Employee Stock Ownership Plans; Analyzed Separately From an Austrian and Libertarian Perspective

Letter 1

From: R
Sent: Tuesday, April 02, 2019 4:27 PM
To: [email protected]
Subject: Re: Your mention of ESOPs

Dear Professor Block,

Recently saw your response to Dwight Murphey (I know, it’s an old piece).

Block, Walter E. 1999. “Controversy: Do Market Economies Allocate Resources Optimally? A Response to Murphey,” The Journal of Markets and Morality, Vol. 2, No. 2, Fall, pp. 279-289;http://www.thefreelibrary.com/Controversy%3A+do+market+economies+allocate+resources+optimally%3F+A…-a0186433142http://www.marketsandmorality.com/index.php/mandm/search

Block, Walter E. 1999. Controversy: Do Market Economies Allocate Resources Optimally? Another Response to Murphey,” The Journal of Markets and Morality, Vol. 2, No. 2, Fall, pp. 297-306; http://www.marketsandmorality.com/index.php/mandm/article/view/634/624 ;

Had something of a quibble, regarding your mention of Employee Stock Ownership Plans.

I’ve read through von Mises’ piece “Observations on the Cooperative Movement” a few times, and really don’t really see how a polemic about cooperatives (largely focusing on agricultural purchasing/marketing coops, to boot) has any bearing on industrial firms with broad-based stock ownership plans for their employees. Most ESOPs own only a minority of company stock, and the trustee is often appointed by the company. There isn’t very much room for meaningful “workers’ control,” especially if we’re talking about a “public” corporation. This also rules out “stakeholder theory,” since we are dealing with legitimate stockholders.

Neither do I see how private ownership of equity is “socialist,” in the Austrian sense (i.e. state/public ownership of the means of production). If your argument is that ESOPs being pushed by state legislation is unconscionable, that’s a valid concern that I’ve seen from other libertarians. With regards to those others, one in particular was Timothy Terrell’s piece on the LvMI website, specifically regarding Louis Kelso’s “Binary Economics” theory; he actually professed no problem with the ESOP in particular, but criticized the idea of the state mandating broader stock ownership via inflationary lending policies (and from what I hear from others in the employee ownership “business,” Binary Economics isn’t really something they have much interest in).

Just wanted to share my thoughts, as someone who does take classical liberal points seriously, and has learned quite a bit from Austrian School writings, but also supports voluntary broad-based employee ownership.

Best, R

Letter 2

On Tue, Apr 2, 2019 at 5:32 PM Walter Block <[email protected]> wrote:

Dear R:

Thanks for your comment

Esops are fine, when not pushed by government. I only object to government pushing them, or “nudging” them, not esops themselves. That is my view as a libertarian. As an Austrian economist, I note that employees have higher time preferences than investors, on average. When employers institute esops, the workers try to sell their shares, so as to be able to spend the money sooner, rather than later. The point is, esops don’t usually arise so as to maximize profits. Rather, they are a result of ideologues who want workers to own shares of stock in corporations. Best regards, Walter

Letter 3

From: R

Sent: Monday, April 08, 2019 9:51 PM

To: Walter Block <[email protected]>

Subject: Re: Your mention of ESOPs

Thanks for the reply, and sorry for my late response.

Hypothetically, in your opinion, would a greater voluntary widespread use such plans (wherein a minority of shares/percentage of a certain firm’s stock is held in trust as a workforce benefit) be “bad” for the economy? I recall von Mises, regarding syndicalism, saying perpetual full worker ownership would necessitate (to paraphrase) “productive goods being withdrawn from the market.” Would this be a similar case with ESOPs (though ESOP companies can be bought out, along with their trust stock).

Letter 4

From: Walter Block [mailto:[email protected]]

Sent: Tuesday, April 09, 2019 7:23 AM

To: R

Subject: RE: Your mention of ESOPs

Dear Reza:

As long as they are fully voluntary, the level of esops has no effect on the economy. It would be similar to the allocation of resources to apples and oranges: it would not matter if this were 25-75, 50-50 or even 0-100, either way. Ditto for corporations vis a vis partnerships vis a vis single proprietorships.

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4:14 pm on August 13, 2019