Kelso’s binary economic system and the social technologies that would become available under the Capital Homestead Act offer a new route to accelerated, quality growth without inflation in the U.S. economy. The logic and justice of binary economics offer an improved framework to move America ahead in accordance with its original founding principles, guided by customs, legal principles, institutions and traditions that are embedded in the fabric of this nation. The American Dream offered a revolutionary vision to all citizens to encourage each person and family to gain income self-sufficiency through ownership of productive assets. Binary economics offers a new paradigm to restore that vision, voluntarily and at no one’s expense.

Notes

1. Louis O. Kelso and Patricia Hetter, Two-Factor Theory: The Economics of Reality, New York: Random House, 1967, p. 54.

2. Frederick Merton, The Rothschilds, A Family Portrait, New York: Atheneum, 1962.

3. Benjamin Watkins Leigh, speech on November 3, 1829, Proceedings and Debates of the Virginia State Convention of 1829-1830, Volume I, New York: De Capo Press, 1971, p. 156.

4. In his book, Top Heavy: A Study of Increasing Inequality of Wealth, New York: Twentieth Century Fund, 1995, Dr. Edward N. Wolff of New York University mentioned that "in 1992, the financial wealth of the top 1 percent was greater than the combined wealth of the bottom 90 percent." Based on his later analysis of the Federal Reserve’s Triennial Survey of Consumer Finances, Dr. Wolff stated that "the nation’s 400 richest families grew by an average of $940 million each from 1997 to 1999, whereas over a recent 12-year period of 1983 to 1995, the modest net worth of the bottom 40 percent of households plummeted 80 percent." (See his paper "Recent Trends in Wealth Ownership" presented at a conference on Asset Ownership in the United States at the New York University, December 10-12, 1998.) Globally, the trends are worse. Jeff Gates in Democracy at Risk: Rescuing Main Street from Wall Street, Cambridge, MA: Perseus Publishing, 2000, cited studies showing that "the world’s two hundred richest people more than doubled their net worth in the four years to 1999, to more than $1 trillion – an average $5 billion each.... This combined wealth ... now equals the combined annual income of the world’s poorest 2.5 billion people" (p. xiv).

5. See The Capitalist Manifesto, Louis O. Kelso and Mortimer J. Adler, New York: Random House, 1958; The New Capitalists: A Proposal for Freeing Growth from the Slavery of Savings, Louis O. Kelso and Mortimer J. Adler, New York: Random House, 1961; Two-Factor Theory: The Economics of Reality, Louis O. Kelso and Patricia Hetter, New York: Random House, 1967; Democracy and Economic Power: Extending the ESOP Revolution, Louis O. Kelso and Patricia Hetter Kelso, Lanham, MD: University Press of America, 1991. (The first two books by Kelso and Adler, and other Kelso writings, are accessible free from the web site of the Kelso Institute for the Study of Economic Systems at www.kelsoinstitute.org.)

See also Binary Economics: The New Paradigm, Robert Ashford and Rodney Shakespeare, Lanham, MD: University Press of America, 1999. In the academy, Professor Ashford has pioneered the consideration of binary economics as a distinct economic paradigm, with special emphasis on "The Principle of Binary Growth," which holds that "capital has a potent distributive relationship to growth." According to Professor Ashford, the principle of binary growth distinguishes binary economics from all prior schools of economic thought.

Other articles on binary economics by Robert Ashford include: "A New Market Paradigm for Sustainable Growth: Financing Broader Capital Ownership with Louis Kelso’s Binary Economics," Volume XIV, Praxis, The Fletcher Journal of Development Studies, pp. 25-59, 1998; "Louis Kelso’s Binary Economy," Volume 25, Journal of Socio-Economics, pp. 1-53, 1996 (available on westlaw.com in its jjsocecon data base); and "The Binary Economics of Louis Kelso: The Promise of Universal Capitalism," 22 Rutgers Law Journal 3, 1990 (available on the web site of the Center for Economic and Social Justice at www.cesj.org and at
www.camlaw.rutgers.edu/publications/
lawjournal/ashford.htm).

A compendium of writings by many authors on this subject (prepared in collaboration with the Center for Economic and Social Justice) can be found in Curing World Poverty: The New Role of Property, John H. Miller, ed., St. Louis, MO: Social Justice Review, 1994. Several articles in Curing World Poverty and a broad array of related writings on the moral, political, social and economic implications of the Kelso paradigm are available on the web site of the Center for Economic and Social Justice op.cit. at www.cesj.org.

