Understanding How Society is Organised for Controlling and Exploiting People

by Manfred Davidmann



CONTENTS

Summary

Introduction

Understanding how Society is Organised
Ownership
Limited Liability
Control and Power
Decision-taking
Income and Wealth

Community, Corporations and Profit Motivation
Purpose of Any Enterprise and Profit Motivation
Profit as Overriding or Sole Objective

Capital and Wealth, Owners and Population
Taking Moneys from Customers to Recover Money Already Spent on the Business
Taking Moneys from Customers for Expanding the Business
Co-operatives and Mutual Aid Societies
Who Benefits
Using Employees' Moneys to Gain Control over, and so Take Possession of, the Population's Wealth.

Notes <..> and References {..}

Relevant Current and Associated Works

Relevant Subject Index Pages and Site Overview



SUMMARY

Describes the various ways in which corporations (companies) accumulate their capital and reserves from moneys taken from customers. Enterprises are allowed to collect, take over and control such moneys and co-operatives also take over moneys from their members.

The report looks at ownership, at the right to own property, and at the way society and our activities are organised and controlled to enable possessions and wealth to be accumulated by a few people at the expense of the population.



INTRODUCTION

This is one of a series of four studies which were undertaken to obtain a better understanding of why people have to struggle throughout their adult lives, in all countries and organisations, at all levels, to maintain and improve their standard of living and quality of life.

We know what people are struggling to achieve {3, 4} and so these studies explore why people have to struggle by looking at what they are struggling against.


The main report 'What People are Struggling Against' brings together the work reported in the four component studies by extracting and rearranging key findings from them.

To get an overview, it would be best to read the main report first. If you want more information on particular aspects of interest, you could then go to the component studies (See Relevant Current and Associated Works).



UNDERSTANDING HOW SOCIETY IS ORGANISED


OWNERSHIP

Ownership {2, 8} is the right to possess something and to decide what is to be done with it. If I own something it belongs to me and I decide what is to be done with it. An example would be owning a house.

Possession is having something in one's custody as distinct from owning it. If I possess something it belongs to another but I can decide how to use it. An example would be renting a house.

Another example would be deciding what to do with my money (ownership) or deciding and controlling the use of money belonging to someone else (possession).


And considering the right to ownership, two questions need to be considered. Namely where does the right come from and how is it exercised.


The right to own property varies among societies. Ownership rights are based on man-made owner-serving laws and there has been little, if any, grassroots community-orientated participation in their drafting.

In other words, such man-made laws which assign ownership 'rights' to owners have been devised by the owners themselves or by those who serve them.

Ownership of land and means of production, of funds and wealth, has always been accumulated at someone else's expense. All belonged to the community, belonged to all alike. And the source of profit (surplus) is money which belongs to another, to someone else. Corporations, for example, are continually collecting money from the population, are enriching themselves by doing so, without acknowledging or returning corresponding ownership rights. <2>


A human right is something one may legally or morally claim, is the state of being entitled to a privilege or immunity or authority to act. Human rights are those held to be claimable by any living person, apply to all living people. Every living person is entitled to them.

So ownership of land and means of production, of funds and wealth, rightfully belongs to the community, belongs to all alike, is a human right. Those who have accumulated them have only possession, which means that they can use and apply them but may do so only on behalf of the community and that they are accountable to the community for the way in which they do so.


LIMITED LIABILITY

According to owner-serving law, companies (corporations) are owned by people. People can buy shares, a share representing a small part of the company. The more shares they own, the greater is the part of the enterprise they own.

Owner-serving law lays down {7} that after owners have paid for their shares, they are not responsible for the company's debts to others such as suppliers, employees or customers.

Which means that owners take the profits but have transferred much of their risk to other people, to suppliers, customers, and employees.

What we see is a system where owners enrich themselves by using and risking other people's moneys.


CONTROL AND POWER {2, 8}

Owner-serving laws enable shareholders to elect a board of directors, usually on the basis of one vote per share. So the majority shareholder decides who, apart from himself or his representative, is appointed to the board of directors. In this way he determines the policy of the enterprise.

Hence other shareholders usually have little say or interest in deciding policy or in managing the company. What is left for them to decide is whether to sell the shares they hold or whether to buy more.

So the person who is the majority shareholder <1> has in effect taken possession of the ownership rights of the other shareholders and can use the company's assets for his own ends.

He in effect controls the enterprise (organisation) and decides what is to be done and how it is to be done.


