+ Chapter 11 Ownership Transfer: Accelerating Transition Jessica Pyett & Larissa Thelin

+ Overview Structural Dysfunction of the Global Investment Industry A Corporate Tax System that Enriches the Few and Imprisons the Many The Closed-Loop System: The Dynamic of Modern Enclosure Shadow Bankers: Predation at Work Economic Depressions: The Ownership Link Heuy Long: Sharing the Wealth Gandhi and Trusteeship Ownership Transfer Put into Action Employee Stock Ownership Plans (ESOPs) Establishing Cooperative Land Banks (CLB)

+ Structural Dysfunction of the Global Investment Industry Instability of global financial system since 2008 Paul Woolley Investments industry & dealer’s cuts 80% of earnings Wall Street – unaffected Hedge funds & private equity funds – instability Prevent the need for taxpayers’ bailout of the banking industry Radical reform

+ A Corporate Tax System that Enriches the Few and Imprisons the Many Current “first” world-debt crisis Higher taxes Reduced access to secure jobs Reduction in private and public pensions Cuts in public service Privatization of health and social care Enclosure of Finance Concentration of corporate power Decrease in access to finance Increase in inequality of global wealth and income Technology

+ The Closed-Loop System: The Dynamic of Modern Enclosure Jeff Gates (1974): drafted new US tax laws Incentives to adopt Employee Share Ownership Plans (ESOPs) Taxation privileges of global corporations – increases inequality of wealth 2 sources of internal funds (75%): after-tax profits and cash created after depreciation allowances 2 sources of external funds (25%): money borrowed and dividends paid on shares Depreciation allowances (67% of total & ~90% internal) No risk of investment loss “Capitalism is not structured to create more capitalists; rather it is designed to invisibly finance the concentration of more and more capital and wealth to existing capitalists” – Jeff Gates

+ Shadow Bankers: Predation at Work Hedge funds: 2001: $531 billion 2007: $2 trillion Seldom act alone High fees Mega-profits = huge losses on other side Minimum investments: $1 million Type of “shadow bank” Shadow banks: Intermediaries between investors and borrows Key provider for private equity firms Private equity firms: Unregulated, not listed on stock exchange, predatory Take over companies & sell them in pieces, leaving them in debt

+ Economic Depressions: The Ownership Link Jean Charles de Sismondi (1819) – why do economies go into depressions? Cost of unemployment paid for socially Under-consumption causes recurrent depressions Spread ownership: 1. Taxing of industrialists (social costs) 2. Ensure equity ownership (wages and profit for workers) Limit impacts of technology Corporations have been legally freed from any restriction but one: to maximize profit for their shareholders.

+ Heuy Long: Sharing the Wealth 1929 Wall Street crash 1934 ½ of Americans were in poverty Huey Long (Governor 1928) High extraction charges for Standard Oil Money used to fund infrastructure and job creation programs Success inspires New Deal Becomes senator (1931) – launches Share the Wealth program (1934) 1 st National minimum wage and maximum salary Increased tax on wealthy to fund every family a guaranteed income Assasinated in 1935 Russell Long Adds tax incentives to adopt Employee Share Ownership Plans

+ Gandhi and Trusteeship Gandhi advocates for India’s freedom from Britain Nonviolent redistribution of land and corporations “Socialization”: between privatization and nationalization Citizen responsibility, community service, and economic democracy “Trusteeship” Combines capitalism and communism Social trust rather than property Good working conditions, welfare schemes, high quality products Sharing profits Bhoodan (“land gift”) – Gramdan (“village land gift”) “What I expect of you, is that you should hold all your riches as a trust to be used solely in the interest of those who sweat for you... I want to make the laborers co-partners in your wealth.” - Gandhi

+ Ownership Transfer Put into Action Trusteeship Model has 3 components: 1. Sharing the gains Wages and salaries 2. Sharing the knowledge Full transparency & accountability 3. Sharing the power Partners elect council

+ Employee Stock Ownership Plans The Kelso Plan: Transformed workers into owners Employees purchase shares in company Share risks and benefits Work for wages – 2 nd income on surplus Successful ESOP: mutual collaboration & low cost finance In US: 13 million of 120 million non-government employees involved 5 main types Few limitations

+ Establishing Cooperative Land Banks Shann Turnball Land ownership separated from buildings Land belongs to CLB Shares distributed to residents based on area occupied by their dwelling E.g. one share per m 2 Self-financing Borrows money to buy & develop the CLB area Loan repaid from acquisition of commercial assets, rent/rates, & with profits from resale of own shares

+ Eliminate cost of land Reduce taxpayer support Captures value of public investment Eliminate real-estate investment Residents obtain equity Cooperative Land Banks (CLB) Benefits

+ Discussion Questions What are your thoughts on the idea of a national maximum salary? What are some examples of Employee Stock Ownership Plans (ESOPs)?