Building an Employee Ownership Coalition

reflecting the contributions of manyscholars.

Recognizing the deep divisionswithin society on the morality ofabortion and other “life” issues, theDeclaration seeks to eliminate theeconomic arguments for abortion andother practices which undermine thesanctity and inherent dignity ofhuman life. As such, the Declarationshould establish some commonground between pro-life and pro-choice advocates based on the idea ofindividual sovereignty advanced byAmerica’s founders.

Norm Kurland pointed out in hispresentation that the U.S. economygrows incrementally by adding about$1 trillion in new plant andequipment, rentable space and

Coming together from allparts of the United States,Scholars for Social Justice

(SSJ) concluded its second annualmeeting in St. Louis on August 23rdby adopting a “Universal Declarationon the Sovereignty of the HumanPerson Under God.” According toCESJ’s Norm Kurland, who editedMike Greaney’s original draft of theDeclaration, this document “re-affirmsthe founding principles of theDeclaration of Independence, cleansedof America’s ‘original sin’ of slavery,but modernized and globalized torestore economic and socialsovereignty to each individual andfamily through broad-based capitalownership.” The Declaration, whichincorporates the expanded ownershipprinciples of Louis Kelso and CESJ,underwent numerous revisions,

Scholars Offer Pro-FamilyEconomic Empowerment Agenda

Continued on page 2

CESJ LaunchesWeb Site!

As a global organization promoting a new paradigm of

economics, CESJ is pleased to reportthat we finally have our own site onthe “World Wide Web.” CESJ owesthis major accomplishment to thetalents and contributed services ofCESJ director and graphic designerRowland Brohawn, with the help ofKemp Harshman, Dawn Brohawnand others.

You’ll find a wealth ofinformation on CESJ’s principles,“Third Way” vision,accomplishments, global network,publications, and membershipprograms. In addition, CESJ’s website presents practical applications ofexpanded capital ownership,including the Capital HomesteadAct, super empowerment zones andValue-Based Management. CESJplans to introduce interactivefeatures and a “chat room” when ourcapabilities allow. So come visit ourweb site, and invite others to checkus out.

CESJ’s Web address is http://www.cesj.org/. Our new E-mailaddress is thirdway@cesj.org. Wewelcome your comments andsuggestions. ▲

An unprecedented leadershipassembly of several major non-

profit employee ownership groupstook place on July 18-19 in theoffices of the Foundation forEnterprise Development (FED) inMcLean, Virginia. CESJ PresidentNorm Kurland and Director ofCommunications Dawn Brohawnparticipated in this organizing event,seen as the first step in uniting andbroadening the employee ownershipmovement.

Other organizations at theassembly included the Foundationfor Enterprise Development(represented by former New York Lt.Governor and Congressman StanLundine, Executive Director; andDavid Binns, Associate Director);The ESOP Association (DonNelson, Chair; Dee Thomas, ViceChair; and Michael Keeling,President); the National Center forEmployee Ownership (Corey

Continued on page 3

Inside:New Birth Update ........................ 4International Developments ......... 5CESJ Mission to Moscow ............. 6Milestones & Weathervanes ........ 8News from the Network ............... 9Essential Reading ..................... 10

Newsletter of the Center for Economic and Social Justice • Summer 1997 • Vol. 12, No. 1

Economic JusticeMonitor

theEconomic JusticeMonitor

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2 Economic Justice Monitor

Our Core Values

Successful organizations start with peoplefirmly committed to a set of core values, whichcannot be compromised without weakening theorganization. CESJ’s strength, unity andprograms flow from our founding principles,agreed upon by consensus from our firstmeeting in April 7, 1984. Our core values weredeveloped to guide us in our work, to attractothers sharing these values and to serve as thevery basis of CESJ’s existence.

We think that our core values, onceunderstood, are universally appealing. We seethis reflected in the broad diversity of thebackgrounds of those who come togetherbecause of these shared values. The essence ofour founding principles has not changed fromthe founding of CESJ. But, as we discuss themtogether and with others, we will continue torefine and clarify our values by consensus. Thefollowing are CESJ’s core values:

�There is an Absolute Source of all creationand of all absolute values such as Truth, Loveand Justice, which represent the ultimateends of human actions. Most people call thisAbsolute Source, God.

�Nothing should stand between God and thehuman person.

infrastructure—roughly $4,000annually per man, woman and child.Traditional methods for financingthese capital assets create few if anynew owners. By democratizing accessto capital credit, a privilege availabletoday to 10 million American workerswhose companies have adopted“leveraged ESOPs,” all Americanfamilies could gradually be lifted fromtotal dependency on wages or welfareto meet their family needs.

Scholars for Social Justice wasfounded by Fr. John Miller, a CESJboard member. Philosophy professorand world-renowned Thomist scholarDr. Raphael Waters of NiagaraUniversity chaired the meeting forthe Scholars for Social Justice. Inaddition to Norm Kurland and MikeGreaney (who spoke on the moralbasis for the Universal Declaration),other CESJ members fromWashington, D.C. attending the SSJconference were Mac and Marcelle

Scholars Offer Pro-Family Economic Empowerment Agenda Continued from page 1

and Dr. George Maloof,Georgetown University architectemeritus Dean Price, State Rep.Wyvetter Younge (D) of East St.Louis, IL and State Rep. RobertMarshall (R) of Manassas, VA.

CESJ invites all its members andfriends to take part in this historicendeavor, by adding your name to thegrowing list of supporters, andenlisting the support of otherindividuals and organizations.

