I continue my comments about “wage slavery” by addressing a common complaint from socialists about working conditions. The advocates of socialism claim that workers should have more control over their work environment and also have some ownership in the businesses for which they work. They include the desire to receive some of the “excess value” that they say capitalists “steal” from them.
Several years ago, I identified five functions that must occur in every business, whether successful or not. Those businesses that perform these functions the best tend to perform the best. I will use these five functions as a framework for addressing the desires of socialists to have more involvement in the companies for which they work. Those five functions consist of:
- Product Development
- Operations and Administration
- Personnel and Management
- Marketing and Distribution
I will address them separately without going into great detail.
In a socialist organization, in which all workers have a voice and management decisions, they must have a process for designing and developing the products created and sold by the company. How does a collective perform this very important function? Do all the workers have a vote in what products the company will manufacture and sell? Or do they appoint a committee of specialists?
Operations and Administration
Most of the workers in an organization are involved in operations or administration. They either help produce the goods and services of the company, or they help to administer the organizational processes — e.g., accounting, maintenance, etc.
Who in the socialist organization will make decisions about who does what and when? If all workers have a voice in this process, will it operate effectively and efficiently? How will they allocate work assignments in a “democratic” organization?
Personnel and Management
Capitalist companies have procedures by which managers hire and fire people and how they organize the management structure of the company. They attempt to place the most qualified people in the most appropriate jobs.
How will this work in a socialist organization? Will a committee decide who gets hired? Will they have the authority to fire anyone, and based on what criteria? Does the concept of management — a hierarchical concept — completely disappear in the “democratic workplace.”
Marketing and Distribution
Any executive in charge of marketing and distribution will tell you that no truth exists in the concept “if you build a better mousetrap, people will come.” Even marketing executives frequently underestimate the importance of well-designed and well-manufactured products in the marketing effort. They do, however, clearly understand that, if you don’t tell people about your “better mousetrap,” few, if any, people will come (buy your mousetrap.)
So, in the socialist organization, how does the company inform the public about the products they have available? Do they require every worker to meet a sales quota? In a socialist organization within a socialist economy, do the workers even have a choice in what products they develop and manufacture and how those products get distributed? Doesn’t some central government agency do that for them?
The finance function addresses issues about which the socialists seem to care the most. They just want their share of the profit pie. So let’s look at three subfunctions of business finance:
- Capital Investment
All businesses require capital investment. Large businesses require plants or offices in which the workers do their work. They also require equipment. They may require large manufacturing equipment, or they may only require desktop computers, paper, and pencils. They cannot, however, provide products and services without at least a small amount of capital.
Do the proponents of socialist organizations propose that the workers bring their own equipment and build their own plants? If they plan to confiscate the capital of successful capitalists, they’re making a prima fascia admission that socialism cannot exist on its own. If they cannot provide their own capital, they must confiscate it from capitalists. Does socialism require capitalism from which to steal?
Socialists seem to focus a lot of attention on business profits. You frequently hear them complain about how the businesses make billions of dollars, while many of the workers make only “slave wages.” They want to distribute those profits amongst the workers.
That sounds like a good idea. Doesn’t it?
The distribution of profits, however, amounts to a much more complex decision then many realize. Profits retained by the company determine the rate at which the company can grow. If a company distributed hundred percent of its profits to the workers, future growth of the business (along with the future expansion of employment) would cease. (Without additional external financing, a company can only grow as fast as the rate at which it plows earnings back into the company, which leads us back to the question of capital investment.)
What socialist committee will make these difficult decisions?
Socialists seldom talk about business losses. Of course, they would like a part of the profits that companies make. Accountants use the term “profit and loss” statement for a very good reason. Even some of the largest companies occasionally suffer losses. Some businesses have losses for an extended period. Some may never see profits and ultimately go out of business. Look at one of the darlings of Wall Street: Tesla. I don’t think this company has ever made a profit. Should Tesla employees chip in to keep the company going?
So how will the socialist workers handle losses experienced by the companies of which they want to own a part? Do they accept a cut in pay? Do they break their piggy banks and add to the capital of the company? If they think they contribute value to the products being manufactured and sold, and those products don’t generate enough revenue, should they accept their responsibility and resign?
Starting and building a successful business does not happen without hard work or by accident. It requires a balanced and intense focus on the five functions that I have identified above. If they don’t do these functions well, more than likely, the company will go out of business.
I have one general question for the socialist who want workers to have more control over the businesses for which they work: Do you sincerely want to accept the responsibilities and risks involved in operating a business?