Dear All,
Since, no doubt, you are eagerly awaiting this information, I have put
below three emails from the COG Ownership archives about the earnings of
capital in binary economics (in response to Bill Ryan). The emails also
deal with
productiveness and --would you believe it? -- they also mention Keith Wilde!
I have labelled them A, B and C with a double dotted line in between them.
I would add here that I can do without Bill Ryan's sarcasm about my
"valuable time". Because he's such a nosy bastard I have in the past
provided him with extensive personal details including:--
a) the 60 or so hours per week I am away from home on my normal work
b) the continual work done on books, papers and conferences
c) the maintenance (doing all the labour) of an extensive public garden.
Indeed, such was the amount of information given to nosy Bill, he was
also informed that, on occasion, I have dressed up like an eighteenth
century
ponce and that, no doubt because of my social conservatism or something, the
colour of my underpants was white. (They are now coloured.)
All in all, I cannot always reply to all the questions asked of me
particularly when I have replied to them before -- I have to get some sleep
sometime.
Oops! I forgot! I also do Wednesday mornings at the Global Table
and much work for the Global Justice Movement.net -- very soon,
Social Credit members will be asked if they can co-operate with
others.......
Anyway, three nice long emails below.
Rodney Shakespeare.
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Email A.
To: <[EMAIL PROTECTED]>
Subject: Questions for Alan Zundel
From: "Rodney Shakespeare" <[EMAIL PROTECTED]>
Date: Tue, 25 Apr 2000 04:29:33 +0100
Reply-to: [EMAIL PROTECTED]
Sender: [EMAIL PROTECTED]
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Dear Members of the Ownership Group,
I withdrew from the Group at the beginning of February. The reasons for
doing so still stand. However my attention has been drawn to Alan Zundel's
continual
a) charging binary economists with evasion
b) support for redistribution
c) denigration of productiveness.
This email is therefore one more attempt to sort things out and I will be
grateful if Alan Z. clearly answers, and does not evade, all the questions
which are posed.
A. AZ. says that the binary view is that in a free market capital and
labor will receive an income return proportionate to their productiveness.
He alleges that this is not so and also alleges redistribution and labor
will suffice for people to lead a decent life in a future economy.
Starting first with his allegation about redistribution and labor:-
QUESTION 1. If redistribution and labor will suffice, why is AZ bothering
to involve himself with the COG group and the cause of the widest possible
(100%) capital ownership?
QUESTION 2. If AZ does not want the widest possible capital ownership, why
is he in the COG group?
QUESTION 3. If AZ does want some capital ownership, will he unequivocably
say roughly what percentage of the population he would like to see owning
capital and receiving at least half of their income from capital? (Perhaps
Keith Wilde would do the same).
QUESTION 4. If AZ and Keith Wilde say they want everyone, or a substantial
proportion of the population, to own a considerable amount of capital, how
do they reconcile that position with their belief that redistribution and
labor suffice?
---------------------------------------
B. The position on factor shares in a binary economy has been explained
to AZ who ignored the explanation when it was made. However, here it is
once more...........
a) Productiveness is an analysis of physical contribution to
production. It is designed to show people the true role of capital assets
in production so that people will demand a fair share of what truly produces
the wealth -- capital. The productiveness analysis suggests that, overall,
capital does 75% of the production and labor about 25% whereas, at present,
factor income shares are roughly 75% to labor and 25% to capital (which
conventional economics uses to say that labor must be doing most of the
work).
b) On factor income in a binary economy, the A/S book says, in the
note at page 50, "The true, full dividend earnings of shares, in a binary
economy, could be as much as five, possibly eight or nine, times what are
paid out at present. See Louis & Patricia Kelso, Democracy and Economic
Power (1991), pp. 124-129."
If you then go to those pages, you find that the Kelsos (page 125) use
a figure of 5 - 7% per annum as the yield for equity stock portfolios. If
we take the average of 5% and 7% to be 6% then, by calculation, the A/S note
works out as 5 x 6% = 30% or, possibly, 54%. So the range of the A/S note
is 30% to 54%.
