Are We Being Robbed?

I interview David Ellerman about economic democracy.

Britt Lower in the TV series Severance. (Image source here.)

The historicizing of discourse has greatly enriched our understanding of the operation of what Antonio Gramsci called the hegemonic ideas of any social order, and has helped us especially to appreciate the power of the way of thinking that appears in a given historical period as “common sense,” in limiting ordinary people’s sense of which courses of action are realistic and which Utopian, and in shaping their verbalization of their own aspirations.

—David Montgomery in his 1993 book Citizen Worker

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David Ellerman is one of the most exciting and interesting scholars out there—I recommend that everyone check out his 2021 book Neo-Abolitionism:

Neo Abolitionism (2021)

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The book says: the “most problematic institution in the economic system throughout most of the world is not the market or private property but the employer–employee relationship”; in “the technical terms of economics, the employer is renting the employees”; “we have a system of voluntarily renting people by the hour, day, week, or any specified time period”; “the neo-abolitionist critique of the human rental system is based on three theories that converge to the same conclusion”; and the “conclusion, common to the three arguments, is that the employer–employee relationship should be abolished in favor of the system of workplace democracy”. Ellerman writes—regarding the three arguments—that each “approach makes a sufficient case for the abolition of the employment system”. The book says that the “real alternative to the human rental system” is: (1) a “genuine system of private property (getting the fruits of your labor)”; (2) a “genuine system of non-fraudulent market contracts”; (3) a system where “everyone is a member of the democratic enterprise” they work in; (4) a system where “people are jointly working for and governing themselves in the workplace”; and (5) a system where people are “jointly appropriating the positive and negative fruits of their labor”. I think that it’s important for people to read the book—Ellerman clarifies a lot in the short book’s 155 pages.

We should engage seriously with any high-quality and deep criticisms of our economic institutions. Such criticisms will—unfortunately—often elicit knee-jerk ideological reactions that impede serious engagement. And these reactions have become more prevalent as the ideological spectrum has narrowed.

Noam Chomsky says in an October 1994 talk whose transcript is the prologue to the 2003 book Chomsky on Democracy and Education: John Dewey was “one of the outstanding thinkers of the” 20th century; he was part of an independent left that “grows right out of” classical liberalism; “the kinds of ideas that Dewey was expressing” have “origins in straight American traditions, right in the mainstream”; there’s been a “deterioration of functioning democracy in the current age, both at the institutional and at the ideological level”; “the doctrinal system has narrowed under the assault of private power, particularly in the past few decades”; and this assault has made it so that Dewey’s “fundamental libertarian values and principles now sound exotic and extreme”. Chomsky remarks in a March 1994 talk whose transcript is Chapter 15 in the 2003 book: Dewey “was appalled by the narrowing of the scope of meaningful democracy both in practice and in the rising democratic theories of his era, mainly the 1920s, 1930s, and 1940s, the progressive intellectuals of the Wilsonian period who laid pretty much the basis for the modern form of the impoverishment and the attenuation of democratic theory”; Dewey held that “democracy requires that the shadow of big business simply be removed so that the political system can function”; the “very institutions of private power, he stressed, undermine freedom and democracy”; in “a free and democratic society, workers have to ‘be masters of their own industrial fate’”; it’s “‘illiberal and immoral’ to train children to work ‘for the sake of the wage earned,’ not ‘freely and intelligently’ under their own control”; “industry must be changed if democracy is to exist”; industry “must be changed ‘from a feudalistic to a democratic social order’”; all of these ideas from Dewey “are, or at least should be, truisms”; indeed, “they were very common coin”; they “were common ideas among uneducated working people not all that long ago”; regarding these ideas, “all of this is as American as apple pie”; it “has nothing to do with Marxism, Leninism, or any of the other scare words that are concocted by the contemporary commissars”; “it’s all completely down the tubes as the system has become more feudalistic in Dewey’s sense, more fundamentally illiberal, and more closed to the ideals of human freedom that were held, and indeed rightly held, by classical libertarians, those who we profess to honor but in fact constantly kick in the face and whose ideas are simply disappearing from sight”; as “the system has itself become more feudalistic, absolutist, unaccountable, narrow, remote, secret in essentially the classical liberal sense, running right up to Dewey and others of the time, as it has become narrower, the doctrinal system has also correspondingly become narrower”; and the “fundamental libertarian principles—which, as I say, were even common coin among the general population, let alone libertarian thinkers—now sound very exotic and extreme”.

