Part Three (Parts 1-2 are available at the Progress Report Archive)
Kelso's proposal can be briefly explained. During the next 20-odd years, the GNP of the United States will double. This "second economy" can be built atop the same narrow ownership base as the present economy, or it can be built upon a broadly democratic base of new wealthowners. If the economy is left to its own devices, the former will occur. If, however, anybody and everybody is enabled to acquire stock in the second economy, then within a couple of decades a genuine "people's capitalism" will emerge. There will still be corporate profits, unearned increments and capital gains, just as now, but they will be reaped by the many rather than the few.
The means by which the new wealthowners will acquire their stock is the same means by which they now acquire cars and color TVs: credit. The difference is that stock, unlike color TV, is self-financing -- it produces income which can be used to pay back the loan. The role of the federal government in all this will be to help establish the credit mechanisms, induce existing corporations to issue new equity, and then sit back and let the economy roar. The government of Puerto Rico is starting to do this on a smaller scale.
In contrast to negative income tax plans, Kelso's proposal requires no alteration of the capitalist distributive maxim, "to each according to his ownership and labor," which is probably more deeply ingrained in America than "to each according to his need" could ever be. It would, however, add millions of wires to the economic switchboard and offer possibilities for worker control through majority stock ownership (although the latter is not one of Kelso's objectives).
Future wealth ownership could also be dispersed through a proliferation of cooperatives and community-owned development corporations, assisted by federal financing and tax preferences. Just as important as dispersing future ownership is breaking up existing concentrations of wealth through steeply progressive and escape-proof wealth and inheritance taxes. In addition, we could recognize that we are no longer a nation of pioneers and establish a reasonable limit on the amount of wealth that any individual can appropriate from society within his lifetime. Such a ceiling would accord with Andrew Carnegie's belief that persons of wealth should live unostentatiously, provide moderately for their dependents and return all surplus revenues to the community through philanthropy, except that in this case the philanthropy would be involuntary.
Needless to say, very few of those who are privileged in America view their surplus revenue as belonging to the community from whence it came:. There is, and always will be, intense opposition to any and all proposals to share wealth and income more equitably. As weapons in the war against equality, the privileged wheel out a panoply of public-spirited arguments, the most respectable of which is that "incentives" must not be impaired. According to this line of reasoning, both the poor and the rich would be less inclined to serve society if affluence were better shared. In the case of the poor, it is poverty that makes them perform unpleasant work. As for the rich, it is fat dividends, stock options and capital gains that induce them to take risks, invest, accumulate more wealth, and otherwise advance the public interest.
At this point the incentives argument merges with the "dead goose" corollary: improving the distribution of goods will undermine the production of goods, i.e., kill the goose that lays the golden eggs.
There is some truth to the incentive argument under present conditions, but we ought to examine the argument itself, and the possibilities for changing present conditions, a bit more closely. People are motivated to perform distasteful tasks by their need to eat, but paying more for the most unpleasant jobs and reducing the hours allotted to them seems a better way to go about things than preserving poverty as an incentive. At the other end of the economic scale, the notion that vast rewards are needed to lure capital owners and managers into beneficial behavior is open to debate. It is quite possible that the reverse is true-that socially desired behavior can be better attained by raising taxes or reducing profit margins, so that those who enjoy accumulating riches will have to strive even harder for their accustomed rewards. A wider distribution of wealth itself would not, in any case, mean lower profit margins.
The "dead goose" corollary is equally open to question. It is more likely that its converse is true, that improving distribution will increase production by putting more purchasing power into the economy. At
the least, it is highly improbable that better distribution and continued growth are ·as mutually exclusive as the "dead goose" theorists proclaim.
NEXT WEEK -- The Final Part
This essay is part of a series written by Peter Barnes for The New Republic magazine in 1971-72. We think you'll be pleased -- and perhaps shocked -- to see
how timely and insightful the essays are for today. Each essay is being republished, in installments, by The Progress Report.
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