One of the goals of the Economic Democracy Act is to “democratize” ownership of capital. By this we do not mean the collectivist “The People” own (meaning everything is owned by the State and controlled by whoever holds political power), the individualist “Democratic Capitalism” (meaning almost everything is owned by a relatively few private individuals holding economic power), or the collective-individualist/individual-collectivist “Servile State” (meaning virtually everything is owned or controlled by a private-public sector economic-political elite holding both economic and political power).
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| John Gapper |
No, when adherents and advocates of the Just Third Way of Economic Personalism say they want to democratize capital ownership, we mean an economic system centered on the dignity and economic empowerment of each person. That is, a system which recognizes life, dignity, and liberty require each person have the power and independent means to support and sustain one’s own life, dignity and liberty — i.e., through one’s private property rights. Economic Personalism aims to diffuse economic power structurally by democratizing access to capital ownership for each person.
And that means democratizing access to the means of acquiring and possessing private property in capital — democratic access to money and credit as a prerequisite to access to capital ownership. That is why a recent article in the Tuesday, March 31, 2026, issue of The Financial Times, while well-intentioned and supportive of widespread capital ownership, completely misses the mark. As John Gapper stated in “Promises to Democratise Finance Lack Path to Power” (p. 13),
[I]n the world of financial services, [democracy] can be sold. A bewildering number of companies are styling themselves as champions of the common person. But what is badged as “democratisation” in finance often bear little resemblance to the real thing. . . . [Financial service providers] are opening up asset classes previously off-limits to non-wealthy investors; . . . This is innovation, for sure. But democracy involves redistributing power as well as access. Investors in funds . . . cannot influence the companies on which their investment depends. By creating new avenue for companies to raise capital from entirely powerless investors, they support the entrenching of founders such as SpaceX boss Elon Musk — which is hardly democratic.
Gapper’s solution? Information sharing and voting shares — both very good, even essential things . . . but he left out the most important thing when advocating a practical program of expanded capital ownership: how to pay for it. That was Louis O. Kelso’s contribution (among other things) to the expanded capital ownership movement.
As Kelso reasoned, labor alone is no longer sufficient to generate an adequate and secure income. The solution he developed agrees with Gapper’s call for financial democratization: allow ordinary people to purchase capital and pay for it with the profits of the capital itself. As he explained it in his article “Why I Invented the ESOP LBO” (LEADERS, October, November, December 1989, Vol. 12, No. 4; note most sources credit Jerome Kohlberg Jr., Henry Kravis, and George Roberts, but Kelso’s work seems to have antedated theirs; it’s not entirely clear from available records):
People once expected technological progress to provide better livings with less toil and more leisure, not just for a career meritocracy but for the average population. Instead, we have a falling general standard of living, the need to work harder and longer, often at more than one job, while leisure, even as an ideal, has virtually disappeared. Indeed, our failure to harness the producing and income-earning power of capital (land, structures, machines and capital intangibles, normally represented by the ownership of common corporate stock) to directly satisfy the needs and wants of families and single individuals throughout the economy is reflected in ways other than contrived privation. It shows up as well as stratospheric national debt and debt service costs, trade deficits, loss of international competitiveness, inflation and human alienation.
These modern symptoms of a miswired economy testify to the validity of the message first made public in The Capitalist Manifesto, i.e., that labor employment alone is no longer the key to a good economic life. Full employment is no longer an adequate or rational goal for an industrial economy. It is most certainly not an adequate goal for a democracy dedicated to the ideal of equal economic opportunity for all.
Meanwhile, what about the other way of earning income, capital work? Well, official policy is that it doesn’t matter who owns the nation’s productive capital. To economic policy, capital is invisible. Capital is important not because it provides productive input and produces income, just as labor does, but because it “creates” employment for labor. It is a mere catalytic agent. The employment and income-producing potential of capital ownership is ignored. Consequently, capital ownership in the U.S., for generations confined to the top 5 percent of families, is being super-concentrated through mergers, acquisitions and non-ESOP leveraged buyouts (LBOs) at a rate the nation has not seen since the days of the robber barons.
And how do the already-rich make themselves even richer? Their most efficient new instrument is the leveraged buyout, which I invented in 1956 for quite the opposite purpose — namely, to build capital-sourced earning power into the middle class and the working poor. The original leveraged buyout is the Employee Stock Ownership Plan, or ESOP. So far, there are about 10,000 ESOPs in the U.S., with new ones being added at an accelerating rate each year. These ESOPs are painlessly enabling some 10 million corporate employees to become capital workers by permanently adding the earning power of capital to their wages and salaries. Over $6 billion in employee capital ownership was acquired by U.S. corporate employees in 1987. But that figure is dwarfed by the over $600 billion in capital acquisitions through the Wall Street rip-off of my invention, which has merely exacerbated the nation’s super-concentration of capital ownership.
The message is clear: adopt the Economic Democracy Act now.
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