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A Tale Of Two Capitalisms

The French government's plans to force companies to pay employee bonuses whenever they raise dividends to shareholders has prompted controversy in France. Is there any right way to divide the profit pie between workers and shareholders?

A Tale Of Two Capitalisms
François Rachline

PARIS - It is said that capitalism was commercial in the 18th and 19th centuries, industrial in the 20th century and for the last few decades, financial, or even boursier (ie, stock market-driven). Over the same period, the structures at the heart of business have also undergone huge changes.

In the 19th century, the so-called "affectio societatis," or collective heart, of a company tended to be those who held the capital, "the capitalists'. Those people who got together to launch an activity, consecrated themselves to it entirely and believed in it unfailingly.

At the time, social conditions were enough to secure a labor force and convince ill-educated day laborers to work in the factory. The workers soon became attached to their tools, not yet forming the heart of the company (apart from a few rare exceptions), which remained the domain of its creators.

These days, the opposite is the case. A sort of capitalism without capitalists has slowly developed in which the salaried workers have become the "affectio societatis," of modern-day companies. It is the employees who carry the spirit of a company, they live and breathe it, and in living and breathing it, they bring the company to life. The capital comes from pension funds and investment funds spread around the world. These investors generally know very little about the company they are invested in. For them, the company is a simple supplier of dividends or underlying capital base upon which to create derivative products.

These two forms of capitalism have been in conflict for some time. The question of how to strike a long-run equilibrium has existed ever since the shareholder has existed in opposition with the salaried worker – sometimes to the detriment of the first of the three poles who remains a client.

Put another way: what's the best way to divide the added value? There you have one of the oldest economic questions in the book, dating at least as far back as the late 19th century political economist David Ricardo. There is no established logic on how to slice up profit for the remuneration of capital holders and the remuneration of labor. Particularly in the heart of the global village, differentials of remuneration – between a country and the rest of the world – can lead to uncontrollable capital movements. The involvement and capital participation of salaried workers is one answer, which is applied in unequal measure, here in France, as in the rest of the world.

The theory of worker participation in capitalism – as supported by former French President Charles de Gaulle – is a big and true response, which also includes the decisive advantage of reconciling national factors with the demands of globalization. Alas, this solution has not yet been seriously applied in big business. Social partners still need to adhere to it.

The French controversy with regards to government plans to force companies to pay a bonus to employees if they raise investor dividends, must be placed in this context. The issue deserves more than an accountancy-based approach, which was undoubtedly influenced by future elections. The announcement gave the illusion of something new, but in the end wound up upsetting everyone. In a globalized world, good governance cannot simply be imposed from the top. It comes through making everyone responsible, not treating them like children. It comes through the creation of transparent conditions aimed at success rather than announcing this or that coercive measure.

Is it not strange, moreover, that a government should decide the division of a company's profits. The desire to restore purchasing power in the country is clearly not questioned -- though we all know the road to hell is paved with good intentions. And this intrusive state hardly seems more enlightened than the interventionist state of old.

Read the original article in French

Photo - Charles Hutchins

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