(The full press release on the SSJConference will appear on CESJ’s website: http://www.cesj.org. For furtherinformation, contact Dawn Brohawn atCESJ: Tel: (703) 243-5155; Fax: (703)243-5935; E-Mail: thirdway@cesj.org.For a copy of “The UniversalDeclaration on the Sovereignty of theHuman Person Under God” with alisting of its co-signers, please sendU.S. $3.00 to CESJ to cover copyingand mailing costs. Overseas orders,please add $1.00.) ▲

McGrath, and Antonio Betancourt,President of the World Institute forDevelopment and Peace.

Besides all members of the CESJdelegation, other signers of theUniversal Declaration include formerD.C. delegate and chair of theCongressional Black Caucus Rev.Walter Fauntroy, Bishop HerbertHermes of Brazil, Rabbi HerzelKranz of Silver Spring, MD, Dr.Norman Bailey, former chiefeconomist for the National SecurityCouncil, Richard Biernacki, formerchair of the ESOP Association, socialethics professor Rev. Dr. EdwardKrause, Rev. Dr. John Miller,editor of Social Justice Review, Rev.Dr. Matthew Habiger of HumanLife International, Judie Brown ofAmerican Life League, philosophyprofessor Dr. Donald DeMarco,presidential candidate Jean-OscarNgalamulume of Congo (formerlyZaire), psychiatrists Dr. Sam Nigro

�There is a hierarchy of human work: Thehighest form of work is perfecting the socialorder to elevate each person in his or herrelationship to God. The lowest but mosturgent form of work is for sheer personalsurvival.

�In interacting with nature to promote one’sown perfection, every person must respectthe rest of creation. Each human being, asteward of nature, remains responsible forconserving natural forms of existence, eachof which is interdependent and shares thesame divine origin with humanity.

�Under the highest sovereignty of God, allsovereignty begins with the human person—not social institutions such as the State, thebusiness corporation or the labor union.

�The essential means to achieve thesovereignty of the person include suchinalienable human rights as the right to life,liberty, and access to productive propertyand free markets, equality of opportunity,and the secret ballot. These rights—including the rights of property—are notultimate ends in themselves, but they areintermediate ends or fundamental means toenable each person to pursue Truth, Loveand Justice.

�People create tools, shaped from theresources and energies of nature, to supportthe economic and social sovereignty of theperson. Through private propertyownership, each person can become master ofthe technology needed to realize his or herfullest human potential and dignity.

�People also create social institutions—including the State, the business corporationand the labor union—each as a highlyspecialized “invisible tool” designed to serve ahighly specialized social function within a justsocial order. Institutions, as organizedexpressions of society’s values and goals,largely determine the quality of each person’sindividual and social life. As historicalcreations of humanity carrying withinthemselves the wounds of history, institutionsare continually in need of healing andperfecting.

�The highest responsibility of each person is topursue absolute values and to promoteeconomic and social justice in his or herpersonal life and all associations with others.

Economic Justice Monitor 3

CESJ Intern Explores the “Third Way”

Rosen, Executive Director; DeborahGroban Olson, Chair; and MalonWilkus, Past Chair); the OhioEmployee Ownership Center atKent State Univ. (John Logue andDan Bell); The Employee OwnershipFoundation, affiliated with TheESOP Association (Dan Bannister,Chair); the Worker OwnershipInstitute, affiliated with the UnitedSteelworkers (Bruce Householder);and the Massachusetts Office ofEmployee Involvement andOwnership (June Sekera, Director).

One question discussed by theEmployee Ownership Assembly waswhether “employee ownership” alonewould capture the attention ofleaders, the media and the public.The more universal message, CESJ’srepresentatives suggested, is“economic empowerment throughbroad-based capital ownership.” Aspointed out in William Greider’sbook, One World, Ready or Not: TheManic Logic of Global Capitalism (seereview on page 11), today’s world isfaced with the problem of how mostpeople will earn an adequate and

secure income, as businesses exportjobs to lower wage markets andreplace human labor with automation.

Greider’s support of the Kelsoniansystem inspired labor attorneyDeborah Groban Olson to launch a“Capital Ownership Group” (“COG”)under the auspices of the NCEO.COG’s research committee, to becoordinated by Professor John Logue,will examine Louis Kelso’s economictheories and CESJ’s proposals for

reforming Federal Reserve policy tostimulate non-inflationary privatesector growth linked to expandedcapital ownership.

Norm also recommended that acomprehensive strategic plan or“movement blueprint” be developedby the group; he suggested usingCESJ’s Capital Homestead Act as thestarting point. A majority of theparticipants agreed with the need todevelop such a plan. ▲

Building a Employee Ownership Coalition Continued from page 1

As part of its mission toeducate a new generation of

leaders, scholars and workers, CESJoffers a unique and challenginginternship. This summer we had thepleasure of working with LaDawnLewis, who came to us throughBrigham Young University’sWashington Seminar Program.During her two-month CESJinternship, La Dawn, who is nowenrolled in Brigham Young’s MBAprogram, delved deeply into CESJ’sconcepts and applications, both atthe macro- and microeconomic level.

LaDawn’s research focused oncurrent “empowerment zones” forlow-income areas, to assess how wellthey are accomplishing theirobjectives. She compared “trickle-down” programs of the ClintonAdministration and similar onesproposed by groups such as EmpowerAmerica, with CESJ’s proposals for“super empowerment zones” designedto economically empower residentsand workers through expanded capitalownership opportunities. As part ofher assignment, LaDawn interviewedCongressional and state programofficials and representatives of

community organizations dealing withempowerment programs, and draftedan initial research paper which willprovide a framework for furtherempirical analysis. In addition,LaDawn assisted with a Value-BasedManagement process within a 100%employee-owned company working toimprove its compensation and risk-and-reward system.

