As lawyer and expanded ownership economist Louis Kelso and his co-author Patricia Kelso observed in their 1967 book, Two Factor Theory:
“The [expanded ownership] revolution makes two assumptions about the good society. One is that its most important value is freedom…. Never in history has universal suffrage been built on a sound economic foundation…. Secondly, it is assumed that leisure is essential to a civilized definition of affluence…. [T]he totalitarian work state…has no place for whole men, only ‘human resources’ and servile functionaries.”
However, human dignity and freedom, political democracy, and a just society cannot exist within an economic system where a tiny fraction of people own the bulk of productive capital and the rest are dependent on jobs, welfare and charity.
The solution to economic injustice is not to make enemies out of the owners but, by lifting barriers, to make owners out of the non-owners. Economic justice demands real economic democracy — empowering each person with the means and opportunity to acquire and enjoy the full rights, rewards and responsibilities of productive capital ownership.
It’s Time to Change “the System”
Neither traditional capitalism nor traditional socialism (nor any amalgamation of the two) provides the economic basis for a world which spreads out and personalizes power. Both of these systems concentrate ownership and power. Both accept the “wage system” as a given — where a few own productive property and everyone works for them or depends on the charity of others or the State.
We believe that the world needs a third economic alternative based on expanded capital ownership, free markets, private property, and limited economic power of the State. As we move into a world of labor-displacing technologies and global competition, we need a “Just Third Way” that transcends the morally deficient and economically unsound systems of capitalism and socialism.
Because power follows property, concentrated ownership leads to concentrated power. Whether through the centralized power of the state or the monopolization by a few of ownership, control and financing of productive enterprises–concentrated power leads inevitably to corruption. And political democracy without economic democracy is a sure-fire formula for class strife, widespread poverty, war, and other social plagues.
America’s founders understood this truth, as did Lord Acton. Consequently, the ultimate check on the potential abuse of power by a non-accountable elite is to spread property and economic power broadly.
We believe that building economic justice in a technologically advancing world requires moving the economy beyond the traditional “wage-welfare state” system to the “expanded capital ownership” system. Private sector profit distributions could then supplant dehumanizing public sector income redistribution schemes for sustaining the mass purchasing power of any market economy.
As visionaries such as Louis Kelso, Fr. William Ferree, Buckminster Fuller, Martin Luther King, Jr. and others have seen, the world has the potential and the untapped resources to create a good quality of life and a sustainable future for every person, where each can be freed economically to pursue his or her fullest human potential and dignity. We just need the right principles and a “win-win” strategy.
Republished from an essay by the Center for Economic and Social Justice (www.cesj.org), Arlington, Virginia.