Saturday, May 30, 2009
The Share Economy: Reduction Ad Absurdum or Good Idea
The Share Economy Reductio Absurdum or a Good Idea L. Weitzman wrote a book that proposed making wages a share of gross revenue for a firm. As the company did better or worse and as the economy did better or worse, employee's wages would go up and down. This would avoid the need for layoffs. This is a much more humane way to send employees the message that the demand was declining for their services. Those that could more easily change jobs would do so in response to the opportunity to get a higher wage. Social scientists have documented the devastating emotional effect of unemployment. For example, Dr. Dieter, the famous Dr. Happiness gave a talk at my University and he reported on a study where those who were laid off suffered a decline in happiness. "Preferences over Inflation and Unemployment: Evidences from Surveys of Happiness" found that a one-percent increase in unemployment produces more than twice the decline on happiness of a one-percent increase in inflation. Others report on a more elusive effect. Reading this and seeing the Savings and Loan Crisis of the eighty's, the Asian Financial Crisis of the late ninety's and now the global recession, proposed: All obligations of a firm shall be a percentage of their income! This eliminates the distinction between equity and debt. A firm that does not have cash on hand gives a share of its income. And consistent with participatory democracy and sortition, ones votes in the firms affairs shall be proportional to ones share of the income whether one is an employee or a shareholder. Thus when GM suffered a practical halving in revenue, both its bond holders (I am one), its share holders and its workers would see their income go down by half. It is certainly a blow to see one's income go down by half. But it is not as bad as loosing one's job. And it certainly not as bad as seeing that one's savings disappear. It is certainly better than what in the quote of one bondholder who said they will put their bonds up as "wallpaper. As a GM bondholder myself with about five thousand invested therein, I certainly concur. And it is better than stocks. There is is an idea that the stock market is just one big Ponzi System As I heard on NPR, those who buy Google don't expect to make the money back from dividends or the revenues of the firm. They intend to sell the stocks at a higher price. And, this means of course that chief executive officers are encouraged to increate short term earnings by gimmicks or outright accounting fraud. This drives up the stocks which make the investors happy. Thus, I propose something dramatic. Once one buys a share, one can never sell it. You can vote along with the other shareholders, including the workers to sell the business and liquidate the business. And presumably, when the steel of a factory is of more value as scrap than in making the product, that is what will happen. And sometimes, a hotel might make so little revenue, that it is time to bulldoze and sell the land. And the few remaining workers and those owning shares in the hotel operation would vote to take that benefit and go on with their lifes. Until then, there is no crisis. In the next post, I will talk about how we handle individual finance in a true share economy--hint rent, mortgages, personal debts are paid as a share of one's income.