Capitalism vs contributionism
A comparison between capitalism and contributionism looking at their similarities and differences
Last updated
A comparison between capitalism and contributionism looking at their similarities and differences
Last updated
Capitalism and contributionism are both focussed on how the organisation is owned, governed and incentivised. The following explores some of the key similarities and differences between capitalism and contributionism for structuring an organisation.
Similar to capitalism, contributionism is flexible and could be adopted in many different economic environments.
Money
Both capitalist and contributionist organisations could utilise multiple forms of money including gold, fiat currencies or cryptocurrencies.
Exchange
Both capitalist and contributionist organisations can operate within free markets where there are high levels of competition and freedom of choice for consumers.
Governments
Both capitalist and contributionist organisations could operate within nations that adopt different governance structures such as classic liberal, regulated, social or state based governments.
Shared values and characteristics
Encouraging entrepreneurship - Individuals that start contributionist organisations would be rewarded for risk taking just as they are in capitalist organisations. Any risks involved with starting up an organisation would be taken into account when evaluating and rewarding each contribution.
Wealth accumulation - Individuals could seek to accumulate wealth in either capitalist or contributionist organisations.
Profit motivation - Contributionist organisations would collectively self determine their own motivations and priorities. This could similarly include a motivation for profit, which is a common motivation under capitalism.
Rewarding effective organisations - In a market economy, both contributionist and capitalist organisations would be rewarded based on their productivity, efficiency and ability to meet market demands.
Personal freedom - Capitalism and contributionism both advocate for people freedom. People would have the autonomy to make their own economic decisions, such as choosing their occupation, how they spend their money and what they decide to produce or consume.
Ownership
How is the organisation owned? What does ownership mean? What outcome does that approach lead to?
Investment
How do organisations handle financial investment?
Ownership changes
How can the ownership of the organisation change? What are the implications of this?
Record of ownership
How is the record of ownership handled?
Private property
What rights do owners have? How can individuals invest and profit from organisations?
Governance participants
Who receives governance rights and how do they elect leadership positions or decide how the organisation is operated? How does this approach impact workers?
Governance rights duration
How long does someone have governance rights for in the organisation?
Voting power
How much voting power do participants have?
Leadership role duration
How long are leadership roles valid for? How does this impact the organisation?
Leadership acceptance
Do leadership roles need to be accepted by workers?
Contribution incentives
How are the incentives for contributors determined? Are certain people being prioritised?
Contribution incentive duration
How long does someone receive compensation for their contributions?
Equal opportunity
Do individuals receive equal opportunity in the organisation? What outcomes does this lead to?
Individualism
How meritocratic is the economic system? How can individuals act in their own self interest? How are the needs of the individual and collective handled?
Inequality
What is the moral justification of inequality? What is the reality of of economic inequality under this model?
Rewarding risk taking
How is the risk of starting new organisations rewarded? What outcome does this lead to?
Competition vs cooperation
How much competition is encouraged? How much cooperation is encouraged? What outcome does this generate?
Inviting contributions
How are contributions identified, encouraged and accepted?
Measuring contributions
How are contributions recorded, verified and evaluated?
Rewarding contributions
How do organisations handle payment, reflection and appreciation of contributions?
Capitalism
Contributionism
Capital shares based ownership.
Ownership is determined by capital based shares. Shares give owners perpetual governance and incentive rights. Existing owners have full control to decide who receives any future shares regardless of the contributions they provide. Shares are commonly distributed between founding members based on labour and capital contributions. Future contributions may or may not receive shares. Capitalist organisations could be owned by one person or by a small number of individuals. They can also be owned by every worker in the organisation depending on how the initial owners decide to distribute shares.
Creates a disconnect between contribution and ownership. Those that own the organisation do not need to contribute towards the organisation over the long term. Shares give them perpetual governance and incentive rights regardless of future contribution.
Contributor ownership (Based on donations, consumption, labour or mixed contributions) or public ownership.
