This January 1976 Economic Report followed my unsuccessful run in 1974 for Representative in the United States Congress (see http://foreconomicjustice.org/336/gary-reber-for-congress-democrat-for-economic-justice/). I ran on a platform advocating broadening private, individual ownership of new productive capital formation and to reform labor unions to represent worker/employees dependent on jobs to empower them to acquire ownership stakes in the companies who employed them, paying for their ownership participation out of the future earnings generated by the growth of the companies. This was a period when there were leaders who seemingly understood the critical importance of broaden ownership but failed to propose and implement real policy and program change to accomplish the goal.
This was also the time, 1968-1976, that I partnered with binary economist and corporate tax attorney Louis O. Kelso in the economic justice advocacy firm that I founded, Agenda 2000 Incorporated. Kelso has written several books on this subject including The Capitalist Manifesto, The New Capitalists: A Proposal To Free Economic Growth From The Slavery Of [Past] Savings, Two-Factor Theory: The Economics Of Reality, and Democracy And Economic Power: Extending The ESOP Revolution Through Binary Economics.
“When Congress and the people got it Right.”
Lost in the 70’s,…
Wealth in the United States is concentrated in the hands of a relatively small fraction of the population. Unfortunately, the data on wealth are sparse. The last comprehensive attempt by the Federal Government to measure its characteristics and distribution was made by the Federal Reserve Board in 1962. It was estimated that more than three-quarters of the country’s total wealth was owned by less than one-fifth of the people, while more than one-quarter was owned by just the top 0.5 percent. The Federal Government should remedy the lack of up-to-date information on personal wealth through periodic surveys and comprehensive reports on this subject.
The distribution of wealth reflects in large part the pattern of ownership of non-residential capital with corporate shares being one of its principle forms. This category of wealth is much more concentrated than total wealth, with the top percentile of the personal income distribution owning 51 percent of the market value of individually owned corporate stock and receiving 47 percent of the dividends. Meanwhile, the new capital assets generated by businesses, which in recent years have averaged well over $100 billion annually, rebounded largely to the benefit of these persons who already have great wealth.
The number of shareholders, moreover, declined by some 18 percent from 1970 to 1975, and data suggest that young people today are not purchasing stocks in significant volume. Balancing this declining role of the individual investor has been the rise of financial institutions, which since 1950 have more than tripled their share of the market value of stock holdings.
To begin to diffuse the ownership of capital and to provide an opportunity for citizens of moderate income to become owners of capital rather than relying solely on their labor as a source of income and security, the Committee recommends the adoption of a national policy to foster the goal of broadened ownership. The spirit of this goal and what it purports to accomplish was endorsed by many of the witnesses at our regional hearings.
Without getting into specifics, the types of programs which could be established to help meet this goal will be outlined. Such alternative methods of broadening capital ownership are under study by the Committee.
In the individual firm, employee ownership can be encouraged directly through tax incentives to the employees to purchase stock or to firms to place newly issued stock into the hands of their employees. The latter approach, known as Employee Stock Ownership Plans (ESOPs), was examined in recent hearings by the Committee.
An alternative plan involves multiform funds which would receive tax-favored contributions from affiliated firms and issue nonnegotiable fund certificates to the employees. This type of fund, which has been in operation in France and West Germany, may diversify its portfolio, although it may be limited to particular industries and regions.
Providing ownership opportunities not just to employees but to citizens at large could be accomplished through various devices. One example would be the establishment of funds which would accumulate personal savings on a tax-preferred basis and use them to acquire a diversified portfolio of equity shares in corporations. For instance, individuals with earned income not exceeding $20,000 could be allowed to save up to $3,000 a year in one or more funds and to deduct this amount from their taxable incomes.
Whatever the means used, a basic objective should be to distribute newly created capital broadly among the population. Such a policy would redress a major imbalance in our society and has the potential for strengthening future business growth.
To provide a realistic opportunity for more U.S. citizens to become owners of capital, and to provide an expanded source of equity financing for corporations, it should be made national policy to pursue the goal of broadened capital ownership. Congress also should request from the Administration a quadrennial report on the ownership of wealth in this country which would assist in evaluating how successfully the base of wealth was being broadened over time.
The main advantages of such plans according to the study were: (1) they stimulated both the issuance of stock and its distribution to new stockholders and (2) the new stockholders would, if so desired, consist entirely of lower and middle income Americans who currently own a very small share of this country’s outstanding stock. It is my intention that the Joint Economic Committee continue its efforts in this area by examining these types of plans over the next year.
The broad framework of my thoughts in this area may be stated quite briefly. Throughout my career as a public servant, I have viewed full employment as a top priority goal for this country. And I continue to do so. But I also recognize that capital, and the question of who owns it and therefore reaps the benefit of its productiveness, is an extremely important issue that is complementary to the issue of full employment. I see these as the twin pillars of our economy: Full employment of our labor resources and widespread ownership of our capital resources. Such twin pillars would go a long way in providing a firm underlying support for future economic growth that would be equitably shared.
HUBERT H. HUMPHREY,
U.S. Senator (D-Minn.)
Washington D.C.
[Note; To date in 2012 there existed over 22,000 ESOPs in America with over 11,000,000 employees participating. The next step in Broaden Capital Ownership, is for 308,000,000 Americans participating in what is know as ‘Capital Homestead Accounts’, a second economy multiplied by 308 million – Citizens. Ronald Reagan and others called it; an ‘Industrial Homestead Act’. ]
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What’s Troubling America and the World today!
“The society had fallen, much as our society has today, into a tangle wherein the bulk of men were disappointed and angry and seeking for a solution to the whole group of social strains. There was indebtedness everywhere; the power of money and consequent usury. There was slavery everywhere. Society reposed upon it, as ours reposes upon wage slavery today. There was weariness and discontent with theological debate, which, for all its intensity, had grown out of touch with the masses. There lay upon the freemen, already tortured with debt, a heavy burden of imperial taxation; and there was the irritant of existing central government interfering with men’s lives; there was the tyranny of the lawyers and their charges.”
— Hilaire Belloc, The Great Heresies, 1938
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“The root cause of present injustices is not to be attributed to division of goods, nor the inequalities of the division, but rather to the fact that the mass of people are practically bereft of ownership. Some means must be devised to admit the proletariats within the proprietory system. Widely distributed property makes for social stability. Any alternative offered lacks the moral discipline of responsibility and ownership. Perhaps the best summary argument for private property is the impossibility of finding any better general system to take its place.”
McDonald, The Social Value of Property According to Saint Thomas Aquinas (Washington, D.C.: Catholic University of America Press, 1939) pp. 185 paragraph 8.
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“In the past, the ownership of business enterprise, the only form of property with which we are here concerned, has always at least in theory, involved two attributes, first the risking of previously collected wealth in profit-seeking enterprise (past savings). But in the modern corporation, these two attributes of ownership no longer attach to the same individual or group. The stockholder has surrendered control over his wealth. He has become a supplier of capital, a risk-taker pure and simple, while ultimate responsibility and authority are exercised by directors and ‘control.’ One traditional attribute of ownership is attached to stock ownership; the other attribute is attached to corporate control. Must we not, therefore, recognize that we are no longer dealing with property in the old sense?”
— Berle and Means, The Modern Corporation and Private Property, 1937, p287
