Okay, maybe it wasn’t the deepest or most meaningful song, but then it wasn’t meant to be. The Chordettes’ version of Lollipop from 1958 (they did the second recording) hit Number 2 on Billboard. It was pretty much the only thing they did that anyone remembers . . . well, Mister Sandman was pretty popular, too. And a decade or so later, “the Archies” with Sugar, Sugar had another one-hit wonder. There must be something about candy that diminishes the seriousness of the message (if any) conveyed.
And what has this got to do with Louis Kelso and Puerto Rico? Well, not much, although the eminent economist and Nobel Laureate Dr. Paul Samuelson seemed to think it did. Samuelson, in fact, appears to have harbored a special animus against Kelso — not that it ever led to Samuelson saying what, specifically, was supposed to be wrong with binary economics or expanded capital ownership. At least, that’s the way it came across to a lot of people.
This was demonstrated a few years after Samuelson’s testimony attempting to refuse Kelso’s proposal for Puerto Rico, when Mike Wallace of 60 Minutes interviewed Samuelson to get his comments on Kelso’s ideas. Evidently Samuelson was starting to feel pressured, for he was even more dismissive of the ideas than he had been previously. The Nobel Laureate changed his reasons for rejecting the ideas, but not his negative assessment:
Mike Wallace: All right. My understanding of Kelso-ism is that it’s designed to enable men who are born without capital to buy it, to pay for it out of the income it produces, to own it and thereafter to receive income from that capital. Devoutly to be wished!
Paul Samuelson: Oh, yes. And it would be nice to have lollipops grow on trees for the picking.
Mike Wallace: The only thing that you object to, really, in Kelso-ism is the fact that it uses a tax loophole to give the workers stock in the company?
Paul Samuelson: That is my primary criticism. Now, you tell me that Senator Long is interested in this. I’m distressed. I’m distressed because Senator Long is an influential Senator in connection with the closing of tax loopholes and the opening of them. (“A Piece of the Action,” 60 Minutes, with CBS News Correspondent Mike Wallace, Produced by Norman Gorin, aired on March 16, 1975.)
First, of course, Samuelson’s “primary criticism” in the intervening years changed from concern for the poor workers who cannot afford to fit themselves into the false assumptions of modern economics by cutting consumption and saving, to concern over the manipulation of the tax system. This is a somewhat ambiguous position for a Keynesian to take. Second, it is difficult to see how wishing for lollipops to grow on trees for the picking has anything to do with binary economics.
Even more odd, Russell Long’s support for the ESOP was, by this time, well known. It is hard to believe that Samuelson was unaware of Senator Long’s key support for the ESOP until Mr. Wallace informed him of it on national television. Long’s support ensured that Kelso’s proposal had been inserted into the Employee Retirement Income Security Act of 1974 as of January 1, 1974. This was more than a year before Mr. Wallace interviewed Samuelson. The only way to understand Samuelson’s position (as well as his denial of obvious and provable facts) is to realize that Samuelson was absolutely convinced that the science of finance is irrevocably wedded to dependence on existing accumulations of savings.
|"Can't get that damn' song out of my head!"|
To return to Samuelson’s testimony on Puerto Rico, nowhere was his lack of understanding of money, credit, and banking (to say nothing of private property) more evident, however, than in his confused comments on early eighteenth century France. As Samuelson related in the passages Senator Harris inserted into the Congressional Record in 1972,
You cannot get something for nothing in economic life. The scandal of John Law in ancient France pretended otherwise, and led to fiasco. I fear the same in this case. If the Commonwealth guarantees bank loans to purchase Patrimony stocks, it has thereby less credit to expend in other directions of development. What advantage is there in a dollar of dividends if it slows down the growth of productivity of real wages by tens of dollars? (Statement by Paul A. Samuelson on House Bill 1708, concerning the Patrimony for the Progress of Puerto Rico, “the Proprietary Fund,” Congressional Record, loc. cit.)
The fractured syntax supports Kelso’s otherwise uncalled-for observation that Samuelson seemed to have turned the task of writing his critique of binary economics over to one of his students. How, for example, does a scandal, even unspecified, pretend anything? What on earth did Samuelson mean by “the growth of productivity of real wages”?
|And it STILL makes more sense than Keynes!|
Those statements in this brief passage that are not incomprehensible are misleading. There is enough sly innuendo inserted to boggle the mind of anyone who has managed to free him- or herself from the disproved Keynesian dogma that only existing accumulations of savings can be used to finance capital formation. As the subtitle of The New Capitalists, the second collaboration of Louis Kelso and Mortimer Adler, puts it succinctly, “A Proposal to Free Economic Growth from the Slavery of Savings.”
Who, however, was this “John Law” whose “scandal” — according to Samuelson — led to “fiasco” in “ancient France”? And what, exactly, was this scandal to which Samuelson referred, and how did it lead to fiasco?
And, by the way, there is no such thing as “ancient France.” “France” didn’t exist until the early Middle Ages when the French — the Frankish tribesmen — came into Gaul and took over most of it (Celtica, Belgica, and Acquitania, leaving Transalpine and Cisalpine Gaul to the other German allies of the Romans), becoming the administrators of that portion of the Roman Empire, with one of them, Clovis, actually claiming to be Augustus, i.e., the principal Caesar.
We’ll look at that in the next posting on this subject.