For a sympathetic analysis from a conventional Keynesian perspective, see Stephen V. Kane, "The Theory of Productiveness: A Microeconomic and Macroeconomic Analysis of Binary Growth and Output in the Kelso System," 29 Journal of Socio-Economics, 541-563, 2000. For another good presentation on binary economics, see Jerry Gauche, "Binary Economic Models for the Privatization of Public Assets," 27 Journal of Socio-Economics 445-459, 1998.

6 . John W. Kendrick, "Productivity Trends and Recent Slowdown: Historical Perspective, Causal Factors, and Policy Options," Contemporary Economic Problems, Washington, DC: American Enterprise Institute, 1979; also R. M. Solow, in Mathematical Methods in the Social Sciences, 1959, pp. 89-104, K. J. Arrow, S. Karlin, and P. Suppes, eds., Palo Alto, CA: Stanford University Press, 1960. Also: Edward Denison, Accounting for United States Economic Growth: 1929-69, Washington, DC: Brookings Institution, 1974, and Accounting for Slower Economic Growth: The United States in the 1970s, Washington, DC: Brookings Institution, 1979.

7. Binary Economics: The New Paradigm, op.cit. at 294. Ashford and Shakespeare further note that "the binary analysis reveals that the law of supply and demand is a natural law, not a political law that can be repealed or evaded to escape its consequences. Just as the law of gravity affects all things material, so too the law of supply and demand affects all things economic. By this law more is produced in open markets than in closed ones. It is thus not only a natural law with universal consequences but also a law that manifests itself in differing ways in different property systems. In state-sponsored communist societies, supply creates very little demand. In the unfree market economies, supply creates considerably more demand, but far from as much as it could. In the open, binary private property system, however, supply will eventually create vastly greater demand." Ibid. At 295.

8. See chapter 4 of Curing World Poverty: The New Role of Property, op cit.

9. As of the third quarter of 2000, the annual increment added to America’s productive asset base of the nondefense economy was $2.07 trillion, consisting of:

New equipment and software, private sector $1,162.4 billion
Nonresidential structures, private sector 286.6 billion
Residential buildings, private sector 362.3 billion
New equipment and software, public sector 108.0 billion
Structures, public sector 154.5 billion
$2,073.8 billion

With a U.S. population of 275.3 million in 2000, this amounts to $7527 of new productive assets for each man, woman and child in America. (Source: The Economic Report of the President, January 2001, tables B-19 and B-21.)

10. A proposed comprehensive national ownership strategy is described in The Capital Homestead Act: National Infrastructural Reforms to Make Every Citizen a Shareholder, Norman G. Kurland, Arlington, VA: Center for Economic and Social Justice, 1999. (Available from CESJ’s web site at http://www.cesj.org.)

11. Norman G. Kurland, "Saving Social Security," August 30, 2001, an occasional paper of the Center for Economic and Social Justice available from the CESJ web site, op. cit.

12. This idea was first advanced by Dr. Norman A. Bailey, former Special Assistant to President Reagan for International Economic Affairs, in his article, "A Nation of Owners," The International Economy, September-October 2000; also available on CESJ web site, op.cit.

13. Described in such books as The New Capitalists (with Mortimer Adler), op.cit., and Two-Factor Theory: The Economics of Reality (with Patricia Hetter), op.cit. See also testimony of Mr. Kelso and Norman G. Kurland before the Financial Markets Subcommittee of the Senate Committee on Finance on September 24, 1973. The most detailed description of binary monetary reforms can be found in this author’s article, "The Federal Reserve Discount Window," which appeared in the Winter 1998 issue of The Journal of Employee Ownership Law and Finance, Oakland, CA: National Center for Employee Ownership. (Also available from the CESJ web site, op. cit.)

14. This idea was also conceived by Dr. Norman A. Bailey. See f.12.

15. Paul Samuelson, Economics, 6th edition, New York: McGraw-Hill, 1964, chapter 14.

16. In fact, Harold Moulton pointed out in The Formation of Capital, Washington, DC: Brookings Institution, 1935, pp. 117-8, that forcing the non-wealthy to reduce their consumption incomes to acquire capital assets is counterproductive. In contrast to "pure credit" repayable with "future savings", the self-denial approach to asset accumulation reduces the feasibility of all growth assets (I), whose financing was based on the assumption of increased consumer demand (C). Cf. Samuelson, op.cit., p. 47.