Expanded Capital Ownership: The Only Answer to Creeping Socialism

By Gov. Ronald Reagan
Address to the Young American for Freedom and to the Bohemian Grove Encampment July 1974.

“…In our resistance to what some of us see as a creeping socialism, we have just theorized about the superiority of capitalism.  Have we really made capitalism work to prove those benefits can do everything for everybody better than the promises of the socialists?  All they can offer with their system, if you analyze it, is to take from the ‘have’ and give to the ‘have-nots’.  That doesn’t eliminate have-nots – it just changes them around.
But capitalism can work to make every body a “have”.  Some years ago, a top Ford official was showing the late Walter Reuther through the very automated plant in Cleveland, Ohio, and he said to them jokingly, “Walter, you’ll have a hard time collecting union dues from these machines,” and Walter said, “You are going to have more trouble trying to sell them automobiles.”  Both of them let it stop right there.  But there was a logical answer to that.  The logical answer was that the owners of the machines could buy automobiles, and if you increase the number of owners, you increase the number of consumers.

Over one hundred years ago, Abraham Lincoln signed the Homestead Acts.  There was a wide distribution of land and they didn’t confiscate anyone’s already privately-owned land.  They did not take from those who owned to give to others who did not own.  It set the pattern for the American capitalistic system.  We need an Industrial Homestead Act. . . I know that plans have been suggested in the past that all had one flaw.  They were based on making the present owners give up some of their ownership to the non-owners.  Now this isn’t true of the ideas that are being talked about today.

Very simply, these business leasders have come to the realization that it is time to formulate a plan to accelerate economic growth and production at the same time we broaden the ownership of productive capital.  The American dream has always been to have a piece of the action.

Income, you know, results from only two things.  It can result from capital or it can result from labor.  If the worker begins getting his income from both sources at once, he has a real stake in increasing production and increasing output.  One such plan is based on financing future expansion in such a way as to create stock ownership for employees.  It does not reduce the holdings of the present owners, nor does it require the employees to divert their own savings into stock purchases.

This one plan, and undoubtedly there are alternatives, utilizes an Employee Stock Ownership Trust to purchase newly issued stock when a corporation needs new capital for expansion.  The trust acquires its funds by borrowing with a guarantee from the corporation, from a commercial bank, or other lending institution.  Over a ten-year period, it is possible for 500 billion of newly-formed capital to be owned by individuals and families who today have little or no hope of acquiring a vested interested in our capitalist system . . . What a better answer could we have to socialism?  What an export item on the World market!  What argument could a foreign land have against a corporation which made its “have-not” citizens into “haves”?

In short, I am suggesting that we face a choice between government that has grown desperate, embarking on a course that leads to confiscation and redistribution, or using the great talent and expertise of the private sector to spread legitimate capital participation in free enterprise to those who now are only property-less employees….”

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From a speech delivered on September 15, 1990 in Gdansk, Poland

“…Meanwhile, what about the workers in those state monopolies that are being put up for sale? I am reminded of a technique for employee ownership that has worked well for many U.S. companies. It goes by various names but the best known is “Employee Stock Ownership Program” or “E.S.O.P.”. With such a program, the employees of a company create a trust which borrows money from a bank to buy shares of stock in the company. The loan is paid back over several years from the employees’ share of the company’s profits. How can they be sure the company will be profitable? The workers, as owners, make sure by insisting that unprofitable or obsolete products be replaced by new ones; that operating costs be kept down; and that new efficiencies of operation are adopted. In the U.S. we have seen it happen time and again.
It is another fact of human nature: When a person owns assets – a house, land, a small business or shares of stock in a big one – he or she will look after those assets…”

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President Reagan Video on ESOPs