What's Wrong With American Business Culture And The Economy?

[fhdz]

Whatever his goals were, or however he defined success, giving people money so that they could (maybe) buy your products is not a transferable lesson.  I don't argue that money in common people's pockets may be more beneficial to society and economy than money in corporate vaults, but it would not be more beneficial to the corporation owning that vault. 

You can't structure society by expecting entities to act against their self-interest;  you instead have to align the incentives for the entities and the entire society.  The fact that some entities did choose to act against their self-interest in the past, out of ignorance or out of lack of competition, does not change that pretty basic conclusion in economics.

This strikes me as short-term thinking. It may be true Ford was not going to get rich directly through some of his employees spending some of their surplus earnings on his cars. However if he can create the idea that the common working man has the ability to own a car that idea will spread beyond his employees and that will definitely profit in the long run.

He isn't going to get it, dude. If you can't fit it on a spreadsheet Guller can't wrap his brain around it.

[The Minsky Moment]

The owners are just one of multiple stakeholders of a corporation. Why is their self-interest identical with the self-interest of the corporation?

I'm not sure I understand the question.  Shareholders are the owners.

Shareholders are the owners, but the corporation only exists in the first place because of a grant of public authority. 
Zanza has a  point in questioning what it means to say an artificial legal construct has an "interest".  To the extent one can meaningfully talk about such a thing at all, it isn't obvious that such interest merely coincides with the right to control.

[Razgovory]

Whatever his goals were, or however he defined success, giving people money so that they could (maybe) buy your products is not a transferable lesson.  I don't argue that money in common people's pockets may be more beneficial to society and economy than money in corporate vaults, but it would not be more beneficial to the corporation owning that vault. 

You can't structure society by expecting entities to act against their self-interest;  you instead have to align the incentives for the entities and the entire society.  The fact that some entities did choose to act against their self-interest in the past, out of ignorance or out of lack of competition, does not change that pretty basic conclusion in economics.

If it doesn't work on a spreadsheet, it probably doesn't work in economics.

This strikes me as short-term thinking. It may be true Ford was not going to get rich directly through some of his employees spending some of their surplus earnings on his cars. However if he can create the idea that the common working man has the ability to own a car that idea will spread beyond his employees and that will definitely profit in the long run.

He isn't going to get it, dude. If you can't fit it on a spreadsheet Guller can't wrap his brain around it.

[fhdz]

If it doesn't work on a spreadsheet, it probably doesn't work in economics.

That's actually demonstrably false.

[Jacob]

Yes. But the corporation is more than just the capital. It is also e.g. the knowledge and skills and time of the employees. Why is giving a corporation your capital in return for a dividend somehow making you only the only relevant stakeholder in corporate decisions? Why is giving a corporation your time in return for a salary not making you a relevant stakeholder in corporate decisions? The owners are affected by corporate decisions, but so are the employees. Why don't they have a say in corporate governance?

I think the German model is incredibly sensible here. It's a hard sell in the US, however.

[crazy canuck]

The owners are just one of multiple stakeholders of a corporation. Why is their self-interest identical with the self-interest of the corporation?

I'm not sure I understand the question.  Shareholders are the owners.

Well not really.  It depends on what kind of stock a shareholder owns.  Shareholder's in widely held companies have very limited rights - nothing that anyone would confuse as the rights of an owner.  Shareholders in closely held companies normally have much more control and something approaching what most people would recognize as a "owner" of something.

Ford had a great deal of control over his company - which was the point being made.   It was Ford's own interest that was being reflected.  In the absence of a strong controlling shareholder I dont think one can ever really say that a corporation has an "interest" in anything.  It is merely a legal construct through which people can invest and hope it is run properly.

[crazy canuck]

The owners are just one of multiple stakeholders of a corporation. Why is their self-interest identical with the self-interest of the corporation?

I'm not sure I understand the question.  Shareholders are the owners.

Yes. But the corporation is more than just the capital. It is also e.g. the knowledge and skills and time of the employees. Why is giving a corporation your capital in return for a dividend somehow making you only the only relevant stakeholder in corporate decisions? Why is giving a corporation your time in return for a salary not making you a relevant stakeholder in corporate decisions? The owners are affected by corporate decisions, but so are the employees. Why don't they have a say in corporate governance?

It is possible.  After all corporations are nothing but a legal fiction designed to limit the liability of its stock holders.  There is no magic rule that states that the Articles of Incorporation of a Corporation cant include a stipulation you are proposing.  But that may limit the appeal of the corporation's stock.

[DGuller]

He isn't going to get it, dude. If you can't fit it on a spreadsheet Guller can't wrap his brain around it.

It's that time of the month again, eh?

[crazy canuck]

Yes. But the corporation is more than just the capital. It is also e.g. the knowledge and skills and time of the employees. Why is giving a corporation your capital in return for a dividend somehow making you only the only relevant stakeholder in corporate decisions? Why is giving a corporation your time in return for a salary not making you a relevant stakeholder in corporate decisions? The owners are affected by corporate decisions, but so are the employees. Why don't they have a say in corporate governance?

I think the German model is incredibly sensible here. It's a hard sell in the US, however.

Unions in North America would also have to change to the German model for this to work.  An even harder sell I would think.

[Jacob]

Unions in North America would also have to change to the German model for this to work.  An even harder sell I would think.

Yeah, for sure; it would require something of a cultural shift.

[Zanza]

After all, the workers could spend that extra $5 an hour of "car money" on something else entirely.

Of course. But someone sells them "something else entirely" and maybe that person is interested in buying one of Ford's cars now...

[DGuller]

The owners are just one of multiple stakeholders of a corporation. Why is their self-interest identical with the self-interest of the corporation?

I'm not sure I understand the question.  Shareholders are the owners.

Shareholders are the owners, but the corporation only exists in the first place because of a grant of public authority. 
Zanza has a  point in questioning what it means to say an artificial legal construct has an "interest".  To the extent one can meaningfully talk about such a thing at all, it isn't obvious that such interest merely coincides with the right to control.

That point may be valid, but the extra responsibilities on top of profit maximization still have to be spelled out, and not just vaguely alluded to.  In a competitive environment, implicit gentlemen's agreements don't have a long lifespan.

[DGuller]

After all, the workers could spend that extra $5 an hour of "car money" on something else entirely.

Of course. But someone sells them "something else entirely" and maybe that person is interested in buying one of Ford's cars now...

Seems like an overly hypothetical thinking for a solid business plan.  Keynesian stimulus doesn't work very well when there is leakage.  The leakage may be relatively contained on a national level, but on the level of car factory, it definitely isn't.

[Zanza]

Unions in North America would also have to change to the German model for this to work.  An even harder sell I would think.

The system can work without unions. The employee representatives are elected in free, secret and equal elections by all employees. Usually the union representatives get a big share due to their good organisation, but some other candidates are elected regularly as well.

[Zanza]

Seems like an overly hypothetical thinking for a solid business plan.  Keynesian stimulus doesn't work very well when there is leakage.  The leakage may be relatively contained on a national level, but on the level of car factory, it definitely isn't.

Fair enough. I agree that the often heard anecdote that he wanted his workers to be able to buy his cars is at least dubious.