We’ll miss LaDawn’s enthusiasticpresence and her many contributions toCESJ, but know that she’ll be helpingto spread the CESJ message with herprofessors and fellow students. ▲

Participants in the first Employee Ownership Assembly. Foreground (left to right): Norm Kurland,Dawn Brohawn, June Sekera, Dee Thomas. Background (left to right): Dan Bell, Bruce Householder,Corey Rosen, Michael Keeling, Dan Bannister, Stan Lundine, Don Nelson, David Binns, Malon Wilkus.Not shown: Deborah Groban Olson, John Logue.

4 Economic Justice Monitor

poverty and crime in D.C. are asvirulent as ever. Under the WallStreet privatization formula, thegrowing prison population willcontinue to generate profits forprisoner warehousing firms likeCorrections Corporation of America.

Whether the New Birth Projectwill be realized in its original concept,remains to be seen. Its designelements (including the expandedownership features) would be equallysuitable for a high tech industrial parkthat could be become the focal pointfor transforming any troubled urbaneconomy into a “Super EmpowermentZone.” In the meantime, NormKurland, Dean Price and othermembers of the New Birth team arecontinuing to seek out possibleapplications in other areas of the U.S.as well as other countries. ▲

Correction: The numbers cited inNew Birth Project report in EJM(Summer/Fall 1996, page 3)suggested that the facility wouldproduce enough power and purewater to pay the cost of the facility inan 11-year period.

These numbers were based onestimates developed by experts(volunteering their time) at the 2-day“New Birth Pre-Planning Session”held at Georgetown University heldon March 11-12, 1996. On closerscrutiny, it appears that some keynumbers were misinterpreted andresulted in overly optimisticprojections of profits, particularlyfrom projected sales of pure water.Funds are being sought to providemuch more accurate projections ofprofits from the New Birth project,including supplementary cashrevenues from the sale of surpluselectricity, oxygen, and the leasing ofspace and facilities to the prison andnew industries attracted to the 1,500acre site.

New Birth Project Update

What is happening with theNew Birth project forWashington, D.C.?

Unfortunately, while there is ablueprint, strategy and a solidtechnical team in place, New Birth isstill seeking a champion and a criticalmass of community support.

As described in an Economic JusticeMonitor report (Summer/Fall 1996),the New Birth proposal calls for thecreation of a $3.5 billion complex tohouse 12,500 prison inmates. Thishigh tech facility would utilizesophisticated waste-to-energytechnologies, and would launchseveral new industries tocommercialize advanced technologiesdeveloped in the federal space andenergy programs. The project wouldbe financed by local commercialbanks with access to the FederalReserve discount window throughmechanisms which would channelfuture ownership and profits of thecomplex and its subsidiary industriesto local residents, employees and theprisoners working within new prisionindustries.

New Birth’s waste-to-energytechnology already exists; allcomponents of the technology havebeen proven feasible by NASA and JetPropulsion Lab. Everyone associatedwith the project still believes that theNew Birth demonstration is in theinterest of the nation and is criticalfor sustainable global developmentand generating new, environmentallysound sources of energy. Butintegrating these components into awaste-to-energy prison facilityrequires significant front money to dodetailed engineering studies, whichthe New Birth team has been unableto raise.

Will there be a rebirth of NewBirth? Certainly the root causes of

New Birth Publicity� CESJ’s work was featured in an

excellent editorial by CESJ friendPeter Hannaford—one ofAmerica’s top public relationsexperts, a former speech writer forRonald Reagan, and a long-timesupporter of Louis Kelso’seconomic vision. Peter, who servesas Managing Director of theFranklin Firm in Washington,D.C., had earlier reviewed CESJ’sCuring World Poverty for theCalifornia Political Review (Spring1995). This past November, hepublished a column for a Californianewspaper on CESJ’s New BirthProject. Acknowledging theambitious scope of the New Birthproposal and the enormouschallenges it faces, Hannafordpointed out that if the New BirthProject succeeded, “the nation’scapital could set an example for allthe states to follow.” (For a free copyof this article from CESJ, please senda stamped self-addressed envelope.).

� Every Tuesday from 10-11 a.m. onhis Pacifica radio show (WPFW,89.3 FM, Washington, D.C.), theHon. Rev. Walter Fauntroy,former D.C. delegate and chair ofthe Congressional Black Caucus(CBC), has been plugging the NewBirth Project and CapitalHomesteading. He frequentlymentions CESJ and ourcommunity investment corporationconcept, which would create a for-profit land planning and real estatedevelopment corporation owned bycommunity residents and workers.Walter is also trying to get theCBC to include CapitalHomesteading in their agenda forAmerica. ▲

Economic Justice Monitor 5

ESOP Developmentsin Egypt

The National Center forEmployee Ownership recently held aconference on ESOP and employeeownership in Egypt (co-sponsoredwith USAID and AFL-CIO).NCEO’s Executive Director CoreyRosen reported that the AlexandriaTire Company (whose innovativeESOP was designed by CESJmembers) is expected to becomeprofitable next year and beginrepaying the loan that purchased a25.8% equity stake for its workers.Corey mentioned that the EmployeeShareholders Association (ESA)concept, for which he credits NormKurland, is the best employeeownership vehicle on theinternational scene today andimproves on the U.S. trust approachto ESOP.

