This section describes the principles from which smallism has been derived or methodologies used or modified to implement smallism.
When we start examining incentives of the workers' ownership of the means of production we find that theory is exactly in line with the results of highly unionised industries. For example, British Rail and British Coal industries of the 1970's where the left wing Labour government of the day could not resist the power of the unions, who demanded ever increasing pay raises and interrupted service provision (by means of strikes) if they didn't get what they wanted.
This is a natural state of incentives when the workers have the power and why nationalisation of industries always fail. The employees' can hold the government to ransom simply by not working. The government cannot simply sack the workers because in dogma 'the workers own the means of production.'
Suppose now we give the customers the ownership of the means of production and now analyse the incentives.
Immediately we jump to the conclusion that the workers will be underpaid, but will it? If workers are underpaid or tools and materials are substandard then the quality of service, and thus productivity reduces, leading to losses and lower share prices and dividends.
This is a double whammy of badness to both the customer who receives substandard products or services and the shareholder as dividend payments less likely.
As a shareholder-customer group, a balance can be struck between the price that the customers are willing to pay for the quality of service, and the return on the shareholding, on the side of the ownership of means of production.
If the customer requires higher quality they need to provide resources for better employee conditions, better tools or better materials.
This will require a balance between dividend returns and price of products. If a company does particularly well, then shareholders are rewarded for providing the extra resources through dividend payments BUT, and a move away from the current sole reason from holding shares being to make a profit at the lowest possible cost if the owner-customers decide they would like to lower the cost of the product then dividend payments can be zero and the funds put back into the company.
The way the consumer can ensure they get better service is to ensure that workers are paid well. If the workers are also local, and thus also shareholders this effect is compounded, and thus the incentives are aligned positively for all.
By having customer ownership of local services the incentives between profit, quality and employee care are better aligned than in the current system where each of these factors competes with each other for resources which drags down the average of all factors.Add a comment
Almost forty years ago the economist Friedrich Hayek wrote a book entitled Denationalisation of Money-The Argument Refined: An Analysis of the Theory and Practice of Concurrent Currencies. Its thesis was that money and monetary order would be better provided by the private sector; instead of a central bank issuing a national currency, Hayek advocated a world in which commercial banks would issue their own currencies and these would co-circulate without regard to national boundaries.
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