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Democracy and Economic Power: EXTENDING THE ESOP REVOLUTION by Louis Kelso, Patricia Hetter Kelso (Ballinger Publishing Co., 54 Church St., Harvard Square, Cambridge, Mass., 02138: $19.95; 168 pp.) : Taking Stock: EMPLOYEE OWNERSHIP AT WORK by Michael Quarrey, Joseph Blasi, Corey Rosen (Ballinger: $19.95; 200 pp.) : Who Owns the Corporation: MANAGEMENT VERSUS SHAREHOLDERS by Edward Jay Epstein (Priority, 41 E. 70th St., New York, N.Y. 10021: $8, paperback; 70 pp.)

March 01, 1987|John Rothchild | Rothchild's lighthearted look at investing, "A Fool and His Money," will be published in 1987 by Viking Press

These ESOPS have nothing to do with the fox and the grapes. They're Employee Stock Ownership Plans. Dull topic, I would have agreed, but the Kelsos' book delivers a lot more than it promises. Under their ESOP banner, the authors take on Keynesians, Calvinists, Marxists, Republicans, Democrats, the union movement, standard loan applications, bankers, Friedmanites and conventional bookkeeping. While they're battling all these culprits in the economic mess, they're also showing us a way out of the mess, which makes this a positive as well as a provocative read.

Here's an attention-getter right from the start: Rich people don't spend enough money. Everybody knows that the rich get richer, but I never realized the trouble with it until I picked up the Kelsos' book. The trouble is that the rich are poor consumers. Not lousy consumers, just inadequate to the task at hand. "The rich are often so rich that they cannot consume what their capital produces," explain the Kelsos. The rich do the best they can up to a point, but you can only buy so many chalets and Rolls-Royces, and after that there's nothing to spend for, and the rest of the money becomes "morbid capital." Morbid capital is invested to make more money, which creates double-morbid capital. More and more wealth rushes upstream toward the wealthy, while less and less trickles down.

The rest of us, meanwhile, struggle along on the wages of our labor. Here's another surprise: Labor isn't going to get us anywhere as a group. So often we're exhorted to work harder, take fewer vacations, imitate the Japanese, but in general, the Kelsos doubt that this will help us. Everything we've heard about modernization, advances in productivity, more output per hour, etc., is a giant smoke screen that hides a pathetic little Oz of person-power. The Kelsos view labor as a terminally use commodity, especially as compared to capital. "The myth of the rising productivity of labor," they write, "is used to conceal the productiveness of capital."

What else could explain the fact that in spite of our humanitarian advances, higher wages, increases in productivity, stronger labor laws etc., the working classes have fallen farther and farther behind? If labor has such value, the Kelsos wonder, then why do 1% of the people control 50% of the assets, the greatest discrepancy in ownership of wealth since the imperial plutocracy of the Roman empire? "Why," they continue on, "are we still pretending to believe that labor is more productive? That technology creates jobs?"

Maybe it's the Puritan ethic. That our country was founded by Puritans, the Kelsos figure, is one reason we've held onto the labor theory of value long after its practical demise. Lately, we've tried to resuscitate the notion by turning it upside down. "Instead of toiling to live, we increasingly live to toil," the authors observe. "Toil is no longer a practical necessity so we perversely elevate it to a moral and social duty." The glorification of labor for its own sake blinds us to its uselessness as a means of getting ahead.

For decades, we've been on this national campaign for higher wages fought out in union-management skirmishes and propped up by various government incentives, while driving ourselves into economic ruin as the rich get richer and capital turns morbid. Morbid capital begets more morbid capital until economic stagnation sets in. The result mocks all good intentions and "is rendering the economy unworkable."

What then is the answer? More welfare and more charity? The Kelsos are particularly disgusted with charity: "Overearning to engage in charitable redistribution is in conflict with the democratic ideal and goal of personal autonomy." Socialism? Not for these authors. Socialism is no cure for capitalism--in fact, there's nothing the matter with capitalism. Here the Kelsos build up to their ultimate contrary opinion: Against the common cries of reformers who bemoan capitalist excess, they argue that the only problem with capitalism is a lack of capitalists.

How do you make more capitalists? By giving shares to the workers, of course. While we've been preoccupied with spreading the wealth through wages and benefits, we should have been spreading it through stock. If every wage-earner had become a stockholder in some company, by now we'd have created millions of semi-capitalists living less off wages and more off their dividends and interest, or as the Kelsos call it, "the wages of capital." There would be further spending, further consumption, further construction on a scale as yet unimagined, as money would be passed around and once-morbid capital brought back to life. That living off capital is better than working for a living any rich person can already attest.

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