It has continually been pointed out that binary economics, among other
things, requires the full payout of the earnings of capital. The full
pay-out feature is required by:-
i) the lender (to enable the loan to be repaid at competitive rates)
ii) the beneficiaries (who have increasing need to participate in the
capital income earned from increasing capital productiveness);
iii) the entire economy (to achieve sustainable aggregate growth and
distributive justice on market principles).
QUESTION 5. Would AZ please address himself to the above paragraphs
(after having read the relevant pages in Democracy and Economic Power) and
give his own estimate as to how all the matters referred to above would
increase the earnings going to capital and to what extent?
c) Further on in the A/S book, at page 184, it says that the
present 75%/25% earnings figures for labor and capital would be the other
way round in a binary economy and, in considering why that would be so, it
should be noted that, in addition to the matters set out above, a binary
economy also has:--
a) A binary property right. This is the right of every person to
acquire capital assets; to pay for those assets with the pre-tax yield of
the capital acquired; and then to receive all the net income earned by that
capital (after depreciation, research and operating reserves) indefinitely.
b) Central bank discounting for viable capital acquistion only
when done for binary (wider capital ownership) purposes (see Norm Kurland's
The Federal Reserve Discount Window in the winter, 1998, Journal of Employee
Ownership Law and Finance).
c) A Capital Credit Reinsurance Corporation which is an essential
part of the structure for providing collateral to credit-borrowers who do
not have collateral.
These things, inter alia, will
d) lead to a big increase in productive capital investment and so of
capital owned;
e) mean that there will be millions and millions of new shareholders
who will put on pressures and devise ways to ensure that capital gets the
percentage of income it deserves. They will do this not least because they
will be dependent upon capital income for a considerable part of their
income.
Moreover, at present there is NO free market for capital nor for labor
(on the latter point, see Richard Stutsman's email).
QUESTION 6. Does AZ admit or deny that, when a) to e) above obtain and
when everybody gets at least part of their income from capital ownership, it
is highly likely that the percentage of income going to capital will
increase?
QUESTION 7. What is his rough estimate of the effect of the above paragraphs
on factor shares in a full binary economy?
----------------
C. A review of AZ contributions to the COG debate confirm that:-
a) he is a redistributionist,
b) despite his claim that he wants wide capital ownership, his concept
of capital ownership would in practice only extend to a few more people;
and
c) he has no overall proposal to solve the position of those who have
no access to the capital markets.
QUESTION 8 Will AZ now agree that he has no overall proposal (apart from
asserting that labor and redistribution suffice) to ensure that all people
are sufficiently and independently productive? (Please note that
redistribution and independent production are incompatible).
QUESTION 9. Does AZ think there is anything degrading in keeping people
dependent on redistribution/welfare (which is his preferred position
although he contradicts that position by claiming to be in favor of capital
ownership)?
----------------------------------
D. Binary growth.
AZ denies binary growth. He has previously been asked that since the wider
the distribution of capital, the greater the growth, is there not a solid
case for 100% individual ownership and the policy that supports that 100%
ownership?
He replied that "The increased growth would not be much different than
if incomes were redistributed. I am not advocating that, simply pointing
out that Keynesians will ask, on the issue of growth, why wait until capital
is broadly owned? Why not simply redistribute incomes? I don't have a good
answer for them."
QUESTION 10. Would AZ now please admit that, for a start, the full payout
of earnings to 100% capital owners in the population, is of a completely
different nature to the redistribution of incomes? (The full payout of
earnings is not the same as the earnings going to capital owners at present.
Binary economics requires that corporations cannot retain earnings for
investment and must go outside the corporation for new finance. The binary
rejection of retained earnings for investment is continually ignored by AZ.
It is also complete nonsense to allege, as AZ does, that only a minute
proportion of capital investment comes from credit. The A/S book uses
figures of 60% for retained earnings, and 30% for borrowed money. If
retained earnings for investment were not allowed, that would probably make
90% being done by borrowed money/credit.)
QUESTION 11. Has AZ ever heard that true free market principle and
allocative efficiency require that producers and consumers be the same (as
stated by Adam Smith and JB Say)? (We are talking market efficiency here
and the case made by Smith and Say completely wrecks the case for
redistribution).
----------
E. Binary property right.
AZ has said that it is a falsehood that people have a right in justice to
own capital but he had also said that he thinks "concentrated ownership is
unjust." He was asked to explain the contradiction and produced a piece
of gorgeous, preposterous contradiction in reply as follows:--
"Concentrated ownership is a sign that political systems are favoring
some people over others in distributing economic benefits and opportunities.