There are now 270 companies withESAs, with a minimum of 10%employee ownership. 15 ESA

companies now have majorityemployee ownership. Corey notedthat one of the problems facing ATCand other Egyptian ESA companies isthat the employees don’t know orappreciate what they have. There isobviously a need for ownership andfinancial education, communicationsand information sharing—vitalcomponents of Value-BasedManagement. ▲

CESJ Builds Supportfor Third Way inCameroon

At the invitation of the CameroonEconomic Development Corporation(CEDEC), CESJ’s Norm Kurlandtraveled on March 7-8, 1997 toYaounde, Cameroon to speak beforetribal, business and communityleaders at a two-day conferenceentitled, “Economic EmpowermentThrough Broad-Based CapitalOwnership.” CESJ friend andconference co-sponsor Antonio

International DevelopmentsUgandaCESJis Formed

CESJ directorBruce Mazziereports that theUganda Center forEconomic and Social Justice is “offand running.” The kickoff meeting onAugust 15 for the chapter in Kampalabrought in members of Parliament,lawyers, government representativesand economists. One of the objectivesof the chapter will be to establish aCESJ hub for other CESJ chapters inAfrica, particularly in Tanzania andCameroon, where CESJ is establishingstrong support for the Third Way.

Bruce, accompanied by his wifeDebbie, had recently started a three-year consulting assignment in Uganda(PRESTO Project) under a USAIDcontract with Management SystemsInternational (Washington, D.C.).He is now beginning to reap theharvest from seeds he had sownearlier in Uganda, where in 1990 hehad helped start the “NationalForum,” to promote new ideas ofeconomic development.

One of Bruce’s objectives inUganda will be to include the CESJCapital Homesteading strategy in thePRESTO Project work plan. Amongthe steps will be a seminar in the Fall(with Norm Kurland as a keypresenter) and the development of anexperimental tax/enterprise zonemodel to test the expanded ownershipapproach.

Bruce had played a key role indelivering the ESOP to another areaof the world—Egypt. He and otherCESJ members created the laws forthe first employee shareholders’association, as part of an ESOP jointventure at the Alexandria TireCompany. ▲

Continued on page 6

Bruce Mazzie

At two-day CEDEC conference in Cameroon (from l to r): Joseph Sah Kuete, Pius Mbu Machang,Norman Kurland, Rose Ndille, unidentified, Antonio Betancourt.

6 Economic Justice Monitor

Betancourt, President of the WorldInstitute for Development and Peace,accompanied Norm and also spoke atthe event.

As a result of Norm’s presentationand meetings arranged by Antonioand Mike Lamson of CEDEC,several key leaders committedthemselves to forming a Cameroonchapter of CESJ. Joseph Sah Kueteand Mrs. Rose Ndille, ExecutivePresident of CEDEC, pledged towork to persuade the government toadopt CESJ’s proposed monetary, taxand expanded ownership reforms; the“capital credit reinsurance” proposal(as an alternative to traditionalcollateralization); and the Value-Based Management approach toprivatization of several key state-owned enterprises. Of particularinterest to the Cameroonian audiencewas CESJ’s “Community InvestmentCorporation” for developing newcommunities in underdeveloped state-owned lands around the country. ▲

CESJ Meets withLabor Unions in France

Following their trip to Cameroon,Antonio and Norm traveled to Paris,where they met with representativesof several French unions faced withthe impending privatization and saleof a major French manufacturing firmwith plants located in the U.S. andLatin America. Offering an ESOPbuyout alternative (which included aninnovative financing approach whichwould be politically and economicallyadvantageous to the selling Frenchgovernment), Norm and Antonioreceived strong labor interest in theirproposal.

Most receptive to their proposals,ironically, were the FrenchCommunist unions. Unlike many

labor leaders in the American labormovement, the French unionsacknowledged that they must dealwith the globalization of themarketplace and the advent oftechnology. They also admitted thatno law or government could protectthe workers from this reality. With achange in the French Government toone headed by Socialist PremierLionel Jospin, who campaigned inopposition to privatization, this effortis on hold indefinitely. ▲

CESJ Mission toMoscow

At the invitation of Dr.Mullanur F. Ganeyev,Duma Deputy and

Chairman of the Russian ParliamentCommission for Analysis ofPrivatization Results, CESJ PresidentNorman Kurland traveled toMoscow last December.

This trip had resulted from aprevious three-hour meeting at theInternational Law Institute(Washington, D.C.) between Normand a high-level Russian delegation,arranged by David Binns, AssociateDirector of the Foundation forEnterprise Development. Throughthe initiative of CESJ’s BruceMazzie, Norm’s trip was sponsoredby Agricultural CooperativeDevelopment International (ACDI).

Norm’s trip was coordinated byeconomist Dr. Valery N. Varvorov,Russia’s leading advocate of ESOPswho heads the Economic ReformFoundation of Russia. Dr. VsevolodA. Marinov, who has translatedseveral important writings of LouisKelso into Russian, served as Norm’sinterpreter.

Highlights of theRussia Trip

In a meeting of the State DumaCommission on Review ofPrivatization Result chaired by Dr.Ganeyev, Norm spoke on a panelconcerned with the privatization ofstate-owned enterprises. Amongothers on the panel were Dan Bell ofthe Ohio Employee OwnershipCenter (which has been providingemployee ownership training inRussia), and Anatoly Drogalev, headof the Industrial Policy Departmentof the Moscow City Government.Norm’s presentation emphasized: 1) aten-point plan for building a new,non-inflationary, high growth andhighly participatory market economyto create ownership sharing and jobsfor workers displaced by privatization,and 2) an eight-point strategy forshifting the old economy to a marketsystem in a humane way. Such aneconomy would allow for sustainableand balanced growth and help to closethe wealth gap between those at thetop and those at the bottom ofRussia’s economic ladder.

