Democracy and Economic Power [Paperback]

Louis O. Kelso (Author), Patricia Hetter Kelso (Author)

Book Description

Publication Date: December 12, 1990 | ISBN-10: 0819179094 | ISBN-13: 978-0819179098

Why do the rich get richer and the poor stay poor? How can we privatize publicly owned capital facilities so that employees and users own the stock? How can unions win 'more' for their members without rendering American employees uncompetitive? What steps can the government take to make every American economically independent? With detailed insight and provocative analysis, Democracy and Economic Power answers these questions and many more like them. In their popular book Two-Factor Theory, the Kelsos first introduced the Employee Stock Ownership Plan (ESOP) and began the process that enabled some 10 million employees to become stockholders. Democracy and Economic Power presents their economic, political, and financial blueprint for extending ESOPs to millions more Americans. With ESOPs they, too, can buy and pay for income-earning capital out of capital's own earnings instead of labor income. Democracy and Economic Power is a must read for anyone concerned about the fate of individuals and the future of democratic institutions in our rapidly automating world. Originally published by Ballinger Publishing in 1986. Co-published with the Institute for the Study of Economic Systems.

Editorial Reviews

From Library Journal

Kelso devised ESOPs (Employee Stock Option Plans) in the 1950s to enable wage earners to become stockholders through leveraged buyouts, and now 10 million are covered. Here Kelso and his wife propose to extend the reach of ESOPs to public employees, professionals, the self-employed, and even home-owners, with seven additional financing techniques, all on the ESOP principle. they believe that broadly-based ESOPs would democratize capitalism, invigorate labor unions, raise productivity, enhance industry's competitiveness, while also alleviating poverty, unemployment, and inflation. These sweeping claims, however, are based more on assertion and faith than on economic analysis. The writing is prolix and turgid. Not recommended. Harry Frumerman, formerly with Economics Dept., Hunter Coll., CUNY
Copyright 1986 Reed Business Information, Inc. --This text refers to an out of print or unavailable edition of this title.

About the Author

Louis O. Kelso is a Partner in Kelso & Company, a San Francisco and New York investment banking firm. Patricia Hetter Kelso is a Vice President at Kelso & Company and also Vice President of the Institute for the Study of Economic Systems.

Product Details

• Paperback: 210 pages
• Publisher: University Press Of America (December 12, 1990)
• Language: English
• ISBN-10: 0819179094
• ISBN-13: 978-0819179098
• Product Dimensions: 8.7 x 5.8 x 0.7 inches
• Shipping Weight: 8.8 ounces
• Average Customer Review: 5.0 out of 5 stars  See all reviews (1 customer review)
• Amazon Best Sellers Rank: #5,004,273 in Books (See Top 100 in Books)

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1 of 1 people found the following review helpful:

5.0 out of 5 stars Broadening the Ownership of Capital, March 20, 2008

By 

Drew Field (Carmel, CA USA) - See all my reviews
(REAL NAME)   

This review is from: Democracy and Economic Power: Extending the Employee Stock Ownership Plan Revolution (Hardcover)

This final book by Lou Kelso and Patricia Hetter Kelso explains the first ESOP Lou created, in 1956, and how that experience can carry over to:

MUSOP (Mutual Stock Ownership Plan, a trust owning several small

businesses for the benefit of all their employees.) The costs of creating and administering an ESOP are usually far too great for smaller corporate business. The MUSOP would allow multiple businesses to share the costs.

CSOP (Consumer Stock Ownership Plan, a trust owning a business for the benefit of its customers.) Lou says that, after he created the first and only CSOP, for Valley Nitrogen Producers in 1963, its competitors lobbied Congress to prevent the creation of any more.

GSOP (General Stock Ownership Plan, for ownership of a business by all the citizens within a related geographic area.) Lou worked to have Congress pass the General Stock Ownership Corporation law of 1978. The Alaska state constitution had been amended in 1977 to have 25% of all the state's mineral rents and royalties placed in a permanent fund. Unlike the trust form of his other plans; the Alaska GSOP was to be a corporation which issued one share for each of its citizens. After a five-year escrow period, the shares would be owned directly by the individuals. However, Alaska chose to use a trust, managed by trustees appointed by its governor (www.apfc.org/fundlaw/ConstAndLaw.cfm.) That trust is one of the examples used for Peter Barnes proposal in his 2006 book, Capitalism 3.0: A Guide to Reclaiming the Commons. A 1972 effort for a similar fund in Puerto Rico had lost out in political battles.

ICOP (Individual Capital Ownership Plan, a trust through which individuals could borrow money to buy securities issued by small businesses.) The securities would be rated and the loans to purchase them would be insured to cover failure by the businesses.

COMCOP (Commercial Capital Ownership Plan, a trust to hold commercial real estate for the benefit of individual investors.)

PUBCOP (Public Capital Ownership Plan would provide insured loans to buy securities in corporations which owned privatized public facilities, like streets, schools, prisons, airports and transit systems.)

RECOP (Residential Capital Ownership Plan, which would combine insurance on home mortgage loans, to lower the interest rate, with tax deductions. The combination would reduce the amount necessary for loan payments.)

All of these purchases would be funded entirely by loans. Repayment of the

loans, except for home mortgage loans, would come from interest and dividends on the securities purchased. There would be insurance against the risk that this would not be enough to make the loan payments. This commercial insurance would be reinsured by the Capital Diffusion Reinsurance Corporation, to be established by the federal government. When the loans had been paid, by interest and dividend income from the purchased business, the individuals would get the right to vote their shares and receive the income directly.

The balance of this final book explains some of the theories behind Lou's programs and describes a changed role for labor unions in converting their members to capital owners.