Re: sorting out the issues

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

I would like to clarify point 3b of the overview presented by Alan Zundel
who has presented Kelso's view as mine.  I would be interested in hearing
from David Ellerman if Alan has properly presented his views?

Alan says:
>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.)

My view is that is that the present forms of capitalism are unequitable and
inefficient and not best suited to promote an environmentally sustainable
political system.  We need to change the rules of ownership to make the
economy more equitable, efficient and sustainable.  (I also want to change
the system of control to create a "stakeholder democracy")

As a financial analyst working for Standard Oil of NJ in NYC in 1962 I
learnt how multinational corporations make surplus profits two, three or
more times greater than the cost of their investments.  The story is told
in my "New Strategies" paper refer to
http://cog.kent.edu/lib/turnbull1/turnbull1.html  As a corporate raider
from 1966 to 1974 I proved how unequitable and inefficient the existing
system could be!  Without ever hearing about Louis Kelso I devised ways to
mitigate the problems of capitalism in 1973 and combined these with the
Kelso proposals in my 1975 book "Democratising the wealth of nations".

I believe that the Kelso position is that "we don't need to redistribute
but to change the distributive mechanisms for 
ownership of newly created capital".  My position is that this approach is
useful but represents only a "band aid" solution to the problem created by
the present rules of ownership which allows ALL types of real property
owners to capture "surplus profits and/or windfall profits from
"externalities".  Sharing the creation of "newly created capital",
mitigates but does not stop the existing system concentrating wealth,
power, privilege and exploitation.

My overview of the situation is as follows:

Karl Marx wanted to eliminate the inequities and exploitation of ownership
by eliminating it
Henry George wanted to reduce the inequities and inefficiencies in owning
land by taxing it
Louis Kelso wanted to expand the ownership of newly created productive property
Shann Turnbull wants to change the rules of ownership to improve economic
efficiency and equity.

The new rule being: If you do not use or contribute to the value of owned
property you loose ownership to those that do.
In this way we could build a "Stakeholder Democracy".

Regards

Shann


At 04:29 AM 1/11/1999 , you wrote:
>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

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