Traveling to the 700-employeeTverskoj Meatpacking plant in Tver(one of the region’s largestemployers), Norm met with IvanGoncharov, General Director of theplant. They discussed the possibilitiesof and roadblocks to implementing anESOP, as well as the disposition ofthe 23% ownership stake in theenterprise still in the hands of theregional authority. Legally thecompany is still a collective with noshares allocated in the names ofindividual workers. However, eachworker has an account valued inrubles representing the value of hisequity in the enterprise earnedthrough a weighted formula based onyears of service and salary. Each

International Developments

Economic Justice Monitor 7

worker can vote on a one-person,one-vote basis in a general workers’council. The plant is governed by a30-member board of directors, halfelected by middle management andthe other half by rank-and fileworkers.

Norm later gave a presentation toleaders of the Legislative Assembly ofthe Tver Region. One of thelegislators attending was a professorat a local university who mentionedthat he is teaching Louis Kelso’s“Two Factor Theory” in his classes.

In a two-hour presentation at theAcademy of Labor and SocialRelations of the Independent TradeUnions, Norm was the main speakerbefore 50 labor leaders. He wasintroduced by Dr. Nicolay N.Gricenko, a Ph.D. economist who isRector of the Academy, which has200 professors, mostly Ph.D.’s and4,000 students. Norm reports that atfirst the audience was skeptical, butwarmed up as he explained thedifference between CESJ’s approachand traditional privatization. Theywere particularly receptive to CESJ’s“Value-Based Management” conceptand its emphasis on leaders who leadby serving and empowering others.Dr. Gricenko later signed a letterauthorizing Norm to represent his

academy in seeking support for theKelsonian approach to privatization.

Norm met with Dr. SvyatoslavFyodorov, Russian Presidentialcandidate, Duma Deputy andChairman of the DumaSubcommittee on the Academy ofMedical Sciences in Russia. Dr.Fyodorov, who is world-renowned forhis pioneering work in eyemicrosurgery, is a successfulentrepreneur who has organized hisclinics so that workers participate inmanagement and profits (but not inownership of shares). He leads a newcentrist political party in Russiawhose platform supports an economicagenda based on worker participation.Dr. Fyodorov had requested a

meeting with Norm after reading aRussian translation of the paperwritten by Norm Kurland andMichael Greaney, entitled “TheThird Way: America’s True Legacyto the New Republics.”

Norm later had a two-hourmeeting with officials of the Mayor’sOffice of the Moscow CityGovernment, including AnatolyDrogalev (head of the IndustrialPolicy Department) and ValerySalkin (Chairman of the MoscowBankruptcy Committee, a formerMayor of Moscow for 5 years, formerDeputy Chairman of the Council ofMinisters of Russia and formerGeneral Director of the Zil truckplant in Moscow).

Mr. Drogolev and Mr. Salkininvited Norm to help select threecompanies from the Moscow CityGovernment portfolio as candidatesfor ESOP privatization along the linesof CESJ’s two-pronged privatizationstrategy. Norm suggested that theCity of Moscow use funds availablefor special demonstrations to allowcommercial banks to extend low-costcredit to demonstration ESOPcompanies. He pointed out that such

At Academy of Labor and Social Relations (from l to r): Dr. Gennadiy Nikolaev, Norman Kurland, Dr.Nicolay Gricenko, and Dr. Valery Varvarov.

International Developments

Meeting with officials of the Moscow City Government (from l to r): Valery Salkin, Dr. Valery Varvarov,Dan Bell, Norman Kurland, and Anatoly Drogalev.

Continued on page 8

8 Economic Justice Monitor

MILESTONES AND WEATHERVANESAppropriations Committee. She isalso a leader in the IllinoisLegislative Black Caucus.Representative Younge, who wonher bid this year for re-election,included in her campaign literaturea 10-point “Economic Bill ofRights” calling for the “right toown property,” the “right of accessto capital and credit,” and the“right to accumulate a minimumbase of wealth.”

� On May 12, The ESOPAssociation’s Board of Directorsaccepted the recommendation ofthe task force headed by RichBiernacki to study proposals byLouis Kelso and Norman Kurlandto reform Federal Reserve policy toenable more people to gain apersonal stake of income-generating assets. One of the taskforce’s recommendations is tosponsor a high-level conference onmonetary reforms to encourageemployee ownership. The key tobroadening the appeal andadoption of expanded ownership,CESJ’s Norman Kurland believes,is access to low-cost capital creditthrough member banks of theFederal Reserve System. Slightenhancements of Section 13 of theFederal Reserve Act of 1913 wouldensure that such loans are onlyavailable through local memberbanks for productive purposes andare channeled through ownership-broadening means. The Fedstrategy addresses a key factordetermining the growth of ESOPand expanded ownership, namely,“Where will the money comefrom?” ▲

� Thanks to ESOP champions onCapitol Hill, there was some goodnews for the ESOP communityfollowing last year’s all-outCongressional assault on ESOP.On August 5, 1997, President BillClinton signed H.R. 2014, theTaxpayer Relief Act of 1997"which contains provisionspermitting a so-called “SubchapterS” corporation to establish andoperate an ESOP (effective January1, 1998), thus avoiding doubletaxation on corporate profits.Unlike C corporations, SubchapterS corporations will not enjoy suchspecial ESOP tax incentives as thetax deferred rollover for sale ofstock to an ESOP [IRC § 1042],the deductibility of dividends paidon ESOP stock, and the higherdeduction limits for repaying loansto ESOPs. (For more informationon the specific ESOP provisionscontained in H.R. 2014, contactThe ESOP Association, Tel. 202-293-2971; fax 293-7568; E-mailesop@the-esop-emplowner.org.)

