Today we are going to take a critical look at the tumultuous relationship between workers and business owners. This relationship is of critical importance because most of us are workers (we work for a living) and few of us are business owners (we have a business from which we make a living). Thus, chances are, we are in one group or the other and are thus affected by the dynamics (i.e. interactions) between them. As this happens worldwide it is something that affects the entire world and it is thus of extreme importance.
WE - THE OWNERS/WORKERS
Absolute ownership
It is true that as Libertarians we believe that property rights are absolute and as such it is also true that the owners of the properties of a company have the right to do with those properties as they see fit. Other theories believe that property rights are "limited" (whatever that may mean). Usually this is where all political theories end and blind belief begins. But in real life, this is not the whole story; not even close.
Classic definition
What are business owners? Business owners are those people whose capital is being used to purchase or build goods or services for production purposes. Once those goods and services are put into action, they will produce retail goods or services. Business owners are typically described as the "owners" of a company or business. This is how governments describe business owners and how tax laws look at business ownership. From this point of view, it is clear that "business ownership" is very well defined. Either a person owns a company (or shares of it) or it does not. Simple, right? Well… no.
Vested interests
A business or company is much more than the properties it contains. The purpose of a business or company is to invest capital and delay personal consumption with the expectation of an increased consumption later. Without a business process, a business plan and entrepreneurial activity to put it all in motion -to act-, businesses will produce exactly nothing.
Yes, the person who owns business properties matters but what also matters a great deal is who has vested interests in the success of said business. What matters is who is acting to benefit the business. Both elements are important and both elements must be taken into consideration if we want to have a more accurate picture of what is going on.
The enlightened definition
Unfortunately the classic definition of "business owner" is also the "legal" definition and -for the most part- does not take into consideration the fact that "business owners" are not the only people with a stake in its production systems (e.g. companies or businesses). A more enlightened definition would be such of Business Interests which includes all people who have a direct vested interest in the success of such ventures because they benefit from them by acting in their behalf. It is downright disingenuous and malicious to state that only "business owners" are interested in the success of their companies. Most workers working for companies or business are interested in the success of their companies too because they:
- Are using their capital (time, labour, skills, know-how, etc) in the manufacturing process
- Are benefiting (receiving wages) from the use and expenditure of their capital (again, time, labour, skills, know-how, etc)
There are very few workers out there hoping that the company they work for goes bankrupt. Those workers may want somebody in the company to be punished or they may want better wages or they may want a stake in the company (co-op or shares) or they may want a higher position or… or… or… Workers want many things but the one thing that most workers don't want is for the company to disappear. This is so because they benefit from the existence and operation of the company. Consider this. Do you know of any Workers' Union that is determined to make their members' compay(s) go bankrupt? Of course not! Do you know of any company that believes that by losing people they retain the same capital? Of course not! That's why people are called "Human Resources". This is not only a politically correct term, but an accurate definition since a "resource" is by definition capital. And so we define the term business venture as:
A business venture is composed by all those who have an interest in its success. They demonstrate this interest by using their capital for the benefit of such venture.
In other words, they act in the pursuit of self-interest by spending their capital in the pursuit of the company's interest. These people do not "wish" the company the best but in the most definitive Austrian Economic sense, they act. This action is what makes their "investment" in the venture real.
What this is telling us is that a "business venture" is composed by only one type of actors; those who use their capital for the benefit of the venture. There are no two classes of actors as previously understood. The difference between workers and owners is an artificial one when we look at the big picture.
Yes, owners may own all the physical and even intangible properties of the company, but this does not mean much if the company does not produce profits. What this makes absolutely clear is that owners and workers they both spend their capital for the benefit of the business venture in pursuit of their own wellbeing. In this pursuit they are equal as a "class". Therefore we need to leave absolutely clear that there is no such thing as a worker or an owner. There are only "business venture" actors whose characteristics (e.g. efforts, benefits, authority, etc) vary on a smooth gradient or slope. From now on we will use the acronym BVA for Business Venture Actor.
Capital is not compensation
Before we continue we must make one clarification. As you may have noticed, we did not include compensation (e.g. wages) in our definition. This is so because compensation has absolutely nothing to do with the definition of Business Venture. At this point we are not concerned with who gets paid what, but only with who is invested in the Business Venture. We will talk about compensation and wages later on.
BVA distribution
With this enlightened definition we can now move forward. This definition of a BVA is difficult to quantify because we would need to quantify the "interest" of people spending their capital trying to achieve the success of the company. We (in this site) cannot quantify "interest" nor can we quantify the "capital" that these people are bringing to the company. This is not so because it is impossible (it is indeed possible) but because such calculation is an economic calculation (i.e. an estimate of value in the Austrian Economic sense) that must be performed for each business venture at each point in time and as such is very complex and time consuming. As a matter of fact, such calculations are performed routinely when a company's "value" is thoroughly estimated for example as a pre-requisite for a sale or merger.
If we want to find out what is the true "interest" of every BVA in a given company, all we need to do is to estimate this person's "capital" contribution to the company and divide it by the sum of all capital contributions from other people plus all tangible and intangible company's capital items. Presto! True share of interest.
What this allows us to do is to look at BVAs under a consolidated light, this is, using a common measure so to speak. In the same manner as money allows us to compare apples and oranges, capital contributions of each BVA (expressed in money) allows us to compare different BVAs. And so the question shifts from who is an owner and who is a worker to what is each BVAs degree of interest?
We can illustrate this scenario with a statistical distribution such as the one below.
In this graph we can see that the old (and obsolete) definitions of "Worker" and "Owner" make very little sense because both would-be classes vary only in the degree of true interest they possess.
Summary
Now that we have established the nature of the relationship between BVAs, we can move forward to analyze the dynamics of such relationship.
Note: please see the Glossary if you are unfamiliar with certain words.