Re: Policy Proposal - Stock Quid Pro Quo for WTO and Gov'

[OWNCO@aol.com]

Dear Deb,

I hate to be a party pooper, but I have trouble with your proposals.

The main  reason is that I think it will damage the image of COG and may set 
back the ownership movement.  After giving you my reasons, however, I will 
offer what I think is a more saleable alternative.

First, it will be superficially attractive to progressives and New Deal 
liberals, confusing and not exciting to most middle-of-the-roaders and 
totally opposed by libertarians and conservatives.  Hence, it will produce 
little progress and can alienate large numbers to the ownership cause.  What 
is needed is something that can excite "radical centrists."  No serious and 
committed Kelsonian will embrace your proposals.  

Second, for COG to win strategically it needs a truly new paradigm for 
analyzing the system and coming up with realistic solutions.  The new 
paradigm must appeal to those who are fed up with the stale and inherently 
conflictive proposals that have come forth from the left and the right.  To 
repeat, it must appeal to the radical middle as the new vanguard for social 
change.  My own experiences in this movement for 35 years have proven that 
ownership ideas that are morally just, involve little or no conflict or 
coercion, and reach out from the principled middle to both the principled 
left and the principled right, can win the day.  (We did not have Ford 
Foundation funding when I served as Kelso's one-man lobby on Capitol Hill and 
orchestrated the political strategy that resulted in the initial ESOP laws in 
the United States, and later a few members of CESJ managed to unite the 
broadest possible extremes on the ideological spectrum on Capitol Hill to 
sponsor a Presidential Task Force on Project Economic Justice, a project that 
was carried out without any money coming out of the Federal budget.)

Third, a major problem in your proposals are its excessive reliance on the 
exercise of state power to solve basic social problems.  A conservative would 
conclude that you want to coerce companies to hand out stock to workers in 
order to escape from restrictive trade policies.  Conservatives would read 
your proposals as suggesting that any action or acqiescence by the state to 
private enterprise should be treated as a privilege for which benefitting 
enterprises should make some compensating move, like turning stock over to 
workers.  It reflects the European approach to profit sharing and ownership 
sharing, in which coercion rather than genuine social justice (i.e., 
restructuring the social order) is involved.  

Fourth, where Kelsonians would restructure the system to eliminate barriers 
(e.g., monopolies) to effective participation by all persons (without forcing 
people to take advantage of new opportunities) and would ensure that any 
"public goods" (like productive credit) be equally accessible to all, 
non-Kelsonians would use the coercive powers of the state to force people and 
voluntary associations to follow their view of what is "good for the people", 
in the collective sense of the phase.  

Fifth, your constitutional amendment that would require companies to give 
away stock if they receive any tax breaks, subsidies, contracts and 
presumably anything of economic value.  I would agree with the concept from a 
standpoint of short-term expedients to open people's minds to social justice 
issues, such as access to economic empowerment for all members of human 
society, but, as a Kelsonian, I wouldn't waste my ammunition on such a 
trivial objective.  Instead, if COG is ready for a bold public stand for 
economic and social justice, I would love to have COG advocate a 
constitutional amendment that would restore the duty of the state to restore, 
as a fundamental right of citizenship, equality of access to the "means of 
acquiring and possessing property."  This was one of the trinity of 
fundamental duties of government under Section 1 of the Virginia Declaration 
of Rights.  It was written in May 1776 by a statesman whom Jefferson 
respected, George Mason, the father of the American Bill of Rights.  
Jefferson blew it when he substituted "pursuit of happiness", a totally 
nebulous phrase, for "property", or better yet "the means for acquiring and 
possessing property."  COG would ignite a bloodless "Second American 
Revolution" by becoming advocates for incorporating Mason's property language 
in a proposed constitutional amendment.  And COG should recommend that the 
UN, the World Bank, the IMF, the WTO and all international public sector and 
NGO organizations add these few words to their charters and promote universal 
access to future capital ownership as a fundamental right of citizenship.

