Sole Proprietorship is the best form of the Ranching Business Essay
As a result of transformation macroeconomics has gained a whole new look. On the background of many small enterprises, economic giants that were rapidly gaining power have stood out trying to dominate in the production and sale of products in all sectors of national economy. Therefore, replacing the initial stage of capitalism, the stage of the domination of finance capital has come, which blends inseparably major industrial and bank capital. Dropping an outdated form of sole proprietorship, a large capital quickly mastered an entirely new type of ownership.
The economist Joseph Nimmo researched the trends of consolidation of industrial production, which led to the formation of giant corporations (joint stock companies). In 1967, he noted the following facts: seventy years before that time, the activities of corporations was limited by the sectors in which production had to be conducted on a large scale (rail and water transport, steel manufacturing, oil production, some mining and quarrying industries) (Nimmo 65-82). Later, corporations covered grocery, flour milling business, newspapers and entertainment companies – all the activities that had once been the domain of individual owners or small firms.
Thus, in the first half of the 20th century not individual capitalist property, but its common form, stock and financial capital started dominating. At this second phase of the evolution of bourgeois economy, the dramatically increased scales of appropriation allowed wide use of advanced technology in production and establishment of mass production of vital goods for the society. The new level of economic development became intermediate for the further socialization of the means of production and commodities.
Still, we claim that in spite of these tendencies, sole proprietorship is the best form of running ranching business due to the specificities of organizing this business and profit obtainment, as well as specificities of this form of ownership regarding possibilities it provides for ranching business.
The Essence of Sole Proprietorship in Organizing Ranching Business
Sole ownership is a form of organization of relations of private property, which is characterized by the belonging of conditions of production to a single individual, who conducts the process of production, that is, possession, disposition and use of means of production, based on one’s own or involving others’ (hired) labor.
Economic form of implementation of sole proprietorship based on one’s own labor is the appropriation of the product of one’s own production or income from its sale. Economic form of implementation of sole proprietorship involving hired labor the appropriation of the share of the revenue from one’s product which remains after the payment of employee salary, which is an economic form of implementation of employee’s ownership on his own workforce (Sitarz 34-39). On the basis of sole proprietorship the so-called sole proprietorship entities are established as, for example, ranching business.
Ranching business is one of the types of sole proprietorship entities, due to the fact that this is the family-labor union of individuals, in which the implementation of sole proprietorship entity is inextricably associated with the use of land for production agricultural goods and further processing and sale of these goods (Steward 40-42).
As any other subjects of sole proprietorship entity, individual entrepreneurs are entitled to (Steward 50-53):
implement any kinds of private enterprise, unless otherwise provided by law;
implement private enterprise with the use of hired labor in accordance with the laws;
establish branches and representative offices in the manner prescribed by law;
fix prices for manufactured goods (works, services), except in cases specified by law;
provide funds (loans) to subjects of private business entities on a reimbursable basis;
carry out foreign trade activities within their legal capacity;
establish associations of private entrepreneurs;
participate in the work of expert councils through accredited associations of private entrepreneurs;
apply to law enforcement and government agencies engaged in monitoring and oversight functions for the prosecution of persons guilty of violating the rights of private entrepreneurs;
apply to the courts for protection of their legitimate rights and interests;
introduce for the consideration of the public authorities the proposals for addressing the causes and conditions conducive to non-fulfillment or improper fulfillment of regulations on the support and protection of private enterprise.
Still, sole proprietorship also gains other aspects due to the peculiarities of ranching business, which are discussed further.
Ranching Business as a Specific Form of Economic Relations
Historic Background
Agrarian relations represent a specific system of economic relations that develop in society towards land ownership, land tenure and land use in agriculture. Their specificity, as it has already been emphasized, is that the principal and irreproducible means of production in agriculture is land. Land distribution between classes and social groups in different economic systems determine the nature of agrarian relations in them, occasionally creating acute contradictions in society. Resolution of these contradictions is carried out during the evolutionary development of agrarian relations, improvement of land tenure and land use, tools used in agriculture, deepening of social division of labor, agricultural integration.
One of the means that revolutionize the development of agrarian relations is agricultural reforms transforming the system of ownership, land tenure and use, organizational forms of ranching in the countryside. They should be based on creation of the conditions under which the direct producer holds the position of the owner of the land, freely choosing manufacturing direction for its business, disposing the produced goods and income (Farm and Ranch Safety Management, 78-81).
These principles were formulated centuries ago. And countries that followed them have created a highly efficient agricultural production, providing food for the population of not only their country but also of other states. These principles were described by Bell, who wrote that everyone should be given the freedom to cultivate in his field the plants that correspond to one’s own interests, abilities, soil properties and which, in owner’s opinion, are able to provide the greatest possible number of products (Bell 180-84).
