Economics

Why are we working harder than ever yet getting poorer while the elite or rather, politicians and those highly connected to politics are getting richer?  

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 what is called 'public ownership' through 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 the nationalisation of industries always fail to produce at potential levels.

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 and the labour party of the day who were (and are) largely funded by the unions and pass laws that protect the power of the unions.

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 are 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 the 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.

Summary

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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Have you noticed how mega companies being listed on a stock exchange is always huge news? 

IPO (Initial Public Offering [of shares]) Jack Ma listed his billion-dollar company a few months ago, DIDI the same.

But wait. What is the primary (traditional) purpose of the stock exchange?  Any business student, even those taking high school business will tell you that share sales are to 'raise funds for the business'. Often to start up - or expand the business.

But when a company is worth billions, and the CEO is the richest man in China something doesn't smell right.

The truth is that the stock markets are fraudulent gambling dens for the rich to become richer.  

Let's look at the unintended (possibly) consequences of some of the changes put into the stock markets.

Short selling - is how stock/share prices are manipulated.  What the big banks and brokers do is wait for the number of orders in the systems to get to a certain price and then set a massive bet against that price, creating a panic sell or buy, short selling enables the fraud to work both ways.

I just said that the brokers wait for a 'certain number of orders' and this takes me to the second fraud.  These brokers 'know what is in the system'.  The 'order books' are open so they have a great advantage over retail traders.

Now, the poor retail trader is a lamb to slaughter. Not having access to the order books puts them at a great disadvantage too. Not to mention that they have to pay extra Fees simply for holding the shares if they are in a leveraged position.  on average 70-80% of retail traders lose money on the markets and foreign exchange. This number has to be published by the retail broker so is easily available on Broker comparison sites.

So what is wrong?  Well, apart from the massive international fraud rings that run the exchanges and brokerages.

Would you be surprised to hear me say that they are not smallism? 

The Smallism vision of a stock exchange is (unsurprisingly) local. Imagine this scenario:

 Your friend wants to start hairdressers but needs to raise capital. She would then register her company and her shares and then place those shares with a local stock exchange, for local people and businesses.  She then goes to all her friends and asks them to 'chip in a few quid' to help her get started.  Once her IPO is finished she has raised the capital and starts her hairdressers.

Of course, not just her friends, some of the shares are available over-the-counter (OTC) at the share shop, and how much people are willing to put into this investment will be a balance of what she has promised to pay back in dividends and the resale expectations of the investor.

Additionally, those local people who have invested are more likely to use that salon to ensure their investment is working well, to see it operate and maybe suggest improvements. Also, they will recommend their friends to use it. 

This leads us very nicely into the article  Where Marx Went Wrong, and how for a stable economic community to operate optimally the customer must also be the owner.  Read more about that here.

If you have any questions about smallism please email admin at this site or you can contact us on twitter @smallismorg  or parler @smallismorganization.  

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