� State Representative WyvetterYounge introduced into theIllinois House of Representatives a

resolution callingfor the FederalReserve todemocratize accessto productive credit.The resolution nowresides in the HouseRules Committeewaiting forassignment in

November to the ExecutiveCommittee of the Illinois House.Representative Younge,representing voters in East St.Louis and the surrounding areas inSouthern Illinois, is the second-ranking Democrat in the Illinoislegislature and heads up the House

a demonstration would eliminatesubsidies and help generate additionaltaxable revenues for the City ofMoscow.

Specifically, Norm won verbalcommitments from various policy-makers, business and labor leaders,and scholars to hold an internationalconference in Moscow on the Kelso(Third Way) model of economicdemocracy. He also obtained lettersof authorization to represent keygroups (including the Russian DumaCommittee on Review ofPrivatization Results and theAcademy of Labor and SocialRelations of the Independent TradeUnions) before the White House,Congress, the World Bank, IMF, andother U.S. organizations, for thepurpose of promoting the Kelsonianapproach in Russia’s privatization andeconomic development initiatives.

Norm noted a general consensusamong the people he spoke with thatRussia’s privatization program is veryunpopular. Most of the enterprisesthat were privatized through thevoucher program are nearly bankruptand cannot survive withoutcontinuing subsidies.

Highlighting the geopoliticaldangers in Russia’s economy, Normobserved, “Military officers arebecoming blood donors to supporttheir families and Russian troopshaven’t been paid in months.” Powerhas shifted from centralized controlby state bureaucrats to centralizedcontrol by a tiny elite of topmanagers, the Russian mafia andRussian entrepreneurs in league withforeign sources of financing. “Therich are getting richer and the poorpoorer,” he commented. In light ofthis situation, Norm felt that therewas tremendous openness amongmost Russians he met to CESJ’sThird Way. ▲

Illinois State Rep.Wyvetter Younge

InternationalDevelopments Continued from pg. 7

Economic Justice Monitor 9

� The Hon. Rev. WalterFauntroy, former D.C. delegateand chairman of theCongressional Black Caucus(CBC), delivered a powerfuladdress before the IllinoisLegislative Black Caucus, onApril 26, 1997. Stressing thepolitical, economic and spiritual

empowermentchallenges facingAfrican Americansand poor andmiddle-classAmericansgenerally, Rev.Fauntroy noted thegrowing anxietyover a lack of

adequate and secure income.Describing the “triple whammy”of job flight to lower wageeconomies, displacement byadvanced technologies, and thedissolution of the Welfare Stateas a means for redistributing Continued on page 10

incomes, Rev. Fauntroy offered a“21st Century solution” based onthe ideas of Louis Kelso andCESJ, calling for “CapitalHomesteading.”

Recalling his experience aschairman of the House Bankingsubcommittee governing theFederal Reserve, Rev. Fauntroyproposed reforming the Fed’sexisting powers to ensure thatnewly created money and creditwould be channeled throughownership expanding vehicleslike ESOPs and CommunityInvestment Corporations. In thatway, new private sector growthcould be financed in ways thatwould automatically create newowners of that future wealth, sothat owners could derive dividendincomes once the capital loanswere paid off. (Copies of Rev.Fauntroy’s address are availablefrom CESJ for $3.00 to covercopying and mailing.)

� Virginia Delegate BobMarshall, a long-time friend ofESOP and CESJ, introduced aresolution promoting employeestock ownership plans which waspassed by the 1997 GeneralAssembly and signed byGovernor George Allen in earlyMarch. Senate Joint Resolution284 calls for the VirginiaSecretary of Administration andthe Commonwealth CompetitionCouncil to begin a study ofprivatizing state agencies throughESOPs. Under the law, theVirginia Secretary ofAdministration and theCommonwealth CompetitionCouncil will study the currentrules, procedures, policies andlimitations of ESOPs in Virginia;

examine current and innovativeESOPs in other states; anddetermine the necessary level ofstate financial support for suchplans.

� Rich Biernacki, a long-timesustaining member of CESJ andpast chairman of The ESOPAssociation, retired in April asCEO of internationallyacclaimed, 100% employee-owned Fastener Industries(Berea, Ohio). Rich had servedfor 32 years with Fastener, whichtoday employs approximately 185people at various locations.Fastener Industries, along withAvis Rent-a-Car and AlliedPlywood Corporation, wasawarded the Global CESJ Value-Based Management Award in1991. In 1980, as Treasurer andboard member, Rich led theemployee purchase of FastenerIndustries. He had served asCEO and Chairman of the Boardfor the past 17 years. All of us inCESJ extend to Rich ourwarmest appreciation for hisprincipled leadership andunwavering support foreconomic and social justice overthe years, and wish him the bestin his next career!

