ESOP: Employee Stock Ownership Plan. The
ESOP is designed to build capital ownership into employees of a
business in the course of efficiently financing its growth or
other worthwhile corporate objectives, without touching employee
paychecks or savings. As to employees, the ESOP is that
constitutionally-mandated missing link that gives them access to
credit to buy the employer's capital stock and, without personal
risk or liability, to pay for it from the pre-tax earnings of
the assets underlying that stock. In other words, equalizing
their access to capital credit with that of the already rich.
MUCOP: Mutual Capital Ownership Plan. This
financing method is intended to provide pooled ESOP financing for a
number of corporations while building diversified portfolios of
their stocks individually for their employees.
CSOP: Consumer Stock Ownership Plan. This
technique is intended for use by public utilities, banks, insurance
companies, and other businesses where long-term relationships
between the producer and its customers are the rule. Through the
intelligent use of credit, it builds capital ownership for customers
while providing unlimited low-cost financing for growth of the
corporation, thus raising the power of the consumers to pay for
their purchases of goods and services while raising the power of the
corporation to produce goods and services. It would normally be used
in conjunction with an ESOP for employees.
GSOP: General Stock Ownership Plan. The GSOP
is designed to build capital ownership into politically designated
classes of consumers within the jurisdiction of the authorizing
government - state, local or federal.
ICOP: Individual Capital Ownership Plan. A
financing device intended to create viable capital estates for
selected categories of individuals while opening broad markets for
equity financing by corporations.
RECOP: Residential Capital Ownership Plan.
This financing plan, in combination with commercially insured credit
financing, would enable home buyers to purchase homes at less than
25 percent of the out-of-pocket principal and interest cost of
similar transactions today, by having their acquisitions treated by
tax and other relevant laws as capital assets, rather than as
consumer items as at present
COMCOP: Commercial Capital Ownership Plan.
Ownership of rental structures, such as office and apartment
buildings, factories, mines, railroads, hotels, resorts, etc., is a
major source of capital cash income. Today such structures and real
estate generally are owned by the excessively wealthy (whose
resulting income is thereby sterilized for purposes of the consumer
economy and denied to those who could use it if the financing had
been COMCOP structured), who use such acquisitions not only to
satisfy their antisocial greed, but to wipe out their income taxes.
COMCOP would enable commercial structure ownership legitimately to
be spread over large numbers of people where it can raise their
power to produce the incomes they need to make them powerful and
self-supporting consumers, maintain their lifestyles, and to
diversify their holdings in businesses in which they become employed
as capital workers.
PUBCOP: Public Capital Ownership Plan. This
plan is designed to provide low-cost financing for capital
instruments used by public bodies of all types - office buildings,
streets and sidewalks, parks, street lighting, schools,
universities, subways, waterworks, harbors, etc. It permits broad
individual ownership, through facilities corporations, by great
numbers of people, while providing low-cost capital facilities to be
leased at market rates to cities and other municipal corporations,
states, the federal government, and other public bodies. PUBCOP is
another tool in the arsenal of binary economics to assure that each
individual can become employed as a capital worker and that
governments do not acquire economic power that should be diffused
throughout the citizenry. PUBCOP financing would employ the dual
functions of binary financing devices. It would be a major means of
eliminating the cost of wasteful, inefficient, and inadequate public
employee pensions while providing much greater economic security and
incomes, both before and after retirement, to public employees and
All of these plans are discussed and diagramed in
more detail in Democracy and Economic Power: Extending the ESOP
Revolution through Binary Economics.
The Capitalist Manifesto
and The New Capitalists together
comprise the first public statement of Louis Kelso's seminal
contribution to political economics - a thesis Mortimer J. Adler,
the co-author, declared "the first clear and systematic statement of
the idea of capitalism that has ever been presented to the world."
Despite its Cold War title,
The Capitalist Manifesto of 1958 is neither a defense of
traditional capitalism nor a polemical call to revolution in the
style of The Communist Manifesto of
1848. It is a theoretical blueprint of the physical and
institutional structure of the western private property, free market
system identified by Adam Smith and the classical economists;
repudiated by Karl Marx and the socialists,
and pragmatically compromised by J. Maynard Keynes. It presents
specific proposals for correcting and perfecting the present system
in the line of, and in the light of, its own logic and principles.
