By Maria Garcia
The only way to ensure the economy works for the majority of the people is to allow the people to manage the economy democratically. We in the IWW believe this is what unions are for: Gaining democratic control of the economy by gaining democratic control of the individual workplaces that make up the economy. Of course, the capitalist oligarchs that run our economy would like us to believe the owners of businesses should be able to manage their businesses however they like with no interference from the community and no interference from their own employees via unionization. Like all other economic arguments, the justification for this view breaks down to an ethical argument: The owner took a risk when they created their business (and hence jobs), so the owner is rightfully entitled to have full control over the business (and hence the jobs. And, by extension, at least partial control of the community itself).
Here is one example of this type of thinking from the conservative news site The Daily Wire:
“Being an entrepreneur is a risky endeavor… Tons of time, money, and effort can be loaded into a business and at the same time be not guaranteed to succeed… Meanwhile, the low skill employees of these entrepreneurs risk nothing to very little… they [politicians] undercut the extreme risks and hardships the owners may have gone through in order to get a higher wage, while the employees get to cash in on their employer’s back.”
Everything about this argument is wrong.
First of all, the author is clearly mixing up the terms “owner” and “entrepreneur.” Most owners are not entrepreneurs. Take General Electric for example. As is true of all companies that issue shares (whether they are publicly traded or not) the owners of GE are the shareholders, and they get to collectively decide how the company is managed via the board of directors that they choose. There is no person on Earth that was alive when GE was founded. So it should go without saying that not a single GE shareholder can count themselves among the group of entrepreneurs that risked “time, money, and effort” to organize the company, so the argument falls apart for old companies. The argument also fails for many new companies.
Jeff Bezos started Amazon and still works there, so it’s safe to say he did invest “time, money, and effort.” But Jeff Bezos only owns about 16% of Amazon. Most of the rest of the other 84% is owned by people that put in little or no effort to get the company started. Furthermore, the next two largest shareholders are Vanguard and Blackrock. Little if any of the money invested by Vanguard and Blackrock is owned by the capitalists at those companies. So they are risking nothing to be owners.
It’s clear, at the very least, The Daily Wire‘s argument only applies to owners that started the businesses they own using only their own money and labor, thereby taking on all the risk themselves. This, however, is not possible.
No business is started without financial and other help from the community (the community that is, at least theoretically, represented by the politicians the author is complaining about). The roads and airports that the owner, employees, and customers use are maintained by the community. The employees the owner hires (who need to be able to read and write to work effectively) were educated by the community. The business’s property is protected from fire, theft, and vandalism by a fire department and law enforcement that is paid for by the community. If the business enters into a contract with another business, the contract may be enforced in a court system that is paid for by the community. Even the money earned by the owner to start the business would have no value if the US government didn’t give it value. The owner, even if they used their own rightly-earned money, did not start the business with no help from the community in which they operate. If starting a business is like scoring the winning touchdown in the NFL, the community spent the whole game moving the ball all the way to the one yard line. At which point, the owner simply walked it into the endzone and claimed a solo victory.
This alone should call the exclusive management claims of owners into question. If the community does most of the work necessary to allow a business to thrive, the community should retain most of the management rights. But there is more wrong with The Daily Wire‘s argument.
It is obviously false that most business owners go through “hardships” to become owners. Owners that are shareholders and outside investors just plunk down money, which doesn’t entail much effort, much less any hardship. For dividend paying companies, becoming an owner even one day before the ex-dividend date (the day which determines who gets paid dividends) entitles the new owner to the exact proportional amount of compensation as anyone that has been an owner their whole life, so they wait an even shorter amount of time for their first payday (and hence experience less hardship) than the actual employees of the company they are investing in. The owners that are also operators and not just outside shareholders are not necessarily risking any money either.
US businesses operate with limited liability for their owners. This means that if a business is started with debt financing, and the owners that started the business did not personally cosign on the loans or put any of their personal property up as collateral, then they did not risk their own money. They risked someone else’s money. Should the business go bankrupt, they can safely walk away with no obligations. This same thing is true if the owner started the company with other forms of outside investment.
Even owners that start businesses with their own labor and put their own money at risk don’t necessarily suffer anything that might be called a hardship. Many new business owners pay themselves a salary out of operating income from the beginning because they start as consulting or service enterprises that don’t require a lot of capital expenditures. As the workload grows, the owners divert some of the work to employees they hire. At no time are the owners earning zero dollars per year. And businesses that do not start with a ready cash flow often have outside financing that allows the owners to get paid from the start.
