The UEM – stakeholders

 

    The stakeholders mentioned to the left and to the right of the UEM scheme

 

    We have earlier described the economic dimension of the societal system as a web consisting of a tight clew of wires (flows) leading from knot to knot. Each knot in the web has a pumping function to keep the flows going.

   The comparison, which has always been made between the economic activity and the blood circulation (Physiocrats / Quesnay, Fr.), is only partially correct, for the circulation is not kept going by one single pump (the heart) but by lots of smaller and bigger pumps.

   The more active the family knots are in the economic sense, the more the flows get activated in the web, and the more restrictive they are – because of uncertain expectations or hampering of the smooth functioning e.g. unemployment – the more the flows will weaken. Families are the origin and the goal of all economic activity, even if that is not always quite clear at first sight due to the extensive specialization.

   The strengthening or weakening of the flows through a knot has of course the most effect on the knots it is directly connected with. We usually call those knots with direct links the stakeholders for it is indeed in their interest that the ‘linked’ knots keep functioning well.

 

    Listing the stakeholders

 

    In the UEM scheme we find the stakeholders mentioned at the outmost left and the outmost right; some of them specifically and others as a group. For the sake of clarity we shall present them in detail.

   At the top of the scheme, we find the financial institutions in the financial layer. This collective noun stands for owners, stockholders, holdings, banks, tax administrations and their counterparts, the subsidy administrations. Owners and stockholders bear the risk of the enterprise and think that, if all goes well, they can cash the profit. Holdings and banks provide enterprises (usually at fixed interest rates) with capital, which is brought together from savings made by family and other entities; these get a remuneration somewhat lower than the dividends the banks hope to cash. Banks also supply money from short- to long term credits / loans at market interest rates. The tax administrations collect the contributions needed to finance the public goods and services. The subsidy administrations (subsidies, premiums, allowances) take care of the transfer of means that serve to let subgroups of economic entities function more smoothly.

  To the left of the infrastructure layer and the production layer the suppliers are mentioned with as subgroup personnel (labourers and employees). A reliable and regular supply of goods and services at fair prices is a prerequisite to have the own entity functioning without hitches. The term personnel is a collective noun for different modalities under which an enterprise is supplied by labour: fixed, part-time, interim, but also consultants and specialists, who accomplish temporary tasks. The difference between labourers and employees is not relevant in the approach of the flows.

  To the right of the infrastructure layer and the production layer stand the customers. A good relation with the people or enterprises purchasing the produced goods and services, by asking a fair price corresponding with the delivered quality and good aftercare, is also needed to make the entity function without hitches. Ultimately it is the customers who have to pay all production factors (make the added value effective) leaving a profit margin for the entity, which is necessary to maintain an ‘unpopulated’ entity significantly.

   At the bottom of the UEM scheme there is another stakeholder, who has surely been denied and forgotten in the past, but under pressure of the inconvenience it gives us (as a consequence of our own mistakes), it begins to be recognized and respected more and more: nature / the earth / the ecological system. That worldwide system serves humanity, but has a finite content and a limited capacity of regenerating, but it is the socle on which rests the worldwide societal system with all of its subdivisions.

 

    Relations with stakeholders

 

    Logically we might expect that every economic entity strives to keep a good relation with all stakeholders. That is what normally happens, but not always and not everywhere. Its motive can be found at the top of the UEM scheme: there we find ‘profit and loss’.

   Profit is what is left after paying for all production factors, and it is the condition for any unpopulated entity to make it worth to let it survive.

   Loss is the shortage that arises, when the products sold at the given prices do not suffice to pay for all the production factors; it is a compelling reason to make corrections in every unpopulated entity, and in case it is not possible, to liquidate.

   For government institutions, which also belong to the group of unpopulated entities, the strive for profit and the avoiding of loss is to be translated as staying as close as possible within the foreseen / allowed budget by operating in the most efficient and effective way that is possible.

   Very large profits, usually thanks to a strong monopolistic position or by applying inventively the legal gaps and possibilities, are either canalized to the owners and the stockholders or beforehand substantially reduced by high wages for the manager(s) and supplementary bonuses.

   That what remains of the profit, after owners, stockholders, the regular personnel and eventually customers have got their proportional extras, actually belongs to the society and should be used for solidary social securities, for it is the society in which the enterprise is acting, that has made the (large) profit possible.

    The temptation of forcing up the profit and having the owners and the stockholders receive only, evidently leads to discrimination against the personnel and the customers, but in excess it creates the concentration of money (capital) in too few hands. If a small group has (too) much money (capital) at its disposition, it can never spend its larger part for consumption or family investments, and as a consequence it will make financial investments. Then there will remain less and less family entities to buy the products from the extra production entities, that will of course get a low return on their investments.

   Under those circumstances the temptation is strong to start speculating in rates of exchange or provoking rises or falls of prices with purposely artificially high purchases and sales of stocks.

   To use the (formerly mentioned) imagery of the orange peel: first of all a really thick peel grows – excess of capital supply lowers the interest rates  – and next the peel effectively gets too thick and comes loose causing the decay of and the peel and the fruit (financial and economic crash).

    In case of loss the weakest stakeholders usually lose the most, while as a matter of fact an equal division of the shrink gives the best guarantee for the survival and the later viability of the entity.