� CESJ director Dawn K.Brohawn received a specialrecognition for her editing ofJourney to an Ownership Culture:Insights from the ESOPCommunity at The ESOPAssociation’s Annual Awardsceremony in Washington, D.C.on May 15, 1997. Journey, whichwas co-published in April byScarecrow Press and The ESOPAssociation, is a collection on

NEWS FROM THE NETWORK

We were saddened to learn of thedeath of Lenora Ferree in lateJune 1997. Lenora, the sister ofour late CESJ co-founder Fr.William Ferree, had served formany years as her brother’sconfidant and assistant. To ensurethat Fr. Ferree’s scholarly work inSocial Justice would be carried on,Lenora bequeathed a substantialportion of her estate to CESJ. Wewill devote her generous gift tofoster further study of Fr. Ferree’sand Pius XI’s contributions to moralphilosophy. CESJ’s republication ofFr. Ferree’s classic work,Introduction to Social Justice(which we dedicated to LenoraFerree) is the first step in bringinghis ideas to a new generation. ▲

Rev. WalterFountroy

10 Economic Justice Monitor

News From The NetworkContinued from page 9

specific articulation of the principle ofparticipative justice. This clarified thecorrect—i.e., production-based—principle of distributive justice, asopposed to what most people todayconfuse with the need-baseddistributive principle under charity.

Ferree clarified Pius XI’s insightthat, unlike Justice in the “individual”realm (dealing with the interactionsbetween people), Social Justice dealswith the restructuring of ourinstitutions, our “social” realm. Fr.Ferree shows how each of us, through“acts of Social Justice,” can organizewith others to reform defective lawsand institutions so they can promotefull human development and dignity.

(Available from CESJ for $5.00 formembers and $6.50 for non-members.Add $1.50 for U.S. postage; $3.00 forforeign postage.)

Journey to an Ownership Culture:Insights from the ESOP Community.Dawn K. Brohawn, editor. Publishedby Scarecrow Press (Lanham, MD)and The ESOP Association(Washington, D.C), 1997. 304 pages,hard cover.

Journey to an Ownership Culture,edited by CESJ’s Director ofCommunications Dawn Brohawn, tellsof the trials and triumphs of buildingan ownership culture at the workplace,in the words of business leaders whohave developed and maintainedsuccessful ESOP companies. Thisrevealingly candid and detailed book,filled with practical examples fromsuch acclaimed ESOP companies asUnited Airlines, Web Industries andPhelps County Bank, explains whythese companies decided to build an

participatory ownershipconcepts, experiences andpractices from leaders in theESOP community. This bookwas the culmination of severalyears of volunteer work frommembers of TEA’s AdvisoryCommittee on Competitiveness,Communications, andParticipation, of which Dawn is amember.

� As reported in the Deseret News(4/19/97) and The Salt LakeTribune (April 19), veteranrailroad conductor and UnionPacific Corp. shareholderRichard Foley presented aproposal at the UP annualshareholders meeting toimplement an ESOP whichwould lead to 51% of thecompany’s stock being owned bythe employees. Richard Foley, amember of CESJ, said he madethe proposal to eliminate thecurrent rancor between UP’smanagement and its employees.

With 85% of UP’s stockeffectively controlled bymanagement (directly and byproxy) at the shareholdersmeeting, the ESOP proposal wassoundly defeated. Richardreports that UP’s managementrefused to inform shareholdersabout his ESOP proposal.However, 30 days following theshareholders meeting, accordingto Richard, the company metwith union representatives andgave a presentation on “employeeownership.” ▲

Three publications released in1997 should be at the top ofevery CESJ member’s reading

list. They provide differentperspectives on the paradigm CESJcalls “the Third Way.”

Introduction to Social Justice byFr. William Ferree, 1997 edition,with foreword by Norman G.Kurland, published by the Center forEconomic and Social Justice,Arlington, VA.

This 1997 CESJ re-issue of Fr.William Ferree’s classic work isessential and timely reading foreveryone concerned with socialjustice. Originally published in 1948(Paulist Press), Introduction to SocialJustice contains a new foreword byNorman Kurland which bridgesFerree’s ideas on Social Justice (basedon the thinking of Pope Pius XI) withLouis Kelso and Mortimer Adler’sconcepts of Economic Justice.

Fr. Ferree, who helped foundCESJ in 1984, died in August 1985,just as he was beginning to appreciateKelso’s ownership theories andbreakthroughs in corporate finance.Ferree saw that Kelso had solved theconundrum of how propertylessworkers could gain access (via capitalcredit) to the means of acquiring andpossessing income-producingproperty, without redistributing thewealth or income of present owners.

Louis Kelso’s “binary economics”converts Ferree’s call for a “family” or“living” wage into the concept of a“living income”—whereby every personand family could derive a viableincome from both their labor and theircapital. And what Ferree had earliermissed in Kelso and Adler was their

ESSENTIAL READING

Economic Justice Monitor 11

ownership culture. It discusses thelessons they are learning, presentingthe principles of thriving ownershipcultures as well as what can go wrong.

For those interested in witnessingCESJ’s “Value-Based Management”at work, this book is particularlyilluminating. One of the mostimportant essays in the collection,“What Can We Learn from an‘ESOP Failure’?”, written by CESJ’sNorman Kurland, tells the story ofSouth Bend Lathe—the quintessentialESOP disaster story. In light of therecent Teamsters strike againstUnited Parcel Service (ironically, oneof America’s largest employee-ownedcompanies), this article highlights theneed for organized labor andcorporate management to abandonthe conflict orientation of the wagesystem and adopt a new paradigm—the ownership system.

(Journey to an Ownership Culturecan be ordered through CESJ for a specialprice of $30.00—which is $5.00 off thepublisher’s price—plus $5.00 shippingand handling. Orders outside of U.S.,please add $10.00 S/H.)

