Borrowed Principles

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.

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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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It does not seem necessary that the expense of those public works should be defrayed from that public revenue, as it is commonly called, of which the collection and application are in most countries assigned to the executive power. The greater part of such public works may easily be so managed, as to afford a particular revenue sufficient for defraying their own expense, without bringing any burden upon the general revenue of the society.

A highway, a bridge, a navigable canal, for example, may in most cases be both made and maintained by a small toll upon the carriages which make use of them: a harbour, by a moderate port-duty upon the tunnage of the shipping which load or unload in it.

… When the carriages which pass over a highway or a bridge, and the lighters which sail upon a navigable canal, pay toll in proportion to their weight or their tunnage, they pay for the maintenance of those public works exactly in proportion to the wear and tear which they occasion of them. It seems scarce possible to invent a more equitable way of maintaining such works.

… When high roads, bridges, canals, &c. are in this manner made and supported by the commerce which is carried on by means of them, they can be made only where that commerce requires them, and consequently where it is proper to make them. Their expense too, their grandeur and magnificence, must be suited to what that commerce can afford to pay. They must be made consequently as it is proper to make them. A magnificent high road cannot be made through a desert country where there is little or no commerce, or merely because it happens to lead to the country villa of the intendant of the province, or to that of some great lord to whom the intendant finds it convenient to make his court. A great bridge cannot be thrown over a river at a place where nobody passes, or merely to embellish the view from the windows of a neighbouring palace: things which sometimes happen, in countries where works of this kind are carried on by any other revenue than that which they themselves are capable of affording.



Even those public works which are of such a nature that they cannot afford any revenue for maintaining themselves, but of which the conveniency is nearly confined to some particular place or district, are always better maintained by a local or provincial revenue, under the management of a local and provincial administration, than by the general revenue of the state, of which the executive power must always have the management. Were the streets of London to be lighted and paved at the expence of the treasury, is there any probability that they would be so well lighted and paved as they are at present, or even at so small an expence?

… The abuses which sometimes creep into the local and provincial administration of a local and provincial revenue, how enormous soever they may appear, are in reality, however, almost always very trifling, in comparison of those which commonly take place in the administration and expenditure of the revenue of a great empire. They are, besides, much more easily corrected.

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