However, not all economies apply this system. For example, the foundational principle, the freedom of management formulated more than two centuries ago, was not understood and implemented in the administrative-command economic model.
Formal socialization of land, forced collectivization conducted in the countryside led to the creation of such forms of economic activity in which the alienation of peasants from the ownership and management reached its limit, bringing selfishness, indifference and a consumer approach to land use. The result of this policy was a permanent crisis in agriculture, and the inability to solve the food problem in society (Riney 112-14).
The main and most acute contradiction prevailing in the agrarian sector of the command model was the one between formal socialization and actual disposition of land by state bureaucracy. The latter manifested in a real unification of ownership and possession in the face of a single entity – the State, on behalf of which the unit officials managed the land (Riney 115-16).
The introduction of sole proprietorship of land undoubtedly solves these contradictions, creating at the same time a range of new contradictions, which can be a cause of profound social upheaval. Land in most countries is the object of private ownership and purchase and sale (Vanvig and Gleason 25-27). This gives rise to acute social conflicts in society, and among Western scholars there are many opponents of sole land proprietorship.
Noting the very useful function of sole proprietorship of the products of labor of a man, including the means of production, they at the same time consider unnatural sole proprietorship of land because it causes damage to society, undermining its material and spiritual values. Therefore, one of the answers to the question of whether the land like other commodities should be traded may be negative.
Organizing Ranching Business
Contradiction stated above may be permitted on the basis different from sale and purchase of land. It goes about the movement of this controversy over the well-known triad of proprietary powers, and possession, above all. Contradictions, formed in relation to land in terms of state ownership on it, are not solved by combining ownership and possession in the person of one entity – the State, but in their separation from each other. With state ownership of land, the possession carried out by the direct producer in the person of the company or individual ranching enterprise should not be formal, but real, in which the owner realizes his ownership of the manufactured product and income (net of tax and rent). Such a separation of ownership and possession of land is realized through fixing land ownership with the right to inheritance, land rent, or the development of collective and mutual ownership (Farm and Ranch Safety Management, 92-97).
Along with this, the transfer of land to private ownership of labor ranch is necessary and possible. In this case, the ownership of the manufactured product and income derives its material basis. However, we emphasize again that there is no fundamental difference between lifetime inheritable possession and ownership of the land farm, above all, because ownership and possession are not implemented in a vacuum of social relations, but in the system of state regulation (Steward 61-63).
In these circumstances, the activities of the proprietor are mediated not only as basic ones, but also as superimposed relations, which put direct producers in a certain institutional framework. Even in countries where the traditions of private ownership account for centuries, the farmers are limited in their activities by legal laws. Thus, it is forbidden to engage in farming without special education. The land owner is also obliged to observe strict crop rotation, provide a certain level of environmental safety, and is bound by the quota of production, and many other factors (Riney 90-92; Steward 75-77).
Thus, the resolution of conflicts related to land ownership, can be carried out in different directions, the most important of which are:
1) delineation of ownership and possession between the state and enterprises;
2) lifetime inheritable possession of the land by a business entity;
3) introduction of private ownership of land by labor ranch.
This is not alternative, but complementary social forms. It is the variety of forms of ownership and management creates a competitive market environment, in which alone the effective functioning of the subjects of the market economy is possible. In this case, the collective form of management in the agricultural sector also has significant potential, for expert see the future not in small, but middle- and large collective enterprises, freed from the pressure of state apparatus. Factually this is the main trend of a globalized market (Sitarz 123-29).
Thus, in the U.S., small farms with the sales of 5 thousand dollars a year make 34% of all households. They produce 3,2% of agricultural products. In a total, the losses of these farms make 700 mln dollars, i.e. one thousand dollars per each ranching business, and only grants from the state allow their owners to stay afloat. But if the farm is able to submit products for at least 10 thousand dollars annually, it is already becoming profitable (Wuerthner and Mollie Matteson 224-28).
In comparison, the biggest ranching businesses selling goods to 500 thousand dollars annually (in the United States, they make only 1,4%) produce 32% of all agricultural products, bringing their owners up to 21,6 billion dollars of net income (Wuerthner and Mollie Matteson 228-30). Stressing the great potential of collective forms, it must be distinguished from collective state farms, in which the collectivist beginnings were never implemented historically. The so-called indivisible funds initially distorted the essential features of cooperative ownership, became the basis which broke the link between labor and property, and finally led to the alienation of farmers both from work and property.
According to economist Larry A. Riney, at the end of the 19th century, a general belief reigned that agriculture was on the verge of rapid industrialization, similar to the one that occurred in other spheres. 100 years later, economists are surprised to find that the situation has still not changed (Riney 119-120). Although the current situation is not quite identical with the former (as the proportion of farmers in a total number of working age population has fallen from 80% to 5%), these differences, whatever important they may be, do not affect the essence, and ranching business remains the sector of family farms (Steward 37).