Sixth, once the right goal is stated and promoted as a fundamental human 
right, the means will follow.  And for those seeking specific reforms, why 
not start with the "Capital Homestead Act," the successor to and totally 
consistent with Kelso's 1964 proposed "Industrial Homestead Act."  To see 
those specifics for the US economy (which are easily adaptable to any 
economy), please go to our web site by clicking on  <A 
HREF="http://www.cesj.org/homestead/cha-summary.htm";>Capital Homestead Act 
Summary of Reforms</A> .

Deb, I know you like to win.  So do I.  I want to help you and COG be 
winners, not losers.  So please take may comments in this light.  Together, 
with the right ideas (and the Kelsonian paradigm offers just that), we can 
turn the world right-side up.

Best regards,

Norm Kurland, Center for Economic and Social Justice

P.S. For those who may be interested in better understanding where I'm coming 
from, please see my attached Labor Day Greetings to all COG members. 


<HTML><PRE>Subject:     A Kelsonian Critique of Initial COG Proposals
Date:           Labor Day1999 (Worker Empowerment Day in the future)


First, I want to express my enthusiasm and congratulations to COG and the 
growing network of people and organizations interested in making broad-based 
capital ownership a fundamental human right and a universal right of 
citizenship.  This goal is the most serious moral omission in most social 
justice initiatives throughout human history and within all nations, capitalist 
as well as socialist.

We in CESJ believe the goal itself should be imbedded in the constitutions of 
all nations, in language similar to George Mason's Virginia Declaration of 
Rights.  The 1776 Virginia Declaration of Rights stated that one of the most 
important duties of government to the people is to secure for everyone "the 
means of acquiring and possessing property."  America's founders knew that 
economic democracy was impossible without broad-based individual ownership of 
productive assets and that putting economic power through property in the hands 
of all voters was the ultimate check on the potential abuse of the inherently 
coercive powers of any government, even political democracies.

While the goal is alluded to in Article 17 of the UN's Universal Declaration of 
Human Rights, no actions or programs of the UN yet promote individual or joint 
access to property in any systematic way.  COG's initiatives have the potential 
of correcting 
this fatal omission throughout the world.

Second, I believe that my greatest value to this network is to make 
contributions from the perspective of a “Kelsonian purist.”  (Because of their 
deep understanding of and solid commitment to the principles of the Kelsonian 
system, the same label can be applied to Patricia Kelso, Robert Ashford, Rodney 
Shakespeare, Norman Bailey, Joe Recinos, Mike Greaney, Dawn Brohawn, Antonio 
Betancourt, Ron Ludwig, Bob Smiley and a few others.)

To the extent participants in COG's “multilog” stray outside the “Kelso box,” 
my reactions and comments should be understood as advocacy of a specific 
paradigm that synthesizes the "win-win" thinking of revolutionary thinkers like 
social architect Louis Kelso and physical architect Buckminster Fuller.  This 
"post-scarcity" paradigm offers a unified, comprehensive, highly principled, 
synergistic and realistic theory of development, economic justice and people 
empowerment.

Everyone, especially the poor, most workers and others excluded from power in 
the past, can gain much within this paradigm, and no one has anything to lose 
(except any continued monopoly of access to and control over the forces and 
tools of economic change.

e).  From a Kelsonian perspective, those who operate outside this box, perhaps 
unwittingly, at best promote change without real justice for the poor.

Both Kelso and Fuller accept human nature as a given, and both aim at changing 
the "winner-take-all" environment now surrounding human beings.  Both strive to 
encourage the creative and life-enhancing side of human nature and to suppress 
tendencies that destroy life or seek domination over the lives of others.  And 
they both reject the Malthusian assumption that economic scarcity is inevitable 
and beyond overcoming with human creativity. They both believe that economic 
abundance is technologically possible.

The new post-scarcity paradigm from which I operate reflects Kelso’s theory of 
economic justice.  This theory offers a comprehensive systems logic based on 
clear principles for redesigning the "invisible" or institutional environment 
that impacts the behavior and quality of life of all members of society.  
Kelso's system of binary economics, if followed, links people as owners to the 
process and benefits of technological change through inclusionary “social 
tools” (i.e., universal access to the secret ballot, the rule of law, 
democratic money and credit systems, simple and just tax systems, 
ownership-promoting labor unions and enterprises).  This paradigm also reflects 
Fuller’s "world design science" principles for redesigning the physical 
environment within which humans live (i.e., improvements in technology and 
physical structures) in order to help all individuals and families become more 
productive, more economically empowered and better able to control their own 
lives.

