Finance and Investment

Abstract

In the two preceding chapters, it has been assumed that the labour-managed firm, of whatever type, hires its capital assets at a market-clearing rate of interest. This assumption is identical to that employed in traditional models of the entrepreneurial firm. How far do these models correspond to the structure of capitalist firms and workers’ cooperatives? Dubravcic (1970) argues that the capitalist firm may be represented as a joint-stock company and as such is a capital cooperative. Meade (1972), however, points out that the typical capitalist firm is not a joint-stock company but an inegalitarian joint-stock company. The inegalitarian joint-stock company behaves identically to a profit-maximising enterprise. The difference between a joint-stock company and an inegalitarian joint-stock company is that in the former, the members contribute physical capital whilst in the latter, they contribute financial capital. The importance of this distinction may be seen from Meade’s (1972) own example.