I was honored and thrilled to interview Ellerman—see below my interview with him that I edited for flow. Ellerman and I both contributed hyperlinks. And I’ll issue a spoiler alert regarding the TV series Severance that premiered in 2022.

1) You write in your 2021 book Neo-Abolitionism: the “abolition of slavery abolished not only the involuntary ownership of other people (workers) but also voluntary contractual forms of lifetime servitude”; “that system of lifetime servitude was replaced by the current system”—the employment system—where workers are rented, hired, employed, or leased; hence “the name ‘Neo-Abolitionism’ for the idea of abolishing the employer–employee contract in favor of each firm being a workplace democracy”; the “overall case against the employer–employee system can be based on any one” of “three different rights-based theories”, namely inalienable rights, property rights, and democratic rights; each “approach makes a sufficient case for the abolition of the employment system”; the “three arguments against the human rental system are modern versions of old arguments that descend from the Reformation and Enlightenment in the Abolitionist and Democratic Movement”; the “first argument derives from noting that the old inalienable rights argument” doesn’t only rule out “the long-term contract of lifetime servitude” but instead also “applies against the shorter-term contract to rent oneself out”; the “second argument is the old labor or natural rights theory of private property” that’s “violated when the employer legally appropriates the positive and negative fruits of the employees working in a firm”; the third argument has to do with the distinction—in democratic theory—“between non-democratic social contracts of alienation” versus “democratic contracts of delegation”; the “arguments are rights-based (not utilitarian or consequentialist)”; the “object of criticism is neither a market economy nor private property, i.e., is not ‘capitalism’ in the sense of a private property market economy”; the “system being attacked herein is the employment system”; “the market contract being attacked is the employer–employee contract wherein one party (the employer) employs, ‘gives a job to,’ hires, rents, or leases other persons (the employees)”; the “argument is not that the employment contract is inherently coercive or involuntary”; by “any juridical standards, the employment relation is voluntary”; most “people today were born and raised in an economy based on the human rental system, so it seems perfectly natural”; the “alternative to the human rental system is not ‘socialism’”; “the alternative is a private property market economy where the people who work in each enterprise are the legal members or ‘owners’ of the enterprise”; each “firm would be a private democratic organization where the people working in it are its citizens”; this “condition already holds in the small family businesses or family farms without hired hands, and in worker cooperatives or democratic Employee Stock Ownership Plans (ESOPs)”; the “best-known examples of workplace democracy on an industrial scale are in the Mondragon system of worker cooperatives in the Basque region of Spain”; and the “purpose here is not to go into how the legal structure of a democratic firm can be derived from first principles”, but instead “to focus on those first principles themselves (inalienable rights, rights to the fruits of one’s labor, and democratic rights) that apply against the human rental system and” that apply “in favor of workplace democracy”. How many people find your argument—which I don’t think anyone else makes other than you—to be exciting, stimulating, new, and different? 

Excellent summary—thanks. 

I have many worker-ownership friends who enthusiastically support my argument—that’s preaching to the choir, though. Warren Samuels, Robert Dahl, Carole Pateman, and Don Lavoie are—outside my circle of friends—the main well-known people who’ve understood my argument and been influenced by it. 

Regarding Samuels, he strongly supported my approach to property theory. I quote—in my 2021 book Putting Jurisprudence Back Into Economics—some kind remarks from him. He says that my “theory of appropriation seems clearly to be the foremost and most tightly reasoned theory of the production, use, and disposition of final output”. And that my theory of appropriation “is the only theory that examines in detail wherein the law of property is and is not specifically involved and that specifies explicitly the total output of the firm, rather than surplus value, as the object of control and disposition”. I also quote from Samuels’s unfinished paper “On Precursors in the History of Economic Ideas: Is Karl Marx a Precursor of David Ellerman?”—the paper asks “whether, as it turns out, Marx, a foremost 19th century critic of property, was a precursor of Ellerman, arguably the foremost contemporary theoretician of property”. It was flattering to be mentioned alongside a figure as big as Marx, but I don’t think that Marx developed anything like an accurate theory of property. I pointed out to Samuels that Pierre-Joseph Proudhon and Thomas Hodgskin took an approach—regarding property—similar to my own and that those two would be appropriate precursors. Samuels died before he could finish the paper. 

