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Where Marx went wrong

Ownership of the means of production should be with the customer, not the worker

When we examine the incentives of the workers' ownership of the means of production we find that agency theory is a good fit for the outcomes experienced.

For example, British Rail and British Coal industry of the 1970s under a left-wing Labour government could not resist the power of the unions who largely funded and drove the direction for the party.  In many respects, the Labour party is the party of the industrial unions.  The unions demanded ever increasing pay raises and interrupted service provision (by means of strikes) if they didn't get what they wanted.  Under Margaret Thatcher, the coal miners went on strike twice.  The first time she had not had time to prepare and gave in to their demands however the second time she refused to allow them to hold the country to ransom and put in place measures to purchase coal from cheaper suppliers.  In hindsight, the leader of the Coal union Neil Kinnock admitted that demands of 40% pay increases were not possible for the country recovering from years of Labour mismanagement of the economy.

This is a natural state of incentives when the workers have the power and why nationalisation of industries always fail to produce at potential levels.  Another case in point in France, which is also still a highly unionised nation - which has seen a decline in foundries over the last decade as unions make operations economically unviable and international globalist companies have the option to move to countries where labour is cheaper.

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 they be?  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. Those very same values for which the customers are now responsible. Put into a localism context we can bring new meaning to "giving back to the community", when we can do achieve this in a literal sense.  

As a shareholder-customer group, a balance can be struck between the price that the customers are willing to pay for specified 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 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 which may be used to improve customer service or experience and/or expand the service to a wider client base in keeping with the flexible ward philosophy. 

The way the consumer can ensure they get better service is to ensure that workers are paid well and have good quality supplies.  If the workers are also local, and thus also shareholders this effect is compounded, and thus the incentives are aligned positively for all.  Smallism is based on a Client-Owner model that strips out middle management tiers, increases the number of management jobs available across society and brings clients, as owners, directly in contact with the day to day running and management of the utility service. 

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.  If the employees are also residents of the ward in which operations are delivered then we have a perfect alignment of incentives.

Read more about he the Client-Ownership of Utilities model.

 

Find out more

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