The Ownership Solution and Democracy at
Risk by Jeff Gates
Jeff Gates met Lou Kelso while Jeff was in law
school, where he wrote articles about Lou’s ideas for his law school
newspaper. At Lou’s suggestion, Jeff worked on Stuart Speiser’s book,
A Piece of the Action. Jeff then went on to be counsel for
Russell Long’s Senate Committee on Finance during the 1980s, where “I
crafted much of the federal legislation encouraging employee stock
ownership plans.” He became special counsel to Kelso & Company and has
since been a consultant to governments and other organizations on
“ownership engineering.” His books are The Ownership Solution:
Toward a Shared Capitalism for the Twenty-First Century,
Addison-Wesley, 1998 and Democracy at Risk: Rescuing Main Street
from Wall Street, A Populist Vision for the Twenty-First Century,
Perseus, 2000.
In The Ownership Solution, Jeff suggests “a
steady broadening of ownership, in the knowledge that a vigorous effort
in that direction will, in time, correct the current concentration.”
Beyond the economic effect, he sees shareownership “as a social tool for
linking people not only to things (productive assets) but also to each
other, to their community and (importantly) to their endangered
environment.”
Jeff presents a clear, compelling analysis of the
current ownership of financial assets and the “closed system” of
business finance. However, he does not believe that new shareowners
will be created if shares must be purchased “from their already
stretched paychecks.” He argues that the “best way . . . is for
government to intervene with a foresighted policy environment that
induces capitalism to create a broader base of capitalists.” Examples
from his own consulting work are ESOPs and extensions to RESOPs (Related
Enterprise, such as a company’s vendor’s employees); CSOPs (Customer)
and GSOP (General, “in which ownership is based on geography or
citizenship.”)
Jeff uses his experience in federal government
policy to suggest “twelve areas where the government’s presence could be
retooled to broaden ownership.” They include favoring companies with
ESOPs or “certifiably broad-based ownership” in making government
purchases, licenses, access to public property, trade assistance, loans
and loan guarantees, public pension plan investments and antitrust
enforcement. He adds ten changes in taxation “to foster broad-based
capital accumulation,” as well as a “major education and communication
campaign to better school citizens about finance, business and the
various paths to ownership.” Combined, all of these measures are to
achieve “a ‘critical mass’ of encouragement so that the current closed
system of finance (which concentrates ownership) becomes less attractive
than financial techniques that broaden ownership.”
In Democracy at Risk, Jeff describes the
current “people-disconnected capitalism” and argues for a
“people-responsive economy.” In chapters like “Killer Capitalism,” he
documents many of the negative effects on people and our environment
from poverty, erosion in real income from work and the continuing
concentration of capital ownership.
The chapter on “Education for Democratic
Capitalism” proposes an education campaign for voters to learn about
“today’s economic disparities, . . the unmet obligations due our
children, . . the antidemocratic nature of our current financial
structure,” and “the threat that economic centralization poses to the
democratic tradition.”
Few new programs are suggested in this second
book. Published just before the 2000 presidential election, it is
mostly a call to political action, to elect a “populist
administration.” Jeff would have the new populist president “proceed
along the same lines as those Huey Long proposed in 1935,” which would
include a “National Share Our Wealth Corporation that would ‘operate as
a steward and trustee for the American people in the redistribution of
wealth.’”
A friend of Jeff’s directed him to our website in
1999, as he was finishing his second book, and we had an email exchange
of views. Democracy at Risk includes descriptions of our direct
offerings for California Federal Bank and Real Goods Trading
Corporation. However, Jeff also says that “the idea of people
accumulating significant capital through personal saving is a
particularly vigorous exercise in futility.” Our experience has shown
that people will choose to buy shares with some of the earnings they
have left after paying for necessities. Loan guarantees, tax benefits
and other government programs could increase the amount of those
purchases, but the political agenda today does not even include any
studies about broadening the ownership of capital.
We see the work to be done as a marketing and
education challenge. In direct offerings, a business presents itself to
its own communities and helps individuals decide whether they want to
become shareowners. No new government program is required. While the
actions that Jeff suggests would seem to be helpful, they risk involving
the law of unintended consequences that so often follows the political
process. Direct offerings can be completed with no new attention from
government.
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