Note that labor accounted for well over 90% of economic input from the beginning of history until almost the dawn of the Industrial Revolution. But from that date (usually placed at about 1775) forward, the constantly accelerating nature of modern technology asserted itself so that in 1974, the ratio of labor input to capital input that characterized the economy of our ancestors in 10,000 B.C. is almost reversed, and capital-in the physical sense is the dominant input factor.

But Who Owns the Capital?

While the quantitative studies indicate some 30 million shareholders in the U.S., the qualitative studies show virtually all the stock in the top 5%. As to indirect ownership, through financial intermediaries such as insurance companies, bank trust departments and mutual funds, such investments are almost never acquired on a self-liquidating basis, so they do not make a net increase in the buyer's standard of living. They substitute income from capital for income from labor. but they rarely raise the economic productiveness of the individual. Such investments evidence a reduced present standard of living and the "storing" of purchasing power, subject to the effects of inflation, for future use. In our advanced industrial economy, it is rare indeed for one to acquire through personal savings a capital holding that would yield a viable income. On the degree of concentration of ownership of productive capital, see Robert J. Lampman, National Bureau of Economic Research, The Share of Top Wealth-Holders in National Wealth, 19221956, (Princeton: Princeton University Press, 1962) pp. 23, 108, 195; (Wharton School Stock Ownership Study, Proceedings of the American Statistical Associa tion, Business and Economic Statistics Section, 1963), pp. 146–168; McClaughry Associates Inc. Expanded Ownership, the Sabre Foundation, Fond du Lac, Wis consin, 1971. At pages 101-198 is a comprehensive survey of the studies on The Distribution of Wealth in the Twentieth Century, by Professor James D. Smith of the Pennsylvania State University. All of the studies surveyed confirm the gen eral accuracy of the Lampman analysis.

Clearly, if the effects of the logic of our double entry bookkeeping market econ omy were not counteracted by a host of detrimental measures designed to radi cally alter the distribution of income, the picture would look something like this

Economic Input and Income Distribution in the U.S. Economy

Assuming Free Market Conditions

Obviously, if labor were to be suddenly evaluated at its free market value, the immediate result would be mass starvation and the collapse of consumption, as well as

of production.

So radical is the redistribution of income that, as a result, the picture looks something like this:

Why Do We Redistribute Income in Violation of the Logic and Morality of Our System When We Could Raise the Productive Power of the Underproductive Many by Giving Them Effective Access to Capital Ownership?

This question leads us quite naturally to the world of finance, for it is finance that is the mother and father of new capital formation, the economic term used to describe new or increased applications of existing technology. It is here that we reach the heart of the difficulty.

The process by which newly formed capital (improved land, new structures, and new tools) is brought into existence under conventional financing techniques can be functionally analyzed from the following example. Suppose a corporation has done its feasibility study for a contemplated expansion (self-liquidation within a reasonable period of years is the essential logic of business investment) and concludes it should spend One Million Dollars for new tools in order to increase output of goods and services for which it foresees a profitable market. The corporation goes to its bank or other lender, convinces the lender of this "feasibility," and borrows the necessary funds-let's say repayable in installments over five years. The picture looks something like this:

The important aspects of this technique of finance are:

When the loan is paid off incremental productive power equivalent to One Million Dollars of tools has been built into a stationary stockholder base. An individual may sell stock which he owns in the corporation, and another individual with capital may buy the stock, but no net new capital owners are created in the process.

Since, as a matter of fact, virtually the entire personal ownership of productive capital in the U.S. economy lies in the top 5% of wealthholders, it is clear that a principal contribution to this concentration of ownership of productive power (productive input being the business basis for personal outtake or income) under the double entry bookkeeping logic of a market economy lies in a technique of finance that builds all incremental productive power into a tiny stock ownership base that already owns functionally excessive productive power, having in mind that the ultimate economic purpose of production is consumption. Those who must constitute the great majority of ultimate customers for business-the people with present and potential unsatisfied consumer needs and wants do not acquire incremental productive power through this process. Those who are in fact already excessively productive (in relation to their present or potential consumer needs or wants) acquire all incremental productive power.

