Diane Trout (alienghic) wrote,
Diane Trout

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Economic systems

I recently found myself in a socialist study group and learned a bit more about their belief system. I am somewhat sympathetic because of my experiences with the current intellectual property regime and what I've learned of the human rights abuses of various industries.

However none of the large scale experiments in socialism have been particularly successful. For instance the essay why socialism causes pollution points out how most of the soviet socialist countries were exceedingly polluted by their heavy industries.

Then I remembered an insight I had some time ago. That the issues plaguing both transnational capitalism and soviet communism is absentee control. In the case of capitalism it absentee owners, for communism it was an absentee bureaucracy.

irilyth pointed me to some essays by the cato institute on how property rights could help prevent overfishing. My innate reaction to increasing property rights is to argue against increasing property rights. Though I realized that is because I am used to thinking about the problems with intellectual property.

On further reflection property rights if the owner is present at the property can provide a system that encourages sustainable management.

A simple example might be the comparison between a privately owned home and an apartment complex owned by an absentee landlord. For instance the appliances in apartments are frequently old and energy inefficient. Since the landlord isn't responsible for the costs of operating the appliance they have little reason to spend capital on improvements. However in the case of the privately owned home, since the owner would reap the benefits of the improvements both in lowered operating costs and increased value of the property it is much more likely that they would upgrade obsolete appliances.

The example I used on why owning fishing rights might not work is actually a general problem with publicly traded companies. The argument is that if a company doesn't provide a sufficiently high return on investment its share price will decline. If it declines sufficiently for the actual real assets owned by the company to be valued more than the price of the outstanding stock, another company is likely to buy them up and sell off the assets. So a company is faced with the choice between short term destruction from a hostile takeover or long term destruction from exploiting it's resource base faster than it can be replenished.

For instance laying off employees and transferring the work to the remaining workers in the short term can increase profitability. However in the long term the loss of skilled labor increases training costs, increases turnover, reduces morale, and reduces the quality of work. With enough layoffs the company ends up with no employees who are actually capable of producing the companies products.

However the motivation for these unsustainable business practices actually comes from the absentee stockholders, not necessarily the company managers. I recall reading comments from some CEOs that they would like to manage their companies in a less destructive way but the imperative for a high return on investment regardless of cost forces them to comply or be fired and be replaced by someone who is willing to run a company that way.

When the owners of the company work at the company they are far more motivated to consider the long term consequences of their decisions–a poor decision now can translate into a lost job in the future.

In the case of distant bureaucracies causing poor decision making for communism the closest to a functional communist society I can provide would be villages in india. In the cases that I have learned of the women of a village are responsible for tending the nearby forest.

Proper care for the forest provides a number of services for the village such as firewood and watershed management. The women managing this resource understood the services it provided and took care to maintain the forest.

The chipko movement for instance formed to take back local control of tree management from distant entities interested in maximum profit from logging.

In this example we have a solution to the problem of sustainable management being solved by community ownership.

However once again the solution is to bring management of a resource back to those affected by the resource.

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