A New Market Paradigm for Sustainable Growth: Financing Broader Capital Ownership with Louis Kelso's Binary Economics
Praxis: The Fletcher Journal of Development Studies, Vol. 14, pp. 25-59, 1998
19 Pages Posted: 29 Mar 2011
Date Written: 1998
This article describes how Louis Kelso’s binary economics can be used to open the prevailing system of corporate finance to enable all people to access non-recourse corporate credit so as to enable them to acquire capital with the earnings of capital. In economies operating at less than full capacity, the broader distribution of capital acquisition will more broadly distribute earning capacity in future years and therefore provide incentives for greater and more profitable investment opportunities in earlier years. The article explains how more broadly distributed capital acquisition with the earnings of capital will lay the market foundation for greater and more sustainable employment and growth. The approach has beneficial application both for developed and developing economies. By employing ownership-broadening corporate finance techniques to finance their real capital acquisitions, crredit-worthy multinational corporations can enhance the demand for the products. By way of joint venture arrangements, developing nations can structure ownership broadening capital acquisition financing as a central component of their economic development strategy and thereby produce both steadily growing earning capacity for their economically disadvantaged citizenry and sustainable growth. Such undertakings are not without collective action problems, but these can be largely overcome with education and constructive, enabling government policy.
Keywords: Corporate Finance, Unutilized Capacity, Broadening Ownership, Income Distribution, Wealth Inequality, Sustainable Growth, Monetary Policy, Economic Development
JEL Classification: A20, B29, B31, D63, E12, E19, F20, E25, E50. F43, G30, I39, L20, M14, O11, O20, P16, P19
Suggested Citation: Suggested Citation