KELSO IDEA HAS MERIT
by Ronald Reagan, April 9, 1975
“He’s an amateur crank.” It was Paul Samuelson talking, professor of economics at the Massachusetts Institute of Technology and winner of the noble prize.
He was talking to Mike Wallace on “60 Minutes” about a self taught San Francisco economist who wants to make every American worker a capitalist: Louis Kelso.
Kelso had been swimming upstream in the rarefied world of economics for nearly 20 years or so when some journalists and politicians began to listen and found he had something to say.
According to Kelso, “America’s official policy is to have a ‘full employment’ economy.”
“This is irrational when technology and automation are destroying jobs faster than new ones can be created.”
“What we need to do is develop a way for the workers to own ‘a share of the action’ – a share of the machines that actually produce the wealth.”
He points out that only about 6 per cent of the U.S. population derives a significant portion of its income from capital.
The rest of the people must rely entirely on wages, salaries and commissions. No job, no money.
What if most of the workers also owned some of the capital and began to derive a healthy portion of their income from this source, he asks.
In time, he says, the boom-and-bust cycle, wild stock speculation and the wage-and-price spiral of inflation would be a thing of the past.
Kelso points out that American industry has a steady need for fresh capital to update and expand itself. (expanded capital ownership)
If, instead of turning to traditional sources for this capital, a company created instead an Employee Stock Ownership Plan for its workers, that “ESOP” could go to the bank, borrow the money to buy the new stock of the company, and pay it back out of dividends from the stock.
After all, he says, industry now pays off its capital borrowings out of profits.
As soon as the loan was paid (typically in three to five years), the workers could begin to get their own dividends.
And. it wouldn’t cost them a cent out-of-pocket to become shareholders. Nor would it require present shareholders to give up any ownership. No “redistribution” scheme.
All the while, industry would have its fresh capital at a cost less then it now pays.
That’ Kelso’s plan in brief. There’s more to it, of course.
Sen. Russell Long, D- La., chairman of the Senate Finance Committee, is seriously interested in Kelso’s visionary solutions to some of our economic problems, and the energetic Kelso (who has put a version of his plan to work in several score private firms) is beginning to get a full hearing for his idea in Washington.
Those ideas may not be perfect, but they offer some real hope that the fraternity of ruling economists -captivates of Keynesian orthodoxy who have held sway for four decades-may be near the end of the road.
Kelso’s challenges to debate Samuelson (or any other orthodox economists) have gone unchallenged.
But no wonder Mr. Samuelson was so tight-lipped when he dismissed Kelso out-of-hand on the television program. Kelso after all wasn’t anointed to the economic high priesthood. Neither was Louis Pasteur.
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“More than 100 years ago, Abe Lincoln signed the Homestead Act making it possible for our people to own land. This was a revolutionary development. Ownership of land in most of the world had not been possible for the ordinary citizen…. The Homestead Act set the pattern for American capitalism…. Now we need an Industrial Homestead Act, and that isn’t impossible.” [Present form; ‘The Capital Homestead Act.’]
Radio commentary, “Tax Plan No. 1,” /Viewpoint with Ronald Reagan/, February 1975.
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“We who live in free market societies believe that growth, prosperity and ultimately human fulfillment, are created from the bottom up, not the government down. Only when the human spirit is allowed to invent and create, only when individuals are given a personal stake in deciding economic policies and benefiting from their success — only then can societies remain economically alive, dynamic, progressive, and free. Trust the people. This is the one irrefutable lesson of the entire postwar period contradicting the notion that rigid government controls are essential to economic development.”
Ronald Reagan – September 29, 1981
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“I will tell you whatever you do don’t risk having to face your children or your children’s children some day when they ask “Where were you and what where you doing on that day Freedom was lost.”
-Gov. Ronald Reagan 1974-
Pass Capital Homesteading Now!
“EVERY CITIZEN AN OWNER”
Republican President Ronald Reagan supported expanding the ownership of productive capital. What happened? Why do we not have leaders who can see the merit of this GOAL in light of the exponential growth of job-destroying technological invention and innovation?
“Our national task today is to restore the conditions for economic recovery, without which our prosperity and our national security cannot be assured. We must restrain the headlong growth of the Federal budget; enact multi-year across-the-board tax reductions to spur new job-creating investment and productivity; roll back the tangle of regulations which needlessly hamper enterprises; and cleave to a sound monetary policy which preserves the strength of the American dollar. But even as we act boldly to achieve these goals, we most work to create the conditions for expanding the ownership of the nation’s wealth, so that all Americans may have their fair chance to become true proprietors of their country.”
–– Ronald Reagan, Letter to Pierre S. du Pont IV, Delaware, 1981.
The Capital Homestead Act would make it possible for every American to become a viable owner of productive capital and not just for the tiny elite who now own our corporations. See http://www.cesj.org/homestead/summary-cha.htm and http://www.cesj.org/about/programs/declarations/ monetaryjustice.htm.
Unfortunately, Reagan never followed through with introducing policies and programs to achieve broadened private, individual ownership. The Employee Stock Ownership Plan (ESOP) trust he had referred to in various settings was already in pla
1. Dignity and empowerment begins with the human person, not any institution. Social justice obligates each person to work with others to perfect the social order to support the dignity and empowerment of every person.
2. Binary Economics: The two interdependent factors of production are “Labor” (all human inputs) and “Capital” (all non-human inputs). The two legitimate ways to produce wealth and be entitled to the incomes produced, are through the contribution of one’s labor and the contribution of one’s capital. The relative value of these contributions is determined by free, open and anti-monopolistic markets–which requires equal access to capital ownership.
3. The three essential principles of economic justice:
1) the principle of participation
2) the principle of distribution, and
3) the principle of social justice (or the “principle of limitation”)
4. The four pillars of a just free market system:
1) limited economic power of the state
2) the full rights of private property
3) free, open and anti-monopolistic markets
4) universal access to capital ownership
For further information on the Just Third Way, see: “The Just Third Way: How We Can Create Green Growth, Widespread Prosperity and Global Peace,” at http://www.cesj.org/