It invites men and women of good will to set to work on the task of
building an economically just and generally affluent society on the
foundation of a Capitalism redeemed of its historical flaws.
Louis Kelso's vision of Capitalism was, in Dr.
Adler's description, "the economically free and classless society
which supports political democracy and which, above all, helps
political democracy to preserve the institutions of a free society."
To Dr. Adler's mind, this conception was "the most revolutionary
idea of the century."
Ten years after his death Louis Kelso is beginning
to be recognized as the originator of a genuinely new paradigm in
political economics. Although introduced more than forty years ago,
its concepts are still virgin terrain because, despite their osmotic
influence in the United States, western and eastern Europe, Russia
and now China, relatively few people are familiar with them.
Make no mistake, Louis Kelso's ideas are just as
controversial today as when he and Dr. Adler introduced them in
1958. The Austrian economist Schumpeter famously defined Capitalism
as "creative destruction." That is also the effect of a new paradigm
on its parent discipline. Louis Kelso's new paradigm targets, first
of all, the conventional premises of economics. But since those
premises are also embedded in western political, economic and
business institutions, particularly the institutions of finance,
Louis Kelso's binary view exposes the fallacies at their heart as
In showing the obsolete ideas at the root of key
institutions - the institutions that concentrate wealth and
frustrate the operating logic of the free market - Louis Kelso
changes the terms of the age-old debate between Conservatives and
Liberals and Capital and Labor. And in doing that, he moves to new
and higher ground the ideological issues that have made western
society a battleground ever since the Industrial Revolution. To
understand Louis Kelso's binary paradigm is to look at the economic
and political world with new eyes, from an exhilarating new
perspective. The social implications of this new view are
revolutionary in the best sense of that word.
Louis Kelso was fascinated by technology. He began
his investigation of the Great Depression with painstaking research
on the effects of technological change on occupations, industries
and the macro-economy. While still in law school, he published a
monograph on how the computer, hardly invented then, would
revolutionize the practice of law. He eagerly looked forward to the
day when the computer would make instantaneous world-wide
communication possible. Unfortunately he died a few years before the
Internet could make this a reality for him.
Now as we enter the new century and the new
millennium, Louis Kelso's binary economic paradigm is even more
important than when first introduced. The demise of the Soviet Union
has left the western market economy free to dominate the world on
its own terms. Understanding market forces and learning how to
exploit them to build stable industrial democracies that are also
Good Societies for everyone who lives in them is our most urgent
task. Louis Kelso has given us the tools - both conceptual and
practical - to accomplish this task. He has also inspired us with
his generous vision of the Good Society that advanced technology
still promises despite centuries of misunderstanding and misuse.
In gratitude for the life and work of Louis
Kelso, and also in honor of his co-author, the late Mortimer J.
Adler, whose encouragement and collaboration made these books
possible, the Kelso Institute takes great pleasure in electronically
publishing both The Capitalist
Manifesto and The New Capitalists.
In so doing, we fulfill Louis Kelso's dearest wish in life - that
his ideas be made accessible to those who will use them to build
institutions that advance civilization and support individuals in
realizing their highest potential.
Louis O. Kelso and Patricia Hetter Kelso estimates of the relative real inputs
to production in the American economy of Labor (Physical and Intellectual) and
Capital over time assuming reasonably competitive markets. So ingrained is the
“ethic” of the “Labor Theory of Value” that they thought it best to refer to
Capital Owners as “Capital Workers” in keeping with their understanding that
Capital instruments do “Work” - as surely as the most diligent human surrogate
worker – and that indeed the observable trend is for Capital Instruments to do
ever more of the Worlds “Work”. The reflexive prevalent attitude of equating
“Economic” man with Essential Human Values including the whole vast array of
values around the “Work Ethic” all contribute to camouflage and maintain the
fundamental miss-match between the way goods and services are produced and
distributed and particularly their trends projected into the future. Cybernetic
contributions (now almost exponential) are only adding to the much longer
Historical trend. Represents US Economy but applies to World trending. HHC
of concentration of capital ownership in the U.S. over time. The same general
pattern applies to virtually all economies of and the World Economy as a whole –
Plutocratic ownership and control of the real means of production. With “The
Labor Theory of Value” it only worsens.
