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April 24, 2020


Ralph Musgrave

“…small businesses that bear risk to a greater extent that does larger capital”. Then how come Virgin Airlines is in trouble? Actually it’s businesses (large or small) that are funded largely by debt that are in trouble, or businesses which have high fixed overheads that are in trouble (e.g. Greggs, which chose to rent properties, rather than buy them).

“Freelance workers who are ineligible for furlough schemes”. Actually there’s a scheme for the self-employed.


Branson has little skin in the game (not withstanding his offer of the odd flood ridden island as collateral) whilst typically sole proprietors, self employed/freelancers risk the roof over their heads. Try getting a business loanfloan from any bank without putting your house up as collateral.


"This points to a case for subcontractors, freelancers and workers to have equity stakes"

They can easily do that by buying shares in the market with a portion of their wages.


"what function, then, do capitalists fulfil?"

Allocate capital to its "highest and best use (HABU)".

The alternative is to have a command economy where the government makes the allocation decisions. Historically, that hasn't worked out well.


The Banks are platform providers, their customers have more risk involved than their shareholders. Time for a new ownership model, or at least a return to an old one.

The alternative to equity markets is not a command economy, capital can be provided via bonds, which do not obtain or warrant a primary fiduciary duty.


So an army of marginally head above water self employed and PAYE can buy 0.005% of available share capital with their surplus. Cushty.
As for efficiently allocating capital you are presumably referring to toy model capitalism. Rather than the teal world type which sees the vast majority of capital allocated to land speculation. (see article 're 95% bank loans for residential mortgages)

Robert Mitchell

> Allocate capital to its "highest and best use (HABU)".

Historically, that has not worked out well for me.



Workers earn their marginal product. If a company gives them equity, it would reduce their other compensation by the same amount.

"bank loans for residential mortgages"

Bank loans for residential mortgages are typically not an allocation of capital, but rather a change in the ownership of the housing stock. Only new residential building is an allocation of capital.

There are rules in place to prevent speculation in real estate, like making sure that people can afford their mortgage payments, but the government did not enforce them, i.e., NINJA loans.


...workers earn their marginal product...
Toy models make for bad predictions and even lousier outcomes.
If workers were homogeneous ergo interchangeable...if they had comprehensive knowledge of the labour market...and were employers able to measure productivity accurately and compete freely in the labour market etc etc etc then maybe such a theory would stand scrutiny. Meanwhile back in the real world, workers do not earn 100% of GDP minus depreciation.
As for NINJA loans and that ilk, it is precisely because governments and regulators are captured by the power of big finance that such activities are tolerated and even encouraged.How so?
Capital is not allocated according to HABU but rather it's diverted toward land speculation and real estate more generally. The preserve of the modern capitalist/banker or general rentier.


The poor always gain least in booms and suffer most in slumps. Talking about different modes of production is as much use to them as a chocolate teapot. There is only one viable model, "modern" or not, and it works for more people than we like to acknowledge. We can of course tax it and correct its failures, when we win an election.

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