It is true that any capital expenditures the founders had to pay up front with their own money are a financial risk to the owner, but that risk goes down with each dollar they earn back on the business. Once the owner’s original investment is earned back, there is nothing further at risk. So while it might be true in the beginning that the owners should have management rights to protect the money they have invested, if the business goes forward as planned, that argument fades. And this doesn’t even touch on the fact that if someone with one hundred million dollars puts one million into a new business and the business fails, their lifestyle and purchasing decisions will almost certainly remain unaffected. Therefore while it is strictly true that they risked a million dollars, they didn’t risk their future standard of living, so they didn’t really risk much.
Turning to the treatment of employees in The Daily Wire argument, the claim that the employees risk “nothing to very little” is almost laughable. Nearly all employees that accept a job at a given company are risking something. If the employee is fortunate enough to be able to choose between competing offers at more than one employer, they risk choosing to work at the worse company. Starting a new job also often entails spending by the employee. They might have to relocate, buy a new car or new clothes. They might only have gotten the job because they invested in a degree or certificate program, which they expect to make a good return on. They risk having to put up with abusive bosses, unexpected pay cuts or changes to health insurance, unpredictable labor markets, and managerial changes totally beyond their control.
If they get fired, they will not lose just a paycheck. They may be saddled with even more debt in the form of fees because of missed debt payments. They may lose their housing, car, or worse. Business closures have been known to cause (former) employee suicide. It is in fact common, especially in cases where a business owner is wealthy and the employees are poor or in debt, that the employees in a business are actually taking on more risk than the owner when they accept employment. Communities, likewise, take on enormous risks when they allow businesses to operate within them, a fact the author completely leaves out while complaining about the politicians that are supposed to keep our communities safe and functional.
Several years ago, a business on Capitol Hill (it was never revealed which one) was hacked, which resulted in hundreds of people from the community having their identities stolen. Jeff Bezos was allowed to start Amazon in Seattle, and then went on to directly and indirectly exacerbate Seattle’s homelessness crisis. There have been many companies over the years that have collectively turned the Lower Duwamish into a superfund site. And let’s not forget Boeing, which is one of the world’s foremost war profiteers. Their lobbying for more war has led to suffering on a truly grand scale. Anytime a community grants permission to form a business they risk allowing these kinds of abuses and many more. These abuses are so common, the field of economics has a name for them. They are called “externalities.”
It is clear that if management rights in a business are made on the basis of which stakeholders took on the most risk to start the business, then the employees and the communities they are members of should at least share management of businesses, if not manage them outright. There seems to be one other common claim on management rights the author is making. At the end of the quote, the author adds the almost offensive line, “the employees get to cash in on their employer’s back.” This seems to be hinting at the idea that the employees (and I assume the wider community) owe the owners and not the other way around, presumably because the owner created the jobs the employees now hold. This is completely backward and displays an amazing lack of understanding of our current, mostly capitalist, economy.
First of all, no particular business (or even type of business) is required to exist for unemployment rates to change. This is why unemployment rates under capitalism have always fluctuated, and will continue to do so, no matter what companies are in operation. Secondly, businesses are not charities. Business owners do not hire employees in order to help the employees or their community. Owners use employees to create goods and services. The goods and services are then sold to the community for a profit (that is, for more than they are really worth), so the owners can enrich themselves. The owners are cashing in on the backs of their employees and the wider community, not the other way around.
In summary, when it comes to established companies that are majority owned by outside shareholders, the shareholders (that is, the legal owners) have no justified claim to management rights. Their claims to such rights are based on the financial risk they are allegedly taking when they purchase shares, but their potential hardships are absolutely dwarfed by what the employees and the wider community are facing should the company misstep.
In all other cases, the community the company operates in should have at least some amount of say in the management of the company to keep a lid on externalities. There are, however, a lot of complicating factors that come into play when determining who should manage a company and what privileges they should receive. Those things should be determined on a case by case basis, and they should be determined democratically by those community members that are most affected and in the best position to do so: the employees of the company. The organizations that put employees in a position to make those determinations are radical labor unions like the Industrial Workers of the World.
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