Regarding Dahl, he writes—in his 1985 A Preface to Economic Democracy—that he wants to consider “a system of economic enterprises collectively owned and democratically governed by all the people who work in them”. And he comments that he has—in “clarifying my ideas on this question”—“profited greatly from a number of unpublished papers by David Ellerman, cited in the bibliography”. 

Regarding Pateman, you can watch a video where she expresses general agreement—in 2016—after listening to me talk about worker ownership. 

And regarding Lavoie, he was a well-read economics professor—at George Mason University, which is a hotbed of Austrian School economics—who read a manuscript of my 1992 book Property and Contract, engaged with it, and wrote a glowing review. I think that these kind words from Lavoie’s review actually got the book published: 

The book’s radical re-interpretation of property and contract is, I think, among the most powerful critiques of mainstream economics ever developed. It undermines the neoclassical way of thinking about property by articulating a theory of inalienable rights, and constructs out of this perspective a “labor theory of property” which is as different from Marx’s labor theory of value as it is from neoclassicism. It traces roots of such ideas in some fascinating and largely forgotten strands of the history of economics. It draws attention to the question of “responsibility” which neoclassicism has utterly lost sight of. It is startlingly fresh in its overall approach, and unusually well written in its presentation.…

[T]his book’s argument is powerful enough to make me feel the need to go to work on responding to it. It constitutes a better case for its economic-democracy viewpoint than anything else in the literature.

He praises the “radical re-interpretation”—he says that it’s “among the most powerful critiques of mainstream economics ever developed” and also that it’s “startlingly fresh in its overall approach”. Regarding the argument that I present in the book, he generously says that it “constitutes a better case for its economic-democracy viewpoint than anything else in the literature”. 

But unfortunately, the main response that I get is a complete lack of engagement—people just ignore what I’ve written. For example, Putting Jurisprudence Back Into Economics hasn’t gotten a single review yet as far as I know—given the way that incentives are in academia, why should you expect orthodox scholars to publicize unorthodox ideas? 

2) Suppose you’re talking to Bob, who’s never read—or thought—about economic democracy before. Regarding Neo-Abolitionism, how would you explain very clearly and simply what the problem is and what your solution is? 

The problem is that our employment system violates inalienable human rights. The violations are similar to the ones that justify our having abolished your ability—in terms of a legally recognized contract—to sell yourself to a master completely voluntarily. These violations are problematic independent of how voluntarily people are employed or how good working conditions are. 

The solution is a workplace-democracy system that respects these inalienable human rights. Employees would—in this better alternative system—become the members or owners of the firm where they work. Authority relations would remain in these worker-owned firms, but the managers would—directly or indirectly—be the workers’ representatives or delegates. The managers are—in today’s typical firm—the shareholders’ agents, but it’s not like that has to be the case forever. 

3) Regarding Neo-Abolitionism, which scholar would you most like to get engagement from and why? 

It would be exciting to get Randy Barnett’s feedback—he’s an expert on contracts. But I worry that engaging with the book would—for an academic—be a significant and unnecessary risk. It’s interesting to look at what Barnett does in his 1986 paper “Contract Remedies and Inalienable Rights”—he does recognize that a person’s services aren’t factually alienable like the services of a vehicle, but then he never pursues the implications of that observation. In the paper, Barnett draws the safe conclusion regarding the employment contract, namely that the legal system should—if the employer isn’t obeyed and the contract is thus “breached”—only allow damages and not try to force compliance. The obvious conclusion is that the employment contract is—unlike the contract to sell the services of your apartment or car—a fraudulent one. But this obvious conclusion is unorthodox and threatening. I worry that a scholar’s career would—given academia’s incentives—significantly suffer if they took the position that the employment contract is fundamentally flawed. 

We all know that a person’s services are factually inalienable. A hired criminal can’t say—as a defense in court—“I was just obeying my employer”. A person’s services aren’t factually alienable like the services of a vehicle are—the hired criminal is culpable for whatever crime was committed. 

4) Neo-Abolitionism talks about three outlawed contracts—the coverture contract, the subjection pact, and the lifetime-servitude contract—that are similar to the employment contract. The book prompts us to consider a dilemma, namely that we must—in order to be consistent—either (A) outlaw the employment contract or (B) validate the other three. What if someone chooses (B)? 