Ownership is determined by contributions or the organisation is publicly owned by the government. In contributor owned organisations, contributors receive temporary governance and incentive rights for their contributions. Owners collectively decide who else will be able to contribute. Any contribution that matches the contribution ownership approach will lead to ownership in the organisation. Contributionist organisations are always collectively owned by those that contribute or collectively by society through their government.
Contribution should always be respected within the organisation. In all contributionist organisations governance and incentive rights are temporary, meaning that contributors will need to contribute over the long term if they want to receive future incentives or for them to have any influence in the organisation.
Financial capital could be invested into an organisation through the issuance of common stock, preferred stock, convertible securities, stock options, warrants, bonds, convertible bonds and convertible notes as some common examples. Sometimes a cap is used for preferred stock, convertible bonds and warrants that limits the potential upside for the investor. Without a cap the potential return on investment an investor can receive is limitless.
Financial capital can be invested into an organisation using loans. Loans can apply similar incentives and terms that are found in capital shares structures. Loans can be flexible and enable an organisation to repay the loan when or if they’re ready to. Loan structures mean a cap would be applied that limits how much an investor could expect to receive back. Interest or penalties could still be applicable for any unpaid loans.
Capital based shares often represent permanent ownership, governance and incentive rights. Shares can be exchanged with other people.
The owners of the organisation that govern how it operates could be people that do not actively contribute towards the organisation. These owners would have perpetual influence over the organisation regardless of any future contributions that other people make towards the organisation.
Contributions made towards the organisation are permanent and non transferrable. Temporary governance and incentive rights received for those contributions can be exchanged with other people. Sometimes an organisation might collectively decide to prevent the exchange of governance or incentive rights.
Exchangeable governance rights could give other people temporary influence over an organisation. People that buy governance rights to influence an organisation would need to perpetually buy more governance rights as these rights would lapse over time. New governance rights would be given to contributors that continue to contribute towards the organisation.
Capitalisation tables list all of the shares that exist within a company and who owns those shares. This could include stock, convertible notes, warrants and equity ownership grants.
Contribution tables are used to record every persons contribution towards the organisation. The ownership type will determine which type of contribution will receive temporary governance rights.
Under capitalism, individuals with shares have the right to use the organisations resources, land, capital and goods as they see fit. Ownership is protected by law and the transfer of shares is facilitated through market transactions.
Individuals can profit from organisations by investing their own capital or labour to receive shares of ownership that have future profit potential.
Under contributionism, individuals with governance rights are able to determine how the organisation uses its resources, land, capital and goods as they see fit. These governance rights should be protected by law and the transfer of governance rights is facilitated through market transactions.
Individuals can profit from organisations by investing their own capital or labour into an organisation. Temporary incentive and governance rights ensure that a contributor can protect their interests.
Shareholders receive governance rights to influence who sits on the board of directors. The board of directors have governance rights to influence who fills any executive positions. The executive positions have governance rights to influence how the organisation is operated. This creates a top down structure where shareholders who might not actively contribute towards the organisation are in control over how the organisation is governed. Executives would make decisions about how the organisation is operated.
Workers may or may not receive shares in the organisation. Workers will often not receive shares that are proportional to the value and impact they have generated for the organisation. Workers without shares would have no voting power to influence who sits on the board of directors or who fills any of the leadership positions.
Any contributions made towards the organisation that match the ownership type would receive governance rights (labour, donations, consumption or mixed contributions). Collectively those with governance rights would vote on who is elected for any leadership positions that exist and would also vote on how the organisation is operated. A board of directors is not required.
Organisations that are governed by workers would always have workers vote on any leadership positions and any operational decisions. For other organisation types the worker may or may not have influence over who is elected for leadership positions.
Share holders are given governance rights that last in perpetuity. However not all investments will receive governance rights. Bonds, preferred stock, convertible securities, warrants and options might not receive any governance rights.