Third, every one of my comments will be based on my admittedly rigid adherence 
to Kelso’s three principles of economic justice and CESJ’s four pillars for 
achieving a just, prosperous and universally empowering economy.  (To 
paraphrase Russell Long when he became a champion of Kelso's ideas, I take this 
position because I think Kelso is right.)  But because of my highest commitment 
to the pursuit of the truth and the marketplace of ideas, I accept any 
challenge and am willing to be proven wrong.

Within this framework, several of the COG proposals would be characterized as 
economically unjust (in principle) or unnecessarily conflictive, 
self-contradictory or tokenistic.  However, it is my sincere hope that my 
criticisms will not be taken as an attack on the person(s) advocating these 
proposals.  Since I'm personally convinced that Kelso’s principles are correct, 
my criticisms are aimed at wrong or confused ideas, not the messenger.  My aim 
is to persuade, not to offend, the advocates of ideas outside the Kelso 
paradigm, even  those whose goals are the same as Kelso's but whose means are 
anti-Kelsonian.

Fourth, to change basic economic policies to expanded capital ownership as a 
fundamental pillar of local, national and global policy, the ownership movement 
needs unity not just for its own sake (a mob is unified).  And it is not enough 
to agree merely on the ultimate goal.  We need to build unity on the basis of a 
mutually agreed-upon long-term vision, core values, operational principles and 
strategic plan to achieve that goal.  Without unity based on a transcending 
“radical middle road” position, COG will never unite conservatives and 
liberals, libertarians and progressives, people from across the ideological and 
generational spectrum, leaders and workers alike.  A unity based on common 
vision and common principles is the only basis for building real solidarity 
inspired by “idea power” and effective “people power.”  In this light, the new 
paradigm of Kelso and Fuller and CESJ’s Capital Homestead proposals (can be 
found at our web site at http://www.cesj.org) deserve to be debated seriously 
by the COG network, before less principled expedients debase the noble goal 
that all of us agree should be advanced.     



My Framework of Analysis (“Where I’m Coming From”)

Kelso’s Three Principles of Economic Justice

Kelso’s principles of economic justice, based on classical concepts developed 
over the last several thousand years, are like a three-legged stool—all 
essential, universal and interdependent for promoting a just economy:

(1) the principle of participation, the “input” principle which ensures 
equality of access to the social means (e.g., money and credit) for the poor 
and working people generally to become owners of land and wealth-producing 
technologies, as well as equal opportunity to engage in productive work (this 
is the moral omission in alternative theories of economic justice);

(2) the principle of distribution, the “out-take” principle which links all 
owners globally, through their property rights and the immutable laws of supply 
and demand, directly and systematically to incomes from their capital inputs as 
well as their labor inputs (thus reducing the need for charity or 
redistribution through the state);

(3) the “feedback” principle (what CESJ calls the “principle of harmony” and 
Kelso called the anti-monopoly principle or “principle of limitation”).  
Whenever either the principle of participation or the principle of distribution 
is violated in the social order—as measured by a growing gap of power, status 
and opportunity between those at the top and those at the bottom of the 
economic ladder—this principle compels everyone to organize together (as COG is 
attempting to do) to restructure the economic order and restore equilibrium 
between participative (input) justice and distributive (out-take) justice.  
(Incidentally, this social duty is what CESJ means by “acts of social justice”; 
it also systematically restores balance between mass consumption power and mass 
productive power as dictated by the laws of supply and demand.)

Kelso’s Four Pillars of a Just Economy

Following these common-sense principles and system of economic justice are the 
four fundamental pillars of policy for building a “just market economy”: 

(1) expanded capital ownership through the democratization of capital credit; 

(2) limiting the economic power of the state; 

(3) restoring the free and open market place for determining the just price, 
the just wage and the just profit; and 

(4) restoring private property in the means of production, particularly within 
global high-technology corporations.

