Project Economic Justice: Ideological Framework

As we noted yesterday, we will be posting the original “strategy paper” that led to the Presidential Task Force on Project Economic Justice, “Project Economic Justice:A Beachhead for Regional Infrastructural Reform,” to be followed by President Reagan’s speech to the Task Force.  Today we post Part I of the paper in its entirety:

Project Economic Justice

A Beachhead for Regional Infrastructural Reform

(Excerpted from a paper prepared by Norman G. Kurland at the request of the Chief Economist for International Economic Affairs, National Security Council, April 19, 1983.)

PART I
The Ideological Framework for Expanded Capital Ownership

Dr. Norman G. Kurland

In the past, most of America’s responses against Marxist aggressions have been defensive, our military actions in response to their military initiatives, our nuclear build-up in response to theirs. On the ideological level, calling our strategy defensive would be a compliment.

Calling for “Freedom and Democracy” without building structures for “Economic Justice” is naive. There is no meat on the message. We should not repeat this disastrous error in the future.

Our Foreign Assistance Act of 1963 stated the overall objective of American foreign aid: “To create conditions in the world under which free societies can survive and prosper.” Twenty years and billions of dollars later our foreign aid programs, as executed, have not impeded Marxism’s global reach.

Puerto Rican slums

Indeed, American foreign aid may have helped to pave the way for many of the Marxist revolutions and expropriations of privately owned enterprises that have occurred throughout Asia, Africa, and Latin America since World War II. Handouts by themselves do not deliver justice or help create a more just social order. They often widen the gap between the rich and the poor. They alienate the people we should be helping. They magnify the obvious difference between the rich and the poor: the rich derive their incomes from the ownership of capital and the poor lack effective access to capital ownership.

Thus, handouts create breeding grounds for Marxist-Leninism. Like military aid, they are at best temporary expedients, useful for buying time to attack the social and economic causes that lead to revolution. By not providing the poor in developing countries with the means to become partners in free enterprise growth, we have wasted resources and lives to revolutions that could have been avoided.

President John F. Kennedy

In the words of President Kennedy, “By making peaceful revolution impossible, we make violent revolution inevitable.”

Farmers, workers, technicians, and businessmen in the developing countries now need more direct access to the finest talent and the most advanced technology, ideas, and institutional structures developed within the American free enterprise system. With access to the best tools and talent of our private sector, for mutual profit, the people of developing countries can create for themselves a freer and more just economic future. We can prove to the world that maximum justice and maximum profits can go hand-in-hand.

The time is now ripe for America to reach out to a broadened global constituency, the poor and oppressed of the many countries from which our ancestors fled. By taking the ideological high road against Marxist collectivism, we can now beat the Soviet Union, not with empty words or deadly weapons but with bold private-sector initiatives that all Americans could support. Through a radical extension of the American free enterprise system, economic justice can be brought to the poorest of the poor in developing countries. In a sense, it would be a Space-Age version of the original American Revolution.

Charles McNary, G.O.P. Senate Minority Leader, 1938

Broadened equity ownership was included in the 1938 Republican Party Platform. It was also called for in the 1976 and 1980 conventions of the Republican Party. Within the last 8 years Congress has passed 15 laws encouraging employee stock ownership plans (ESOPs) and over 5,000 companies are gradually spreading equity ownership among their several million workers. [Note: Figures are for 1983.] In 1976 the Joint Economic Committee of Congress declared broadened ownership of new capital as a major priority of American economic policy. While some academics and labor spokesmen have voiced skepticism and concern, citing a few cases where ESOPs were abused, even this resistance is diminishing. Several books and hundreds of articles have appeared in recent years favoring expanded ownership policies.

A labor statesman who recognized that the twin problems of productivity decline and cost-push inflation were unsolvable through the traditional wage system was Walter Reuther, the late head of the United Automobile Workers. Speaking before the Joint Economic Committee of Congress in 1967, he stated, “Profit sharing in the form of stock distributions to workers would help to democratize the ownership of America’s vast corporate wealth. If workers had a definite assurance of equitable shares in the profits, they would see less need to seek . . . increases in basic wages.”

Even John D. Rockefeller III called for such a plan in his book, The Second American Revolution (1973).

Hubert H. Humphrey

In a letter to The Washington Post not long before his death, Senator Hubert Humphrey explained why he supported broadened capital ownership:

“[C]apital, and the question of who owns it and therefore reaps the benefit of its productiveness, is an extremely important issue that is complementary to the issue of full employment. . . . I see these as twin pillars of our economy: Full employment of our labor resources and widespread ownership of our capital resources. Such twin pillars would go a long way in providing a firm underlying support for future economic growth that would be equitably shared.”

The expanded ownership concept, purely on its merits, enjoys broad bipartisan support on Capitol Hill. The first to publicly support the concept was populist Senator Fred Harris in 1972. The first to introduce ESOP legislation aimed at comprehensive reform of the U.S. tax system was conservative Senator Paul Fannin in early 1973.

Senator Russell B. Long

The main champion of employee stock ownership in Congress is Senator Russell Long, who first learned of the ESOP as a result of Senator Mark Hatfield’s initiative to convert the Conrail system into a 100% employee-owned railroad. Other sponsors of ESOP legislation have covered the ideological waterfront, from Robert Byrd and Alan Cranston to John Towers and Mac Mathias, from Jesse Helms and William Roth to Gary Hart and Paul Tsongas, from Phil Crane, Jack Kemp and Bill Frenzel to Parren Mitchell, Don Edwards and Ron Dellums.

Rep. Michael Barnes, Chairman of the House Foreign Affairs Subcommittee on Inter-American Affairs, reacted to a proposed expanded ownership initiative for El Salvador, by recalling the words of former Salvadoran President Duarte:

“If my people believed that tomorrow would be better than today, that their children would have a better life than they have had, then the communists could ship in all the guns they want. There won’t be anyone to pick them up and use them.”

Rep. Barnes added his own footnote, “There’s more wisdom in that single statement than in everything our government has had to say on the issue in the past two years.”

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