sorting out the issues

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Hi.  My name is Alan Zundel and I just learned of this discussion Thursday 
from Keith W.  I spent the better part of Friday reading thru the previous 
contributions, and there was a lot of info to assimilate.  I want to 
contribute if I can, but I wanted to try to sort out the various issues first 
to make sure I am on track with everyone else.  So, first a short 
introduction, then an outline of the issues as they look to me, then a couple 
comments.

I am not an economist, but a political "scientist," and my interests have 
revolved around questions of social justice in the economic sphere since I 
worked with poor people in an inner city parish 20 years ago.  That was the 
time of the "Reagan Revolution" and all the political debates about the 
intersection of politics and economics, which caught my interest because of 
my experiences with the poor.  I did an M.A. in polisci (political theory) 
and wrote my thesis on workplace democracy (David E.'s name is familiar to me 
from the readings I did at the time).  A little while later I started a 
doctoral degree at the University of Michigan (polisci: public policy) and 
while trying to think thru my reservations about workplace democracy came 
across Kelso's books (first via Stuart Speiser's).  His ideas grabbed me, and 
still do.  I have written a little about them in a book on poverty policy and 
an article on Kelso's ideas being published next year.  I am currently an 
assistant professor at the University of Nevada-Las Vegas (this is my tenure 
year and things look good so far).  The organization listed in my signature 
below is a small one I set up a few years ago to spread some of the ideas I 
derived from Kelso.  I already know Keith W. and Norm K. (and Robert 
Ashford), and Michael H. knows a little about me from my organization.

But on to the business at hand.  Am I right that the issues being discussed 
break out something like the following?

1. Is broader capital ownership good, bad or neutral from a macro-economic 
standpoint?

1a. Conventional economic theory sees it as bad or neutral (I am paraphrasing 
what I think I read, I am not an expert on conventional theory)--are there 
flaws in the reasoning?  (Everyone here thinks or hopes there are?)

1b. Is Kelso's theory (the "orthodox" version), which sees it as good, sound? 
 (As far as I remember Norm K. is strongly arguing this position, and David 
S. more tentatively.)

1c. Does a revised version of Kelso's ideas (e.g. Shann's) do a better job of 
it?  (David E. has been arguing with Shann about this.)

2. This hasn't been as explicit, but: is broadened capital ownership good 
from a political-ethical standpoint?  (E.g., Keith sees it as an issue of 
providing income security in an age of transitory employment, a position I 
very much agree with; David E., if I remember right, argued that it is not 
ownership but rights of democratic control over the workplace that are 
important.)

3. If broadening ownership is a good thing, what's the best way to get there?

3a. Would/do Kelso-type financing devices work as claimed?  (Much discussion 
has revolved around ESOPs, to the neglect of non-employment based models, 
except for Shann's ideas about getting stocks into the hands of 
"stakeholders".)

3b. Are policies that, in effect, redistribute ownership justified?  
(Orthodox Kelsonians--and Shann if I read him correctly--would say no, we 
don't need to redistribute but to change the distributive mechanisms for 
ownership of newly created capital; David E. has, I think, been charging that 
ESOPs are redistributive and so I surmise he is against redistribution.)

I think that covers it.  Would like to know if others think that I have 
sorted this out properly, missed something important, or seriously distorted 
something.

Finally, a couple initial comments from myself.  One is that I have looked at 
Kelso's writings pretty closely, and Bob Ashford's as well, and I think there 
is a major problem at the heart of the orthodox version.  There seems to be 
some confusion here over what Kelso said about capital productivity.  Kelso 
rejected the concept of productivity for his own idea of "productiveness."  
Productiveness means something like the amount of physical work contributed 
to producting something, and the claim is that capital productiveness far 
outstrips labor productiveness in the modern economy.  I guess that is 
sensible enough, but Kelso went on to claim that in a truly free market 
economy (not one distorted by political interventions, like our present 
economy, with its 25% capital 75% labor income shares) income shares would be 
based on productiveness.  A lot of Kelso's theory is built on that 
foundation, but I have yet to get an answer as to *why* income shares in a 
free market would reflect productiveness.  It seems to me that supply and 
demand set the price of labor and capital, and though growing capital 
productiveness would increase demand for capital, lots of other factors also 
come into play in setting income shares.  For example, higher birth rate and 
lower life expectancy would reduce the supply of labor and boost its price 
(income share) relative to capital's without any change in productiveness.  
Even more to the point, as others have pointed out, more use of technology 
means greater demand for highly skilled labor, which if supply does not keep 
up raises it price regardless of its "productiveness."

I think there is a lot of good in Kelso's complex web of ideas, but the 
orthodox Kelsonians' attachment to the concept of productiveness hinders 
other people from looking for them.

Second, to reemphasize a point made above: the discussions of ESOPs are 
interesting, but even Kelso saw them as second-best to his other policy 
ideas.  Some of the flaws of ESOPs as devices for using credit to help the 
capital poor become owners come from the fact that they are employment-based 
devices, which is not a necessary feature.

And last, if such capital-credit devices are really redistributive, as I take 
David E. to be arguing, is that a bad thing?  I know the claim is that they 
are not, and it is an interesting issue, but if the principle of income 
redistribution (at least to some degree) is morally and politically 
acceptable (I think this is quite tenable), wouldn't wealth redistribution 
also be?  I am inclined at this point to see this as somewhat of a side 
issue, so I am wondering why it seems so important to others?

Alan Zundel
Institute for the Public Good
http://www.publicgood.org