Kelso would agree with Karl Marx that where the ownership of capital is 
concentrated, a free market economy contains the seeds of its own destruction 
if working people have only their labor to sell and are thus forced into 
competition with labor-displacing technology or workers willing to take less 
pay for the work.  (For example, through the global economy and the Internet, 
it is today possible for companies like the $500 billion Microsoft to hire a 
dozen Ph.D. information systems designers in India for the cost of hiring a 
single American worker for the same job.)  As the number of unemployed and 
underemployed people grows, political pressures mount for increased government 
intervention in the form of redistributive, anti-free market, and anti-property 
policies and laws.

However, as Milton Friedman asserts derisively, Louis Kelso would “turn Karl 
Marx upside down.” Friedman is right in suggesting that Kelso agrees with 
Marx’s diagnosis of the Wall Street model of capitalism.  However, Friedman is 
wrong in not acknowledging that Kelso would oppose Marx on Marx's rejection of 
free markets, private property, and the limited economic power of the state.  
In other words, free markets and capitalism are not necessarily synonomous.  
Marx's rejection of these fundamental three pillars of a free and just market 
economy has led inevitably to even more corruption and elitist domination over 
people's lives than under capitalism, for no other reason that it leads to the 
deification of the state and perpetuates the economic dependency of the people 
on those who rule the state.

But, unlike Milton Friedman and others who worship free markets while ignoring 
monopolistic accumulations of capital, Kelso also recognizes that restricting 
the economic power of the state and restoring private property and free markets 
is politically impossible without democratizing access to capital credit and 
economic institutions generally to achieve broad-based capital ownership as a 
fundamental fourth pillar of a just economy.  Kelso’s new paradigm explains why 
the pillar of expanded capital ownership is so essential for overcoming the 
inevitable injustices and power concentrations found both within the Wall 
Street capitalist model and the many variations of socialism, including the 
Welfare State.

Two Analytical Labels to Describe my Support or Opposition  to Specific 
Proposals

I presume that most people in the COG network are familiar with and support 
Bucky Fuller’s understanding of the history and potential of technological 
change.  Hence, I will concentrate my comments on Louis Kelso’s contributions 
to the new post-scarcity paradigm.  I will describe the “Kelso box” as “DEPP” 
(which stands for “Democratized Economic Power to the People”) and everything 
outside that box as the “CEPS” (which stands for “Concentrated Elitist Power 
through the State”).

Undoubtedly some people will reject my characterization if I maintain that 
their proposals fall within the CEPS box.  I would urge that before they react 
negatively they first seriously study the basic writings by Kelso, Robert 
Ashford and Rodney Shakespeare, and the Center for Economic and Social Justice, 
to understand why their proposals are characterized this way.  In fairness to 
Kelso, everyone within the COG network, particularly academics, should do their 
homework before tackling the radical set of ideas and proposals that the Great 
Books philosopher Mortimer J. Adler called "the most revolutionary idea of the 
century."

Critical Readings for People Trying to Understand the Kelso Paradigm

For discussions on Kelso’s economic paradigm, see Binary Economics: The New 
Paradigm, University Press of America, 1999; Curing World Poverty: The New Role 
of Property, Social Justice Review and CESJ, 1994; Democracy and Economic 
Power: Extending the ESOP Revolution, University Press of America, 1986; and 
The Capital Homestead Act: National Infrastructural Reforms to Make Every 
Citizen a Shareholder, CESJ, 1999 update of 1982 paper.  For an understanding 
of Fuller’s contributions, see Utopia or Oblivion: The Prospects for Humanity, 
Bantam Books, 1969.  The Center for Economic and Social Justice maintains a web 
site at http://www.cesj.org for those seeking further materials and background 
on the Kelso paradigm and a summary and full text of the Capital Homestead Act, 
as well as my article, “Beyond ESOP: Steps Toward Tax Justice” (The Tax 
Executive, April, July 1977),on the rationale for a radically simplified tax 
system based on Kelsonian principles of economic justice.

