[This review was published in the Winter 2001 issue of The Journal of Social, Political and Economic Studies, pp. 759-761.]
The Ownership Solution: Toward a Shared Capitalism
for the 21st Century
Jeff Gates, who has long been involved in the movement for ESOPs (employee stock option plans) in the United States, argues in this book for worldwide systemic changes in the financial structure of capitalism to create a broadly distributed ownership of productive enterprise. He argues that there is a "design flaw" in capitalism as we now know it. By virtue of this flaw, the financial system produces more capital for those who already have it, but does little to "create more capitalists." As the book's subtitle suggests, Gates favors a "shared capitalism."
It is hard to know how to categorize Gates, and perhaps under impending world economic conditions it is unnecessary to do so. In the past, it would have been valid to point out that his enthusiasm for worker ownership reflected either (a) a dishonest, because unadmitted, desire to promote a transition to socialism as many socialists have advocated it for well over a century; (b) a naive, because uninformed about that history, effort to do the same thing; or (c) a desire to inject some modicum of worker ownership into a market economy, but without an exclusionary animus against the wage system, which would not itself be inconsistent with a free market system.
Worker ownership, when combined with an opposition to other forms of enterprise that involve "the wage relation," has long been part of the socialist program. Indeed, Louis Kelso and Mortimer Adler's book The Capitalist Manifesto (1958) was a plea for socialism, quite transparent to anyone who read the book seriously (which, apparently, almost nobody did). The fact that so many advocates of a free market have gotten onto the ESOP bandwagon is explainable by their not understanding this, combined with their implicit assumption that employee ownership would never be carried to the point of banning other forms of enterprise.
The idea that capitalism has a "design flaw" making the rich richer and the poor poorer, and leading also to overproduction and a lack of purchasing power in the hands of the masses, has also been around for well over a century. It has been central to much socialist thought. If nothing new has been added to the equation, this is a tired, much refuted, argument – overcome by the immense productivity and broadly raised living standards generated within market economies.
The question that those who support capitalism and to whom socialism is anathema must now ask themselves, however, is whether this perception of a flaw as just described is now being borne out by the rapid on-rush of a radically labor-reducing technology. In the impending age of computers, robots, materials science and biotechnology (an age that is just beginning, even though we may think we are fairly well into it), will it not in fact be true that immense rewards will come to those who own the technology, while the billions of people who are not owners of the capital and who inevitably will not be "knowledge workers" compete for a constantly diminishing economic role? If this occurs, it will show up as mass unemployment in many areas of the world – or as a vastly increased polarity of incomes and wealth in societies where wage flexibility is allowed to foster a continued near-full employment.
It does seem to this reviewer that the technological revolution, which far surpasses anything we have experienced before even during the Industrial Revolution, raises questions that all proponents of a free market must, sooner or later, take seriously. These questions will be painful, precisely because they point toward the need to reexamine long-exploded socialist nostrums. Once that reexamination starts, there will be much reason for dialogue between market-economy enthusiasts and such thinkers as Jeff Gates. The necessity will be to maintain a vigorously competitive global market, with all the innovation inherent in it, while establishing the economic basis for a civilization in which all benefit. The second part of this will be valuable for its own sake, but is also imperative if social order is to be maintained. In a world of revolution and violent desperation, nobody will thrive.
One difficulty with Gates' suggestions is that they center heavily on workers sharing in ownership. This presupposes widespread employment. If the promise for the future is going to be non-labor-intensivity, the sharing of ownership will hardly be able to be accomplished by bringing in employees. Nor does Gates concern himself particularly about the lack of diversification that employee ownership of individual enterprises entails. (This is no small problem, since firms have a very real propensity to fail, especially under the competitive conditions that have come to exist in the world market.) He mentions GSOCs (general stock ownership corporations), in which large numbers of people own shares of broadly-based productive processes such as the Alaska oil field; and it seems that this offers much more promise for the future than employee ownership. It may be that he sees employee ownership as merely a stepping-stone to this, but if so he doesn't see his way clear to say so.
The Ownership Solution is far more relevant today than the Kelso-Adler book was in 1958. People of all persuasions are well-advised to begin reading this literature seriously.
Dwight D. Murphey