In the City
A new capitalism
Nicholas Davenport
An important book has arrived from America — a plan to provide every American family with a $100,000 stake in the economy*. It is not a joke. It is a serious proposition worked out by an astute international lawyer, Stuart Speiser, who pioneered the use of econometrics to determine the legal value of human life. (He acted for the families of 164 people killed in the Turkish DC10 air disaster of 1974.) He is therefore a down-to-earth man, not likely to fall for the wild notions of an economic crackpot. So it is remarkable that he should have been carried away by the unconventional and revolutionary ideas which Louis Kelso (a corporation lawyer) and Professor' Mortimer Adler expounded in The Capitalist Manifesto of 1958.
This classic book, which was ignored by the economic Establishment, traced the transition of laissez-faire capitalism into the mixed economy capitalism, which is described as capitalism mixed with socialism. In it full employment has been recognised as the economic priority and this has been accompanied by taxation of the incomes and property of the 'haves' and the distribution of the tax revenues to the 'have-nots' through social security and welfare. This policy may have given capitalism another chance of survival but, according to Kelso and Adler, it was a big mistake, for inflation was inbuilt and full employment became impossible. The post-war reformers, they argue, should have gone all out for the diffusion of capital ownership which would bring about a more equitable income distribution.
Stuart Speiser tells how the idea of 'Universal Capitalism' first came into the mind of Louis Kelso, how Professor Adler extracted it from him, gave it intellectual content in The Capitalist Manifesto, and got it discussed at the Aspen Institute seminars, where ex-President Ford fell for it. It is a very easy book to read because he has written it as a personal adventure story in his quest for the salvation of the American. economy. Do not be put off by this *A Piece of the Action Stuart M. Speiser (Van Nostrand Reinhold Co., $14.95)
boyish approach. He is not writing down to your intelligence. He gives a very shrewd analysis of Kelso's theories and, disagrees, as I do, with some of his rash propositions. But there is the germ here of a financial revolution which could change our society if it can be sold to the public and taken up sensibly by the politicians. The main objection to it that I see is its name, 'Universal Capitalism'. It is not a term which will endear itself to British socialists who are pledged by Clause 4 of their constitution to destroy capitalism.
But to come back to Speiser's argumentation. He is, of course, describing the ills of the American economy, but we have the same troubles here — only more so. The American welfare state had pushed up transfer payments by the Federal government to about $168,000 million in 1976, which was over 40 per cent of the entire Federal budget. In 1975 there were 80 million 'tax dependants' in America, that is government employees, military personnel, retired, disabled, unemployed and those on welfare against only 71 million workers in private enterprise. Of course, he adds, government workers also pay taxes and some contribute productive services, but the financial plight of New York City makes it clear that this 'transfer' escalation cannot continue much longer without reaching breaking point. Breaking point came in Sweden in 1976 when the prime minister tried to shift the entire burden of health insurance and pensions on to companies and self-employed; thereby making 500,000 self-employed Swedes pay taxes of 101.2 per cent on all income over $35,000!
Stuart Speiser's conclusion is that the American mixed economy cannot solve its problems of inflation and underemployment without some radical change. The same has been said of our own economy on very high authority. Both economies have virtually stopped growing. When investment is undertaken it is more likely to be for the purpose of employing less people than for the purpose of expansion. It is interesting to find how often Speiser's criticism of the American mixed economy falls into a Marxian slant. He
quotes Kelso as saying that the monopolisation of capital ownership — 1 per cent of the population owns over 50 per cent of the individually owned equity stock — has turned the country into a nation of industrial sharecroppers because the great majority work only for subsistence wages and do not share in the ownership of productive capital. Most Americans, he adds, fit Marx's description of the proletariat — namely unpropertied wage slaves. It is estimated that the amount of new capital created by American corporations in 1976 was $120,000 million. Present corP°: ration finance and tax systems are so rigged' says Kelso, that the bulk of this new capital created will be owned by the few already owning most of the corporation stock. Why not spread the ownership of this new capital, he asks, and issue the new stuck to families which own nothing except their personal domestic assets? An ingenious way to do this has been worked out by Kelso. He calls it the Financed Capitalist Plan, involving the banks, the Federal Reserve and a nel government agency, CDIC — the Capita Diffusion Insurance Corporation• 14, e suggests that the first year of capital diftho' sion, taking the 076 figure of $12130,d million for new capital created, should embrace twenty million families. The heaA of each family would go to a bank and arrange to buy $6,000 worth of stock °Ica credit. There would be no risk to the Ock buyer or to the bank because the hank would be insured by the CDIC. The stipc.s acquired would be held in escrow until it l paid for out of dividends received on the
,, shares. Kelso estimates that this would take
about , about seven years, assuming average ear ings of 20 per cent on capital. But, requires a big change in company tax law. w Companies would be compelled by law er pay out all their earnings in dividends aft.._ allowing for working capital and depreel'd tion. Further, companies would be all°vite a corporation tax deduction in respect of tl:_c dividends paid on the stock owned by obe twenty million new capitalists. Congress' of says, would have to decide on the numbeirop families entitled to share in the plan and the limit of stock to be acquired, but as ad plan creates millions of new capitalists arir provides a new source of capital for CO uld panics now facing capital shortages it w°ei mean that the economy would start to woe on itself and grow at a much greater P than the 5 per cent considered acceptntibone today. So here is Stuart Speiser's calenla ibe
for $4.5 trillion new capital outlays ill `,‘
decade 1975-1984: 50(1M°
capital 0100M l'`
A crackpot scheme? This astute lavl5 does not think so. Something desperate e to be., ;done to restore growth to of the economy. As Kelso says, the deatof a 0Pe (r fafmily ilies arn = $100,000 t economy is the first step in the death, Will civilisation. My criticisms and apPraisa follow next week.
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