Another ongoing nonsense by leftists is that the workers, not the entrepreneurs, are the ones who own the means of production. This would be complete nonsense spreading on social media. Having graduated from the College of Commerce (now the School of Business and Economics) makes me cringe at the idea. I've had some business marketing classes, accounting classes, and operations management classes which can help refute this idea. I keep hearing, "If only the poor will unite altogether--you rich are no more." Well, let's try and think about how the idea of workers, not entrepreneurs, owning the means of production can't work.
Defining what capital really means
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| Image by Sabrina Jiang © Investopedia 2020 |
Capital is a broad term that can describe any thing that confers value or benefit to its owner, such as a factory and its machinery, intellectual property like patents, or the financial assets of a business or an individual. While money itself may be construed as capital is, capital is more often associated with cash that is being put to work for productive or investment purposes.In general, capital is a critical component of running a business from day to day and financing its future growth. Business capital may derive from the operations of the business or be raised from debt or equity financing. When budgeting, businesses of all kinds typically focus on three types of capital: working capital, equity capital, and debt capital. A business in the financial industry identifies trading capital as a fourth component.
Investopedia also defines working capital as:
A company's working capital is its liquid capital assets available for fulfilling daily obligations. It is calculated through the following two assessments:
Current Assets – Current Liabilities
Accounts Receivable + Inventory – Accounts Payable
Working capital measures a company's short-term liquidity. More specifically, it represents its ability to cover its debts, accounts payable, and other obligations that are due within one year.
Note that working capital is defined as current assets minus its current liabilities. A company that has more liabilities than assets could soon run short of working capital.
What we see is that capital in itself is what runs the business. The entrepreneur sets aside a certain sum of money to run a business. The entrepreneur buys the building, equipment, the raw materials for production, and employs people to get everything running into action. The entrepreneur has to make sure that revenues exceed expenses. Expenses include the wages of all employees whether they are part of direct labor or indirect labor. Any good entrepreneur will know that treating employees right, getting the best machinery, getting the best raw materials, and any best means of production will yield more quality products than bad ones. If workers are treated well, paid accordingly, and have good working conditions then they will be motivated to do better. A research team that's paid well and has good working conditions will be motivated to make better products.
In short, entrepreneurs need their workers. The workers need to be hired. The capital is money set aside for all operations expenses. The workers become partakers of the capital when the entrepreneur pays them their salary. If they aren't paid well then there's the right to quit. If employers mistreat their workers then the latter have the right to quit and the duty to call in labor rights. Employees can complain to the government that they're mistreated while they present proof of it. If entrepreneurs treat their workers right such as giving them good working conditions--workers will have the duty to fire workers who don't do their work right. Entrepreneurs should fire incompetent workers to keep the labor force in check and to avoid bad influence. It's a two-way street for success when entrepreneurs treat workers right and workers submit to their entrepreneurs.
Capitalism means the emphasis on private ownership and businesses to fill in demand. Any good entrepreneur will have to find the best ways to create the best products. No good entrepreneur will believe that fear produces results. Instead, a good entrepreneur will focus on making sure that the employees are in good condition. It would mean making sure every capital is wisely allocated such as giving proper compensation to the workers. A worker who doesn't get a fair share of the capital (i.e. proper wages) has the right to quit and look for a better job.
Debunking the claim that they can do better if they owned the means of production
The Great Leap Forward ended up being a massive failure. Tens of millions died by starvation, exposure, overwork, and execution in just a few years. It broke families apart, sending men, women, and children to different locations, and destroyed traditional communities and ways of life. Farmland was damaged by nonsensical agricultural practices and the landscape denuded of trees to fuel the steel furnaces. Thirty to 40% of the housing stock was demolished to obtain raw materials for collective projects. In industry, massive quantities of capital goods and raw materials were consumed in projects that yielded no additional output of final goods.The Great Leap Forward was officially halted in Jan. 1961 after three brutal years of death and destruction.
Mao's so-called "industrial revolution" ended in failure. So much for saying that foreign direct investments (FDI) will just harm the country. Mao tried his formula by "self-industrialization" and as the late Lee Kuan Yew said it--it failed miserably! Families were torn apart (reminds me of sending Filipinos to work abroad is doing the same). Farmland was destroyed because of overproduction and the killing of the sparrows. The sparrows only ate a few grains and ate many pests. Mao could've chosen to import raw materials but his stubborn pride didn't allow him. Three years later, the Great Leap Forward was nothing more than a failed realization.
It wasn't until the great Deng Xiaoping took over China at the age of 74. Reading Lee's book From Third World to First interestingly wrote a lot about China under Deng. Deng who is infamous as his regime was involved in Tiananmen Square Massacre was also the man who brought back Chinese entrepreneurship. Although Deng considered himself a socialist--his modifications by adding Chinese characteristics somehow worked. Deng allowed free markets in Communist China to do business. As he said in America, "China is open for business." Deng's policies allowed China to progress into an awakened sleeping dragon. It was a big difference from Mao's so-called "Great Leap Forward".
If there was any real Great Leap Forward--it was Deng's. Deng wasn't afraid to import raw materials, import employment, import anything, to achieve the China he dreamed of. Deng said that he wasn't too particular about the cat--it's all about if it catches the mice that are causing trouble. Deng's methods had proven that private enterprises work better. The same went for Vietnam and Do Muoi. Samsung from democratic South Korea has some of its units manufactured in Communist Vietnam. Deng's China proves that competition, not state-run monopolies, will create better products.