If this favoritism were eliminated, ownership would be broader. But this
doesn't mean any particular citizen has a right to own capital."
The contradiction remains. His answer gives game, set and match to
the binary economists. He admits that the present system favors some people
over others in distributing economic benefits and opportunities and says
that, if this favoritism were eliminated, ownership would be broader.
However, AZ has NO answer to this 'favoritism' and he continually denies the
one thing which would end the favoritism -- the binary property right --
which would seem to be the strongest evidence that, at heart, AZ is a
supporter of the status quo.
QUESTION 12. Why doesn't AZ just admit he is a supporter of the status quo
full stop?
Rodney Shakespeare.
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Email B.
To: <[EMAIL PROTECTED]>
Subject: Productiveness and full pay-out of earnings
From: "Rodney Shakespeare" <[EMAIL PROTECTED]>
Date: Tue, 16 Nov 1999 00:18:14 -0000
Reply-to: [EMAIL PROTECTED]
Sender: [EMAIL PROTECTED]
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Dear Ownership Group Members,
Alan Zundel says the idea of productiveness is useless and when made the
centerpiece of spreading capital ownership provokes skepticism towards the
whole enterprise. He goes on to say that without a way to measure relative
productiveness you cannot do anything with it.
1. Productiveness is a measurement of work actually done. In some
situations, it allows the percentage contributions of capital and labor to
be accurately assessed and in other situations there is a degree of
uncertainty.
Yet, even in the latter situation, that does not mean that the
percentage contributions cannot be decided. If two people collaborate in an
undertaking they may have very different views of what they have each
contributed and the value thereof but if they cannot decide it between
themselves a judge will decide it for them. The judge's decision on
contributions (maybe made in a rough and ready way) then decides the
relative remuneration. In the sack-carrying situation, for example, the
addition of the donkey to the man very clearly adds a lot of extra work
being done by the donkey. That extra work is measurable in sack-miles. If
Alan does not understand that the difference between 1 and 20 sack-miles
gives a measurement of relative performance then I cannot help him.
2. In a binary economy understanding of productiveness (i.e. an
understanding of who or what really does do the work) will imbue society
and, in order that all humans may, throughout all of their lives, be
genuinely and continuously productive, it will be necessary that all
individually own what really does most of the work -- capital. Alan, if he
likes, can keep on claiming that productiveness cannot be measured but, in
practice, the percentage contributions will be decided whether he likes it
or not.
3. Alan also asks -- Why would income shares in a free market reflect
productiveness? He says that I have not addressed that question.
Apart from the understanding of productiveness, a binary economy has a
number of key features including:-
a) A binary property right. This is the right of every person to
acquire capital assets; to pay for those assets with the pre-tax yield of
the capital acquired; and then to receive all the net income earned by that
capital (after depreciation, research and operating reserves) indefinitely.
b) Central bank discounting for viable capital acquistion only
when done for binary (wider capital ownership) purposes (see Norm Kurland's
excellent The Federal Reserve Discount Window in the winter, 1998, Journal
of Employee Ownership Law and Finance).
c) A Capital Credit Reinsurance Corporation which is an essential
part of the structure for providing collateral to credit-borrowers who do
not have collateral.
d) Full pay-out of the earnings of capital.
The binary property right includes the full pay-out of the earnings of
capital (net of reserves for depreciation, research and development).
Without the full pay-out feature there can in practice be no competitive
self-financing binary property right.
The full pay-out feature is required by:-
i) the lender (to enable the loan to be repaid at competitive rates)
ii) the beneficiaries (who have increasing need to participate in the
capital income earned from increasing capital productiveness);
iii) the entire economy (to achieve sustainable aggregate growth and
distributive justice on market principles).
THAT, for a start, will mean a big shift in the percentage of income
going to capital (rather than labor) owners. (Assuming 75%labor/25% capital
at present, perhaps some other contributor to this debate would like to
estimate how big that shift might be).
In addition, as previously explained, there will be millions and
millions of new shareholders and if Alan does not understand that they will
put on pressures and devise ways to ensure that capital gets the percentage
of income it deserves, then I cannot help him on that either.