Only extremists do that—for example, Walter Block. And I’m delighted when people choose that option and show their true colors—non-extremists understand that it would be dystopian if the government were to recognize those three contracts. 

Usually the response to the dilemma is—unfortunately—no response at all. People just ignore what I’ve put forward—why should they call attention to something that they can’t answer? 

5) How many of the three outlawed contracts are irreversible? And imagine we made it legal to transfer your vote away to someone else in exchange for money—would this vote-transferring be irreversible? I think people might get hung up on irreversibility whenever someone compares the employment contract to something seemingly irreversible—the irreversibility aspect might distract from any potential commonalities. 

The reversibility aspect is a red herring that distracts from my actual argument—reversibility isn’t at all relevant to what I argue. I’m happy to talk about reversibility—I want to highlight that it’s wholly irrelevant to what I argue, though. 

As for the hypothetical vote-transferring that you refer to, it would be reversible in the sense that you could do it for just a single election and then not do it the next time around. You could also buy the vote back from the purchaser—as long as they hadn’t used it yet—or buy someone else’s vote to replace the one that you transferred away. As for the coverture contract, it was reversible through divorce. And as for a hypothetical subjection pact, you could imagine a temporary subjection pact that would be undone after five years or something.

As for a hypothetical lifetime-servitude contract, Murray Rothbard writes—in his 1982 book The Ethics of Liberty—about the possibility of buying out such a contract: 

Suppose that Smith, when making his agreement for lifelong voluntary obedience to the Jones Corporation, receives in exchange $1,000,000 in payment for these expected future services. Clearly, then, the Jones Corporation had transferred title to the $1,000,000 not absolutely, but conditionally on his performance of lifelong service. Smith has the absolute right to change his mind, but he no longer has the right to keep the $1,000,000. If he does so, he is a thief of the Jones Corporation’s property; he must, therefore, be forced to return the $1,000,000 plus interest.

You can see how the contract would be reversible. And you could just leave, but the government would—in a world where the government recognized this contract—come after you to make sure that you paid the money you owed. You’d be—if you left—in the same situation as someone in our world who takes out a loan and doesn’t pay it back. 

6) What do you think of the TV series Severance that premiered in 2022? How much relevance does it have to Neo-Abolitionism? A 30 April 2022 CNN piece says: the “critically lauded Apple TV+ sci-fi thriller, renewed for a second season, revolves around Adam Scott’s character, Mark, who’s undergone a procedure called ‘severance’ at his company, Lumon Industries”; his “brain has been altered with an implant that renders him unable to remember what happens during the workday, halving him into what the characters call an ‘innie’ office worker, and an ‘outie’ at home”; the series “is disorienting and surreal, set to a simple four-chord theme (and one hell of an earworm) that evokes dread and horror”; the “more we see of Lumon, the more nefarious its mysterious mission seems”; and in “this era of mass resignations, union strikes and work-from-home revolts, it’s truly an uncannily well-calibrated series debut”. The piece says: 

In one of the show’s most chilling scenes, Helly (Britt Lower), the new severed recruit who’s repeatedly tried to leave—including by threatening to cut her own fingers off with a paper cutter—watches a video from her “outie” telling her she’s not allowed to quit.

“I am a person. You are not,” outie Helly tells her innie. 

I think that the “I am a person” part might be relevant to Neo-Abolitionism—I’m not sure, though. There’s a video that shows this part: 

That was my favorite part of the first season. And Alex Mell-Taylor writes in a 12 May 2022 piece: Severance “successfully links modern corporatism to the religiosity of cults”; “Lumon is a textbook example of a cult, and we see this also in the way the company worships the founding family, particularly their charismatic founder, Kier Eagan”; the “Employee Handbook is written like a bible that espouses Kier’s gospel”; and “Lumon is steeped in an intense religiosity that Mark’s innie has known his entire life”. He writes: 

We are so normalized to the pervasiveness of corporate culture that even satire like Severance can fly over the heads of many of us. We worship our places of work. They have become blind cults where we are willing to give our corporate owners anything they ask of us, even our minds.

