BOOK TWO

 

III - NEW SHAPE OF CORNUCOPIA


In the creative society, demand will not grow for what our industrial system was geared to produce. Coming back to the foremost example, there is simply no market to sell many more cars in America. What we want is more services, more intangibles. We will have to phase down a significant part of our production capacity to a replacement level that will leave room for technological improvements, but which will no longer be based on planned obsolescence.

Changes at the production-line level will reflect on the structure and "Cornucopia" - the production system from which we derive our affluence - will have to take a new shape to reflect the new reality. Corporate citizens will establish new relations with their shareholders, their workers and managers, their customers and the State. New ways of investing will correspond to the new ways of working.

There will be fewer risks to take in industrial production and less returns to be expected from the huge investments in fixed capital in this sector. Wealth will have to move from industrial production to the production of intangibles. Can we extend below wealth in transition - wealth as money and wealth as fixed capital - the equivalent of the "net below" that GIA will have provided for manpower?

We will have to reduce even more drastically the labour force in the job framework, as the ways of producing brought by the creative imperative will impose professionalism. How do you organize properly the work of employees who can "take it or leave it" when it comes to their jobs and who, more and more, prefer to leave it and become entrepreneurs of their own? How do you approach clients who have more than enough of almost everything? How does a corporation deal with a State really committed to full-employment, guaranteed income, and leisure? How does the State manage to finance its operations, maintain production /consumption equilibrium and fairness in transition?

And what about after the transition? It was easy to keep a share of the spoils for investors when machines, as multipliers, were essential to production. How can wealth keep a hold on a share of the profits, in a system where ideas become the multipliers? As Cornucopia takes on a new shape, are we going to throw in the towel or, for the sake of order, keep on fighting to keep wealth productive?



1. THE WAY OF MOMENTUM

In the beginning, there was not only freedom but also entrepreneurship. Entrepreneurship means taking decisions and making profits; it implies that gains are related to results. It lasted quite a while; the peasant of old was a real entrepreneur, who sowed and bore all the risks, the risks both of his own making and of circumstances on which he had no control ("the weather"...) until he reaped in the fall the harvest on which he would starve or survive.

With industrialization, this type of entrepreneurship lost ground, because it was unmanageable. In a complex industrial system, what each worker produces is something that may have value... if it is used..., in whatever will be used... to produce something that will be used... and so on, until you drive that car, smoke that cigarette, or until services are otherwise obtained from the goods that have been produced.

When each interchangeable worker's job aims at some "intermediate" production for use in some "intermediate" consumption, what he produces comes to have no real value but that of a future, in the sense that there are corn, or sugar "futures" on the Commodity Market. How then could it be possible, for Johnny Worker, to support the risks "until harvest come " and to wait out the time lag between his work done and its final use ?

Why should he bear these risks anyway ? There are an awful lot of "if's", at times, in an industrial production/consumption sequence, a lot of risks that may turn sour and a lot of efforts that may be lost, but the part of these risks that remains under the worker's control is negligible. For a worker on the production line, to work a little more or a little better appears of very little consequence; all rests upon the "weather" now, it seems, depending on the equipment..., and marketing... and global demand... and "higher policies". So why should he , the worker, bear the risks?

If the worker himself will not or cannot bear the risks, the risks do not disappear, however, nor the notions of results and profits. Someone must put a price tag on this work-future that may have value, take the burden of the risk and pay Johnny in cash for his efforts. Someone whose task it will be to take risks and to make decisions: an entrepreneur.

Capital and the Entrepreneur

In early industrial production, the significant risks were divorced from the interchangeable worker's performance - that could be taken for granted - and closely bound to marketing and investment decisions; so, the Capitalist could easily be also the Entrepreneur. The business owner, wearing both hats, would get both the Capitalist's "interest" - (the money that accrues to money merely because it is money) - and the Entrepreneur's "profit", the price paid to whomever will bear the risks of uncertainty, wrong decisions and adverse luck.

Even today, some Fat Investors may still wear both hats. Consider, for instance, that the capitalist who invests in anything less secure than Government Bonds is taking a risk, that he is an entrepreneur - to a point - and that any interest he draws above Government Bonds' current yield is "profit". Consider that the investor who turns money into "fixed" capital - such as the machines that will be the multipliers in the production process - runs a risk also, and is therefore part capitalist and part entrepreneur: his dividend is meant to account for both interest and profit.

Some wear both hats. The distinction nevertheless must be made, because to discuss of entrepreneurship reasonably, we must first dissociate it from the old, emotion-laden, ghost-word "capitalism". It is important to understand that entrepreneurship may lead to capitalism, but is not capitalism. The capitalists and entrepreneurs play different social roles, and often have opposite interests; just see Shares and Bonds compete on the Stock Market!

So, it is quite misleading to discuss the entrepreneur's profit and the capitalist's interest in the same breath. It creates a confusion that gives birth to the notion of "excess profit". Because the price paid by Johnny Worker - that is you and me - to be spared the risks of the "weather" is naturally discounted from the added value of his work to become the entrepreneur's "profit", it is always felt to be excessive. Actually, when Entrepreneur and Capitalist are seen as two distinct persons, there is no such a thing as "excess profit", because the entrepreneurs' profit is always tightly squeezed between the necessary Worker/Consumer's consumption-level income and the Capitalist's interest.

