I wondered, what if you don’t use other people’s money. Are you not a capitalist then? Even if you build dozens of factories and employ thousands of people, as long as you started with your personal savings, and then grew without ever taking a loan.
But I guess the answer is that in such case, you are still using your own capital. Capital doesn’t necessarily mean other people’s money—that’s just the popular way to get started.
The fundamental difference compared to a successful pre-capitalist baker is that… he couldn’t expand his business? Like, he probably could build a bigger bakery, hire more people, bake more bread, but he couldn’t… what exactly? Separate ownership from management? Like, he couldn’t retire and hire someone else to manage the bakery, paying them a salary but keeping the rest. Or start a second bakery in another city, without personally overseeing it.
(I suspect, more realistically, if the bakery got too big, the local feudal simply found a way to take his money, so that was the practical limit: don’t stick out. Or maybe I’m too pessimistic about the property rights in the past.)
Well, the pre-capitalist baker can’t go IPO, that’s for sure. They can take out a loan from a local moneylender if they want to put in a bigger oven and don’t have savings to do it. How well the terms of that loan will be enforced might depend on how the local duke is feeling about moneylenders lately; q.v. The Merchant of Venice.
In our time, the makers of Twinkies and Wonder Bread are traded on the NYSE; while smaller local bakers are still typically privately held. But I bet that the local bakers’ retirement savings are invested in mutual funds.
Great point!
I wondered, what if you don’t use other people’s money. Are you not a capitalist then? Even if you build dozens of factories and employ thousands of people, as long as you started with your personal savings, and then grew without ever taking a loan.
But I guess the answer is that in such case, you are still using your own capital. Capital doesn’t necessarily mean other people’s money—that’s just the popular way to get started.
The fundamental difference compared to a successful pre-capitalist baker is that… he couldn’t expand his business? Like, he probably could build a bigger bakery, hire more people, bake more bread, but he couldn’t… what exactly? Separate ownership from management? Like, he couldn’t retire and hire someone else to manage the bakery, paying them a salary but keeping the rest. Or start a second bakery in another city, without personally overseeing it.
(I suspect, more realistically, if the bakery got too big, the local feudal simply found a way to take his money, so that was the practical limit: don’t stick out. Or maybe I’m too pessimistic about the property rights in the past.)
Well, the pre-capitalist baker can’t go IPO, that’s for sure. They can take out a loan from a local moneylender if they want to put in a bigger oven and don’t have savings to do it. How well the terms of that loan will be enforced might depend on how the local duke is feeling about moneylenders lately; q.v. The Merchant of Venice.
In our time, the makers of Twinkies and Wonder Bread are traded on the NYSE; while smaller local bakers are still typically privately held. But I bet that the local bakers’ retirement savings are invested in mutual funds.