The other principal methods of financing new capital formation, those using internal cash flow such as retained earnings, investment credits, depletion, accelerated depreciation, etc., all have precisely the same concentrating effect. In the aggregate, all of the conventional techniques of finance above mentioned accounted for nearly 98% of new capital formation during the past decade.

The sole remaining financing method, the sale of new equities for cash, has the same concentrating effect: the new stock is sold to people with capital who can pay cash for it.

In short, the logic used by business in making investment-the logic of investing in things that will pay for themselves-is not available to the 95% of Americans born without family capital ownership. As the non-human factor increases in quantity and in relative productive power, its ownership remains concentrated in a stationary fraction of the population. With rare exceptions, employees, including executive employees, do not own functionally significant amounts of productive capital.

Business finance, because of our incomplete national economic policy (a failure to interpret the Employment Act of 1946 as requiring a broadening of the ownership of capital in order to achieve "maximum purchasing power" in the hands of those who need it) and our attempt to solve the income-distribution problem entirely through employment, has failed to recognize the importance of creating new owners of capital without diminishing the take-home pay of labor. Business operates in such a way as to deprive even the employees, both submanagerial and managerial, of the great corporations (1,000 of which produce nearly 80% of the goods and services of the private sector) of effective means of legitimately acquiring the ownership of viable holdings of capital.

The end result, to which businessmen naturally object, is that it falls to government to close the purchasing power gap which occurs when 5% of families (who own all the capital) acquire ownership of all incremental per capita productive power, and the majority, with most of the unsatisfied product needs and wants and rising expectations stimulated by all the modern techniques, acquire ownership of none of the incremental productive power. The techniques government must use to close the purchasing power gap, and the effects of its actions, are too well known to dwell on here:

Welfare redistribution of every imaginable kind.
Redistributive taxation of every conceivable kind.

Subsidization of employment, both within and outside government, of millions of people who would not be employed except for the subsidies, the cost of which subsidies are a social burden upon the present and future of the economy directly affecting the quality of life of the people, although the conventional wisdom overlooks them in evaluating the performance of the economy.

The adoption of myriads of pieces of legislation encouraging employees to demand and receive more pay for less work, even to the point of demanding increasing pay for no work input whatsoever. All such costs go into the prices of products, thus creating inflation, artificial scarcities and a decline in the economic quality of life, where plentitude and growth in the affluent quality of life should prevail because it is consistent both with the objectives of business, with its technical capabilities, and with the desires of the people.

A rising sense of strife between management and labor, and between the rich and the poor-a natural result of governmental redistribution.

A growing sense of economic alienation and helplessness, the natural result of not owning capital in a world where most of the wealth is produced by capital. The fiscal integrity of government is being destroyed at every level, as a result of our defective corporate strategy and incomplete economic policy that attempts to solve the income distribution problem through employment alone rather than jointly through employment and broader ownership of capital, the other factor of production. From the municipality, the county, and the state, to the Federal government and the United Nations, staggering but still growing debt (the not-so-secret source of our precarious present prosperity) is being piled upon unwilling taxpayers and the taxpayers of the future, while the underproductive and non-productive masses demand more welfare, more subsidies, more redistribution.

We can now state the question even more clearly. As technology changes the input mix that goes into the production of goods and service, causing, at an accelerating rate for each unit of output, progressively more input from the non-human factor to be used and progressively less human factor input, conventional finance, rather than counteracting this defect, actually amplifies it. In other words, as the productiveness of capital rises in relation to that of labor through technological change, the ownership of capital, as the result of conventional finance, becomes progressively more concentrated.

Can We Raise the Economic Productiveness of the Underproductive Who Do Not Own Capital, i.e. Do Not Own the Thing That Embodies Technology?

Because we cannot in a free society long violate the logic of a market economy, our business and financial institutions must, as labor input accounts for progressively less of economic produc ways of restoring, and indeed enhanc