No excess profit can be made for long, because little risk together with high profit will invite competition and will drive up the price of venture capital for entrepreneurs, as they rush in to take advantage of the bargain low-risk, until the capitalists reap the surplus and the entrepreneurs are left with only the "fair" price for their risk... which tends to be an equal chance to win or lose, biased only by each individual's business acumen. So-called "excess profit" will have been spent on higher interest rates and will have been transformed into "capital".

As capital, it will then be plundered by the State according to needs and the surplus money redistributed to consumers, through transfer payments and other means, so that the money will be made available for the consumers to buy everything that is produced and equilibrium is maintained. "Capitalism" as a system - as money accruing to money simply because it is money, and the consequent wealth concentration - died in America circa 1932.

A money game still goes on amongst those who have money above their consumption needs, but it has little impact on consumers. It is a non-zero sum game only amongst the wealthy, and the surplus symbolic "money-for-power" that the rich use for chips is now conveniently borrowed, and put aside harmlessly after game-use, until it is wiped out by inflation. Capitalism is dead and now lies buried under a huge pile of Treasury Bills and Bonds.

So much for the fate of capitalism. Entrepreneurship is something else: it is momentum. Profits may accumulate and become wealth, in which case they are treated as wealth, but as "profit" they merely mean action! They are the cost of contingencies accepted, of "iffiness" in the process. Profit is the price that we accept to pay for entrepreneurship in our society, and it does not determine the relative financial standing of the Haves and Have-nots (there are small profits and huge salaries), so much as the risks we are ready to take and the dynamism we want.

It is a collective choice to deny profit as an incentive as Socialism does, to let it collect like fat in some spots like primitive Capitalism, or to spread it across the system. In recent years, corporate profits after taxes have accounted, in the U.S., for only 4% to 8% of National Income... A very small price, indeed, for a lot of momentum.

The third alternative

The State must take responsibility for what is in our collective interest and this, in a creative society, maybe more than anything else, means production. In socialist countries, the State, the Great Planner at the top, makes all the profit - usually less than the sum of the individual profits it negates to individuals - and has to inject it back in the system to keep it going. It is usually done without regard for motivation or initiative related to production, reducing further still the chances for "profit", collective or individual.

In the WINs, when we discovered about forty years ago that our production system was in dire need of help, the first reaction was naturally to call the State to the rescue and for the Octopus to take over the whole production apparatus. In the U.S. we resisted the urge until now, and, although a few European WINs may still be toying at times with the idea of nationalization, the trend is rather in the other direction. It seems that good sense will prevail.

The State should not nationalize the production system, nor any part of it, for nationalization has been proven, time and again, to be a most inefficient way for the State to assert its control over production. The problem, with State ownership, is not that the people are the shareholders; the problem is that the State, acting in the name of the people, cannot resign itself to act as the typical shareholder in a modern corporation, to remain quiet and leave management to managers.

Top-dogs as shareholders, with few exceptions, have known for sometime yet that real decisions should be left with managers: top-dog owners remain content with Authority and other niceties that come with wealth. The State, as a shareholder, will not remain quiet but will designate civil servants whose jobs it is to nose around, to grant favors, to bow to so-called higher interests, to control and question every move, and otherwise to make both life impossible for public managers and profit an unattainable goal for the nationalized industry.

Nationalization is out, because it is not only economically inefficient, but also socially superfluous. Through taxation, the State - call it the "People" if you like - is already a silent partner that benefits from the sweat and blood of entrepreneurs and may grab, without effort, any share of the profit that rulers care to determine. It would be totally absurd for the State to move in and kill, through public mismanagement, the goose that yearly lays the golden egg of corporate income tax revenues in addition to our day-to-day prosperity. It is unthinkable that the State should do something so stupid as to nationalize the ailing industrial production system that certainly needs all the initiative it can get. The State will not nationalize industries. It will cure our woes another way.

Doctrinal capitalism is dead, and the revised version that we have been implementing - and improving by bits and pieces - over the last decades, is not the solution either. Profit in our system is allowed, but the need to maintain the proper level of consumption has us link the final fate of profit to the financial situation of the recipients. The richer the worse, in terms of system efficiency, since profit then transmutes faster into "capital", after which it assumes a mythical value only and is confiscated by Santa Claus for redistribution rather than being used to spur motivation and reward initiative.

The fewer profit-centers we have in the system and the higher up they stand along the wealth scale, the faster profit is obliterated, like all superfluous wealth, through redistribution and inflation. When there is no profit to be made and another worthy motivation is not offered to deciders, no risks will be taken and stagnation will occur.

To optimize the dynamism and to encourage motivation in production, it is necessary not only that there be profit, but that it be spreaded around and reach a maximum of profit centers within the system. So, trust a creative society to choose a third alternative. It will follow the logic of the creative imperative and of the gambit on leisure; it will promote the way of momentum, entrepreneurship , rather than socialism or capitalism.


Next

Link to my BLOG Nouvelle Société !(Click here).

Table of Content

Accueil
1