Collectively the organisation needs to decide how long temporary governance rights should last for. Governance rights will need enough time for the full value of the contribution to be realised. Temporary governance rights could range anywhere from 1 to 10 years or more in terms of duration. Capital invested would never receive permanent governance rights. Instead capital investments would receive temporary governance rights until the loan has been repaid. In practice, capital investments could receive long term governance rights due to the delay in how long the organisation takes to repay the loan.
Voting power is proportional to the amount of shares someone has when selecting board members. The boards of directors often use an equal voting power approach to make decisions. Executives may leave larger decisions to the CEO and other decisions could be delegated to certain executive to handle. The voting process may or may not be collaborative and use multiple stakeholders.
Voting power would be determined by the value of the contributions provided or equally between contributors that reach a certain threshold of contribution. It could also be determined using a combination of these approaches.
Leadership is selected by shareholders and then by the board of directors. The leadership will only change if these stakeholders decide to change the leadership.
This approach to leadership selection means that leadership can be stagnant for long periods of time if the leadership is fulfilling the expectations of the shareholders and board of directors. Workers that don’t have shares would have little to no influence over changing the leadership.
Leadership is selected by the contributors that govern the organisation. Leadership roles will usually use leadership contracts to define the responsibilities and parameters of the position. These contracts would also include the duration for how long the contract will last for. Founders could issue themselves leadership contracts to ensure they have influence over the organisation for a certain period of time.
Leadership roles are temporary. Contributors would vote on which individuals should fill those positions. Contributors will decide whether they want a leadership role to continue or not when any existing contracts have lapsed.
Leadership roles do not need to be accepted by workers in a capitalist organisation. Workers have to accept what shareholders and the board of directors have decided when it comes to leadership positions.
Contributors would collectively decide who is selected for any leadership positions that are introduced. For startups with self elected leadership positions the contributors would need to decide whether they accept the leadership or not by deciding whether to join the organisation or not.
Leadership will determine how much profit is allocated towards labour in terms of bonuses and how much is allocated towards growth, business expenses or shareholder dividends. Leadership is incentivised to maximise shareholder value by prioritising growth or paying dividends.
Shareholders are prioritised as they will receive the benefit from any business growth or dividend payments. If workers get prioritised for incentives this would be due to a goodwill decision from the leadership and shareholders.
Contributors will collectively decide how profit is distributed between contributors and what should be reserved for growth and business expenses. Organisations may use a proportional reward approach based on the value of each persons contributions. Other organisations may decide to adopt a simpler and more balanced reward structure in more cooperative environments.
Prioritises rewarding contributors. Everyone who is involved in creating and operating the organisation should be fairly rewarded.
Share holders receive perpetual incentive rewards. Workers might not receive shares and might only be rewarded a salary in the year they contribute instead of being rewarded over the long term.
Incentive rights could last anywhere from one to ten years or more. Capital and labour contributions would receive temporary incentive rights so that their contributions can be fully rewarded over the long term. Incentive rights would lapse once the contribution has been fully rewarded or after the incentive duration period.
Individuals may or may not receive fair compensation for their contributions depending on how shares and incentives are distributed within the organisation.
Under capitalism there is only equal opportunity for creating new organisations and not for individuals that make contributions within existing organisations. Individuals have limited opportunity to improve their economic status through hard work and talent as they rely on the good will of leadership to be rewarded fairly in existing organisations. Alternatively they must start their own organisation.
Individual contributions would always be respected. Each persons contributions would receive a fair reward based on the value of the contribution. Contributors may alternatively decide to adopt a different incentive approach that is not proportional if this is preferred.
Under contributionism there is equal opportunity for creating new organisations and contributing towards existing ones. All contributions would be respected regardless of the organisation and its stage of development. Individuals have the maximum opportunity to improve their economic status through hard work and talent.