One World, Ready or Not: TheManic Logic of Global Capitalism byWilliam Greider, published by Simonand Schuster, 1997.

Best-selling author WilliamGreider has meticulously laid out thecase for the “Third Way.” Greider,who conducted numerous interviewsof corporate CEOs, managers andworkers, labor leaders, economistsand government officials around theworld, reveals a growing crisis.Greider points to the inescapableforces bringing about theglobalization of the marketplace—

changes impelled by the growth ofmultinational corporations, themobility of capital to low-wage areas,and the advance of labor-displacingtechnology. The engine of corporatefinance, deregulation of trade, and thedecline of the welfare state arecombining to threaten the livelihoodsof workers everywhere trapped by thewage and welfare systems of everycountry.

One World, Ready or Not confirmswhat lawyer-economist Louis Kelsopredicted more than thirty years ago.Greider sees the problem of“overproduction” as people havinginsufficient income to purchase whatis produced, asking in his finalchapter, “what is to be done?” Wheregovernments and labor unions havesought to redistribute income toaddress this imbalance, Kelso offereda rational and morally soundalternative. By enabling people(through access to capital credit) toacquire income-producing assets(chiefly corporate equity), people canin fact earn enough income topurchase what society produces.

Greider answers his own questiondramatically in Chapter 18, which hedevotes to the expanded ownershipparadigm, Louis Kelso’s concepts, andCESJ’s “Capital Homesteading”proposals. Greider describes thevisionary “New Birth Project” forWashington, D.C. and its audaciousproposal for financing this $3.5 billionproject through local banks withaccess to the discount window of theFederal Reserve System. Indeed,Chapter 18 provides one of the mostsuccinct presentations of Kelso andCESJ’s ideas that has ever beenwritten. Greider has shown us thatthe old paradigms are collapsing, andthe moment for Kelso’s Third Wayhas arrived. ▲

ESSENTIAL READING I am very pleased to see thatFather William Ferree’sIntroduction to Social Justice hasbeen reprinted, just under 50 yearssince it first appeared. There isnothing new in this pamphlet, inthe sense of a discovery of basicfacts about humanity[1], but it is avery clear commentary on PopePius XI’s teaching on the commontask implied in making the commongood a reality. It addresses an“unseen cultural environment”which “reflects our ultimatespiritual and moral values anddefines the quality of our daily lives,even more than the tools we use orthe physical structures thatsurround us” [2]. What is mostilluminating in the work is theclarification of the need for all toparticipate in the task ofconstructing a just society. At itsbest, politics has to include anexplicit consideration of goodness,not only in terms of good laws andsocial structures, but in what isrequired of every citizen.

This is a timely re-issue of awork which recalls essential basicprinciples. Without a cleardeployment of concepts of charityand justice, many highly motivatedChristians can lose their bearings inthe potentially treacherous waters ofnational and international politics,and eventually run aground. Recentinitiatives of Bishops Conferencesin the United States and in Englandand Wales—to name but two—prove how relevant this pamphlet is.I welcome such a brief and lucidreminder of fundamental socialquestions asked by Aristotle andmany since, and answered succinctlyand worthily in Pius XI’sEncyclicals Quadragesimo Anno andDivini Redemptoris.

Paul Cardinal PoupardPresident, Pontifical Councilon Culture, The Vatican

[1] Cf. Conclusion, p.55.[2] From the Foreword by Norman Kurland, p.iii.

Economic Justice Monitor is published by the Center for Economic and SocialJustice (CESJ). Established in 1984, CESJ is a non-profit, ecumenical, all-volunteer, research and educational organization with internationalmembership. CESJ promotes a free enterprise approach to global economicjustice through expanded capital ownership. Donations to CESJ are tax-deductible under IRC Sec. 501 (c)(3).

For information on memberships and publications, contact CESJ at P.O. Box40711, Washington, D.C. 20016 • Tel.: (703) 243-5155 • Fax: (703) 243-5935.By e-mail: thirdway@cesj.org • Internet address: http://www.cesj.org

CENTER FOR ECONOMIC AND SOCIAL JUSTICE

P.O. Box 40711 • Washington, D.C. 20016PLACE

STAMP

HERE

▲ Closing Thoughts ▼

❝If we as an American people . . . jointogether in this quest for the economicparadigm for the 21st Century—black andwhite together, affluent and poor together,Asian, Hispanic, Protestant, Catholic, Muslim,Jew and Gentile together—I believe that wecan build the kind of coalition across thisnation that will move our nation’s leaders toestablish Capital Homesteading as theEconomic Paradigm of the 21st Century.❞

The Hon. Rev. Walter Fauntroy,Ten-term D.C. Delegate to the U.S. Congress andformer Chairman, House Banking Subcommitteeon Monetary PolicySpeech before the Illinois Legislative Black Caucus,April 26, 1997

Curing World Poverty: TheNew Role of Property: $12.00,CESJ members; $15.00, non-members. Please mention memberdiscount when ordering. Postage inU.S. and Canada: $U.S. 2.50 percopy; other countries, $3.00 per copy.Quantity discounts available. Ordersmay be paid by VISA or MasterCard,or by check or money order (in U.S.

funds) payable to Central Bureau, CCUA. Mail to SocialJustice Review, 3835 Westminster Place, St. Louis, Missouri63108, or call 314/371-1653 to order by phone. ▲

CESJ Change of Mailing Address!!!Please note for your records that CESJ’s new mailing address is:P.O. Box 40711, Washington, D.C. 20016.