23 Things They Don't Tell You About Capitalism
Dr. Hopkins
EC 4350
11 September 2012
Reading Journal #2
23 Things They Don't Tell You About Capitalism
Chapter 2
What they tell us: Shareholders are not guaranteed any fixed payments.
What they don’t tell us: Shareholders really only care about the short-term profits instead of long-term investments which in turn reduces the growth of the firm in the long-term.” …the L word, that is limited liability, is what has made modern capitalism possible.” (12)
-Karl Marx defends capitalism
Adam Smith was against LLC because “…it cannot well be expected that they would watch over it with the same anxious vigilance…” (13). LLC’s were granted (royal charter) to bigger companies of national interest at first but as bigger industries came on board (railway, steel, and chemicals) LLC’s became more generally available. In Britain suspicion about LLC’s lingered on even as late as the 19th century but it was Karl Marx who saw its potential calling it “capitalist production in its highest development”. Of course Marx had an ulterior motive calling LLC’s a “point of transition” to socialism because it did actually did what he wanted, separate ownership from the managers without compromising production. (14)
-Death of the capitalist class-
This dream did not come true but it advanced capital accumulation and technological progress. Although there was a risk of manager’s playing with other people’s money most of the managers (leaders) were charismatic entrepreneurs (Henry Ford, Thomas Edison, Andrew Carnegie) who were largely vested in the company so making ill-advised decisions would hurt them too. Eventually the companies got too large and the professional managers were deciding how the companies were run. Many feared that these new professional managers were career bureaucrats and had their own personal agenda to maximize sales and not profits to see bigger to boost their egos. Joseph Schumpeter saw this coming and said it …”reduce[s] the dynamism of capitalism, but
EC 4350
11 September 2012
Reading Journal #2
23 Things They Don't Tell You About Capitalism
Chapter 2
What they tell us: Shareholders are not guaranteed any fixed payments.
What they don’t tell us: Shareholders really only care about the short-term profits instead of long-term investments which in turn reduces the growth of the firm in the long-term.” …the L word, that is limited liability, is what has made modern capitalism possible.” (12)
-Karl Marx defends capitalism
Adam Smith was against LLC because “…it cannot well be expected that they would watch over it with the same anxious vigilance…” (13). LLC’s were granted (royal charter) to bigger companies of national interest at first but as bigger industries came on board (railway, steel, and chemicals) LLC’s became more generally available. In Britain suspicion about LLC’s lingered on even as late as the 19th century but it was Karl Marx who saw its potential calling it “capitalist production in its highest development”. Of course Marx had an ulterior motive calling LLC’s a “point of transition” to socialism because it did actually did what he wanted, separate ownership from the managers without compromising production. (14)
-Death of the capitalist class-
This dream did not come true but it advanced capital accumulation and technological progress. Although there was a risk of manager’s playing with other people’s money most of the managers (leaders) were charismatic entrepreneurs (Henry Ford, Thomas Edison, Andrew Carnegie) who were largely vested in the company so making ill-advised decisions would hurt them too. Eventually the companies got too large and the professional managers were deciding how the companies were run. Many feared that these new professional managers were career bureaucrats and had their own personal agenda to maximize sales and not profits to see bigger to boost their egos. Joseph Schumpeter saw this coming and said it …”reduce[s] the dynamism of capitalism, but