Capitalism is only somewhat meritocratic as it enables organisational structures that are able to exploit labour contributions for the benefit of others. Capitalism advocates for equal opportunity of starting a new organisation to benefit yourself rather than trying to create a meritocratic organisation that benefits everyone that contributes.
A capitalist system values competition and the pursuit of self-interest as drivers of innovation and economic growth. The main way that an individual could act in their self interest in this economic model is by starting their own organisation.
Capitalism highly focuses on the needs of the individual and sometimes even at the expense of the collective due to the exploitation of labour. Meeting the needs of the collective requires goodwill gestures from capitalist owners.
Contributionism enables true meritocracy where each person is treated equally and each persons contributions are evaluated based on their merits. Individuals can start their own organisation or join existing ones and be rewarded based on the value of their contributions.
A contributionist system values both competition and collaboration. The pursuit of self-interest can be drivers of innovation and economic growth. An individual could act in their self interest by either starting a new organisation or by joining an existing organisation. Their contributions would be respected in any contributionist environment.
Contributionism seeks to balance individual rights with collective well-being. While it values individual freedoms, it also emphasises the importance of fair competition and cooperation within the organisation. Individual success should never come at the expense and exploitation of others inside the organisation.
Belief that economic inequality is a natural and acceptable outcome of differing talents, efforts and choices. Justification of inequality as a necessary condition for incentivising hard work, innovation and risk-taking.
Capitalism can lead to excessive levels of inequality as contributions are not correlated with ownership, governance and incentive rights. Earlier contributions that are able to capture more shares than others are able to perpetually benefit from a smaller amount of contribution at the expense of future contributions. This create economic inequality that is not based on merit but is instead based on excessively rewarding earlier contributions made towards the organisation.
Contributionism advocates for organisations to self determine their own incentive structures. If the organisation is competitive then the justification for inequality is the same as capitalism where it is based on different talents, efforts and choices. Organisation that are more cooperative may handle incentives differently and decide to reduce the possibility of large differences in financial outcomes due to different collective values and preferences.
Contributionism only accepts economic inequality when the outcomes are actually based on differing talents, efforts and choices. This is achieved by respecting every contribution within an organisation so that top performing talent can be rewarded fairly regardless of when that contribution happened. Earlier and riskier contributions would still be highly rewarded but not excessively or at the expense and exploitation of future contributions. Inequality could still occur due to differences in organisation success and contribution value and impact.
Early labour and financial capital invested into the organisation will often receive shares that give them perpetual governance and incentive rights.
Early contributions can receive an excessive reward due to shares giving them perpetual incentive rights.
The value of early contributions would be multiplied by a risk reward multiplier to ensure that earlier and riskier contributions are fairly rewarded. Any governance and incentive rights received would be temporary.
Someone could receive compensation that is many multiples higher due to their risk taking to start an organisation. The key difference is there is always a cap on the amount of compensation someone can receive for these contributions as this ensures that future contributions are respected. Risk must be fairly rewarded but not excessively and at the expense and exploitation of future contributions.
Competition is excessive under capitalism. Workers are incentivised to start their own organisations when they do not get fairly rewarded for their contributions in existing organisations. This leads to a perpetual need for workers to create new organisations in an attempt to receive fair value for their contributions. This can lead to excessive amounts of competition.
Cooperation is limited or non existent under capitalism. Capitalism enables top down leadership structures that have full control over how the organisation is operated. Decisions around compensation and prioritisation are often handled by leadership positions. Workers have little to no control over organisation decisions.
Capitalism creates a highly wasteful environment due to the perpetual need for workers to create their own organisations if they want to be fairly rewarded for their contributions. This can waste resources and time that could have been better spent cooperating within an existing organisation.
Competition is balanced under contributionism. Organisations would self determine whether they want a competitive or cooperative environment internally. Competitive environments will often mean that contributions are evaluated and rewarded proportionally based on the value and impact they generate. This incentive structure makes it highly desirable for workers to join existing organisations but it could also still be lucrative to start new ones.
