The Divine Right of Capital

A much better manifesto of Capitalism is Marjorie Kelly’s The Divine Right of Capital (amazon.com).  In it, Kelly explains in greater detail the divide between capital and labor, some of its origins, and dives deep into the assumptions latent within the current system which she hopes to see uncovered and overturned.

Kelly repeatedly returns to the metaphor of feudalism, with the noble Board of Directors paying tribute to the shareholder lords, ignoring the needs of the masses of peasant employees.  It’s quite a good metaphor, especially as she espouses for democratization of companies, just as politics saw and end of feudalism and monarchies with the rise of democracy over the last 200+ years.

Kelly’s other big idea is to switch around the key narrative of financial reporting.  Rather than:

Capital income = Revenue – Cost of materials – Employee salaries and other expenses

this should instead be:

Capital income + Employee income = Revenue – Cost of materials – Other expenses

Simply put, this new formula puts the income of the capitalists (a.k.a. “owners”) on equal footing to the income of the employees who generate the revenues.

Kelly takes that one big step further, advocating that the capitalists share in the ownership of the companies.  Her big, potentially revolutionary idea is that employees should threaten to walk out, all at once, negotiating with the shareholders to see just how much those shareholders value their employees.  She gives one anecdote of this happening, during a buyout of an advertising agency, and thereafter suggests every employee do this whenever the are being “purchased” in an acquisition.

Beyond that, Kelly’s spends nearly every page explaining why “ownership” needs to be shared, why ownership of companies isn’t the same as owning a house or car, why employees are undervalued, and arguing in a dozen different ways why she’s right.

What’s missing from the 200 pages is how to go about making that change.  Beyond Kelly’s walkout idea, which I worry could happen en masse, creating an economic mess bigger than 2007/2008, she’s not helpful in offering solutions.  And even if her change came to be, Kelly provides no details on how employee ownership is supposed to work in practice, how shares get allocated, how shares get created and destroyed when employees start and leave jobs, etc.

All in all, this is a far better description of the problem than Kelso’s The Capitalist Manifesto, but similarly left me without a clear path to follow.