Charles Handy citing the 1930 reference by Lord John Maynard Keynes projecting
the future world of his grandchildren. That would be right about now as
technological advancement not only
provides the possible means for Humanity’s collective “Transcendence of
Scarcity” but poses the problem to
progressives by their commitment (along with virtually all economic theorizing)
to the “Labor Theory of Value”
currently informing virtually all National Economies on Planet Earth & the
International System as well. HHC
His non-conformist "capitalism" might be compared to the
peoples' capitalism ideas of
G. K. Chesterton in which ownership is distributed to as many people as
possible within the economy. Kelso developed the idea of
Binary Economics to explain the need for expanded capital ownership in
light of industrial production and the dominance of capital instead of
In 1956 Louis Kelso invented the Employee Stock Ownership Plan (ESOP) to
put his ideas into practice. In 1958 he collaborated with the philosopher
Mortimer Adler to write The Capitalist Manifesto that is
considered the primary source of his economic theories. Kelso and Adler
followed this book with The New Capitalists (Random House, New York:
1961). Both books are readable online from the Kelso Institute.
The distributive dynamics of capitalism by Louis O Kelso,
self-published; 2nd edition (1956)
The Capitalist Manifesto, by Louis O. Kelso and Mortimer J.
Adler, Random House, New York: 1958; reprinted Greenwood Press,
Westport, Connecticut: 1975. Also published in French, Spanish, Greek
The New Capitalists: A Proposal to Free Economic Growth from the
Slavery of Savings, by Louis O. Kelso and Mortimer J. Adler, Random
House, New York: 1961; reprinted Greenwood Press, Westport, Connecticut:
1975. Also published in Japanese.
Two-Factor Theory: The Economics of Reality, by Louis O.
Kelso and Patricia Hetter, Random House, New York: 1967; paperback
edition, Vintage Books: 1968. (Originally published under the title
How to Turn 80 Million Workers into Capitalists on Borrowed Money.)
Also published in Spanish and German.
Democracy and Economic Power: Extending the ESOP Revolution
Through Binary Economics, by Louis O. Kelso and Patricia Hetter
Kelso, Ballinger Publishing Co., Cambridge, Massachusetts: 1986;
reprinted by University Press of America, Lanham, Maryland: 1991. Also
available in Russian and Chinese.
WRITINGS BY LOUIS O. KELSO
Karl Marx: The Almost Capitalist, American Bar Association Journal,
Corporate Benevolence or Welfare Redistribution?, The Business
Lawyer, January, 1960.
Labor's Great Mistake: The Struggle for the Toil State, American Bar
Association Journal, February, 1960.
Welfare State - American Style, Challenge, The Magazine of Economic
Affairs, New York University, October, 1963.
The Case for the 100% Dividend Payout, Trends (published by
Georgeson & Co.), New York, December, 1963.
Poverty and Profits, by Hostetler, Kelso, Long, Oates, the Editors,
Harvard Business Review, September-October, 1964.
Beyond Full Employment, Title News (the Journal of the American Land
Title Association), November, 1964.
Cooperatives and the Economic Power to Consume, The Cooperative
Accountant (published by the National Society of Accountants for
Cooperatives), Winter, 1964.
Why Not Featherbedding?, Challenge, September-October 1966.
(Reprinted in American Controversy: Readings and Rhetoric, by Paul K.
Dempsey and Ronald E. McFarland, Scott, Foresman and Company, Glenview,
The Economic Foundation of Freedom, The American Prospect: Insights
into Our Next 100 Years, Houghton Mifflin Company, Boston: 1977.
Labor's Untapped Wealth: An Address by Louis Kelso, Air Line Pilot,
WRITINGS BY LOUIS O. KELSO AND PATRICIA HETTER KELSO
Uprooting World Poverty: A Job for Business, Business Horizons,
Fall, 1964. (Reprinted in Mercurio, Anno VIII, No. 8, Rome, Italy,
August, 1965; Far Eastern Economic Review, Vol. L, No. 1, Hong Kong,
October, 1965. Winner of the First Place 1964 McKinsey Award for
Significant Business Writing.)
Poverty's Other Exit, North Dakota Law Review, January, 1965.
Equality of Economic Opportunity Through Capital Ownership, Social
Policies for America in the Seventies, edited by Robert Theobald,
Doubleday & Co., New York: 1968. (Excerpts from this essay reprinted in
Current, April, 1968.)
