To the Editors:

D. Bruce Shine,
General Counsel
United Textile Workers of America

Professor Murphey responds:

I am calling my remarks a “response” rather than a “rebuttal” because I hope to enlist common ground—not an adversarial relation—with people such as Mr. Shine.

In my article in the July Freeman, I essentially made three points:

1. That employee ownership is growing by leaps and bounds as a result of the massive tax preferences that have been given to it since 1974. This growth is a product of “interventionism,” not of the free play of market forces.

2. That the rapid institutionalization of employee ownership will create a vast new constituency for government intervention. One reason for this is that millions of employees are being caused to rely upon a non- diversified form of holding as one of their principal investment vehicles. Government will almost inevitably, given the political realities once an enormous employee-ownership constituency comes into being, be called upon to make sure that employee-owned companies don’t fail or at least to serve as guarantor that the employees won’t lose the value of their shares if their companies fail.

3. That, even though I don’t think the move toward employee ownership will lead to socialism in the United States, the Left can certainly be counted on to seek to dominate it with an anti-cap-italist animus. Workers’ control was central to much 19th-century socialist thought, and has been a centerpiece of Western European and American socialist thinking in recent years. What many of us don’t realize is that there is an extensive and active socialist literature on the subject. This suggests that we are creating a potentially hostile institution within the heart of capitalism itself, with all of the future conflict that that entails. Those who favor a free market had better get busy within employee-owned businesses to see to it that such ownership actually does create an identification with capitalism on the part of the employees. We need to understand that American employees’ hearts and minds are going to be contested territory in an unfortunate ideological war. It’s a war in which proponents of a free market will, as always, be at a serious disadvantage in terms of intellectual and media articulation.

These are the points I made in the article.

Now I am pleased that Mr. Shine has raised an aspect that I did not have space to address in my article. (I’ve devoted considerable attention to it in recent issues of the Conservative Review and The Journal of Social, Political and Economic Studies. I will be glad to send copies to anyone who writes to me in care of The Freeman.)

He refers to the writing of Louis O. Kelso, known as “the father of the ESOP (Employee Stock Ownership Plan).” He indicates that Kelso and his coauthors—who were Mortimer Adler for the first two of four volumes and Patricia Hetter Kelso for the final volume—actually favor employee ownership as part of a free market system, not of socialism.

I can only hope that Mr. Shine, and others, will go back and read Kelso’s books carefully, looking past the rhetoric of a “new capitalism” and seeing that what Kelso has actually been propounding for over 30 years is a thoroughgoing socialism.

In fact, Kelso’s writing is the most fascinating example I know of semantic inversion. He and Adler were brilliant in devising a way to call socialism “capitalism.”

ESOPs are only a small part of the road to the “new capitalism.” The idea is to have an unlimited supply of government-backed credit to lend to virtually everyone, without obligation to repay (and thus the semantically disguised handout), to make it possible for people to buy all sorts of property—including even shares in sidewalks—until everyone in our society owns roughly the same amount of property. Then everyone is to receive payments derived from their ownership as a form of entitlement. This vast scheme of redistribution and of entitlement payments is called “capitalism” because everyone is made an “owner” and is said to be receiving a return on his or her “capital.”

I know this is astonishing, but anyone who doubts my summary of it is urged to run, not walk, to the public library to read any one—but preferably all four—of Kelso’s books. There, under an impressive array of verbiage and semantic inversion, the discerning reader will see the whole scheme laid out in all its glory.

I hope Mr. Shine is one of the many who have genuinely been fooled by the Kelso books. Many solid free market proponents have accepted the Kelso rhetoric at face value. I have no doubt but that true proponents of a market economy will join me in opposing Kelso’s scheme, although anyone who’s been snookered needs a little time to adjust to a realization of it. After a short period of disbelief, they should be angry. Not at me as the messenger bringing bad tidings, but at Kelso.

Dwight D. Murphey

The Wichita State University

Wichita, Kansas