So the system is organised so that a few, a relatively very few, people at the top take the key decisions. Considering mergers and take-overs, we see them battling with each other for more power, for greater control, over people and resources.


DECISION-TAKING

Although a company does not take decisions it can be held responsible and can be held to account for decisions taken by individuals within it. To that extent it serves as a cover for those who take key decisions, for owners and directors. {2, 8}


INCOME AND WEALTH

Directors are motivated by pay in its various forms, by greater wealth and by greater influence which includes dispensing patronage, and power. The pay of directors is what owners decide to pay themselves and their directors, is what the market will bear and increases with increasing influence and power. {3-4, 9}


The National Remuneration Pattern {5} is a precise pictorial record of the differentials within a country and between countries, from top to bottom, from young to old. It is used to assess changes in income and differentials for individuals, groups and professions. It also shows the relative value placed on different kinds of work. At the top are the owners or those who work directly for them, at the bottom are wage earners, pensioners, the poor.

What we see is a pattern of differentials which rewards service to the owners and their establishment rather than ability or service to the community. The nurse, the teacher, the fire-fighter and the police officer are at present paid comparatively little for the work they do.


In addition, purchasing power is being transferred from the bottom to the top. It is being transferred from those who can least afford to reduce their standard of living, to those at the other end to whom the extra purchasing power means greater luxury. The same percentage increase means a far greater amount at the top compared with the bottom of the income scale. In this way inflation is used to redistribute take-home purchasing power from the bottom to the top. Differentials and poverty increase even in an affluent society under full employment as long as attention continues to be focused on percentage increases instead of on amounts. {5}


It has been estimated {10} that 10 percent of the UK population were sinking into direct poverty, any gains in income being overtaken by the increasing cost of living. The next 20 percent were losing out, were being reduced to relative poverty. On the other hand the top 0.4 percent of the population took gains in take-home purchasing power which were 100 times those received by the general population. {5}



COMMUNITY, CORPORATIONS AND PROFIT MOTIVATION


PURPOSE OF ANY ENTERPRISE and PROFIT MOTIVATION

The purpose of any enterprise is to satisfy the community's needs by providing high quality goods and services at reasonable prices.

Those who can satisfy its needs are motivated by the community towards doing so by the reward, that is by the resulting profit. This process is referred to as 'profit motivation'. {6}

What matters is the value of the service to the community. Success is measured not by financial gain (profit) taken by owners, but by what the community gains.

The real profit or gain any enterprise achieves is the gain which the community obtains as a result of the enterprise's operations. Thus the social costs, that is costs to the community (such as pollution or unemployment) of any operation, have to be taken into account. {1}


For the free-market economic system to work, it is essential that prices are allowed to float unhindered according to the unhindered natural balance between supply and demand, within limits set to protect the community.

This means that there must be free unhindered competition.

It also means that profit margins and prices need to be controlled effectively so as to protect the community from exploitation. {6}

In this way the community attempts to ensure that its needs are satisfied at reasonable prices, that it gets good value for money.


PROFIT AS OVERRIDING OR SOLE OBJECTIVE

Problems arise when profit becomes an overriding or sole objective to owners, directors or managers, and they concentrate on maximising profits regardless of cost to others, regardless of the cost and consequences to the community. Profits are then maximised regardless of the cost to the community, limited only by the likelihood of unpleasant consequences. {1}

Profits can be increased by reducing labour costs. Those wishing to increase profits regardless of the cost to others, will thus aim to reduce the standard of living of the working population, and will aim to increase the needs of the working population so that people will work for less. And putting the interest of the owners before that of the community is the main cause of our deteriorating environment and of our deteriorating quality of life. {1}

The report 'Social Responsibility, Profits and Social Accountability' {1} showed that we are faced with a sequence of incidents, disasters and catastrophes which are increasing in frequency and in severity, affecting more and more people. The consequences of such socially irresponsible behaviour are now such that they threaten the survival of people as human beings.



CAPITAL AND WEALTH, OWNERS AND POPULATION

Shareholders would not even consider handing their moneys over to a corporation without in return becoming an owner of a corresponding part of the corporation, without getting a corresponding number of shares in return.

Customers are not given a choice. The corporation (its owners) simply take their customers' moneys
  • for getting back money already spent on the business and
  • for expanding the business
without giving the community corresponding ownership rights.

To 'rob' is to take unlawfully. But we are here looking at moneys being taken legally and largely without the owners' knowledge or agreement. What is taking place is perhaps best described by the phrase 'legalised robbery'.


TAKING MONEYS FROM CUSTOMERS TO RECOVER MONEY ALREADY SPENT ON THE BUSINESS

Money spent on new equipment and buildings is written off against income, say over a period of five years for equipment. After five years the enterprise has collected from its customers whatever has been spent on such assets. These moneys are deducted from income as a cost before calculating corporation (income) tax, in other words the enterprise pays no income tax on these amounts.

So an enterprise collects from its customers whatever its assets like equipment and buildings have cost, doing so without paying income tax on the amounts it collects.

And every time one buys goods or services, the price includes not only the manufacturer's and supplier's costs and profits, but also includes moneys (depreciation; capital replacement) for replacing their buildings and equipment.


TAKING MONEYS FROM CUSTOMERS FOR EXPANDING THE BUSINESS

As said already, no shareholder would simply hand his money over to a corporation (to its owners) without getting in return a corresponding share of the corporation's assets.

Yet when one buys goods or services, the price includes not only costs and profits, but also includes moneys which manufacturers and suppliers accumulate in 'reserves' for expanding the business or taking over other businesses.

So corporations (their owners) are continually collecting money from the population, are enriching themselves by doing so, without acknowledging or returning corresponding ownership rights.


CO-OPERATIVES AND MUTUAL AID SOCIETIES

Even co-operatives and mutual aid societies (building societies, credit unions) have been retaining some of their members' profits each year, for no apparent valid reason, accumulating these moneys for over 150 years <3>. By continually adding these moneys to their reserves they have become rich and powerful. That is, their chief executives and directors have become powerful, influential, and well paid. {2, 9, 11, 13}

And this explains some of the odd things which have been taking place such as

Buyers of the Trustee Savings Bank receiving not only ownership of the bank but also the money they bought it with. {12}

Lloyds Bank in effect using C&G Building Society's reserves to persuade C&G's members, both depositors and borrowers, into voting their mutual self-aid society out of existence. {9}

Abbey National apparently using N&P Building Society's reserves to persuade N&P's members to hand over the society in return for share or cash payments drawn in effect mainly or completely from their own reserves, from their own capital. {9}


WHO BENEFITS

These moneys are in effect taken from ordinary people and placed under the control of a few people at the top who in this way gain power, are enabled to dispense patronage (and support each other), gain high incomes and much wealth.

This 'legalised robbery' seems to be a key feature of the way society is organised to benefit those at the top.


USING EMPLOYEES' MONEYS TO GAIN CONTROL OVER, AND SO TAKE POSSESSION OF, THE POPULATION'S WEALTH

Company pension funds generally offer better pension provisions than commercial pension schemes. At first employers used their pension schemes as a way of motivating people to stay with the employer, to reduce staff turnover and its associated expenses.

Company pension funds in the UK are usually managed by 'trustees' on behalf of the pension fund's contributors and pensioners. But the terms of the trust deed usually provide that the employer (the company) has a controlling say in how the fund's moneys are to be invested and used <4>. And some employers have insisted that pension fund surpluses be transferred to company profits.


Pension funds run into many GBP billions and between them own, and thus are in position to influence and control, much if not most of UK's equities.

These moneys and funds should be under the democratic control of those who contributed and those who are contributing to them. But ultimate control, and the power and influence that goes with it, have in effect been taken from the working population and placed in the hands of those who own and control companies (corporations).


Company credit unions provide some financial services to members and some company credit unions are very large indeed.

In the USA over 75 per cent of credit unions are run by employers who in this way control the lending and investing of over USD 151 billion. In the UK also there are credit unions run by employers for their employees. Whoever controls a credit union also controls its reserves. It seems as if here also the employer (company) may be gaining control over enormous capital sums.

Control of these moneys and funds should be under the democratic control of those who contributed and those who are contributing to them, should be in their hands and be exercised by them. But at present it appears that, although limited by certain legal safeguards, the employer, that is those at the top, have a deciding control over these moneys.



NOTES AND REFERENCES


NOTES

<1>     Or the person who is the majority shareholder of the holding company in whose name the majority of the shares are registered
     
<2>   See 'Capital and Wealth, Owners and Population'
     
<3>   Since I discovered this and published my findings {2} there have been isolated instances of co-operatives moving in the direction of giving their members a better deal.
     
<4>   There are legal safeguards which protect pension fund members to a considerable extent. For example, I remember one corporation which used its pension fund for providing subsidised mortgages to those managers it relocated. Subsidised by charging a below-market rate of interest. They stopped doing so after a member of staff pointed out that the pension fund had to obtain the best return it could for its members and so could not be used to subsidise staff relocations.


REFERENCES

{ 1}     Social Responsibility, Profits and Social Accountability
Manfred Davidmann
http://www.solhaam.org/
     
{ 2}   Co-operatives and Co-operation: Causes of Failure, Guidelines for Success
Manfred Davidmann
http://www.solhaam.org/
     
{ 3}   Motivation Summary
Manfred Davidmann
http://www.solhaam.org/
     
{ 4}   The Will to Work: What People Struggle to Achieve
Manfred Davidmann
http://www.solhaam.org/
     
{ 5}   Work and Pay
Manfred Davidmann
http://www.solhaam.org/
     
{ 6}   Community Economics: Principles
Manfred Davidmann
http://www.solhaam.org/
     
{ 7}   Ownership and Limited Liability
Manfred Davidmann
http://www.solhaam.org/
     
{ 8}   Ownership and Deciding Policy: Companies, Shareholders, Directors and Community
Manfred Davidmann
http://www.solhaam.org/
     
{ 9}   Building Societies
Manfred Davidmann
http://www.solhaam.org/
     
{10}   Appropriate Pay
Manfred Davidmann
Social Organisation Ltd
     
{11}   Mondragon Co-operatives (Mondragon Corporacion Cooperativa)
Manfred Davidmann
http://www.solhaam.org/
     
{12}   The Trustee Savings Bank Give-Away
Manfred Davidmann
http://www.solhaam.org/
     
{13}   Credit Unions
Manfred Davidmann
http://www.solhaam.org/



Relevant Current and Associated Works

     
Title   Description
     
     
Main Report
       
What People are Struggling Against: How Society is Organised for Controlling and Exploiting People   Report of study undertaken to find out why people have to struggle throughout their adult lives, in all countries, organisations and levels, to maintain and improve their standard of living and quality of life. Reviews what people are struggling against.
     
     
Component Reports
     
Corrupted Economics and Misleading Experts   Shows how 'Economics' is used to misinform and mislead the general public. Clearly states underlying considerations of specific important economic relationships and comments on misleading political interpretations and on role of independent experts.
     
Taxing the Population for Private Profit   Shows how taxpayers' moneys are used in different ways to enlarge the profits of companies (corporations). These are in effect allowed to tax the population and to pass large parts of their operating costs to taxpayers and so to competitors.
     
Democracy Under Attack: Top-level Leadership and Decision-taking   Discusses and illustrates the internal struggles taking place in political parties and all other organisations, for achieving greater democracy and against those wishing to overpower democratic processes of decision-taking.
     
Understanding How Society is Organised for Controlling and Exploiting People   Describes how corporations (companies) accumulate their capital and reserves from moneys taken from customers. Enterprises are allowed to collect, take over and control such moneys. Cooperatives also take over moneys from their members. And much more.
     
     
Other relevant current and associated reports by Manfred Davidmann
     
Style of Management and Leadership     Major review and analysis of the style of management and its effect on management effectiveness, decision taking and standard of living. Measures of style of management and government. Overcoming problems of size. Management effectiveness can be increased by 20-30 percent.
     
Role of Managers Under Different Styles of Management     Short summary of the role of managers under authoritarian and participative styles of management. Also covers decision making and the basic characteristics of each style.
     
Directing and Managing Change     How to plan ahead, find best strategies, decide and implement, agree targets and objectives, monitor and control progress, evaluate performance, carry out appraisal and target-setting interviews. Describes proved, practical and effective techniques.
     
Motivation Summary   Reviews and summarises past work in Motivation. Provides a clear definition of 'motivation', of the factors which motivate and of what people are striving to achieve.
     
The Will to Work: What People Struggle to Achieve   Major review, analysis and report about motivation and motivating. Covers remuneration and job satisfaction as well as the factors which motivate. Develops a clear definition of 'motivation'. Lists what people are striving and struggling to achieve, and progress made, in corporations, communities, countries.
     
Work and Pay   Major review and analysis of work and pay in relation to employer, employee and community. Provides the underlying knowledge and understanding for scientific determination and prediction of rates of pay, remuneration and differentials, of National Remuneration Scales and of the National Remuneration Pattern of pay and differentials.
     
Work and Pay: Summary   Concise summary review of whole subject of work and pay, in clear language. Covers pay, incomes and differentials and the interests and requirements of owners and employers, of the individual and his family, and of the community.
     
Exporting and Importing of Employment and Unemployment   Discusses exporting and importing of employment and unemployment, underlying principles, effect of trade, how to reduce unemployment, social costs of unemployment, community objectives, support for enterprises, socially irresponsible enterprise behaviour.
     
Transfer Pricing and Taxation   One of the most controversial operations of multinationals, transfer pricing, is clearly described and defined. An easily-followed illustration shows how transfer pricing can be used by multinationals to maximise their profits by tax avoidance and by obtaining tax rebates. Also discussed is the effect of transfer pricing on the tax burden carried by other tax payers.
     
Inflation, Balance of Payments and Currency Exchange Rates     Reviews the relationships, how inflation affects currency exchange rates and trade, the effect of changing interest rates on share prices and pensions. Discusses multinational operations such as transfer pricing, inflation's burdens and worldwide inequality.
     
Organising   Comprehensive review. Outstanding is the section on functional relationships. Shows how to improve co-ordination, teamwork and co-operation. Discusses the role and responsibilities of managers in different circumstances.
     
Social Responsibility, Profits and Social Accountability   Incidents, disasters and catastrophes are here put together as individual case studies and reviewed as a whole. We are facing a sequence of events which are increasing in frequency, severity and extent. There are sections about what can be done about this, on community aims and community leadership, on the world-wide struggle for social accountability.
     
Social Responsibility and Accountability: Summary   Outlines basic causes of socially irresponsible behaviour and ways of solving the problem. Statement of aims. Public demonstrations and protests as essential survival mechanisms. Whistle-blowing. Worldwide struggle to achieve social accountability.
     
Co-operatives and Co-operation: Causes of Failure, Guidelines for Success   Based on eight studies of co-operatives and mutual societies, the report's conclusions and recommendations cover fundamental and practical problems of co-ops and mutual societies, of members, of direction, of management and control. There are extensive sections on Style of Management, decision-taking, management motivation and performance, on General Management principles and their application in practice.
     
How the Human Brain Developed and How the Human Mind Works   Describes clearly what happens while sleeping, role of dreaming, meaning of dreams. Functioning of the two halves of the human brain is related to the autonomic nervous and the immune systems. Shows how human behaviour is affected by primitive instincts.
     
Using Words to Communicate Effectively   Shows how to communicate more effectively, covering aspects of thinking, writing, speaking and listening as well as formal and informal communications. Consists of guidelines found useful by university students and practising middle and senior managers.
     
Community and Public Ownership   This report objectively evaluates community ownership and reviews the reasons both for nationalising and for privatising. Performance, control and accountability of community-owned enterprises and industries are discussed. Points made are illustrated by a number of striking case-studies.
     
Ownership and Limited Liability   Discusses different types of enterprises and the extent to which owners are responsible for repaying the debts of their enterprise. Also discussed are disadvantages, difficulties and abuses associated with the system of Limited Liability, and their implications for customers, suppliers and employees.
     
Ownership and Deciding Policy: Companies, Shareholders, Directors and Community   A short statement which describes the system by which a company's majority shareholders decide policy and control the company.
     
Creating, Patenting and Marketing of New Forms of Life     Evaluates problems in genetic manipulation, and consequences of private ownership of new life-forms by multinationals. Lists conclusions and recommendations about man-made forms of life, their ownership and patenting, about improving the trend of events.
     
The Right to Strike   Discusses and defines the right to strike, the extent to which people can strike and what this implies. Also discussed are aspects of current problems such as part-time work and home working, Works Councils, uses and misuses of linking pay to a cost-of-living index, participation in decision-taking, upward redistribution of income and wealth.
     
Reorganising the National Health Service:
An Evaluation of the Griffiths Report
  1984 report which has become a classic study of the application and effect of General Management principles and of ignoring them.

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Relevant Subject Index Pages and Site Overview


The Site Overview page has links to all individual Subject Index Pages which between them list the works by Manfred Davidmann which are available on the Internet, with short descriptions and links for downloading.

To see the Site Overview page, click Overview

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Copyright    ©    1998    Manfred Davidmann
All rights reserved worldwide.

History
11/12/98 Completed
03/01/99 To Website
30/01/99 Minor style changes
07/02/99 Main report published. Reference added.
02/06/02 Added 'Relevant Current and Associated Works'