Democracy and Economic Power

Powerful institutions do not change until compelled to. The catalyst of change is a crisis which threatens the society’s life. Such a crisis now confronts the West. Is it too late to reverse our downward slide? To restore our economy and the democracy which it supports? Kelso and his co-author Patricia Hetter Kelso believe that our first step should be to broaden the ownership of productive capital — the physical things that produce wealth and income in the industrial society we have now. In Democracy and Economic Power: Extending the ESOP Revolution Through Binary Economics (University Press of America, 1986) they present eight detailed schemes for creating new capital ownership in the process of restoring economic growth. These schemes work to democratize economic power without resorting to “populist” redistribution of property. These financial proposals are all based on the logic of the Employee Stock Ownership Plan (ESOP), which Kelso invented in 1956 to enable employees to buy a California newspaper chain from its retiring owner. The ESOP was the original leveraged buyout, subsequently used with dazzling success by the already well-capitalized to concentrate ever more capital in those who cannot spend their capital earnings to buy the goods and services produced, thus closing the production-consumption gap which has grown wider and wider as technology becomes ever more efficient. Democracy and Economic Power explains the logic diagram of the private property, free market economy — and your part in it. It explains why your share of the income pie is shrinking. When all else fails, read the directions! Democracies notoriously postpone action until on the brink of a crisis. Then they are capable of an incredibly powerful response.

Powerful institutions do not change until compelled to. The catalyst of change is a crisis which threatens the society’s life. Such a crisis now confronts the West. Louis Kelso and co-author Mortimer J. Adler saw this crisis coming more than fifty years ago. In The Capitalist Manifesto (Random House, 1958) they warned that if we continue our ever more futile efforts to distribute through labor the income which is increasingly earned by the other income-producing factor — capital assets — we will disable the private property free market. And we will also consolidate economic and political power in a government already heavily centralized, thus endangering our constitutional freedoms and civil rights. We will continue to create a constantly growing tax burden to subsidize income and wealth distribution in order to stave off economic collapse. We will gradually liquidate private property in capital, thus socializing our economy, and we will have progressive and increasing inflation. We will gradually hollow out the legal and economic infrastructure, the invisible scaffolding that holds our society together. Finally, our society will implode. Is it too late to reverse our downward slide? To restore our economy and the democracy which it supports? Kelso and his co-author Patricia Hetter Kelso believe that our first step should be to broaden the ownership of productive capital — the physical things that produce wealth and income in the industrial society we have now. In Democracy and Economic Power: Extending the ESOP Revolution Through Binary Economics (University Press of America, 1986) they present eight detailed schemes for creating new capital ownership in the process of restoring economic growth. These schemes work to democratize economic power without resorting to “populist” redistribution of property. These financial proposals are all based on the logic of the Employee Stock Ownership Plan (ESOP), which Kelso invented in 1956 to enable employees to buy a California newspaper chain from its retiring owner. The ESOP was the original leveraged buyout, subsequently used with dazzling success by the already well-capitalized to concentrate ever more capital in those who cannot spend their capital earnings to buy the goods and services produced, thus closing the production-consumption gap which has grown wider and wider as technology becomes ever more efficient. Democracy and Economic Power explains the logic diagram of the private property, free market economy — and your part in it. It explains why your share of the income pie is shrinking. When all else fails, read the directions! Democracies notoriously postpone action until on the brink of a crisis. Then they are capable of an incredibly powerful response.

Louis O. Kelso originated the species of capital acquisition fi­nancing techniques of which the Employee Stock Ownership Plan (ESOP) is the best known. In 1958 his theory of free-market, private-property economics was published in The Capitalist Manifesto, co-authored with philosopher Mortimer J. Adler. In 1967 he and Patricia Hetter Kelso published Two-Factor Theory: The Economics of Reality. In 1970 he founded Kelso & Company as a merchant bank specializing in ESOPs and other forms of binary economics. Kelso holds the de­grees of B.S. in finance, cum laude, and J.D. from the University of Colorado, where he was editor-in-chief of The Rocky Mountain Law Review and later taught constitutional law and municipal finance as an associate professor. A corporate and financial lawyer, he headed his own law firm in San Francisco from 1958 to 1975. In 1963 he was awarded the degree of honorary Doctor of Science in economics from Araneta University, Manila, The Philippines.