Re: Kurland v. Turnbull

[Shann Turnbull <sturnbull@mba1963.hbs.edu>]

Dear Thomas Brandt and the Homestead discussion group

Thank you Thomas for your contribution.  You have nicely and simply
summed up the operational differences.  

However, I am not in disagreement with either the use of ESOPs or the use
of tax incentives for their introduction.   

My 1975 book promotes ESOPs and is dedicated to Louis Kelso "who
developed the first capitalistic technique for distributing the wealth of
nations.."

Proposals to introduce sunset provisions for owners who are not
operationally involved in their property creates another technique for
democratising the wealth of nations.  The two proposals are
complementary.  However, ownership transfers obtained through an
Equity Quid Pro Quo (EQPQ) for a tax incentive would be simpler than
ESOPs and have greater applicablility, as they do not depend upon growth,
involve all citizens/stakeholders, and be more tax efficient in
democratising the wealth of nations. 

The special advantage of Leveraged ESOPs is that they provide a way to
finance NEW investment from the savings created by the investment rather
than from consumption forgone.  Through this process ESOPs convert
debt into equity which can be democratically distributed.  ESOPs
could be used to make economic development self-financing to avoid
accepting foreign loans which export economic values and foreign exchange
earnings through interest payments.

ESOPs also provide a way for communities, regions and nations to finance
development without relying on outside equity which can drain away income
in perpetuity to create resource rich but cash poor communities, regions
and nations.  This problem was identified by Professor Edith Penrose
in her 1956 paper on 'Foreign Investment and the Growth of the Firm',
The Economic Journal,  vol LXVI, pp. 220-235, who stated that
foreign investment can create produce "unlimited, unknown and
uncontrollable" foreign payments.  A problem which can also be
overcome by the introduction of Ownership Transfer Corporations (OTCs)
created by EQPQ deals.

ESOPs represent a "band aid" in democratising the wealth of
nations when compared with OTCs for two reasons:
(i) They are focused on new investments and
(ii) They do not prevent the new owners getting overpaid with profits in
excess of the incentive to invest which creates the problem of
concentrating wealth.
In other words, ESOPs do not cure the problem of wealth
concentration.  
ESOPs can be used to amerliorate the concentrated ownership of new
investment, but they do not limit the rights of owners and so do not
change the rules of ownership which creates wealth concentration.

Regards

Shann

At 03:37 PM 1/2/2000 , Thomas Brandt wrote:
>To Mr. Turnbull and Mr. Kurland:
>
>I want to make sure I understand the essence of your disagreement, so
I would
>appreciate it if you could comment on the following summary of my
>understanding.
> I apologize to both of you and everyone else if I'm the only one who
doesn't
>grasp this.
>
>My impression is that your differences boil down to this: 
>
>Mr. Turnbull feels property ownership should be time-limited like
patents, but
>advocates only tax  incentives--rather than
coercion/confiscation--to broaden
>ownership of existing property and capital (as well as new capital
created by
>future econ growth and money supply expansion).  
>
>Mr. Kurland thinks ownership of existing property and capital should
remain
>inviolable (except for incentives to encourage ESOPs and other
Kelsonian
>alternatives e.g. CSOP, RECOP, etc??), and that COG efforts should
focus
>exclusively on broadening ownership of capital created by future econ
growth 
>and
>money supply expansion.  
>
>Most puzzling to me is Mr. Kurland's condemnation of Mr. Turnbull's
advocacy of
>using the tax system to induce owners of global corporations to
sunset their
>ownership rights.  In addition to ESOP tax incentives (which I
thought Mr.
>Kurland supported), Mr. Kurland also advocates elimination of the
double tax on
>corporate profits, making dividends deductible at the corporate level
and tax
>deferred, and inheritance law reforms.  I see little difference
in the
>ostensible level of "coercion" in either strategy. 
Both seem more feasible and
>"voluntary" to me than efforts to democratize the money
supply (as desirable as
>that may be).   
>
>If I've oversimplified or otherwise distorted your positions, please
let me
>know.  If not, it seems your similarities greatly exceed your
differences.  
>
>Mahalo and Aloha!

Shann Turnbull

P.O. Box 266 Woollahra, Sydney, Australia, 1350

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