Proletarian Capitalism

As Art Carden recently pointed out, it's not at all difficult for members of the American proletariat these days to enter the ranks of capitalists. All they need to do is to buy corporate shares. Easy-peasy. In fact - and contrary to the supposition of French economist Thomas Piketty et compagnie - a sizable majority of ordinary Americans are already capitalists. Gallup reports that 61 percent of Americans identify as owning corporate stock.

This reality mixes uneasily with the tale that Monsieur Piketty has been peddling for more than a decade. In his view, capitalists are a distinct and privileged caste largely closed to outsiders. Further, because (as he reckons matters) capital grows both automatically and faster than the economy as a whole, members of this high caste grab ever-larger shares of wealth, leaving fewer and fewer crumbs for the masses. The best practical means of preventing what would otherwise be extreme inequality and immiseration of the masses is a hefty global tax on wealth and much higher rates of income taxation - all imposed in ways that prevent the heartless capitalists from taking refuge in jurisdictions with lower rates of taxation.

Beaucoup problems fill Piketty's tomes and papers, not the least being his failure to recognize that neither economies nor capital stocks (or values) grow automatically. He's blind to the fact that market-driven innovation and competition incessantly create new capital while reducing or even destroying the value of older capital, all in ways that move new flesh-and-blood people into the central ranks of the 'capitalists' while moving others onto the periphery. Recall that twenty-one years ago Mark Zuckerberg, the son of a dentist and a psychiatrist, was no one's idea of a capitalist. He's now worth more than $139 billion.

But reality gets even better. Today, we ordinary folk needn't launch companies, or even invest in the stock market, to become capitalists. We just need our smartphones.

While working together not long ago on a business trip to California, my Mercatus Center colleague Ashley Schiller and I were chatting about Uber and the obstacles that many governments have erected to hinder the use of this amazing innovation. Ashley had a brilliant insight, which I share here with her kind permission: Uber, Lyft, Doordash, Airbnb and other sharing-economy apps allow ordinary people to turn their privately owned consumer durable goods into income-producing capital goods.

Uber enables someone who would otherwise drive his or her car only for personal use to drive his or her car for capitalist use - that is, to drive his or her car in an income-earning (and, hence, wealth-generating) manner. Uber easily turns a consumption good into a capital good for however long the car owner chooses to operate as a transportation capitalist. Importantly, for whatever number of hours automobile owners use their personal cars as Uber or Turo vehicles, part of the value of those automobiles becomes part of the value of an economy's capital stock even though formal statistics and M. Piketty do not register it as such. And it is capital owned not by Uber or Lyft, but by the drivers - the workers - themselves.

Uber and other ride-sharing apps supply ready tickets for all who own automobiles to gain admission into the capitalist class.

Likewise with Airbnb. J. Willard Marriott had to buy land and hire construction crews to erect large buildings with rooms for lease in order to enter the ranks of the rentiers. But now you, I, and every other homeowner can easily reap the profits of rentiers - can easily monetize the rental value of some of our real property - merely by signing up with Airbnb.

Simply by repurposing existing personal property, Uber, Airbnb, and other sharing-economy innovations enlarge humanity's stock of productive capital. And in doing so these innovations also create more capitalists. Government interventions against sharing-economy innovations, therefore, not only artificially keep the size of the capital stock from growing, they obstruct an easy entrance that many ordinary people today would use to join the capitalist class. Were he still alive, Marx presumably would look askance at these obstructions - obstructions that are demanded, Marx certainly would not be surprised to learn, by already-establishedcapitalists.

Marx, of course, also bewailed the fact that under capitalism, workers don't own the tools with which they work. In this allegedly cruel system, the tools belong to the capitalists while the workers are the ones who actually wring from the tools the profits that are then seized by the capitalists. Workers' 'alienation' from the tools that make them productive is responsible for their immiseration.

Happily, the 'problem' of alienation (if it be a problem) is solved by sharing-economy apps. As mentioned above, the Uber driver is both the worker and the owner of the chief tool with which she works. Similarly, each of the 4 million Airbnb hosts is both the laborer who transforms spare bedrooms into hotel rooms and the landlord of the rent-receiving estate. No alienation here!

Given this reality, you'd think that devotees of progressive and other leftist ideologies - even Marxists - would cheer loudly and long for sharing-economy apps. Alas, they don't. I leave to the reader the challenging task of figuring out why those persons who fret about the disproportionate gains allegedly reaped by owners of capital, as well as about workers' not owning the tools that make them productive, are also today among the staunchest critics of the sharing economy.