education philosopher

The Dragon’s Den and the Reciprosity of Capitalism

Posted in political philosophy by KevinCK on October 29, 2009

dragon's denLast night, my wife and I watched the BBC program The Dragon’s Den, where five venture capitalists listen to various pitches from struggling entrepreneurs, deciding whether to give them money in return for a stake in the business. Today, I read Marx’s The Communist Manifesto. Coincidence? Yes. Is there a connection? Yes! The former helps to prove the latter wrong by showing that, contra Marx’s assertions, capitalism functions reciprocally for mutual benefit rather than in a master/slave relationship.

In the Communist Manifesto, Marx writes of the proletariat (the working class) as if they were slaves to the bourgeoisie (capitalists):

Not only are they slaves of the bourgeois class, and of the bourgeois State; they are daily and hourly enslaved by the machine, by the overlooker, and, above all, by the individual bourgeois manufacturer himself. The more openly this despotism proclaims gain to be its end and aim, the more petty, the more hateful and the more embittering it is.

…and again…

And here it becomes evident, that the bourgeoisie is unfit any longer to be the ruling class in society, and to impose its conditions of existence upon society as an over-riding law. It is unfit to rule because it is incompetent to assure an existence to its slave within his slavery, because it cannot help letting him sink into such a state, that it has to feed him, instead of being fed by him. Society can no longer live under this bourgeoisie, in other words, its existence is no longer compatible with society.

Marxism sees employer/employee relations – and all other capitalist dealings – as a one way master/slave relationship; “I will pay you what I want and you will work for me regardless of whether you want to.”

The irony is that supporters of capitalism recognize that this is not at all the truth. In fact, defenders of capitalism (rightly) note that capitalism is the one and only economic system where employers may not enslave employees; in fact this is so by definition. A slave, to be a slave, is enslaved involuntarily. Her wishes are not taken into account, she is treated only as a means, and has no say in her fate. Capitalism, though, puts emphasis on contract; an employer cannot force unwilling participants into its employ, and employees are free to leave a job if they can find something better. The entire relationship is quite voluntary on both sides.

The further irony is that the same cannot be said about communism. Marx has it backwards: communism is the type of social structure that takes away choice from members by telling them that they will make what the government says they will make, will work where the government says they will work, etc.

How does this come back to BBC’s Dragon’s Den? Well, the show’s premise includes a huge imbalance of power. Struggling entrepreneurs pitch their company to rich venture capitalists in hopes that they can arrive at a deal where the venture capitalist gives x amount of money for x percent of the company’s returns.

Marx would likely say that this is nothing more than slaves pitching to masters – the proletariat groveling to the bourgeoisie. But watching the show quickly demonstrates that nothing is further from the case. Yes, the businesspeople are asking (and to an extent pleading) with rich venture capitalists to “throw them a bone.” But both the venture capitalists and the businesspeople are free to work out a deal to both their likings, and if the deal is not agreed upon by both parties, no transaction occurs. If the capitalists don’t like the company’s business model or think the valuation is too high, they decline. If the struggling entrepreneurs think the “dragons” are asking for too high a percentage of the business, they are free to walk away.

What will surprise Marxists even further is that it often happens where a venture capitalist makes an offer only to be turned down by the entrepreneurs, thus proving that there is no master/slave thing going on. Just as often, of course, the venture capitalists decline to make an offer. But the third option is the most illustrative of capitalism: it sometimes happens where the capitalist makes an offer that they think the businessperson will accept and the business person accepts the offer as agreeable. The capitalist gets the percent of the business she thinks is fair and the entrepreneur gets an injection of money (and help) into their business. Both parties, at this point, have a vested interest in the company doing well.

Marxists will be quick to point out, however, that the process is still adversarial – as agreeable as it may look. The businessperson is trying to get as much money for as little percentage of the company as possible. The capitalist, in turn, is trying to part with as few dollars or pounds as possible for as much percentage of the company as possible. Libertarians do not deny that employer/employee relations are adversarial in just this way: the employer wants to pay little but get much work, and the employee wants to get as much for as little work as she can. But noting that the process is adversarial is not to be mistaken for being unfair: the “dragons” and entrepreneurs are trying for their own best interest, but the one keeps the other in check.

The Marxist’s biggest concern may be in those cases where the employee (the proletariat) does not have the ability to shop around for other options and, in this  case, is literally stuck with one employer. This gives the employer the ability to exploit the employee. Yes, this will almost certainly happen to a small percentage of low-skilled laborers. But there is a huge difference between (as in communism) the state telling you that you MAY not look for a job other than the one you have or MAY not ask for more pay, and the inability at the present time to find another job or get more pay. In the former case, the employee has no hope that they will be able to search for a new job even in the future. In the latter case, there is always the future promise that one can get another job and the knowledge that no one can coercively stop her from trying. The former case ends in resignation and acceptance of fate. The latter case can lead to hope.

So, the Dragon’s Den is an interesting show that shows the Marxists wrong in their depiction of employer/employee relationship to master/slave. In capitalism, as in the Dragon’s Den, no one may be compelled to work or pay against their will, but can only make a deal if both parties agree to it.

Now, I’d hate to see what the Communist’s Den looks like: “The Government’s best deal is that you give us 100% of your business and we give you bread. NEXT!”

 

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