Re: HOMESTEAD: Ray Carey's Democratic Capitalism

["David Spitzley" <dspitzle@wash.k12.mi.us>]

>>> john@medaille.com 07/26/05 10:02 PM >>>
The odd thing about "independent productiveness" is that, were it true, it 
would make employee ownership well-nigh impossible; the price of a share, 
assuming somebody would be willing to part with something so valuable, 
would be a thousand times what a worker earns. But then the whole problem 
of ESOPs is that they can only work as a re-distributive tool if the 
current owners are willing or compelled to dilute their ownership, that is, 
sell them below below market rates. If sold at market rates, than nothing 
is redistributed, only the form of ownership changes. The market is Pareto 
optimal, which is Italian for "nothing really changes."
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For what it's worth, I've struggled with some of Kelso's theoretical 
constructs, and I believe that "independent productiveness" was a poor choice 
of terms.  One of Kelso's main points in the Capitalist Manifesto was that the 
provision of financial capital to enterprises was an exercise of productive 
capability by the capital owner, i.e. capital assets are a mechanism by which 
the owner increases his/her productive capabilities.  Thus, to the extent that 
workers and capital owners are both actively contributing to production, and 
(in the context of modern industry) neither could produce without the other, 
they are both "independently" productive.  I think it was a worthwhile insight 
in the context of Kelso's discourses of the dangers of confiscatory government 
policy, but the terminology seems to have distorted the ensuing debate into one 
of whether we've reached the point of self-winding hurdy-gurdies, which kind of 
misses Kelso's original point.  I think "independently exercised competences" 
might have matched his intent a bit better while being consistent with his 
overall terminology, but it's a bit clunky.

I'll also point out that Kelso's original ESOP model did not entail anybody 
selling their assets below market value, becasue the ESOPs would have access to 
low cost capital credit through the Federal Reserve, allowing them to purchase 
the assets at a cost that would make it possible to repay the loans primarily 
through the earnings of the acquired assets.  Since this has never to date been 
politically feasible, the legislative implementation of ESOPs in the US differs 
in several ways from the original proposal, which generally orients it towards 
government-incentivized voluntary redistribution of assets.  Nevertheless, 
alternate formulations of ESOPs could eliminate the necessity of sub-market 
asset pricing, so it is important to distinguish between weaknesses in the 
actual implementation and inherent flaws in the original concept.


David

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