I think it’s interesting to consider Mell-Taylor’s comment about workplaces having “become blind cults where we are willing to give our corporate owners anything they ask of us, even our minds”. And he comments: in “contemporary labor circles, modern jobs are sometimes pejoratively referred to as ‘wage slavery’ because of the power imbalance between employees and employers”; one “may ‘voluntarily’ enter into a job, but often only because” one needs money for things like housing and food; and Severance “strains the credulity of the traditional argument defending wage slavery—that the participant agreed to it—by demonstrating how contracts can be weaponized to coerce consent”. 

You see the controlling-implant idea in sci-fi literature like William Gibson’s 1984 novel Neuromancer—Severance dramatizes that concept in an ingenious and compelling way. 

But in the first season at least, Severance doesn’t make the big philosophical point about the employment contract. Our normal employer–employee relation treats people as if they’re non-responsible rented things—as if they’re part-time robots. The employees in this relation have signed a contract that legally alienates their self-determination within the scope of the employment—it’s like a robot being programmed. The employees in this relation owe 0% of the liabilities and own 0% of the assets they create—that’s the legal role of a non-responsible rented thing. And consider how an employee suddenly stops being a non-responsible thing when they commit a crime. Suppose that an employee commits assault—the moment the employee’s fist touches someone’s face, the employee somehow instantly blossoms into a fully responsible agent in the eyes of the law.

You can imagine a sci-fi scenario where an implanted chip wipes out (A) your de facto free will and (B) your de facto responsibility. This implant would make the facts—about the worker—align with the way that the employment contract treats the worker legally. And I myself have used—as did George H. Smith—the chip-in-brain metaphor of a chip being implanted in someone’s brain in order to turn them into a part-time robot. But Severance’s first season dramatizes a concept where two factually responsible persons are created from one—no part-time robot is created. 

As for Mell-Taylor’s piece, he evidently thinks that “coercion” is the only concept that could invalidate a contract. That’s not true, though—Neo-Abolitionism gives reasons that don’t have anything to do with how voluntary the contract is. 

7) What’s the best criticism—of your Neo-Abolitionism argument—that you’ve seen so far? And what’s your response?

The most common response is—unfortunately—an annoying one where people (A) ignore the actual argument, (B) insist that the human-rental contract is voluntary even though I explicitly and unmistakably agree with that observation, and (C) rest their case. 

Another response is to say that I’m calling for “socialism”—a private-property market economy of democratic firms fits no current definition of that term, though. People use the weasel word “socialism” when they lack a real counterargument or don’t understand what my actual argument is—using the weasel word lets you bring in various totally irrelevant critiques that have nothing at all to do with my actual argument. 

People should understand that there are about 6500 ESOPs operating quite successfully in the US covering 10% of the private workforce—it’s not like a democratic firm is an abstract idea that hasn’t been tested. You can go see these firms right now if you want to. 

I don’t know of any direct and unsympathetic engagement with the argument. But I know of two unsympathetic scholars—Frank Knight and Israel Kirzner—who never engaged with my actual work but did engage with the point about legally treating people like rented things. Regarding Knight, it seems like he was trying to defeat what he saw as the strongest criticism of the employment system. And regarding Kirzner, he was engaging with Ted Burczak’s 2002 paper “A Critique of Kirzner’s Finders-Keepers Defense of Profit” that quotes “Ellerman at length to see how he conceives the legal ‘thingification’ human beings undergo when they become rented laborers”—according to Burczak, “Ellerman concludes that because it is factually impossible to alienate responsibility for one’s actions, it is unjust for a worker to be transformed by a legally recognized labor rental contract into” a “thing without legal responsibility”. How did Knight and Kirzner respond? Both of them asserted—without any basis—that employing an employee to perform a task is just like employing a machine to do the task. This assertion is false, though—the hired-criminal example shows that it’s inaccurate. 

But most never even get to the point that Knight and Kirzner got to. Most instead fixate on voluntariness—how can one voluntarily alienate responsible agency, though?

8) You say—in Neo-Abolitionism—that your “arguments are rights-based (not utilitarian or consequentialist)”. But aren’t utilitarian arguments perfectly strong ones? 

The utilitarian arguments are—necessarily—so vague and ill-grounded that they wouldn’t support abolishing any contract at all. Only the rights-based approach lets you conclude that a given outlawed contract should be invalid instead of merely regulated. But the rights-based approach is threatening to our employment contract—our current system’s defenders therefore face a logical conundrum. 