The Main Features of Running Ranching Business
Undoubtedly, there must be some objective basis, which, despite new stages of scientific and technological development, emergence of fundamentally new types of technologies and means of labor, should allow the family ranching business not only survive but also to some extent be an important element of agribusiness. Such an objective basis is agricultural production itself, its specific nature and features that distinguish it from other spheres of social production.
Let us list these features. The main thing is that ranching deals with a living object, living nature, living organisms that transform living matter, the natural energy into the products of human activity. In contrast to the industry, in ranching production biological working tools are a priority. Soil fertility, animals, seeds and feeds – all this is produced not outside but within the ranching itself. The discordance of the production time and working period, depending on natural conditions determine the seasonality of production. All factors together dictate the peculiarity of technology, specific requirements for industrial means of labor, organization of production, and quality of the workforce (Steward 61-64; Rosenauer 79-85).
Since in the agrarian sector specialization does not reach such a depth as in industrial sectors, a worker must have a broader level of training to be able to perform operations across the whole production cycle. In field cropping, for example, consolidated manufacturing operations involve plowing, pre-planting processing, planting, tending plants, and harvesting. Each of them is characterized by a large number of features, which are constantly being adjusted by quickly changing weather conditions (Steward 78-80).
Therefore, the work in ranching does not have templates or firmly fixed order of manufacturing operations, or rigid predetermination of organizational forms. It is hard to find as sphere of production requiring creative labor as much, as ranching. All this determines the patterns of production process management, excluding directive manner. Change of environmental conditions in virtually several hours requires prompt decisions and actions of the workers of a specific rancho.
In contrast to industrial sectors, where due to a single division of labor an intermediate result matters, in ranching business the production effect is always embodied in the final product. Therefore, there is no impersonalization in the production process, which is typical for the industrial sector. All these features inevitably bring changes in the concept of concentration of agricultural production, determining a natural basis of ranching business (Riney 145-47; Rosenauer 89-93).
However, when it comes to maintaining an objective basis of the stability of ranching as one of the alternative community forms, in addition to biotechnology, environmental and economic factors, it is necessary to note the social and moral factor, which was expressed by Rosenauer et al. in a capacious formula: no nation can achieve prosperity until it realizes that plowing a field is an activity as decent as writing a poem (Rosenauer 111).
Contemporary Tendencies and Problems of Sole Proprietorship in Ranching Business
Anonymity and alienation of labor, even in the prosperous (from the economic point of view) households, have radically changed the atmosphere in which the labor activity of employees of ranching business is realized today. Many of them clearly understand that the labor in this sphere of economy has become more stressful and intense. Sole farmer can rely only on himself and his family, and must be able to take risks. Family well-being depends not only on the degree of labor participation in the economy, but also on climatic conditions. Unfavorable year, even with a carefully designed system of insurance and farm credit, threatens by economic downfall (Wheeker 58-60).
Ranching business of developed countries is now experiencing the impact of two major factors (Wuerthner and Matteson 217-23):
1) the price inelasticity of agricultural products;
2) the backlog of demand on supply.
The elasticity coefficient of 0,2-0,25 means that the price of agricultural products should be lowered by 40-50% in order to make consumers increase their purchases by only 10%. The demand on income is also inelastic. With income growth by 10%, the increase in consumption of agricultural products will occur at the level of 2%. The demand for a number of agricultural products (lard, for example) has not just stopped growing, but also is also decreasing for several years. Another threat is that countries of the former Soviet Union may stop purchasing American grain. In this case, farmers will not be able to survive without the active state support (Wuerthner and Matteson 322-29).
In common market countries, subsidized coefficients are applied in this field on those goods that are used by farmers: fertilizers, scientific services, equipment, etc. At the same time, the purchase price is determined for the farmer; and the state is consciously implementing the policy of subsidies to achieve social stability.
Conclusion
In general, agrarian relations represent a specific system of economic relations that develop in the society towards land ownership, land tenure and land use in ranching business. Sole proprietorship in ranching business is implemented by an individual on the basis of land owned by him in ownership rights, as well as in the effect of any other right allowing the use and (or) disposal of this property (land), and that is why this is mostly appropriate for this sphere of economy.
Next, ranching business has its own specificities. In contrast to industry, in ranching production biological working tools are a priority, as well as such factors as the production of soil fertility, animals, seeds and feeds within the ranching business itself and not outside of it; discordance of the production time and working period; dependence on natural conditions and seasonality of production. All these factors determine the peculiarity of technology, specific requirements for industrial means of labor, organization of production, and quality of the workforce; which, in turn, determines the patterns of production process management, excluding directive manner. In general, sole proprietorship is mostly suitable for organizing ranching business and therefore, provides high quality natural products which have health benefits for the consumers.
