Philippe D. Grosjean © 20091 The employment contract: Achilles’ heel of the capitalism system? Workplace Democracy Workshop March 2, 2009 Louvain-la-Neuve,

Philippe D. Grosjean © 2009 1

The employment contract: The employment contract: Achilles’ heel of the capitalism system?Achilles’ heel of the capitalism system?

Workplace Democracy Workplace Democracy Workshop Workshop

March 2, 2009March 2, 2009

Louvain-la-Neuve, BelgiumLouvain-la-Neuve, Belgium

This presentation is based on the arguments developed by ELLERMAN D. in Property and Contract: The Case for Economic Democracy (1992, Cambridge MA: Blackwell), http://www.ellerman.org/Davids-Stuff/Books/P&C-Book.pdf


SummarySummary

• The inherent logic of the current western-style economic system (democratic capitalism) resides in its refusal:

1. To accept the genuine mechanism that initiates the first property right to an asset that did not exist before one started to produce it.

2. To implement democracy in the workplace while demanding it in the political place.


1 - The initiation of a property 1 - The initiation of a property rightright

1.1 - The life-cycle of a property right: BIRTHBIRTH

Birthof

Property

Deathof

Property

Producer ConsumerTransfer

Life-Cycle


1.1 - The life-cycle of a property right: TRANSFERTRANSFER

Birthof

Property

Deathof

Property


Life-Cycle



1.1 - The life-cycle of a property right: DEATHDEATH

Birthof

Property

Deathof

Property


Life-Cycle



1.1 - The life-cycle of a property right

• In English, the creation or initiation of a property right is called « appropriation ».

• Economics focuses on the transfer of property rights in the marketplace. But to be transferred, a property right must first be created or initiated and it will be eventually terminated.

• To avoid confusion (specially in French), we suggest to use the neologism « neopropriation »



What is the legal machinery for

appropriation (neopropriation)

of assets and liabilities

created in production?

1.2 - The legal machinery



Examples in every-day life:


1. My grand-children makes a painting with my pencils

2. I cook a pastry in my friend’s kitchen

3. I log a cubic meter of firewood with a rented power-driven saw

4. I type a doctorate thesis with the PC of my boss.

5. Etc.

1. My grand-children becomes the 1st owner

2. I become the 1st owner of the pastry

3. I become the 1st owner of the cubic meter of firewood logged with the saw

4. I become the author of the doctorate thesis.

5. Etc.

LABOUR 1st OWNER




• When no law is broken,

• “Let the liabilities generated by an activity lie where they have fallen, and then let the party which assumed the liabilities claim any appropriable new assets resulting from the activity.” This party is named the “firm”.

In every-day life, there is an automatic market mechanism

operated by an “Invisible Judge”




In every-day life, one becomes automatically the owner of the first

property right to the result of our labour,

• Because one previously got the free use of, or one rents, or one already owns all necessary inputs.

• And one becomes the first transferor of this property on the market either by donation or by contract.



In every-day life, the ownership of the product is NOT “attached” to the

ownership of capital goods!

• Capital goods can be rented out!• The party that rents capital goods and all

other inputs will appropriate the whole product, i.e. become the residual claimant.




Why is it different when there is an employment contract?

• The employer says: “because you use my capital goods, I automatically become the owner of the first property right to the result of your labour”!

• And he adds: “I am therefore the first transferor” of this property right on the market!

1.3 - The illegal machinery of the employment contract



• Because, if property rights to assets are generally alienable rights, i.e. property rights that could be transferred on a market,

• The initial property right to an asset is an inalienable property right, i.e. a property right that cannot be transferred even with full, free and informed consent against a salary!

Why is it illegitimate?

1.3 - The illegitimate machinery of the employment contract



• See the full demonstration in the works referred to on the last slides of this presentation.

• In summary: the employment contract is culprit of driving a wedge between de facto and de jure responsibility.

Why is this right inalienable?

+ Whole product

De facto responsibility

De jure responsibility


1.3 - The illegitimate machinery of the employment contract


In the capitalist democracies, there is a schizophrenic mixture of alienable

and inalienable rights!

1. The distinction is carefully recognized and enforced between inalienable and alienable rights.

2. The specific inalienable nature of the voting right is carefully maintained in order to prevent the possibility of power accumulation within of few number of beneficiaries.

1. The distinction is carefully hidden and neglected between inalienable and alienable rights.

2. The specific alienable nature of the initial property right is wrongly imposed in order to allow the possibility of capital accumulation within a few number of beneficiaries.

In the political and social system

In the economic and social system






And the culprit is the employment contract!


The inputs K and L cooperate together

to produce …..The outputs Q

The Poetic View of Production

An axe cooperated with me to chop down the cherry tree!George Washington

2.1 – WHO IS WHO IS DE FACTO RESPONSIBLE?DE FACTO RESPONSIBLE?

2 – Workplace Democracy2 – Workplace Democracy


The Engineering View of Production

Given an axe and some of my labour, the cherry tree was chopped down!George Washington

A chemical reaction,

with no “actor”,which produces…

The outputs Q

The inputs L

The inputs K




The humanistic View of Production

I used an axe to chop down the cherry tree!George Washington

The Workers perform labour L and use up the

inputs K to produce

…The outputs QThe inputs K




• It is not the aluminium that makes people, it is the

people who make the aluminium……..!

• Therefore people should have the right to self-determination and self-government in the workplace!




• The employment contract implies:

1. That people are allowed to individually or collectively renounce their democratic rights in the workplace and voluntarily become the subjects of a ruler (i.e., the employer) or ruling association (i.e., the share-holders),

1. While the employer is not the delegate, representative, or trustee for those who factually work in the workplace.

• The employment contract is a contract of alienation, not delegation!