You will—if you read slavery apologetics—see that slavery’s defenders (1) talk about slavery’s positive utilitarian role and (2) largely avoid anything as definite as a rights-based argument. A pro-slavery antebellum book refers to “the great problem of slavery” and says: 

This great problem, as we have seen, is to be decided, not by an appeal to the inalienable rights of men, but simply and solely by a reference to the general good. It is to be decided, not by the aid of abstractions alone; a little good sense and practical sagacity should be allowed to assist in its determination. There are inalienable rights, we admit—inalienable both because the individual cannot transfer them, and because society can never rightfully deprive any man of their enjoyment. But life and liberty are not “among these.” There are inalienable rights, we admit, but then such abstractions are the edge-tools of political science, with which it is dangerous for either men or children to play. They may inflict deep wounds on the cause of humanity; they can throw no light on the great problem of slavery.

The quote is from Albert Taylor Bledsoe’s 1856 book An Essay on Liberty and Slavery. 

9) Do we have any way to say whether a democratic-firm system would make workers and consumers better off? I guess that workers want to know what their salary and lifestyle would be like in a given system. And that consumers want to know how innovative a system would be and what quality of goods and services it would deliver. In terms of workers, someone online pointed out that a fast-food worker would experience—if your vision were implemented—the following changes: 

• (A) the worker would be more like a business owner

• (B) the worker would care more about their work

• (C) the worker would take more pride in their work

• (D) the worker would be properly responsible for their work

• (E) you’d no longer have the status-quo situation where the employer takes responsibility when it suits them and then drops responsibility when it doesn’t 

I think that a democratic-firm system would be a very interesting alternative to our employment system.

The workers are important people in a democratic or worker-owned firm—they’re legal members of the firm and not merely hired hands.

I’d certainly expect people to be better off as legal members than as hired hands—that’s not the point, though. It’s not about being better off—it’s about dignity, being legally treated as a responsible person, and not being legally treated as a rented thing. 

10) You write—in Neo-Abolitionism—that the “purpose here is not to go into how the legal structure of a democratic firm can be derived from first principles”. How would democratic firms be structured legally? And generally, how would your system be implemented? 

I go into the legal-structure questions in my 1990 book The Democratic Firm. And in my many journal articles—the ones that come to mind are my 1984 “Theory of Legal Structure” and my 2016 “Worker Cooperatives as Based on First Principles”. 

Tej Gonza, Gregor Berkopec, and I have a 2022 journal article that addresses the issue of legal structure—the abstract says that the “purpose of this paper is to analyze the main features of the US ESOP model and to define a technical description of the European ESOP, which builds on the good features of the US model and improves the flawed features”. 

We’re a long way from any non-fantasy discussion of how to actually make the transition. And I have no special insight into how that history will play out 50 or 100 years from now. 

The overall point is to change corporations so that (1) the workers are the members and (2) the common shareholders hold debt instruments that could have variable income. How will people manage to get from here to there against the power of Wall Street, which can argue—among other things—that “everyone’s” pension would be hurt if common shares were downgraded to debt instruments? There’s a technical argument that nothing has changed as long as the debt instrument is appropriately denominated, but who knows about Wall Street’s “animal spirits”. And you’d expect even more pushback from small- and medium-sized firms—ones that aren’t on Wall Street where shareholders are distant from actual operations—in response to transition being imposed on them. But the US might—if change comes to the US last—be able to draw from other countries’ different transition experiences. 

I’ll share one writer’s speculation on how to transform the corporation: 

Although it is impossible to imagine the easy success of any movement to reform the modem corporation, it is not difficult to suggest points that such reform might encompass. Starting with the understanding that the corporation is the entrepreneur and so entitled to the profits and the capital gains, one would ask, Who are the people of the corporation? And the answer would be that they are first and foremost those who do the work of the corporation, namely, the management and the other workers, and secondarily the stockholders, under the present system, and that they should all be able to share in both rewards and control.

