[Editor: This article by J. J. Kenneally was published in The Labor Call (Melbourne, Vic.), 12 April 1928.]
The rights of living capital.
The terms “Capital” and “Labor” fail to truly and adequately describe or represent the factors and forces engaged in the carrying on of industry. These terms were applied in days long gone by to exalt so-called ‘‘Capital” above its real position, and to degrade the worker to a position much below his real standard. Thus was a gap created which separated the worker from the employer in every walk of life.
I shall demonstrate how this gap may be removed by the establishment of true Co-operation, which will bring Capital and Labor together, and ensure the harmonious working of both sections to their mutual, financial and material advancement.
I propose to show that the consummation of industry is brought about by Capital and Capital only, and that consequently capital must be of two kinds, viz., Living Capital and Dead Capital.
Now, while Living Capital can and does create Dead Capital, it is impossible for Dead Capital to create Living Capital. Consequently it must be admitted that Living Capital (Labor) is the major and more essential factor in producing, manufacturing and distributing the wants and general requirements of every civilised country.
Living Capital is represented by intellect, skill, natural ability, education, training and mental and physical exertion.
Dead Capital, on the other hand, is represented by land, buildings, machinery, stock, money and the good will of trade. It is easily understood that Dead Capital by itself is practically useless, and it is this uselessness of unused Dead Capital that causes thinking minds to appreciate the full value of Living Capital. The capitalisation of Dead Capital having already been fully explained, is understood by people in every community, but it is not so with Living Capital. The system of assessing the value of Living Capital is entirely new, and it is, therefore, necessary to establish a correct formula by which the correct capitalisation of Living Capital can be achieved. Dead Capital is usually required by its owner to return him, say, 5 per cent. per annum as interest and, say, another 5 per cent. as depreciation and cost of insurance, that is, 10 per cent. per annum. Ten years’ earnings at 10 per cent. per annum equals the principal or full amount of Dead Capital invested.
Now, Living Capital is required to do the same. Therefore 10 times the annual earnings of the “human machine” is its Living Capital invested in the industry. Being capitalised on the same basis, both Living and Dead Capital must share the profits and losses on equal terms. This is, indeed, true co-operation. A wage earner on a basic wage of £4/10/- per week would earn in 52 weeks £234, and in 10 years his total earnings would be £2340, and as 10 years’ earnings is computed as his capital value, the Living Capital of that “human machine” in an industry in which he is engaged would, therefore, be £2340. If the nett profits, for the year, were sufficient to pay 5 per cent. on the total amount of Living and Dead Capital invested or engaged in the industry, then that “human machine,” as Living Capital, would receive 2340 shillings, or £117, as his bonus or dividend, in addition to his wages, as the result of the successful working of the industry.
Now, take the case of the chairman of the Victorian Railways Commissioners, who receives a salary of £5000 a year. On the formula that 10 years’ salary represents his Living Capital in the industry, his Living Capital would be £50,000. And 5 per cent. of the profits on his Living Capital of £50,000 would be £2,500, as his bonus or dividend, in addition to his salary, for his successful management of the Victorian Railways. But if, on the other hand, a loss was incurred of, say, 1 per cent. on the total amount of the Living and Dead Capital invested or engaged in the Railways for the year, then the reduction from his salary to meet his share of the loss would be £500, while the reduction of 1 per cent. of his (the basic wage earners) Living Capital of £2340 would be only £23/8/- for the year. A loss of £1,650,000 would be about 1 per cent. The owner of Dead Capital would fare in exactly the same way. He would receive his bonus or dividend of 5 per cent. on the amount of his Dead Capital when such a profit was to be distributed, and in like manner, he would have to contribute 1 per cent. to make up for his share of the loss. This is actual as well as true Co-operation.
The recognition of what constitutes Living Capital, and the treating of capital, Living and Dead, with equal justice is the first really forward step to remove discontent, class consciousness and class hatred. It is also the first step to secure the actual and friendly co-operation of employers and employes. The real shareholders in every industry, therefore, are the workers — owners of Living Capital, on the one hand; and the investors, title, bond and scripholders — owners of Dead Capital, on the other hand.
One of the many merits of this system is the interest, for selfish motives, taken by each employe in the efficient and successful performance of his work.
This interest inspires each worker, not only to do his best in the efficient performance of his task, but also to see that his fellow worker does his best in like manner. This system removes non-producers, such as foremen, spies, pimps and inspectors. It is the natural and most effective way to get rid of the “loafer,” the “sponger,” the “waster” and the “thief,” if any, from a hive of industry carried on by workers keenly interested in its success, and equally determined to prevent the possibility of loss. This is the only system by which Governmental activities can be most successfully run, and most satisfactorily controlled. Under this system, the workers would have a controlling voice, in proportion to their capital, in the appointment of managers, superintendents, etc. The workers would see that “dead heads,” such as bosses’ favorites and bosses’ proteges were not employed in the industry, and that merit only was the acceptable qualification for positions.
J. J. KENNEALLY.
The Labor Call (Melbourne, Vic.), 12 April 1928, p. 11
employe = an archaic form of “employee”; plural: employés (employees)
nett = an alternative spelling of “net” (especially used in a financial context, regarding money or assets remaining after expenses, deductions, losses, taxes, etc.)
per cent. = an abbreviation of “per centum” (Latin, meaning “by a hundred”), i.e. an amount, number, or ratio expressed as a fraction of 100; also rendered as “per cent” (without a full stop), “percent”, “pct”, “pc”, “p/c”, or “%” (per cent sign)
scripholder = someone who holds (owns or possesses) scrip (a certificate, or certificates, which can be exchanged for cash, dividends, or goods, such as stock certificates; a small scrap of material, usually paper, especially a written document)
viz. = (Latin) an abbreviation of “videlicet” (a contraction of the Latin phrase “videre licet”), meaning “it is permitted to see” (the “z” derives from the z-shaped Latin shorthand symbol for “et”, as used in the Tironian shorthand style); in actual practice, “viz.” is used as a synonym for “in other words”, “namely”, “that is to say”, “to wit”, or “which is” (used when giving further details about something, or giving a list of specific examples or items)