basic moral problem that faces man as he moves into the age of
automation, the age of accelerating conquest of nature, is whether
he is really fit to live in an industrial society; whether his
institutions will adjust rapidly enough; whether he will rivet
himself with an absurd institution like full employment in the
economic order when it is not only unnecessary but unadministratable
in anything but a slave society; whether freed from the necessity to
devote his brain and brawn to the production of goods and services,
he can address himself to the work of civilization itself." (Louis O. Kelso, 1964)
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
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 others.
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
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 well.
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.
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
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. HHC - Below Quotes @
"Conventional wisdom says there is only one
way to earn a living, and that's to work. Conventional wisdom effectively
capital (land, structures, machines, and the
like) as though it were a kind of holy water that, sprinkled on or about
it more productive. Thus, if you have a
thousand people working in a factory and you increase the design and power
machinery so that one hundred men can now do
what a thousand did before, conventional wisdom says, 'Voila! The
of the labor has gone up 900 percent!' I say
'hogwash.' All you've done is wipe out 90 percent of the jobs, and even the
ten percent are probably sitting around
pushing buttons. What the economy needs is a way of legitimately getting
ownership into the hands of the people who
now don't have it." (Louis O. Kelso, Journal Asset Based Finance,
"The trouble with today's techniques of
finance is that they're designed to make the rich richer. None are designed
to make the
poor richer. That's why the poor are poor.
Because they're not rich." (Louis O. Kelso, San Francisco Examiner &
"The Roman arena was technically a level
playing field. But on one side were the lions with all the weapons, and on
the Christians with all the blood. That's not
a level playing field. That's a slaughter. And so is putting people into the
without equipping them with capital, while
equipping a tiny handful of people with hundreds and thousands of times more
than they can use." (Louis O. Kelso, Bill Moyers: A World of Ideas,
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
In 1956 Louis Kelso invented the Employee Stock Ownership Plan (ESOP)
to put his ideas into practice. In 1958 he collaborated with the
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 and Japanese.
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, March, 1957.
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, Illinois: 1968.)
The Economic Foundation of Freedom, The American Prospect:
Insights into Our Next 100 Years, Houghton Mifflin Company, Boston:
Labor's Untapped Wealth: An Address by Louis Kelso, Air Line
Pilot, October, 1984.
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 18, 1972.
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,
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,
The Great Savings Snafu, Business and Society Review, Winter,
Why Owner-Workers Are Winners, The New York Times, January 29,
Why I Invented the ESOP LBO, Leaders, October/November/December,
Don't Meddle With ESOPs, The Journal of Commerce, October 2,
Looking in a Marxist Mirror, The Journal of Commerce, January
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, April, 1987.
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,
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:
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,
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, California: 2002.
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 can use."