As a first approximation of how these shares should be al­located, one might assume that there is some rationality behind the present distribution. At present, management and other workers get wages and bonuses and fringe benefits, and stock­holders get dividends, and these are the more or less satisfactory result of explicit or implicit negotiations. Each individual’s proper share might then be determined by taking the individual’s income from the corporation, whether wages or dividends or both, and dividing it by the total of all individual incomes from the corporation (not counting interest, which is a cost of doing business). Cash dividends would be paid in accordance with such shares, which would be recalculated annually. In addition to cash dividends—and it is a crucial addition—new stock equal in value to the corporation’s increase in net worth would be issued in the same proportions as cash dividends (or stock would be canceled if net worth fell). This stock—and sooner or later all stock in the corporation—would be inalienable. It could not be sold or be­queathed or pledged as security for a loan or given away; but it could at any time be exchanged with the corporation for a nego­tiable note or bond, or, at the corporation’s option, cash. And such an exchange would have to be made when the owner of the stock left the corporation, retired, was fired, or died. Over the years—within a generation at the outside—most of the present stockholders would be converted into bondholders. They would have their reward. The remaining stockholders would all be ac­tive in the business. They could, of course, like their predeces­sors, run it well or ill; could sell it or merge it or abandon it; but whatever happened, it would be their doing, and they would be the ones to benefit or suffer from it.

Let me state most emphatically that what I call the Labor Theory of Right leads to employee ownership, not to profit shar­ing. Profit is, as we have repeatedly noted, a residual. It is sys­tematically unpredictable. It is, nevertheless, affected by deci­sions regarding everything from product development to marketing. The interests of laborers and owners in such decisions are rarely identical; sometimes they are diametrically opposed. In profit sharing, conflicts are resolved in favor of owners. When laborers and owners are the same people, decisions can turn on the interests of the enterprise rather than on class advantage. Decisions may still turn out to be right or wrong, but they will be so for everyone. There will be neither scapegoats nor windfall profiteers. 

George Brockway wrote this in his 1995 book The End of Economic Man—he was actually the president and chairman of W. W. Norton & Company.

11) To what extent would affluent lifestyles still exist in a world of economic democracy? Someone might say: “I agree with Ellerman’s argument. But I don’t want to be shut out from living a fancy lifestyle. And I think that it would be depressing and wrong to eliminate affluent lifestyles even if I myself don’t enjoy one.” 

There’s plenty of room for non-obscene affluence in an economic democracy—the wealth would be earned according to better and more legitimate principles, though. 

The argument seems weak—what moral relevance does the concern about affluence have? And what makes this concern—even if it does have some moral relevance—more important than a rights-based argument that the person agrees with?

12) I saw a complaint that the following things aren’t clear: how existing companies would become worker-owned; how Apple employees would come up with the millions and millions of dollars that they each would need in order to buy the company; why Walmart workers should get shares worth a tiny microscopic fraction of what Apple employees’ shares would be worth; whether the state would just give these shares—which are people’s shares and people’s pensions—to the workers; how the new system wouldn’t implode the economy; and how it would be ethical for people to appropriate businesses that they didn’t (A) create or (B) risk anything to build. Are any of these challenges valid? 

The ESOP mechanism is the current way people create worker-owned firms—this mechanism doesn’t depend on workers coming up with the money out of their pockets. And owners set up ESOPs completely voluntarily—there’s no coercion of any kind.

We should—regarding the transition—reconstitute the corporation so that (1) the employees are the members and (2) the existing shareholders are the creditors. And (2) is already the de facto situation in publicly traded companies, since the public doesn’t invest in Wall Street companies in order to exercise the right to vote but instead does so in order to receive an income stream.

As for the economy, employee ownership creates companies that are more efficient—not as “efficient” for the previous employers, though—and also more resilient. 

And as for unjust appropriation, one would hope for a more or less voluntary transition—tax breaks could help to grease things. I can’t predict how the transition will happen. 

I think that the simple and obvious idea of a company’s people being its members—instead of its people just being rented—will come around sooner or later. That’s assuming that we don’t destroy the planet first, though—we do have a truly perilous environmental situation that’s rapidly worsening before our eyes. 

13) How much practical value do you expect Neo-Abolitionism’s argument to have? And how much practical value have other abstract arguments had in the past? Chomsky offered this blurb for Neo-Abolitionism when I contacted him: “Deeply grounded and scrupulously argued, Ellerman’s Neo-Abolitionism is a major contribution to envisioning, and creating, a truly free and just world.”