Cooperation is required under contributionism. Even in competitive environments there is a need to cooperate with others to decide how to measure, evaluate and reflect on contributions. This cooperation helps to ensure that contributions are always respected. Cooperative environments may use simpler incentive structures that match the preferences and values of the contributors that govern and operate the organisation.
Contributionism creates a balanced approach for handling competition and cooperation. Contributors collectively agree on whether the organisation will lean towards being more cooperative or competitive. Workers would be able to join organisations that match their preferences or they could alternatively start their own organisation. There would be far less need to perpetually create new organisations in an attempt to be fairly rewarded for contributions. Innovation and impactful contributions would be highly rewarded within existing organisations as well as in new ones.
Identified - Executives will decide which contributions are required or beneficial to the organisation. They may also delegate this decision to other people.
Encouraged - Publicly shared information and job advertisements.
Accepted - Executives or delegates would decide who is accepted into the organisation.
Identified - Contributors will determine which contributions are required or beneficial to the organisation. Leadership roles may also be delegated this responsibility if these roles exist.
Encouraged - Publicly shared information and job advertisements.
Accepted - Contributors or leadership roles would decide who is accepted into the organisation.
Recording - Capitalists partially have an incentive to record contributions so that they can remove poor performers. They are not incentivised to fully reward other contributors as this would reduce the potential profit for shareholders. Contributors will often rely on the goodwill of the leadership for their contributions to get noticed or properly recorded.
Verifying - Leadership will determine whether a process is introduced or not for properly verifying contributions. Contributors rely on the goodwill of the leadership for this to be done properly.
Evaluating - Leadership will determine what process is used if any to evaluate worker contributions. Contributors rely on the goodwill of the leadership for their contributions to be properly evaluated to understand the value and impact that was generated.
Recording - Contributionists are highly incentivised to record contributions accurately as this will be used to fully respect their contribution. The full value of the contribution can be rewarded over the long term if it is properly recorded. Contributors also benefit from their contributions being publicly available so they can benefit from the market being able to see their full value.
Verifying - A contributionist organisation would introduce a process for verifying contributions to ensure people did what they say they did. This is an important part of respecting peoples contribution.
Evaluating - A contributionist organisation would introduce a process for evaluating contributions that is either handled by those in leadership positions or collectively through a governance process.
Paying - Workers will be paid their agreed salary income and any bonus income will be determined by leadership. Alternatively, a separate process for handling bonuses could be used if the leadership decided to introduce this. Contributors would rely on the goodwill of leadership to receive fair compensation for their contributions. Capital share ownership structures incentivise the leadership to extract any surplus from labour to reward the share holders.
Reflecting - Leadership is not incentivised to reflect on historical contributions and reward them anymore than they have been as this would reduce profits for the shareholders. Contributors would rely on the goodwill of the leadership if their previous but highly impactful contributions are to be fully rewarded.
Appreciating - Leadership may or may not introduce a process for showing appreciation towards recent and historical contributions. Efforts around showing appreciation rely on the goodwill of the leadership to arrange these types of events and initiatives.
Paying - Contributors would collectively decide whether any surplus from labour is reserved or distributed. Donor and consumer owned organisations would not be able to extract out any surplus for their own benefit. Profit would be used to pay for labour, repay financial obligations or pay for other organisation expenses. Contribution evaluations would help with fairly rewarding each contribution.
Reflecting - Contributionist organisations would adopt a process for reflecting on historical contributions when this is necessary. Some contributions can take multiple years to understand the full value and impact that was generated. Contributors will look to highlight any contributions that they believe are worthy of further compensation due to the ongoing value and impact they generated.
Appreciating - Contributors or leadership would collectively determine how the organisation shows appreciation for recent and historical contributions. This could be small and informal initiatives or it could be much larger ones depending on the preferences and needs of the organisation.