Reparations and the Churches, Business Horizons, December, 1969.
Invisible Violence of Corporate Finance, The Washington Post, June
Man Without Property, Business and Society Review, Summer, 1972.
Corporate Social Responsibility Without Corporate Suicide,
Challenge, July-August, 1973.
Employee Stock Ownership Plan, Business & Government Insider
Newsletter, July 30, August 6 and August 13, 1973.
Employee Stock Ownership Plans: A Micro-Application of
Macro-Economic Theory, The American University Law Review, Spring, 1977.
The Greatest Financial Planning Tool of All . . . Could ESOP Save
General Motors?, The Financial Planner, November, 1981.
Sychophantasy in Economics: A Review of
George Gilder's Wealth and Poverty, The Great Ideas Today,
Encyclopœdia Britannica, Inc., Chicago: 1982.
The Right to Be Productive, The Financial Planner, August and
Tax Reform Is Not the Answer, Chief Executive, Spring, 1983.
How We Can Achieve Lifetime Employment, Chief Executive, Autumn,
Damning Binary Economics With Faint Praise, Workplace Democracy,
Leveraged Buyouts Good and Bad, Management Review, November, 1987.
The Great Savings Snafu, Business and Society Review, Winter, 1988.
Why Owner-Workers Are Winners, The New York Times, January 29, 1989.
Why I Invented the ESOP LBO, Leaders, October/November/December,
Don't Meddle With ESOPs, The Journal of Commerce, October 2, 1989.
Looking in a Marxist Mirror, The Journal of Commerce, January 11,
ALSO RECOMMENDED - BOOKS
Curing World Poverty: The New Role of Property, edited by John H.
Miller, C.S.C., S.T.D., Social Justice Review, St. Louis: 1994.
Binary Economics: The New Paradigm, by Robert Ashford and Rodney
Shakespeare, University Press of America, Lanham, Maryland: 1999.
ALSO RECOMMENDED - WRITINGS
The ESOP According to Kelso, by Stuart Nixon, Air Line Pilot,
The World According to Kelso, by Steven Hayward, Inland Business,
Louis Kelso, Capitalist, Bill Moyers: A World of Ideas II, edited by
Andie Tucher, Doubleday, New York: 1990.
The Binary Economics of Louis Kelso: The Promise of Universal
Capitalism, by Robert H. A. Ashford, Rutgers Law Journal, Vol. 22, No.
1, Fall, 1990.
Louis Kelso's Binary Economy, by Robert Ashford, The Journal of
Socio-Economics, Vol. 25, No. 1, 1996.
Binary Economic Modes for the Privatization of Public Assets, by
Jerry N. Gauche, The Journal of Socio-Economics, Vol. 27, No. 3, 1998.
A New Market Paradigm for Sustainable Growth: Financing Broader
Capital Ownership with Louis Kelso's Binary Economics, by Robert
Ashford, Praxis: The Fletcher Journal of Development Studies, Vol. XIV,
The Fletcher School of Law and Diplomacy, Global Development and
Environment Institute, Tufts University, Medford, Massachusetts: 1998.
The Theory of Productiveness: A Microeconomic and Macroeconomic
Analysis of Binary Growth and Output in the Kelso System, by Stephen V.
Kane, The Journal of Socio-Economics, Vol. 29, No. 6, 2000.
The Ultimate Management Team, by Chris Bayers, WIRED, January, 2002.
Employee Ownership and Corporate Performance: A Comprehensive Review
of the Evidence, The Journal of Employee Ownership Law and Finance, Vol.
14, No. 1, National Center for Employee Ownership (NCEO), Oakland,
Binary Economics, Fiduciary Duties, and Corporate Social
Responsibility: Comprehending Corporate Wealth Maximization and
Distribution for Stockholders, Stakeholders, and Society, by Robert
Ashford, Tulane Law Review, Vol. 76, No. 5-6, June, 2002.
"The Roman arena was technically a
level playing field. But on one side were the lions with all the
weapons, and on the other the Christians with all the blood. That's not
a level playing field. That's a slaughter. And so is putting people into
the economy without equipping them with capital, while equipping a tiny
handful of people with hundreds and thousands of times more than they