Louis O. Kelso

Where would ESOPs and Employee Ownership be without Louis Kelso?

Image – Credited to The Kelso institute.

“Conventional wisdom says there is only one way to earn a living, and that’s to work. Conventional wisdom effectively treats capital (land, structures, machines, and the like) as though it were a kind of holy water that, sprinkled on or about labor, makes it more productive. Thus, if you have a thousand people working in a factory and you increase the design and power of the machinery so that one hundred men can now do what a thousand did before, conventional wisdom says, ‘Voila! The productivity of the labor has gone up 900 percent!’ I say ‘hogwash.’ All you’ve done is wipe out 90 percent of the jobs, and even the remaining ten percent are probably sitting around pushing buttons. What the economy needs is a way of legitimately getting capital ownership into the hands of the people who now don’t have it.”

(Louis O. Kelso, Journal Asset Based Finance, 1982)

Kelso’s binary economic theory states there are two different ways to earn a living or acquire wealth, the first is through wage income, the second is through the acquisition of capital. Louis states this quite eloquently as “Labor is the source of subsistence, capital is the source of affluence. My idea is to make everyone a capitalist, and therefore financially secure”

To put it simply, Kelso put in place a legal mechanism where the owners of the firm could sell the firm to their employees with no money down, and use the future proceeds of the firm to retire the debt. This was codified through the Employee Retirement and Income Security Act of 1974. A very interesting read on this came to pass is available at For Economic Justice.

Louis’s work is being continued by The Kelso Institute . This site includes downloadable copies of works by Louis Kelso, Mortimer Adler, and Louis Kelso and Patricia Hetter: