Understanding Ownership

On a run around one of my favorite routes, I ended up listening to a podcast from Bernard Chapin.  Uncie Bern had wandered into the discussion of whether the Nazi's were indeed socialist (which by most mathematical, economic, and political measurements were).  While one would think with the full name "The National Socialist German Workers Party" would leave little doubt, Hitler was a such a bad man that the left desperately has (and still needs to) paint him as a right winger (while still have heart palpitations for Mao, Stalin, and Che).  This has resulted in a painfully childish debate of semantics about who owned what, were the means of production owned by the state, did the state tell the corporations what to do, were they "corporatist," blabbity blah blah freaking blah.

Alas, I believe it is high time to do away with semantics and discuss precisely what is "ownership" so that before we all get caught up in the minutiae and technicalities of ideologue-infested debate, we can let you, the individual, think for yourself as to whether or not the Nazi's were indeed socialist (not to mention, be able to identify who is and is not an advocate of socialism).

First, one must ask "why do we own any assets" in the first place?

Is it pride?  Is it power?  Is it consumption?

It can be all of those things, but we have to delineate between a consumable good/asset and an investable asset.

A consumable good (or asset) is precisely that.  It can be consumed. 

An apple.
A bottle of scotch.
A movie.
A video game.
A car.

All of these things, sometimes immediately, some times over the course of years, are inevitably used up or "consumed" by the "consumer" and no longer serve any purpose or value.  They feed a person, comfort a person, make life convenient for a person, but in the end they are consumed.

Contrast that with an investable asset, where that asset is not to be consumed (like a Milky Way bar) but rather employed in a process or business to generate INCOME aka PROFIT aka EARNINGS. 

The computer you use to run your company.
The factory used to build widgets.
Even the trucks (which can also be considered a consumable asset) is considered an investable asset as long as it is used in such a capacity.

These assets are used to generate further earnings by which you can live off of and thus are considered "investments."  Alas, "assets" in this particular economic sense of the word typically imply there is some income generating potential of those assets and are what are traditionally referred to by communists as the "means of production."

Now what the left and communists will do to "prove" the Nazi's were not socialist is point to the fact that under socialism it is the state the owns the means of production while under capitalism it is the private sector or individual who owns the means of production.  And since the Nazi state did NOT own Germany's corporations, but rather said corporations were still in private hands, the Nazi's=Capitalists=Ronald Reagan=White Males=Kill Them All.

However, like most arguments of the left, they are disingenuous, deceiving, and intellectually dishonest. 

The reason why is that while "officially" under Nazi Germany corporations were largely in private hands, the state still effectively told them what to do, what to produce, and how much of it.  So sure, the deed to the plant had "Hans Fricktenstein" on it, and the deed to the factory had "Heinrich Gorsternstoppen" on it, but it was only in name.  The Nazi state controlled it, not the individual "owner," rendering "official ownership" moot.

Of course, faux leftist intellectuals and libertarian conspiracy theorists will then pull out the term "corporatist." The leftists do this to throw you off track, while libertarian conspiracy theorists do this so they can use 50 cent words to fake intelligence.  But whatever name they call it, it's still the STATE that effectively controls and owns the factors of production.  Merely slapping "corporatist" on it does not change it's economic nature.

However, thinly veiled and politically-incentived semantics aside, there is a more compelling, fundamental economic reason that ultimately governs what precisely is "socialist" vs. what precisely is "capitalist."  And it is not whose name is officially on the deed, nor even who effectively "controls" the assets.

It's who owns the profits of these investable assets.

You see, the ONLY reason people go into business is because they want to make a profit.  It's very cute and funny how naive college students, as well as their older (yet pathetically not wiser) professor counterparts think "profit" is some how evil or unnecessary.  When in reality NOT ONE THING in ANY economy would ever have been produced without the prospect for profit.  You go to work because you intend to earn more than the gas and car maintenance you expend working there.  I write posts and books because I intend to make money on them.  And Warren Buffett gives up his money when buying companies not for S's and G's, but because he wants the profits of the companies he's buying.  Thus, the real reason for assets even to be considered "investments" or "means of production" (and thus, sough after) is because of the profits they MAY potentially generate.

Alas, ownership is not determined by the deed, nor even the dictates of what is to be produced by the state, but who receives the profits.

At first, leftists and other ignorants of society will rush to point out "who receives the profits."  The evil rich people.  The illuminati.  The bilderberg groups.  "Big Oil."  "Big Pharma."  But there is ONE entity that that is a bigger shareholder than all the interconnected, multinational corporations and hedge funds combined.

The state.

You see, with a 36% federal corporate tax rate, combined with a ever so roughly 4% state tax rate, the rough average corporate tax rate is 40%.  This means your state and federal government combined are the single largest shareholder of US corporations. 

They did nothing to earn that money. 
The states nor the federal government risked their own money in purchasing any investable asset.
Even Barack Obama didn't build that.

They merely through law declared that they are the default owner of 40% of all US corporations.

Throw in dividend taxes and the statutory rate is 50% (arguments of effective rate duly noted). 

Ergo, the economic REALITY is that the United States is not an "evil greedy capitalist" nation like the left would have you believe, but a half owned, state entity where the government is the defacto 50% owner of all US corporations.

Now, of course it is not only corporations and companies that produce all the economic production in the nation.  There are individuals, small businesses (who are not in the 50% tax range), and (as many leftists are no doubt spewing vehemently) just because the STATED tax rate is 50%, doesn't mean corporations pay that rate (the EFFECTIVE rate, sans dividends, is closer to 32%).

But we all know that the government taxes these entities as well.  We have sales tax, property tax, personal income tax, gas tax, nearly everything is taxed.  So it is ALL forms of profit that are taxed one way or another.

So how do we measure this, and thus define, whether a particular government or political party is "socialist" or not?

Government spending as a percent of GDP.

I've hit this one on the head before, but not from the angle that taxation is nothing more than a percent ownership in private ventures.  And while you may "own" your house, or may "own" your corporation, or may "own" your stocks, you only own the percentage that the government does not tax away.

What is that percentage in the US?

Well, it depends on the state, but on average 40%. 

When you combine state, federal, and local spending, the cumulative "state" is a default 40% shareholder in all American economic activity.  This is certainly not the totalitarian Soviet Union or today's North Korea, but it is also NOT the "evil, heartless, capitalist" nation the left successfully dupes the perennial idiots of our country into thinking it is paints it to be. 

The larger point is not that the US is "40%" socialist.  Nor that a "communism-socialism-capitalism-anarchy" spectrum more aptly describes today's economies (although it does).  The key is to understand that it is ownership of PROFITS that determines the true ownership of the assets.  And that any debate that ignores this should be relegated to the societal garbage bin where it belongs - academia.

Now, just ask yourself this question.

What does a 40% socialist state say about who owns you and your life?

That is for another post at another time.