2 JULY 1977, Page 15

A new capitalism

Sir: Nicholas Davenport's articles (28 May and 4 June) and Mr R.A. Shakespeare's letter (11 June) should help to open-,the minds of legislators and economists to the idea that income distribution can be made equitable through broad diffusion of share ownership. Most British and American economists are still trying to make income redistribution, work. They are back where Keynes was in 1936, when he wrote in his General Theory that wealth was part of the fixed social structure, not to be tinkered with. They failed to notice that by 1940 Keynes had smelled inflation coming, and had reversed himself by writing that the solution was a piece of the ownership action for everyone.

Thanks to the splendid work of Louis Kelso, the United States has taken the first steps toward universal capitalism, through legislation which encourages companies to distribute shares to their employees. How- ever, the ESOP and TRASOP plans which are described fully in my book A Piece o fthe Action (to be published in the UK on 13 July), 'have severe limitations. Their benefits are payable only in employer shares, so that employees are subject to the

Rolls-Royce type disaster. The TRASOP plan adopted by American Telephone and Telegraph (described in Mr Shakespeare's letter) is actually a government giveaway, financed entirely by the taxpayers through a huge tax credit. The shares are distributed in proportion to salary so that the highest paid executives and workers of the leading companies benefit most, at Treasury expense.

Leaders of both parties in America rec- ognise that ESOP and TRASOP are not broad or equitable enough to solve any macroeconomic problems. They are now studying broader plans, which would not be tied down to the employment relationship. The Financed Capitalist Plan described in my book; Nicholas Davenport's unit trust scheme; and the National Dividend Plan, all require and deserve careful analysis. In America, we are arranging for these plans to be simulated through use of long-term econometric models. The same could and should be done in the UK immediately, so that the ideal plan of capital diffusion can be found before the next Grunwick.

Stuart M. Speiser 200 Park Avenue, New York, NY 10017