SPECIFIC COMMENTS:

1.  Call for demonstrations against the World Trade Organization meetings in 
Seattle in November.  My Reaction:  CEPS (“Concentrated Elitist Power Through 
the State”).  Protesting against the lowering of trade barriers is a negative, 
defensive, reactionary and ultimately futile mercantilist response against the 
potentially positive potential of the economic globalization process.  If the 
demonstrations were to succeed, and I don’t think they will, it would come at 
the expense of  the American consumer and workers in exporting industries, as 
well as workers in other countries.  A more constructive response by COG is to 
insist on WTO policies that ensure a level playing field for workers globally, 
based on the four pillars of a just market economy described above.  Rather 
than trying to protect jobs in America, COG should be offering WTO a 
comprehensive and unified global agenda along lines of our Capital Homestead 
Act, aiming at equalizing ownership and profit sharing opportunities for all 
workers and families in America as well as in our trading partners.  Changing 
the rules of the Fed, the IMF and all central banks of WTO countries on how 
money and credit are created and irrigated into the productive sector would 
offer a far more powerful and more logically compelling alternative to the WTO 
than trying to repeal the laws of supply and demand, as the adversaries of the 
WTO would be attempting.  It would avoid violating WTO prohibitions against 
trade preferences, industry protections and subsidies.  COG should be in favor 
of faster rates of investment in high-tech capital (which will draw more 
underproductive and globally vulnerable workers into a more productive private 
sector), financed through more participatory ownership techniques, thus 
enabling America to produce more at lower costs but with a new, more empowering 
social contract for working Americans.  To gain a broad bipartisan base of 
support for COG’s goal of democrating capital ownership and access to capital 
credit, COG should advance the honey, rather than the vinegar (coercive) 
approach to policy reform.  Neither the American worker nor the Bangladesh 
textile worker needs a program that increases power of any power elite; they 
deserve genuine economic justice and genuine economic empowerment and I fail to 
see how COG would achieve these goals by taking any stand against a freer, more 
just and borderless global economy.  

2.  Ownership as a Quid Pro Quo for Government Largesse. My Response: DEPP 
(“Democratizing Economic Power to the People”).  I would agree that whenever 
government gives a subsidy to business, it should do so in ways that promote 
economic justice for all (i.e., broader participation in ownership, governance 
and profit sharing for workers and citizens generally).  For example, when I 
lobbied in 1972 for the NMU to save the American passenger vessels, or in 1973 
to turn the Conrail system into a 100% employee-owned rail system, or in 
1979-80 to try to get 72% (rather than the token stake of 13% agreed to by the 
UAW) of Chrysler stock for workers by running the government loan guarantee 
through a leveraged ESOP, I followed this expedient.  However, from a Kelsonian 
standpoint, I would view this only as an expedient pointing to a new direction, 
not a position based on sound principle or logic.  

The government would do much more for the workers by revising Chapter 11 of the 
Bankruptcy Code to promote reorganizations of failing companies through 
“Value-Based Management” (see www.cesj.org) and ESOP debt-to-equity 
refinancings, backed up by bank loans discountable at the regional Fed for 
modernization and reorganization funding.  By leveling the playing field under 
the Capital Homestead Act, which involves no taxpayer subsidies at all (only 
structural reforms), the need for government subsidies would be radically 
reduced.  

Instead of trying to use the tax system to subsidize worker ownership, COG 
should promote a fairer, more simple and more neutral tax system that 
encourages (1) tax-deferred accumulations of capital for all citizens, (2) that 
avoids any tax on incomes below the poverty line, (3) that encourages full 
payout of dividends (thus providing worker-owners with second incomes to 
increase takehome incomes while inducing companies to finance their growth 
through Capital Homesteading loans discountable with the Fed, (4) that funds 
Social Security and Medicare payouts from general revenues, (5) that encourages 
the spreading of ownership of large estates after the owner dies widely among 
many, especially working people, (6) that imposes a fair tax on all incomes, 
including capital gains (after inflation indexing), dividends, interest and 
other capital incomes and (7) that integrates corporate and individual taxes by 
making dividends deductible at the corporate level.

3.  Re-Activating the Federal Reserve Discount Window for Bank Loans to Capital 
Homesteading Vehicles Like ESOPs, CSOPs and Community Investment Corporations 
at a Service Charge of 0.5%.  

