Today I intend to show why, under capitalism, wealth is a reward to property, independently of talent, hard work or creativity.
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A few weeks ago, according to reports by Reuters and Bloomberg:
"Apple became the most valuable public company of all time after its market value climbed beyond $US620 billion to surpass a milestone set by Microsoft more than a decade ago.
"Its shares were up 2.3% at $US662.73 in overnight trade (...)". (See here)
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| Click for a larger version. [1] |
The chart above traces Apple Inc. (AAPL) market-close share price since September, 1984. All that time, within the US and abroad, assembly workers assembled gadgets, mobile phones, computers. Industrial designers, designed; computer programmers, programmed. They contributed anonymously to the production with their physical and mental efforts and were paid for it. They pulled their own weight, so to speak.
Stuff was sold; profits made and cash dividends were distributed.
According to Yahoo Finance, this was AAPL price in September 7, 1984: USD26.50 (adjusted for dividends and splits). This was the price in August 14, 2012: USD631.69. [1]
A shareholder (or capitalist, if you prefer) who held AAPL stock since September 1984 did not do anything: did not assemble a single machine or write a single code line, didn't design anything. No hard work, creativity or talent flowed from the shareholder to the firm.
If she bought the share in the secondary market, inherited it, or somehow acquired it from an original capital subscriber (say, won it in a raffle), she did not contribute to the initial capital, either.
What about "entrepreneurship"? Assuming one accepts entrepreneurship as a potential justification, an individual's ownership of AAPL stock cannot be said to improve the quality or quantity of the gadgets produced, neither it influences their method of production or variety. [2]
Moreover, shareholders, as such, don't need to go near the firm they partly own, know what is it they do, or for that matter, even breathe: institutional investors, for one, can't do those things and they are shareholders in the exact same sense human shareholders are.
And yet, every shareholder gained from holding that share: USD26.50 (the price of a single AAPL share in September 7, 1984), adjusted for inflation, is equivalent to USD58 to 60 in August 2012. The close price of USD631.69, represents a capital gains of at least 950% over the original investment. [3]
It's hard to see what kind of contribution shareholders, in their capacity as shareholders make to the productive process, even taking into account "entrepreneurship". The only justification shareholders (breathing or not) need to profit from their ownership of shares is ownership itself.
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Note that I am not making any value judgement. I am not saying this is good, or should be otherwise. The reader is free to decide.
Some readers, however, are likely to oppose this scenario on several grounds. A common objection, for starters: let's leave aside institutional investors and limit the discussion to breathing human shareholders; these shareholders, the objection would go, may deserve their gains, no longer as reward for hard work, personal talent or creativity, but due to other personal virtues.
Incidentally, formulated that way, that is a moral objection, not that there's anything wrong with that. But it's important to call spade a spade.
To keep this post as short as possible, that and other objections will be considered in the coming weeks.
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Readers are invited at all times to submit their questions, to offer their own original objections and comments. Please, however, check the Comments page before posting.
Notes:
[1] Yahoo Finance: APPL
[2] The topic of entrepreneurship has become popular in the last few decades. To this day, however, the notion of entrepreneurship is contested even among mainstream economists and for good reasons: how do we define and measure it?
[3] Source: BLS. Series ID: CUUR0000SA0
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