Rodney Shakespeare.
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Email C
To: <[EMAIL PROTECTED]>
Subject: Re: OWNERSHIP: Re-statement of two matters
From: "Rodney Shakespeare" <[EMAIL PROTECTED]>
Date: Thu, 8 Feb 2001 00:14:40 -0000
Reply-to: [EMAIL PROTECTED]
Sender: [EMAIL PROTECTED]
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Alan,
1. I stated that "a human is an independent producer who can work
with another independent producer (who might be another human being or a
machine) and that a machine can work with another machine or a human......."
To which you replied, "None of this has ever been an issue. These facts
are obvious......."
Since you and I are agreed on this, can we now hope that Keith Wilde will
agree as well?
2. Your position is that, in a binary economy, the productiveness of
factor shares will not be reflected because, you say, they will be related
to supply and demand, not productiveness.
However, I say that, IN PRACTICE, they will be related. It is
interesting that you say "of course if you throw out unions, minimum wage
laws, etc. incomes going to capital will be higher." If, as in a binary
economy, everybody owned a substantial capital estate, there would indeed be
a very different situation in which, for example, unions might well decide
to pursue the interest of their members via capital, rather than labor,
incomes. That is an important aspect of binary economics.
Furthermore, delving into the archives, I find that I have stated
extensively to Alan as follows:--
1. The binary economy has a full pay-out of earnings from capital. In
Democracy and Economic Power (pp 124 - 129), the Kelsos not unreasonably put
the present yield of capital as 5 - 7%. (This is yield, not rise in the
price of shares).
a) Taking the typical American corporation, the Kelsos then say that if
federal income tax, state corporate tax, employer's share of Social Security
and municipal corporate income taxes were removed, the return to
shareholders would (at an extremely conservative estimate) double. The
passage in the book (p 125) also discusses that half federal and state
coporate income taxes and all the employer's share of Social Security are
levied for the support of welfare and, of course, the position may have
changed since the book was written. However, it is clear that a 'extremely
conservative' doubling of payout is envisaged.
b) Then, on p. 127, the Kelsos discuss how corporate boards "plow in"
between half and three quarters of the net after-tax earnings of
corporations i.e., retained earnings.
The Kelsos then say that a) and b) increase the earnings of capital by a
factor of four to six times.
So, the average of 5% and 7% is 6%. The average of 4 and 6 is 5.
6% x 5 = 30%.
c) The Kelsos then add in for consideration 'substantial nonquantifiable
factors.'
I think I should say here that because some things are not precisely
quantifiable it is intellectually dishonest to eliminate them from any
computation or calculation. The best thing to do is to make a reasonable
estimate within certain parameters and go from there. If that is not done
then the whole calculation has little if any validity.
The factors include:-
i) The present unfree market does NOT ensure that those who produce
are those who consume so what each individual puts into the economy is what
the individual is able to 'take out' i.e. consume. This, of course, breaches
basic free market pricniple for the efficient creation of wealth. Among the
mechanism, methods and devices for breaching the basic free market
principles are the 'myth of the rising productivity of labor' which
'squeezes the property in capital' and results in allowing production
facilities to deteriorate.
ii) The 'malicious destruction of capital assets' through arson,
sabotage, and pilferage by the capitalless majority.
iii) The use of savings- based financing for capital investment. The
Kelsos describe such investment as 'costly, capriciously allocated,
irrationally expensive and always limited.'
iv) The earnings of 'morbid capital' (i.e., capital in excess of that
which can or will be used to support the consumer lifestyles of the owners)
are altogether diverted out of the market economy for useful goods and
services.
v) Work rules that prevent the efficient use of new technology etc.
The Kelsos say that if people owned the capital a three-shift (instead of
one-shift) use of capital would be much more acceptable to the owners.
vi) employee 'time theft'.
(The Kelsos think v) and vi) above would alone multiply the
productiveness of capital several times over.)
Then on page 130 of the book, the Kelsos consider the effect of
simulfinancing which combines the capital investment by giving those
expected to consume the power to consume.
At which point the Kelsos say "we estimate that the productiveness of
capital can be augmented another 100, 200 or 300% over and above the
potential increments already noted. The general effect of these many forces
that weaken the productiveness of capital in the current economy is to
decimate it."
