Magazine article Newsweek

Why Thomas Jefferson Favored Profit Sharing

Magazine article Newsweek

Why Thomas Jefferson Favored Profit Sharing

Article excerpt

Byline: David Cay Johnston

President Obama's State of the Union speech last week focused on America's severe and growing inequality, but he stopped short of repeating the Founding Fathers' many warnings that this condition could doom American democracy.

The founders, despite decades of rancorous disagreements about almost every other aspect of their grand experiment, agreed that America would survive and thrive only if there was widespread ownership of land and businesses.

George Washington, nine months before his inauguration as the first president, predicted that America "will be the most favorable country of any kind in the world for persons of industry and frugality, possessed of moderate capital, to inhabit." And, he continued, "it will not be less advantageous to the happiness of the lowest class of people, because of the equal distribution of property."

The second president, John Adams, feared "monopolies of land" would destroy the nation and that a business aristocracy born of inequality would manipulate voters, creating "a system of subordination to all... The capricious will of one or a very few" dominating the rest. Unless constrained, Adams wrote, "the rich and the proud" would wield economic and political power that "will destroy all the equality and liberty, with the consent and acclamations of the people themselves."

James Madison, the Constitution's main author, described inequality as an evil, saying government should prevent "an immoderate, and especially unmerited, accumulation of riches." He favored "the silent operation of laws which, without violating the rights of property, reduce extreme wealth towards a state of mediocrity, and raise extreme indigents towards a state of comfort."

Alexander Hamilton, who championed manufacturing and banking as the first Treasury secretary, also argued for widespread ownership of assets, warning in 1782 that, "whenever a discretionary power is lodged in any set of men over the property of their neighbors, they will abuse it."

Late in life, Adams, pessimistic about whether the republic would endure, wrote that the goal of the democratic government was not to help the wealthy and powerful but to achieve "the greatest happiness for the greatest number."

Professor Joseph R. Blasi and Douglas L. Kruse of Rutgers and Richard B. Freeman of Harvard gathered many of the founders' writings on this topic for their new book, The Citizen's Share: Putting Ownership Back into Democracy. Copies are currently circulating among congressional staffers in both parties as politicians brace themselves to face what polls show is a rapidly rising concern among voters over economic gains concentrating at the top.

Since 1993, almost a quarter of all income growth in the U.S. has gone to the top 1 percent of the 1 percent, about 16,000 households. At the same time, the bottom 90 percent, more than 280 million people, reported less total real income in 2012 than in 1993.

Among countries with modern economies and solid democratic traditions, America has by far the worst child poverty. Its distribution of income puts America far from European allies and Canada, but in the same zone as Brazil, Mexico, Russia and Venezuela.

The authors' most significant discovery may be that one of the first laws enacted by Congress, a 1792 subsidy to revive a cod fishing industry ravaged by the British Navy, directed most of the money not to the wealthy ship owners, but to a class of fisherman known as "sharesmen." They earned a portion of the profits, under contracts negotiated in advance, somewhat like modern unions bargaining with management.

Blasi learned of this during a brief 2006 stay at an old sea captain's cottage in Boothbay Harbor, Maine. "No electricity, no TV, but I found this old book that told this story, which I did not believe," says Blasi, who has studied worker ownership of businesses for four decades. …

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