What Do You Do When Capital Eats Labor Alive?

Oct 29, 2019 | Timothy L. Stewart

Nathan Schneider recently penned a manifesto about the history and merits of employee ownership in a capitalistic society.  This piece examines the roots of the ESOP, dating back to Louis Kelso, who referred to himself as the “capitalist of tomorrow.”  Mr. Schneider illustrates the following key point to Kelso’s thinking:

The animating idea of Kelso’s career, which he came to as a student and sailor and held to unfailingly afterward, was that the production of market value results from two kinds of inputs: labor and capital. As technology advances, labor becomes less important and capital more important. Capital, in turn, will end up claiming a greater share of the resulting profits. Kelso followed Karl Marx’s analysis of the problem of capitalism—that capital wants to eat labor alive—but inverted the solution. Rather than folding the means of production under a workers’ state, he wanted to create more capitalists. That, he believed, would ensure that ever more people own the means of production and reap their capital’s returns. Creating more capitalists, he thought, would protect democracy and capitalism alike from capture by a small, wealthy elite.

It is in this “inversion,” that both the political left and right come together:  everyone likes the idea of employees owning companies.  At the risk of oversimplifying things, the left-leaning like ESOP companies because they help reverse income inequality, and the right-leaning like them because they produces employees who think and act like capitalists.