OWNERSHIP: Trying to get back to ideas...

[John Médaille <john@medaille.com>]

If we can leave off the personal fights for a moment...

I would like to return to a basic problem in schemes to redistribute 
property, particularly any scheme that relies on a market priced buy out.

I do not see how this would redistribute property. The price of a 
productive asset is merely the discounted NPV of the expected cash flow. In 
other words, it is the same thing in a different form. If somebody owns 
$100,000 in a stock, it merely means that the current value of all the 
expected cash flows is $100,000. The only way the workers can buy out the 
stock is to mortgage the stock's expected cash flow. Buy outs are Pareto 
optimal--which means that nothing really changes; the power each party held 
before and after the sale remains the same. The former owners would be 
possessed of the cash, which represents the same claim on the output of 
society that they had before. The workers might be the nominal owners of 
the stock, but the returns would be mortgaged to pay off loan so that 
instead of getting the benefits themselves, they would go to the 
lender--plus interest.

ISTM that such schemes would actually change power relationships only  if 
the stock was under-priced for some reason; that is, if the returns were 
larger than expected. That could be for several reasons. One would be poor 
information, and since returns deal with the future, this happens quite 
often. However, it happens in both directions; the stock could just as 
easily be overpriced. Or a superior management technique could improve 
returns, and in the case of employee buyouts this is supposed to be one of 
the benefits. However, it is not necessarily the case that employees will 
run the company better (look at United Airlines). Further, unless the 
improvements where phenomenal, it would be a very slow process indeed, one 
that could be derailed in any number of ways.

This leads us, or at least it leads me, to the conclusion that any real 
change in economic power relationships must involve some form of 
expropriation. For example, if we look at the redistribution of land in 
Taiwan, we find that it was a forced sale at below market rates. In other 
words, a partial compensation and a partial expropriation. And that's what 
it will always have to be if relationships  are really to change. ESOPs can 
work if there is a "willing" expropriation; that is, if the current owners 
are willing for altruistic motives to dilute their own ownership and not 
insist on a market price. But if they get the market price, the sum of 
power relationships in the society will not change. They may change within 
one company, but only by giving the current owners power (cash) to worsen 
them in some other company.


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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