The Cooperativist Manifesto

CHAPTER 7: THE ECONOMIC NEED FOR BROAD OWNERSHIP OF CAPITAL INSTRUMENTS

Concentrated ownership of capital instruments detracts from the economic efficiencies of markets. Economic justice compels us to ameliorate disparities. As a society, we must use our laws, taxes and other normative arrangements to encourage broad ownership of capital resources amongst individuals and households.

John Maynard Keynes is renowned for his early declarations that mass consumption is necessary to support mass production in an industrial economy, and that mass consumption required mass distribution of purchasing power. Influenced by the Keynesian belief that economic prosperity relies upon the successful distribution of purchasing power, governments of industrialized nations initiated programs encouraging full employment, social security payments, unemployment compensation, minimum wage legislation and other mechanisms that promoted purchasing power amongst the masses.

Government policies involving the provision of subsistence support and transfer payments to individuals and households represented a movement known as "social democracy". State transfers enfranchise the poor by allowing low-income individuals the opportunity to participate in the marketplace. The advances of social democracy have been thwarted by the return of a neo-capitalist doctrine that overlooks the valuable contributions of Keynesian economics.

The purchasing power of the masses cannot increase as long as (a) labour is valued on a diminishing basis; and (b) the bulk of productive wealth is concentrated in the hands of a few. The aggregate of what is produced in a closed economy generally equals the aggregate power to consume. As the return to labour declines relative to capital, the ownership of capital instruments will become more concentrated. There will be a point where numerous workers are either excluded from participation in production or are unable to earn a decent standard of living from the productivity of their labour, thereby negatively influencing aggregate consumption.

We have seen that technology continues to transform the ways in which goods and services are produced. Production is constantly becoming less labour intensive. Our economic and legal systems encourage capital owners to legally and contractually appropriate the bulk of residual profits. Capital accumulation will become more concentrated as long as our existing economic system continues to distribute most or all of the benefits of increasing productivity to the owners of capital assets. If we are serious about creating economic justice, then we must focus our attention on the true culprit of diminishing purchasing power, namely, the contractual appropriation by capital owners of the residual profits of labour.

We must pursue economic arrangements whereby the residual profits of production are distributed amongst workers, owners and the State in accordance with their respective contributions. The distribution does not have to be uniform, but it should be equitable. Innovators, entrepreneurs and managers who make special contributions towards the production of wealth can rightfully claim a greater share of the residual profits than individuals who provide basic labour input services. Rewarding labour out of profits promotes productivity.