Capitalism and socialism have long been considered economic archetypes. Every government’s economic policy appears to be judged by its placement on the capitalist-socialist continuum. However, this framing of economic systems has its fair share of critics.
Robert Nisbet offered one famous critique of this simplistic spectrum. In The Quest for Community, Nisbet wrote about the individualist-collectivist paradigm. He argued that as the importance of community organizations and civil society diminished, there could only be an increased emphasis on individualism or dependence on the state. Radical individualism led to conflicts between individuals, who could only appeal to the state for protection in the absence of societal mediators. With increased appeals came an increased influence of the state. Eventually, all individuals became subordinate to the state, and an omnipotent state was the end result of an increased emphasis on the individual.
Acknowledging this paradox, many thinkers throughout history have advocated for a “third way” that transcends the limitations of the two-sided economic spectrum. These followers of a “third way” have similarly critiqued both capitalism and socialism as arrangements that ultimately concentrate wealth and power in the hands of a few select individuals. Eventually, a few productive people own productive property and everyone works for them or depends on the charity of others or the state.
The Center for Ethics and Social Justice (CESJ), for example, is a nonprofit think tank based in Arlington, Virginia, that seeks to explore and implement “third way” thinking in the modern world. In response to this monopolization of wealth and power, CESJ advocates for the decentralization of state power and the widespread concentration of property to people across society. CESJ’s mission is to “advance liberty and justice for every person through equal opportunity and access to the means to become a new capital owner.”
Founded in 1984, the CESJ is rooted in the philosophy of Louis O. Kelso, who believed that a just market economy had four essential pillars. Three of these pillars matched the classical economic understanding of a capitalist economy. The first pillar was the limited economic power of the state, whose duty was to enforce contracts, prevent monopolies, and lift barriers to participation. The second and third pillars were the restoration and protection of private property and free and open markets for determining just prices, wages, and profits. However, Kelso believed that classical economists had overlooked a fourth pillar: the necessity of universal access to a means of acquiring capital ownership.
Kelso’s inclusion of a fourth pillar created a different system from classic capitalism, and he coined the term “binary economics” to refer to this updated economic understanding. Binary economics recognized the inseparability of “labor” (human input) and “capital” (non-human input) in economic growth and the production and distribution of goods and services. It also recognized the changing relationship between labor and capital as advanced technology displaced human labor in many sectors of the economy.
Because of the failure of human labor to keep pace with technological change, Kelso believed capital should be distributed as widely as possible among laborers. To counter the diminishing value of human labor, Kelso invented and pioneered Employee Stock Ownership Plans (ESOPs) to give laborers access to capital. ESOPs democratize capital ownership in a market economy, providing employees with stock ownership often at no cost and making them employee-owners of the corporation.
Although Kelso’s ideas were attacked as impractical by his contemporaries, they were championed by Senator Russell Long and enshrined into law. Despite the criticism his work received during his lifetime, the concrete realization of Kelso’s ideas is anything but impractical. Today there are over 10,000 ESOP companies and over 11 million employee-owners across the United States.
In light of Pope Francis’ recent calls for solidarity for the unemployed and those in public office to provide opportunities for people to engage in the dignity of work, CESJ’s “third way” merits consideration. Although Kelso’s ideas of economic justice and the CESJ’s current mission are not motivated by any specific moral beliefs, their philosophical underpinnings coincide neatly with Catholic Social Teaching. CESJ acknowledges and affirms the dignity and sovereignty of the human being, the necessity of participative, distributive, and social justice, the limited power of the state, and the right to private property ownership in their core principles.
GK Chesterton once said, “The problem with capitalism is not that there are too many capitalists, but too few.” Economic instability, unemployment, and underemployment are now hallmarks of everyday life, no doubt exacerbated by the technological change that Kelso knew would diminish the value of human labor. Perhaps it is worth taking a look past the capitalist-socialist paradigm to options that transcend the false dichotomy: widespread capital ownership, ESOPs, and binary economics.
John Sullivan is an Irish Rover alumnus who currently lives and works in Washington, D.C. Although he is disappointed in Notre Dame’s current football season, at least he knows the Irish Rover is in better hands than Brian van Gorder’s defense.