Why ownership matters?

I was reading the article The Seven Deadly Sins of Economic Liberalism a friend of mine Lucas Juan Manuel kindly sent to me. The article describes private ownership that generates wealth as:

Economic liberalism triggers a socio-economic system based mainly on financial speculation jointly with inappropriate economic measures and structural/social reforms.  Let’s take Euro area as an example.  The EU implemented painful austerity measures in order to reduce the high level of government debt in many country members.  But it was, and still is, a wrongly-conceived austerity

There are many ‘enterprises and entrepreneurs’ arising from political clientelism (crony-ism and patronage), and those kind of enterprises and entrepreneurs do not generate wealth and prosperity in our societies because they are not competitive.  This kind of capitalism is deeply disappointing for the real entrepreneurial spirit (genuine enterprises).

 In this way, wealth, well-being and prosperity are being concentrated in the hands of a few and the income gap between a country's richest and poorest people enlarges dramatically. “Obviously, this way of capitalism is inherent to political corruption and prevents equal opportunities in the economic and social spheres.”

Although somehow hidden, ownership nevertheless matters in all the above described topics. There are different approaches to ownership of a property. The question is whether all of them are sustainable for the advancement of a society as a whole?

Let’s define different ownerships and their (potential) effects.

‘Personal ownership’ is where assets and property is belonging to an individual, also known as individual ownership. Contrary, the ‘collective ownership’ assets and property belongs to a collective body of people who control their use and collect the proceeds of their operation. Very similar is ‘common ownership’ (or non-ownership) where assets and property are held in common by all members of society. Any country owns property (‘state ownership’) where assets are state owned or owned by certain state agency consequently having jurisdiction over in terms of use. And finally, assets owned by a government or a state and available for public use to all their constituents are called ‘public property’.

For the purpose we group the above ownership classifications in two groups: a private ownership – a person or small group of members of society own the property and a collective or common ownership – the property is owned by society or its representatives. This approximation will suffice for what I’m trying to explain.

Two social systems – capitalism and socialism –are basically defined upon the ownership of property. In Social vs. Economical system I argued that we definitively can compare social systems that represent human behavior, organization, relations or social structure. On the other hand we can measure up different economic systems of producing and distributing of goods and services. But we cannot compare capitalism and socialism therefore we will not mix them here either.

All too often, people do not understand the differences and consequences of the various forms of ownership. Therefore, we will term a system of largely private ownership that is open to different but mostly privately owned organizations as capitalism. It is an economic system (and not social system) in which trade, industry, and the means of production are privately owned and operated via profit and loss calculation (price signals) through the price system. Capitalism’s proponents claim that the right to both, hire and fire freely, helps to embolden firms to take the risk of job creation and thereby raises the average level of wages and perhaps employment too.

Contrary, a common ownership (or Co-Ownership) system is based on a principle according to which the assets of an organization, enterprise, or community are held indivisibly rather than in the names of the individual members. It involves an arrangement whereby the assets and instruments of production belong indivisibly to all members (with the exception, perhaps, of temporary delegate bodies, freely elected by the community and at all times subject to recall).

I would argue that the basis of any prosperous society which generates the value and is growing is the way where all members are organized for the production and distribution of wealth and not only some of its members!

The principle of holding the means of production in private or in common defines where the wealth (and produced profit) will eventually go. Would it go to private pockets or will it return to the society as a whole. In first case the owner gets all the profit and, unfortunately, even if big enough does not pay any tax to the community. It is upon his/their will what (if anything) will be returned to the society or the environment. In the common ownership the society as a whole gets the profit and uses it for the benefit of all.

Reflect on the Walmart stores. Founded in 1962 by Sam Walton, it is today the world’s largest retailer, as well as the largest corporation, with 6.700 stores with annual revenues of $356 billion, and 1.5 million employees worldwide. Walmart pays its workers less than other retailers and we all know that when the workers do not earn enough to survive and to support their families they rely on public assistance programs to make ends meet. Or another big multinational – McDonald, where two thirds of revenue leaks out of the community a restaurant is based in. An investigative report about the cost effectiveness of tax abatements in e.g. Lane County, Oregon, U.S.A., calculated the cost to the community in lost taxes on about $23.800 per job for non-local firms. Hence talking about private ownership (with extremes in multinational corporations) we can be sure that the main focus of the owner(s) is to get as much as possible from the organization and to get richer and richer. It is done on expanse of the environments, local communities, states and/or societies.

On the other side Gbenga Ajilore has calculated that the economic impact of e.g. local bookstore is more than four times greater than that of a typical Barnes & Noble store. Commonly owned businesses rarely move, and their proprietors are not inclined to move to lower worker cost regions to get higher rate of return from business. This means that they are much more reliable generators of wealth, income, and jobs for the society they make part of. Therefore, they do return back to community a lot of what they earn.

So, I hereby claim that the society is considered ‘rich’ not because some members in it are very rich while others are poor but rather when all the members of society are ‘rich’!

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• Social vs. Economical system
• To trust the Capital?
• Philosophy and the Corporate Boardroom