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From: eder@ssc-vax.UUCP (Dani Eder)
Newsgroups: net.politics
Subject: Re: Re: Re: Libertarianism & Luck
Message-ID: <380@ssc-vax.UUCP>
Date: Thu, 24-Jan-85 16:24:45 EST
Article-I.D.: ssc-vax.380
Posted: Thu Jan 24 16:24:45 1985
Date-Received: Sun, 27-Jan-85 07:15:35 EST
References: <272@gargoyle.UChicago.UUCP> <547@ccice2.UUCP> <428@whuxl.UUCP> <4245@ucbvax.ARPA> <436@whuxl.UUCP>
Organization: Boeing Aerospace Co., Seattle, WA
Lines: 53

> No, it certainly would not be OK.  If JPG distributed his billion dollars
> to 100 million laborers or those who actually do the work that sustains
> the billion dollars then this would seem more fair than perpetuating
> and even increasing an unequal distribution of wealth. Giving the one billion
> dollars to somebody other than his son does not resolve the fundamental
> problem--perpetuation of an unequal distribution of wealth and passing
> on such wealth without any effort on the inheritors part, other than
> crawling out of the womb.
>  
     Let's see just how unfair the current system is.  I'll use the
Boeing Company for 1983 as my example, because I have our annual
report handy.  Total income was $11.308 billion. 98.4% of this was
due to sales, the other 1.6% was mostly interest on time deposits
and the like.  Most of this, $8.128 billion, goes to expenses:
buying raw materials and parts from subcontractors, utility bills,
purchase of machine tools, local and federal taxes, debt service, etc.

     The remaining $3.18 billion is available to pay employees
salaries and profits to the shareholders.  The employees received
$2.825 billion, or 88.8% of this.  The shareholders received
$136 million, or 4.3%.  The balance was reinvested in the company,
to provide future growth.  Even assuming all the retained
earnings eventually go to the shareholders, they receive only
12.2%, or $355 million.

     Why should the owners receive anything?  Well, they own
a bunch of buildings, tools, and land, worth $3.048 billion,
with which you can build useful products, like commercial
airplanes.  Why should the workers receive anything?  They
have specialized skills and experience that can produce those
products.  It takes a cooperative effort of those who have
the hardware and those who know how to use it to build the
products.  Why is it reasonable for the shareholders to
get 12.2% of the 'profits'?  It is they who take the risk of
losses.  The employees are guaranteed a known wage.  It is
true that employees may be laid off, but so long as they
work they will get a definite amount for their time.  On the
other hand, the shareholders have no guarantee of profits.
It is possible for them to lose their entire investment.
They could also make lots of money.  It is for the risk taking
that they are worthy of their gains.

     Now, a regulated monopoly, like public utilities in most
states, has no risk.  The state typically sets a guaranteed
rate of return, typically fairly high.  This, to me, is wrong.
If there is no risk, the rate of return should be very low,
maybe 3%.  Otherwise the shareholders in the monopoly ARE getting
a free ride of the type several USENET readers complain about.
So, the libertarian answer is to de-regulate the monopolies,
and allow competition and the market to operate.

Dani Eder / Boeing / ssc-vax!eder