One of the features of a modern economy that politicians and policymakers work ceaselessly to overcome is the fact that as technology advances, human labor becomes relatively less valuable as an input to the production of marketable goods and services. This puts downward pressure on wages in competition with technology. It becomes increasingly difficult for people to gain an adequate and secure income solely from wages without massive State intervention in the economy.
The solution to the problem of inadequate wage income is not to increase dependence on the State as the source of all economic good — or any, for that matter. The State does not create wealth. People create wealth. Understanding that is the basis of all sound monetary and credit policy.
Instead of looking to the State to solve all of our problems, then, the solution is actually straightforward and simple. As Louis Kelso pointed out when interviewed for an editorial in Life magazine in 1964, "If the machine wants our job, let's buy it [the machine]." In other words, if a machine can do the job we were doing, we should buy the machine and, as owners, receive the income (profits) generated by the machine as a right of private property, rather than ask the State to confiscate profits from other owners to give to us.
To do this, Kelso invented the ESOP, the "Employee Stock Ownership Plan," a method of corporate finance that would allow workers who have no savings and who cannot afford to cut consumption to acquire part ownership of the companies for which they work. Since they have no savings and generally can't afford cuts in pay, the ESOP allows workers to "buy now, pay later" . . . out of the profits generated by the company itself, profits to which they, as owners, would have a natural right. Kelso's idea was that workers-as-owners would first use their portion of profits to pay for their shares in the company, and then use the profits as a "second income" to supplement or (in some cases) replace income from wages.
Powerful as it is in contrast to the standard wage system arrangement, the ESOP is not potentially the most powerful, nor the most effective application of Kelso's ideas. For example, it only applies to people who work in corporations, not sole proprietorships, partnerships, non-profit or government workers, or the military, to name a few other groups.
Consequently, the "ESOP concept" can be adapted to other situations, with the most generally applicable being the "Capital Homestead Account," or "CHA." A CHA would empower ordinary people to borrow money, the amount to be determined by a pro rata share of the total estimated growth of the economy for a period. Using non-recourse credit, collateralized with capital credit insurance and reinsurance (for greater security), ordinary people would be able to participate in the economic growth of the economy both as wage workers (owners of labor) and as shareholders (owners of capital).
Other financing and ownership vehicles also use the same concept. There's the "Citizens Land Bank," or "CLB," which could be used to finance rebuilding infrastructure and vest every citizen in an area with direct ownership of the land and infrastructure — what used to be considered a "natural monopoly" of the State, but by using the corporate structure creatively, could be owned directly by everyone.
The "Homeowners Equity Corporation," or "HEC," would drastically reduce both the cost and the risk of home ownership by making people owners not of their homes directly, but of the corporation that owned their homes. Rental payments would be equal to the original cost of buying or building the home, plus a maintenance fee and a fair profit for the management company. As rental payments were made — much lower than mortgage payments on the same house due to "no interest" money used by the corporation to finance the house — the tenant would earn shares in the corporation up to the cost of the house. When the tenant had earned shares equal to the cost of the house, he or she could continue as a tenant with a favorable long-term lease at a much-reduced rent, or exchange the shares for title.
All of these vehicles and more should be considered when the question comes up as to how Japan is going to finance the rebuilding. Many people have lost everything, some of them after having worked an entire lifetime building lives for themselves and their families. It would be wrong to make them pay once again, and then not receive the full benefit of owning the rebuilding.
Whoever finances the future will own the future. Shouldn't it be the people who will ultimately pay for it? The Japanese people are going to be asked to make great sacrifices in the near future. It is only right that they receive the full stream of benefits from the sacrifices they will make, and in many cases have already made.
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