"Decimate" means 'to take one tenth of'. So the Kelsos go on to say
"capital in an economically democratized economy would be well over ten
times more productive than we might suppose if we were only thinking in
terms of the yields of secondhand stocks today."
That means the Kelsos take the original 5 - 7% yield and multiply by 10
which makes 50% or 60% or 70% and an 'average' of 60%.
On p. 50 of their book Ashford and Shakespeare summarize the matter by
saying "The true full dividend earnings of shares, in a binary economy,
could be as much as five, possibly eight or nine, times what are paid out at
present." That means anywhere between 25% and 56% (as compared with the
original 5- 7%) with the 'average' being about 40%.
The matters above are, in themselves, sufficient answer for Alan.
2 However, there are other matters which, although not precisely
quantifiable, would exist and an estimate must be made for them (rather
than play the dishonest game of saying that because something is not
precisely quantifiable, it cannot be taken into consideration).
a) A binary economy would have 100% individual ownership (Alan may or
may not agree with that but it is part of my answer on the binary economy).
That means 100% of the people with a direct interest in capital
income (whereas most people today have a direct interest in labor income.)
b) Automation. Perhaps Alan would consider a fully automated factory
and ask himself how any of its income would be paid out to labor except by
redistribution.
c) Possible new type of corporations. I am thinking out aloud (and
one binary economist has already expressed disagreement with this) but it
seems to me possible that, in a binary economy, a new type of corporation
would emerge which would be based on binary productiveness (and not the
labor theory of value as I think is probably the case with David Ellerman's
proposal) and which would pay out firstly to capital with labor as the
residuary. It's only a thought and may not be a good one but I give it.
d) In previous emails I have also stated that Alan may have difficulty
with the concept of binary productiveness (which he wants to junk as useless
and distracting) because he is unwilling to accept it as a study of physical
reality. Productiveness specifically addresses the matter of who or what
does the work and establishes that, in physical reality, a very large
percentage of the work is done by capital (in co-operation with, or even
without, labor). When that understanding is widespread people will demand
ownership of capital and demand that it pay out according to its
productiveness. Again, they will make that demand if only because their
income and living standards depend on it. At present, substantial welfare
payments are made to people who have made NO productive input (those
payments include payment for a child's education). Those payments come
about because if they did not exist, there would be death/revolution/high
crime/whatever.
e) Alan's apparent belief that factor shares in a binary economy would
be much the same as now, completely ignores what happens when people in
society as a whole determine that money should go in this or that direction.
In the binary economy, people would determine that income goes to share
holders and not (directly or indirectly) to welfare dependents because there
will be little or no need for that welfare (nor for that 'free' education.).
Get real, Alan.
f) In answering Alan in the past I have also said there would be
increased capital payment because of:-
i) A binary property right. This is the right of every person to
acquire capital assets; to pay for those assets with the pre-tax yield of
the capital acquired; and then to receive all the net income earned by that
capital (after depreciation, research and operating reserves) indefinitely.
The binary property right includes the full pay-out of the earnings of
capital (net of reserves for depreciation, research and development).
Without the full pay-out feature there can in practice be no competitive
self-financing binary property right.
The full pay-out feature is required by:-
i) the lender (to enable the loan to be repaid at competitive rates)
ii) the beneficiaries (who have increasing need to participate in the
capital income earned from increasing capital productiveness);
iii) the entire economy (to achieve sustainable aggregate growth and
distributive justice on market principles).
THAT, for a start, will mean a big shift in the percentage of income
going to capital (rather than labor) owners. (Assuming 75%labor/25% capital
at present, perhaps some other contributor to this debate would like to
estimate how big that shift might be).
ii) Central bank discounting for viable capital acquistion only
when done for binary (wider capital ownership) purposes (see Norm Kurland's
excellent The Federal Reserve Discount Window in the winter, 1998, Journal
of Employee Ownership Law and Finance).
iii) A Capital Credit Reinsurance Corporation which is an essential
part of the structure for providing collateral to credit-borrowers who do
not have collateral.
iv) As previously explained, there will be millions and millions of new
shareholders and they will put on pressures and devise ways to ensure that
capital gets the percentage of income it deserves.
Rodney Shakespeare.
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