Ideas can have a big effect—history shows this. People can look at my book list titled “The best books on principles for a fair and just private property market economy”—I wrote a description for each of the five books on the list. There are—on the list—two books that I recommend if you want to learn about abstract arguments’ practical impact. First, Garry Wills’s 1978 book Inventing America. And second, the 2009 updated edition of Staughton Lynd’s 1968 book Intellectual Origins of American Radicalism. 

I wrote Neo-Abolitionism for an academic audience—the book isn’t formulated for any purpose other than reaching academics. I definitely want the argument to reach the public—I definitely want the argument to flourish outside the academy. I do hope that others will popularize the book’s argument—that would be great. 

The book lays out the basic arguments that expose the dominant ideology—which condones the renting of people—as deeply flawed. It is—when it comes to big societal changes—important to have an abstract argument. You can’t merely say that you’d like to have a different world where we have democratic firms—you need to have a theoretical case in favor of that other world. 

14) How much practical value does Neo-Abolitionism’s argument have in light of the fact that opposition—often on classical liberal grounds—to the human-rental system is deeply rooted in the American tradition? To play devil’s advocate, is your argument superfluous in light of tradition? 

Classical liberalism provides the best framing for my argument. But the problem is that classical liberals have to actually engage with what I’m presenting. The unfortunate situation is that they have every incentive to ignore my argument instead—from their perspective, why not simply ignore it? 

There are cases where classical liberals have understood the basic factual point about the employment contract but have then refused to draw the obvious conclusion. They agree that a person’s responsible agency is factually inalienable when you’re talking about a lifetime or about criminal activity—they somehow won’t say that it’s also factually inalienable when you’re instead talking about eight hours a day or non-criminal activity. And they will—at the very most, since others don’t even get this far—dodge the entire issue at hand with a completely obvious and totally irrelevant observation, namely that criminal and non-criminal activity are quite different legally. 

James Buchanan won the Nobel Prize in Economics. And it’s interesting to read his following words: 

The justificatory foundation for a liberal social order lies, in my understanding, in the normative premise that individuals are the ultimate sovereigns in matters of social organization, that individuals are the beings who are entitled to choose the organizational-institutional structures under which they will live. In accordance with this premise, the legitimacy of social-organizational structures is to be judged against the voluntary agreement of those who are to live or are living under the arrangements that are judged. The central premise of individuals as sovereigns does allow for delegation of decision-making authority to agents, so long as it remains understood that individuals remain as principals. The premise denies legitimacy to all social-organizational arrangements that negate the role of individuals as either sovereigns or as principals. 

These words are from the 1999 book The Logical Foundations of Constitutional Liberty. There’s a huge contradiction between the employment relationship and Buchanan’s principles—the employment system isn’t at all one where workers “remain as principals” while delegating “decision-making authority to agents”. The “central premise of individuals as sovereigns” denies “legitimacy to all social-organizational arrangements that negate the role of individuals as either sovereigns or as principals”. But nobody would ever say that the employment relation is one where the employees are the principals and where the employer is their agent. It’s doubtful that Buchanan understood this contradiction—he probably just never thought about it. Ideology blinds people—it makes them unable to see what’s right in front of their face.

15) Why do you spend time criticizing Marx? I heard the following: Marx has nothing to do with the effort to challenge the human-rental system; Marx’s errors—whatever they may be—are irrelevant; and Marxists barely exist and have no influence. 

First, Marx still has considerable influence on the left. And there is—in my view—a very harmful dynamic where those defending our human-rental system are happy to agree with the Marxists that our system is based on private property. This agreement obscures (1) the fact that our system is based on the employment contract and (2) the criticism that our system violates the principle that private property is supposed to rest on. Regarding (2), John Bates Clark’s 1899 book The Distribution of Wealth says that a “plan of living that should force men to leave in their employers’ hands anything that by right of creation is theirs, would be an institutional robbery—a legally established violation of the principle on which property is supposed to rest”.

Second, spending more time criticizing Marx helps to clarify that I’m not a Marxist or “socialist”—that clarification is important, since calling me a Marxist or a “socialist” is a common response from the current system’s defenders. One way people will respond to my argument is to ignore the labor theory of property and say that I’m somehow instead promoting Marx’s long-refuted labor theory of value. I want to guard against illiteracy or actual deception—I therefore try to make it extra clear that none of the theories that I promote are Marxist.