you are a hunter-gather. I wasn't referring to specific theories. My point was more about observing how the world is.
- dalbasal 9y ago
  Sure. What's universal is universal. But what's the point of defining something as capitalist (or anything) if it applies to every case. Characteristics of capitalism (let's go with the Marxist definition) certainly aren't universal. Not every human economy includes private property, for example. Not every system include a bourgiouse elite, a customary, religious or military elite is more common historicaly.

Avshalom 9y ago

>>How can all companies be employee owned if you need to invest a lot of capital to start a car factory. You go to a bank (or credit union in this instance) with a compelling business plan and a history of success and get a loan. If the company at some point can't make the payments they declare bankruptcy, the company dissolves and the credit union takes ownership of the company's assets (or what ever was used as collateral) which it then sells off. Same as real estate deals the people who take the loan legally own the property unless they fail to pay off the loan, then and only then does the property change hands to the loaner.

dalbasal 9y ago
Interesting point, considering a lot of modern finance, where there is often very little investor "risk capital" in the sense implied by the OP. A lot of large infrastructure projects, for example, are funded by loans with very little (or none) equity capital. Risk is borne by the firm, its lenders, or the state. The "owners" are basically they guys who get the deals made. I have no idea if employee-owned companies will be any good. There were examples (eg Egged) in the past that didn't work well. But it's curious to see them taken as an impossibility for reasons like this, that they don't fit inside of a textbook free market example, with all incentives perfectly aligned. Half the companies in the world weren't started this way. How did Russian oligarchs buy all those state companies? Leveraged buyouts. IE, the banks (does this count as the state?) gave them money to buy (or start) them. The more interesting questions are around management. How does an employee owned company work well? Answer that with confidence, and I think everything else is solvable.
- Avshalom 9y ago
  I don't actually think "how" is even a question at this point. If you poke around wikipedia's (clearly incomplete) list of cooperatives and employee-owned* companies the answer is/has-always-been pretty clearly: just like any other form of company works. *coops however aren't necessarily employee owned-- there's a several models-- and ESOP style employee ownership can be pretty weak from an ownership perspective so in addition to being woefully incomplete the lists should also not be taken at face value.