My Response: DEPP.  If COG does nothing else, this objective will democratize 
the American economy and, by example, point the way toward a more just, freer, 
and more productive global economy for workers everywhere, especially in the 
poorest and most exploited regions of the world. 

However, I would not impose quotas or requirements for a specified percentage 
on banks, other than having the Fed monitor banks to ensure that local bank 
loans are made for economically feasible (i.e., self-liquidating) projects.  
Banks will make lots of money under our proposal, because they will charge the 
same competitive mark-up over their cost of money as with conventional direct 
loans to corporations.  The best safeguard against abuse is to require that 
only “qualified” Capital Homesteading loans under Section 13 of the Federal 
Reserve Act be eligible for Fed discounting and that no access to the discount 
window would be permitted for conventional corporate loans (which benefit 
current owners), for speculation in stock or commodities, for non-productive 
purposes like consumer loans, or for bailouts of failing banks and other 
countries.  

The differential in the cost of money to the banks, which would in any case be 
passed on to the borrowers, will be more than sufficient to induce significant 
movement toward leveraged ESOPs, CSOPs and CICs.  The 0.5% Capital Homesteading 
“service charge to banks from the Fed would not involve any taxpayer subsidy 
but rather would simply cover the cost of providing a uniquely “public good” 
(i.e., asset-backed new money) on an equitable basis to Americans who in the 
past have been systematically excluded from equal access to capital credit (a 
gross violation of equal protection under the U.S. Constitution).  Thus, no one 
can attack this proposal on the basis of unfairness or preferential treatment 
or in any way violating voluntary participation in the competitive market 
system on a truly equal basis.  All Americans would be eligible to benefit on 
an equitable basis.  The already rich would still have access to already 
accumulated savings from domestic and foreign sources (“other people’s money”), 
but albeit at a much higher base rate.  And neither the Fed nor Wall Street 
could argue that the two-tier base of interest is inflationary, since, under 
our proposed 100% reserve requirement, all new money would be asset-backed, 
structured to produce higher rates of private sector production and designed to 
reduce the need for inflationary and non-productive job and income 
redistribution expedients.  

For more details on this proposal, visit the CESJ web site at 
http://www.cesj.org.

5.  Capital Credit Insurance and Reinsurance as a Substitute for Lack of 
Collateral.

DEPP.  Normally workers and the poor cannot qualify for capital credit, because 
the have no assets to forfeit in the event the capital loan cannot be repaid.  
This collateralization barrier can be overcome by encouraging the private 
sector and the governments at all levels to establish commercial insurance for 
lenders to Capital Homesteading vehicles like ESOPs, CSOPs and CICs.  

After World War II a similar program was set up in the form of mortgage 
insurance so that returning veterans, who had no assets, could borrow money to 
buy new homes.  It worked.  The same can be done, supported by a Capital Credit 
Reinsurance facility, to expand the capital base of America so that all workers 
and families can acquire on credit a growing portfolio of full dividend payout 
stock.  Except for a small reserve fund to kick-start the capital reinsurance 
facility (which would be a good place for justice-loving rich people, 
foundations, pension funds and government to put their money), the effort would 
be self-financed out of the risk premiums that lenders add to the interest 
charged to borrowers, which normally would be paid out of profits.  Properly 
designed the program would not require the government to be the insurer of last 
resort, as in the savings and loan fiasco.

6.  More Later.   

In the meantime, now that I’ve thrown my bit of intellectual plastique into the 
middle of the COG network, I’ll be waiting eagerly for some feedback. 

 Incidentally, David Spitzley’s account of my “debate” with Corey Rosen (which 
COG has available to you in its library) cut out much of the meat.  For those 
interested in the full debate, I’d be happy to send it to you.  

Again, I hope that COG will encourage a full debate on the Kelso approach to 
economic justice and democracy.  Otherwise, the movement will have only 
marginal impact on the growing and dangerously wide gap of capital ownership 
and economic power between a tiny wealthy elite and the six billion mostly 
non-wealthy people around the world who have been excluded systematically from 
their fair share of the action. 
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