By: Robert Ashford
One important duty of lawyers is to assist clients in
identifying and securing their essential rights, responsibilities,
and opportunities. One important purpose of legal education is to
enable lawyers to assist clients and society in identifying and
securing essential rights, responsibilities, and opportunities.
This Article describes one opportunity (based on an approach to
economics called “binary economics” first proposed by Louis Kelso),
rarely advanced by counsel, that may offer women and people of
color, public corporations, and their shareholders benefits far
greater than expectations based on the mainstream economic theories
(classical, neoclassical, and Keynesian) usually employed to
evaluate economic policy and opportunities.
Although the binary approach is most frequently advanced as an
economic theory (because economics is the subject that it most
significantly modifies), binary theory is grounded in private
property principles of (1) universal participation, (2) voluntary
exchange, and (3) limitation which have deep roots in the work of
John Locke and the Anglo-American common law.
The opportunity is to secure for growing numbers, and eventually
all women and people of color, the right to acquire capital
with the earnings of capital. This right is presently enjoyed
by all well-capitalized people, which includes some women and
people of color, but only a minority of them.
According to binary economics, because present demand for
capital is dependent on demand for consumer goods and services in a
future period, a voluntary pattern of steadily broadening
capital ownership promises more production-based consumer
demand in future years and therefore more demand for capital and
the labor to create it in earlier years.
To acquire capital with the earnings of capital,
well-capitalized people use (1) the pre-tax earnings of capital,
(2) collateral, (3) credit, (4) insurance and markets to diversify
and reduce risk, and (5) a monetary policy intended to protect
private property. These techniques that work profitably for
well-capitalized people can also work profitably for all
people. Moreover, in an economy operating at less than full
capacity, if capital can competitively pay for its acquisition
costs out of its future earnings primarily for existing owners, it
can do so even more profitably if all people are included in the
capital acquisition process.
Broadening the right to acquire capital with the earnings of
capital is beneficial to women and people of color because it will
enhance their earning power and autonomy by supplementing their
labor income and/or welfare benefits increasingly with their
earnings from capital. Broadening the right to acquire capital with
the earnings of capital will also benefit public corporations and
their shareholders because it will provide a stable, growing,
broadening, production-based consumer demand that will enable
public corporations to employ their existing productive capacity
more fully and profitably and to invest more profitability to
achieve greater growth.
A binary economy offers an entirely voluntary means that enables
major prime credit-worthy corporations to meet any portion of their
capital requirements while simultaneously empowering their
employees, customers, neighbors and others to acquire shares in
participating corporations with non-recourse credit, and pay for
those shares with the earnings of the capital acquired. The
acquired shares would be “full-dividend shares” that would
distribute their full return (net of reserves for depreciation,
research, and development to maintain the competitive productive
capacity of the capital) first to repay the cost of capital
acquisition and then to provide capital income to supplement wages
and welfare benefits.
Beyond advancing the little-understood opportunity of public
corporations to operate much more profitably for their shareholders
by expanding their ownership via the right to acquire capital with
the earnings of capital, this Article maintains that in their
advocacy, counsel for women and people of color are duty-bound to
draw attention to the issue of the unutilized productive capacity
(UPC) of public corporations (which is rarely mentioned in the
discourse and advocacy related corporate fiduciary duties and
corporate social responsibility).
Adopting a “holistic” understanding of UPC (one that includes
not only “static” measurements based on existing corporate assets
and the existing work force, but also includes the unutilized
capacity to create even more productive capacity), the Article
maintains that the existence of UPC (1) means that public
corporations could be operating much more profitably for their
shareholders, (2) means that public corporations could provide more
basic necessities, such as food, clothing, shelter, transportation,
and healthcare, and simple comforts and conveniences (that many
women and people of color lack) by way of greener and more socially
responsible processes and practices, (3) is not adequately
addressed by the existing mainstream economic theories, (4) offers
the prospect of enriching poor and working people without
redistribution, and (5) if included by counsel in their advocacy
for women and people of color, will improve the prospects for
advancing the neglected interests their clients.
The Article asserts that binary economics provides a powerful
analysis of the existence and cause of unutilized productive
capacity, and a uniquely beneficial remedy for profitably employing
unutilized productive capacity that will enable public corporations
voluntarily to (1) enhance their profitability, (2) improve the
markets for their products, (3) reduce their tax burden, (4)
broaden their share ownership, and (5) economically empower women,
people of color, and others without the need for redistribution by
extending the right to acquire to acquire capital with the earnings
of capital to growing numbers of people.
Noting that binary economics has been ably advanced by Professor
Anthony Cook as a means of achieving Black reparations without
redistribution, this Article concludes that (1) that binary
economics offers an important instance of interest-convergence, as
described by Professor Derrick Bell, for public corporations, many
shareholders, women, people of color, and poor and working people
generally, and (2) in important contexts, under the rules of
professional responsibility, counsel who have undertaken to
represent the economic interests of women and people of color
should not exclude from their representation the advocacy of the
right to acquire capital with the earnings of capital without their
clients’ informed consent.