2.2 – The employment contract is a contract of subjection



• Contracts of subjection have already been abolished in today’s democratic countries:

– The contract for selling oneself,– The contract to alienate one’s political

rights,– The covertures' marriage contract wherein

the woman loses her independent legal personality in favour of the husband’s, ….

2.2 – The employment contract is a contract of subjection





1. The distinction is carefully recognized and enforced between inalienable and alienable rights.

2. The specific inalienable nature of the rights to self-determination and self-government is carefully protected.

1. The distinction is carefully hidden and neglected between inalienable and alienable rights.

2. The specific inalienable nature of the rights to self-determination and self-government in the workplace is carefully denied.








And, again, the culprit is the employment contract!


To transform a firm into a DEMOCRATIC FIRM, let us examine the bundle of shareholders’ property rights attached to equity shares:

1. Voting right

2. Whole product property right

3. Net asset property right

In an ordinary capitalist firm, the whole bundle is treated as

one amalgamated alienable property right

attached to equity shares.



Even though ……..

This is an alienable property right of whoever owns the means of production, i.e., an external

party or the workers themselves.


According to the theories of property and of non fraudulent contract, this is

a personal inalienable right of property to the whole product (Q, -K, -L)

of the workers-members.


According to the theory of democracy, this is a personal inalienable right

to self-determination and self-government of the workers-members.

1. Voting right



In a DEMOCRATIC FIRM, the bundle of shareholders’ property rights must be broken down into two distinct categories of rights attached to two distinct basic roles human beings can play within an economic and social system:

An alienable property rightProperty certificate• Transferable on the market• Giving no right to control the Firm

Two inalienable membership rights

of the workers-membersMembership certificate• One voting right per member• Delivered when joining the Firm• Destroyed when leaving the Firm• Not transferable on the market

The alienable property right to the means of production.


The personal inalienable right of property to the whole product (Q, -K, -L).


The personal inalienable right to self-determination and self-government.

1. Voting right


Role of an

Actor

Role of an

Owner


In a DEMOCRATIC FIRM,

• People are no longer employed by some one else,

• They employ themselves.

• Wage-earning (salariat) is replaced by INVESTARIAT



INVESTARIAT is based on four basic principles:

1. People have the personal inalienable right to self-determination in whatsoever circumstances,

2. Corollary to this right, people are always de-facto responsible for their self-determination,

3. People have the personal inalienable right to self-government in whatsoever circumstances,

4. People have the personal inalienable property right to the positive and negative outputs from their labour.



It is generally a necessity for a DEMOCRATIC FIRM to own assets to operate smoothly.

How is it organized?

How is the transferable (alienable) property right to the net asset organized amongst the workers-members with due recognition of their individual property right?

What happens when a worker-member decides to terminate his (her) employment with the firm?


This is an alienable property right of whoever owns the means of production, i.e., an external

party or the workers themselves.



ASSETSASSETSFixed assets

50.000 €

Circulating assets

50.000 €

100.000 €

LIAB.LIAB.

100.000 €

40.000 €

External liabilities

60.000 €

Individual internalliabilities

Beginning year n-1

Operating result for the year n-1

Sale of the positive outputs: +100.000 €

Cost of the inputs: - 50.000 € ================ Profit + 50.000 €

80 % paid to the workers

20 %lent by

the workers

ASSETSASSETSFixed assets

50.000 €

Circulating assets

110.000 €

LIAB.LIAB.

110.000 €

40.000 €

External liabilities

Beginning year n

60.000 €

(+ 10.000 €)

Individual internalliabilities

70.000 €

(+ 10.000 €)

Acti

f n

et

Acti

f n

et

Personalproperty right

of all workers


A DEMOCRATIC FIRM:

1. Realizes the democratic principle of self-government in its assignment of voting rights to those who are governed, currently and in the future.

2. Realizes the principle of private property appropriation (neopropriation – becoming the first owner of the result of one’s labour) in the assignment of net income rights, currently and in the future.



In a DEMOCRATIC FIRM:

3. Internal capital accounts recording net asset value, does not force workers to sacrifice fruits of their past labour reinvested in the firm.

4. There is no “shareholder’s equity”. Nobody can purchase the firm to control it. An external investor can only lend capital to the firm without getting the right to control it.



In a DEMOCRATIC FIRM:

5. The principle of “limited liability” is abolished. There are no longer “rights without responsibilities”(*).

6. There is no restriction as to who is the client of the firm: the client could be “private” or “public”.

(*) Refer to the excellent contribution by Dr Dan Plesch and Dr Stephanie Blankenburg, Corporate Rights and Responsibilities: Restoring Legal Accountability. https://eprints.soas.ac.uk/5707/1/RSA_Corporate_Rights-Plesch_and_Blankenburg.pdf



For detailed information on Democratic Firm

• David ELLERMAN– Download complete text of Property and Contract: The Case for

Economic Democracy (1992, Cambridge MA: Blackwell) at:

http://www.ellerman.org/Davids-Stuff/Books/P&C-Book.pdf – Many other papers at: www.ellerman.org

• Philippe D. GROSJEAN– Download complete text of L’engagement pour les travailleurs

(L’HARMATTAN, Paris, 2007) at: http://www.editions-harmattan.fr/index.asp?navig=catalogue&obj=livre&no=24974

– More information at: www.grosjean-philippe.eu


Documents

Philippe D. Grosjean © 20091 The employment contract: Achilles’ heel of the capitalism system? Workplace Democracy Workshop March 2, 2009 Louvain-la-Neuve,