Reconceiving the Economic Institutions of Capitalism
"...Another "innovation" was the use of company scrip instead of US currency to pay wages. Scrip was only good at the company store. This assured that mining companies recaptured through monopoly prices some of the wages they paid. It occasionally allowed them to raise wages without eroding their profits (since they could recover the wage rise through higher store prices and housing rents).
Company stores and company towns were a way for those with economic and political power to extract a few more dollars from the people doing a lot of the work and assuming a lot of the workplace risk. Like investment bankers who apparently couldn't come up with (as Joe Stiglitz put it in Freefall) a good mortgage product with"low transaction costs and low interest rates" that "would have helped people manage the risk of home ownership, including protection in the event their house loses value or borrowers lose their job," so some coal companies could not come up with a means of providing necessary housing and food to employees without also further impoverishing workers and enriching owners. That lack of creative, far-sighted innovation got them (and us) unions and excessive regulation. A communist plot? Hardly. More like capitalist myopia, something that seems to plague certain sectors of our capitalist economy in ways that doom them (and us) to repeat the past."
If we're going to reboot capitalism, the first bullet point on the agenda might just be, as I've recently discussed, a higher purpose on which to found a better set of institutions. One that insulates and protects companies, people, and countries from myopia, unnovation, and rent-seeking - as embodied in company towns, company stores, CDO's, Big Macs...
The list, of course, is endless. But the wealth it has destroyed isn't. That's the point - and the problem.