How do the ideas presented in Money for a Threefold Society [MTS] relate to what Steiner said about land – and means of production – having no value?
Let us begin with something Steiner wrote in July 1919 [1]:
In a healthy social organism, capital goods and other means of production will have a one-time cost at the time of delivery. The producer will then be able to manage them, but only for as long as he can contribute to production by his management. The business will then have to be transferred to another not by sale nor by inheritance, but rather as a [non-purchase transfer] to the one best able to manage it. It will have no sale value, and thus no value in the hands of an heir who does not work. Capital with independent economic power will work in the establishment of the means of production; it will dissolve itself instantly when the creation of the means of production is finished (The Renewal of the Social Organism, CW 24, p. 12). [2]
Here and in other places, Steiner clarifies how assets – capital goods and other means of production, including land – must be constructed or otherwise prepared, prior to becoming means of production as such. That is to say: some amount of spirit and labour must be applied to pure nature or materials in order to make the land or means of production ready to produce. During this time, the situation is no different than for any other good produced by means of spirit and labour working upon nature. Therefore, up until the asset is ready to produce, it is really a good just like any other, that can be bought and sold.
However, once the land or means of production becomes ready to produce, the societal rights relationship must change. The asset ceases to be a good that can be bought and sold; rather, the right to use must pass to a competent manager who uses it for production on behalf of society.
Thus, independent capital provided by risk-takers must be invested first of all, in order to finance the initial preparation of the means of production. Once it is complete and ready to begin operations, the investment risk element is dissolved with the one-time payment at the time of delivery.
This exactly reflects the process for asset registration described in Money for a Threefold Society. Only an economically productive asset – land or means of production – can be registered to a manager who takes on the right to use. At the same time, the asset is given a book value [3]. Initially this book value is set equal to the one-time initial purchase cost of the asset – because this price reflects its productive value as assessed by the purchaser, the first manager. Subsequently, however, the book value will depend on the ability of the manager to produce – as well as other factors such as depreciation – and so the book value of the asset can rise or fall over the course of time.
How does this align with Steiner’s statement that an operational means of production has “no sale value”? To understand this, we must also know that when a business operation is transferred to a new manager, the latter assumes both the capital – the assets – and the obligations – the liabilities – of the previous manager. As Steiner wrote:
When the first administrator no longer can or will manage an enterprise, the capital with which it was established will either be transferred to a new administrator, along with all obligations or, depending on the wishes of the original owners, be returned to them (Towards Social Renewal, 1977, CW 23, Chapter 3, p. 103).
So let us imagine that Mr. Vandersloot leads the startup of the Heavy Horse Tractor Manufacturing Company. To construct the tractor manufacturing plant, he raises $8 million dollars from various risk-taking investors, which he expends in the construction process. Once complete, the tractor manufacturing plant is ready to begin production, at which point it is sold, through a purchase transaction, to Mr. Wilson – the first operating manager – for $10 million dollars.
Since the local financial community supports this manufacturing plant in their area, and also believes Mr. Wilson is a capable manager, he is allowed to register the manufacturing plant as an asset with a book value of $10 million threefold dollars. This sum is transferred to Mr. Vandersloot, whose construction company makes a satisfactory return on their initial investment of $8 million. At this point, the original independent capital dissolves away again, and the manufacturing plant becomes financed by a $10 million threefold dollar usage loan through the financial community.
Let us further imagine that by the end of the first year of operations, Mr. Wilson, a competent manager, has been able to repay $1 million threefold dollars of the usage loan – so that now the outstanding principal is only $9 million against the $10 million threefold dollar book value.
Now if after this first year Mr. Wilson retires, and it is decided by all parties that the rights to use the factory should pass to Ms. Xanthos – then both the capital and the obligations pass to Ms. Xanthos. To compensate Mr. Wilson for his loss of rights to use, Ms. Xanthos must pay him $1 million threefold dollars. Having no money herself, she does this by increasing the usage loan principal from $9 to $10 million threefold dollars, and transfers this $1 million in cash to Mr. Wilson.
