 |
| George Mason: Life, Liberty, Private Property |
The paper suggests
a number of things that can be done to ameliorate the immediate situation and
lay the groundwork for a just and effective recovery. Today’s portion focuses on “the unacknowledged
right” of private property, the chief prop of life and liberty, with which most
people have no problem (at least for themselves). It then gives an example of how even under
current law in the United States it is possible for people without existing
savings of their own to purchase capital that pays for itself out of its own
future profits.
UNIVERSALIZING
CAPITAL OWNERSHIP
How Article 17 of the Universal Declaration of Human Rights Can Save the
Economy
April 17, 2020
Center for Economic and Social Justice (CESJ.org), April 17, 2020
Part II
The
Unacknowledged Right
Among the 30 articles in the United
Nations’ Universal Declaration of Human Rights (UNDHR), ratified in 1948 by 48
countries, Article 17 states: “Everyone has the right to own property,
alone as well as in association with others” and “No one shall be arbitrarily
deprived of his property.”
 |
| Louis Kelso: A nation and a world of owners. |
In other words, to secure one’s life
and liberty, every child, woman, and man should have the equal right to become
an owner of productive capital assets. Since the date of the UNDHR’s adoption,
however, no country in the world has promoted this right. None have instituted
policies providing every person equal future opportunity and access to the
means to exercise it.
Article 17 embodies the principles of
“economic personalism,” starting with respect for the dignity, security,
empowerment and fullest development of every human being. Solutions based on
these principles would finance future economic growth throughout the world in
ways that would create new work opportunities and unite all citizens as
productive capital owners, without eroding the rights of existing owners. These
solutions offer the potential efficiencies of a more participatory,
non-monopolistic and just free market system, enabling a growing base of
taxpayers to pay the budgeted costs of government and begin paying down
accumulated government debt.
An Example of
Universal Capital Ownership Financing.
One micro-economic example for
promoting new global monetary policies consistent with Article 17 is the
world’s first 100 percent bank-financed employee buyout of Mid South Building
Supply, Inc. (Springfield, Virginia, USA) as described below. This successful
model demonstrates the power of expanded capital ownership financing.
As a result of new laws adopted in
1974 by the US Congress, all Mid South workers were provided in 1985 with
access to capital credit from the company’s commercial bank to purchase 100% of
outstanding shares of their company to be repaid with the full stream of future
pre-tax corporate profits. No employee had to put up any money to become an
owner.
 |
| Participants sell their shares to the ESOP for cash when they leave. |
In 1985, the company’s tax-exempt
Employee Stock Ownership Plan (ESOP) Trust purchased all 3,000 shares of
company stock from the then-owners, for which it paid $7,300,000, a price at
the higher end of an independently appraised “fair market value.” The plan was
structured to avoid any deductions from wages or salaries, personal savings or
personal loans.
This was made possible because under
US law, an owner who sells a company to the employees through an ESOP is
permitted to defer any taxes on the gain from the sale whose proceeds are used
to purchase “qualified” shares (i.e., shares meeting required
standards) in other companies, unless those shares are sold during the life of
the selling owner. In the case of the Mid South ESOP, the selling owner was
able to make an asset-backed loan guarantee to serve as collateral (or
substitute for loan default insurance) for the commercial bank loan the
employees used to purchase the shares through the tax-sheltered ESOP Trust. The
law allows a company to deduct from its taxable income any future profits used
by the ESOP to pay for shares or distributed to employees through the ESOP.
The bank assessed the feasibility of
Mid South’s loan on the basis of the future stream of pre-tax profits,
projected to be earned by the company within 20 years. The company’s cash
contributions and dividend payments to the ESOP repaid the acquisition loan 7
years ahead of schedule. By December 31, 2018, the appraised value of the
shares of Mid South Building Supply had increased 536.93 percent above the
original purchase price.
Since the workers became the owners,
the company’s workforce has increased 328.95 percent, and the company has
expanded from two locations to eight locations in two states with over 125
full-time employees. Over the years, basic labor compensation of all employees
has been paid competitively. $4.5 million of profits have been distributed
under Mid South’s Bonus and Profit Sharing Plan and approximately $17 million
of the company’s annual ESOP contributions have been used to repurchase shares.
No employee has ever put up any personal savings or taken payroll deductions to
become an owner in Mid South.
#30#
