Re: HOMESTEAD: Ray Carey's Democratic Capitalism

[John Médaille <john@medaille.com>]

At 09:29 AM 7/27/2005 -0400, David Spitzley wrote:

>I'll also point out that Kelso's original ESOP model did not entail 
>anybody selling their assets below market value,

Exactly, which is why it won't work. A market exchange leaves everybody's 
power intact. But the whole point is to shift economic and political power. 
That can't be done through the market.

>  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.

That's always true in a properly priced security; the earnings pay the 
cost. But if Rodney is correct about "independent productiveness," the 
price of the share would be out of reach for the working person since his 
earnings, under that theory, are so a small fraction of the output. Zero 
interest rates will not solve that problem.

>  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.

Which is the only way it can work. Kelso thought he had a way to 
redistribute power on a market basis, but that is not what markets do, 
barring fraud or ignorance.

>  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.


Someone will have to show me these "re-formulations," since the market only 
exchanges equal values. Without a sub-market purchase, either voluntary or 
compelled, nothing really changes.


John C. Médaille

"A dead thing can go with the stream...
but only a living thing can go against it."
         -G. K. Chesterton
http://www.medaille.com/distributivism.htm
john@medaille.com

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