If we look at this situation more closely, we realize that in fact, Ms. Xanthos literally pays nothing for the factory – not even the $1 million that she seems to pay. This is due to the fact that, as Steiner points out, the registered factory no longer has any sale or purchase value.
What in fact happens is that, when the factory is transferred to Ms. Xanthos, she simply takes on the full financial obligation of the usage loan. She must compensate Mr. Wilson for the $1 million he contributed during the first year of operations, but apart from that, she owes him nothing whatsoever. When all is said and done, she takes on the $10 million usage loan – just as Mr. Wilson had done one year previously. [4]
In other words: Mr. Wilson made a decision to pay down $1 million of the usage loan against the tractor factory during the first year, in order to reduce usage fees. With this money, he might also have chosen to do something else – in which case his outstanding usage loan principal would have remained constant at $10 million. In such a case, he would have received no compensation at all from Ms. Xanthos, when she took on the same $10 million obligation by becoming the next manager. So the $1 million that Ms. Xanthos pays merely compensates Mr. Wilson for the $1 million he chose to put in. This payment by Ms. Xanthos compensates Mr. Wilson for his usage loan payment, but has nothing to do with the cost of the manufacturing plant itself – which has, in fact, no sale value.
Alternatively and equivalently, Mr. Wilson could have repaid $1 million on the usage loan during the first year, and then withdrawn this same amount again the day before the transfer – in which case he would again have pocketed his $1 million, without receiving any compensation from Ms. Xanthos. [5]
In end effect, every scenario is identical: Mr. Wilson starts with a $10 million dollar usage loan; whatever money he repays against the outstanding principal balance, he receives back again at the time of transfer. Upon transfer, Ms. Xanthos receives the right to use the asset and takes on the $10 million dollar usage loan obligation, while paying absolutely nothing for the tractor factory – which has no resale value.
So no price or purchase of any kind is involved in the transfer of assets – even though, at first glance, it may seem that this occurs. In fact, the second manager pays nothing and merely accepts the right to use the asset along with the associated financial obligation – namely, the usage loan in the full amount of the book value. If a financial payment does occur, this merely compensates the previous manager for the value of their own private ownership share of the asset – which legitimately belongs to them, independently of the asset itself.
– T. Michael Cox, 21 September 2024
— NOTES
[1] This essay, titled “The Threefold Social Organism, Democracy and Socialism,” was first published in the newsletter Soziale Zukunft [Social Future], Issue 1, Zurich, July 1919.
[2] Unfortunately, this passage contains a serious mistranslation – which has been corrected above. See MTS note 145 to Chapter 8.
[3] Book value is defined in MTS as “the share of the value of the goods and services produced by the asset that accrues to the owner” considered over the lifetime of the asset (MTS Note 77 to Chapter 4). This share is normally very small in comparison to the share of the value of the goods and services produced that accrue as compensation to workers and managers for their physical and spiritual contributions.
[4] To make this example as clear as possible for the reader, depreciation, inflation, and other complicating factors have been left out of the discussion.
[5] Consider this: How did Mr. Wilson obtain the $1 million that he used to repay part of the usage loan? Since the book value is calculated on the basis of the estimated ownership share of profits from the goods and services produced in future, then this ownership share – which corresponds to the rate of depreciation of the factory – is a mere trickle that might take many decades to amortize.
From this perspective, it is clear that the $1 million dollars that Mr. Wilson raises in one year cannot possibly all come from ownership profit shares; this must have come from his own personal earnings, that he decides to put back into his own business to save usage fees. And therefore, when the factory is transferred, Mr. Wilson has the right to receive his personal earnings back again prior to transfer.
Clearly then, when Ms. Xanthos pays $1 million to Mr. Wilson upon transfer, this is done independently of the factory – the means of production – itself, which has no value in the transfer. Rather, this payment compensates Mr. Wilson for the personal financial capital he put in, which he now simply receives back again.