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Re: Some responses
I agree with we need to accept the process of globalisation and that we
need to reform the details of the process as suggested. The
proposal of relating expanding ownership to debt relief is OK but is a
bit indirect. I would also like to directly relate expanded
ownership as way to reform globalisation.
I have written a 800 word essay set out below on this approach. If
the footnotes were removed it would be suitable as an Op Ed piece in
mainstream newspapers or article in a popular journal. It would
counter the critics of the protestors that the have no constructive
approach to theirs concerns over globalisation. Might anybody
suggest a suitable editor to sent it to?
Globalisation reform
Shann Turnbull*
The process of globalisation requires reform. Globalisation is
undermining democracy and alienating citizens around the world. The
benefits of sharing knowledge and products internationally can be
achieved without the current unacceptable economic, political and social
costs of globalisation as explained below.
Economists cannot detect the financial costs of globalisation because
they do not have a framework of analysis to detect when investors are
getting overpaid. Economists base investment analysis on rates of
returns and neglect investment time horizons. Global investors use
both. To reform the globalisation process we need to understand how
investors make decisions.
The prime concern of an investor is to first recover the money they put
at risk. The second priority is to maximise the cash surplus.
No investment can produce a profit until its costs are recovered.
Notwithstanding this fundamental truism, accounting doctrines mislead
investors and economic analysts by reporting accounting profits before
the investment pays for itself. To offset this deception,
international accounting standards do not identify the cash surplus
arising after the investment cost is paid back. Even if accountants
reported investment surplus value this would not reveal how much
investors were getting overpaid unless the investment time horizon was
also reported.
An investment time horizon is the future period used by investors to
determine if they will make an investment. Investors cannot rely on
uncertain distant future cash returns to make decisions so they are
ignored. Investors also discount the value of any future cash at a
compounding rate equal to the returns they could get from alternative
investments. The uncertainty and discounting results in direct
equity investors using a time horizon of ten years or less.
Investors do not rely on receiving any cash back after their time
horizon to provide them with the incentive to invest. By
definition, any cash obtained after their time horizon is a surplus
incentive or surplus profit
(1).
Economic “rent” or excessive rates of return arising before the
investment time horizon do not represent surplus profits. Surplus
profit is not a concept found in economic textbooks. This is why
leading economists around the world do not have framework for evaluating
the costs of globalisation. Economists are denied an insight on how
wealth is unnecessarily concentrated and so how it could be more
equitably distributed (2).
Politicians are left with no alternative but to try and correct the
problem through tax and welfare transfers which generates big government,
voter alienation and political disenchantment.
The win, win, win solution for investors, government and citizens
respectively is to introduce tax incentives for wealth transfers to occur
directly between citizens rather than through the government. The
tax incentive would provide both global and domestic investors alike with
bigger, less risky profits sooner in exchange for transferring to
citizens at no cost, ownership of their investment after their time
horizon. This would create Ownership Transfer Corporations (OTCs)
described in my book Democratising the Wealth
of Nations (3) and my other articles in
refereed journals (4).
OTCs transfer surplus profits to those citizens on whom all firms depend
for their existence. In this way, employees, customers and
suppliers, including those providing infrastructure services in the host
communities would receive surplus profits. Just as importantly the
control of both global and domestic firms would be localised to align the
interests of local politicians to their constituencies rather than to
alien big business. Localised political control is sustained
because OTCs expand not by growing bigger but by creating networks of
“offspring” firms through shareholder re-investment of cashflows to
introduce appropriate technology, diversity, choice and
competition.
The political problem of globalisation is that it increases the degree to
which external parties control the means of local production and
exchange. This process has resulted in the
world's 200 largest corporations (5)
accounting for 28 percent of global economic activity while employing
less than one-quarter of one percent of the global workforce. OTCs
would reverse this process. They introduce democratic political
participation in the control of a firm that is not currently present
except with employee owned firms. Competition between stakeholders
provides a much more effective and efficient way
to improve competitiveness (6) than
competition for control through the stock exchange. It also reduces
the need for government regulation by introducing self-governance.
The overpayment of investors with surplus profits is inconsistent with
economic efficiency, equity and sustainability. Capitalism needs to
be reformed to reduce the social alienation created by citizens and their
politicians loosing control of communities, regions and national
economies though globalisation. The potential for the rich to
control and alienate the poor is indicated by the degree by which Bill
Gates increased his wealth in 1998. It was greater than the total
wealth of the poorest 45% of USA
households (7). The solution is to reform capitalism by
establishing a worldwide community investment code (CIC) based on the
introduction of OTCs.
oooOOOooo
806/09272000
(Word count is 799 without numbers for notes)
*Shann Turnbull is author of Democratising
the wealth of nations (8) reviewed by
Dr. Jim Cairns (9) and co-author of
Building Sustainable Communities: Tools and
concepts for self-reliant economic change (10).
Hyper-links and notes:
(1) The development of the concept of “surplus profit” is set out in
my 1992 paper 'New Strategies for Structuring Society From a Cashflow
Paradigm'
http://cog.kent.edu/lib/turnbull1/turnbull1.html
(2) Examples cited by the Shared Capital Institute.
Refer to “Ownership statistics: Why shared capitalism is needed” at
http://www.sharedcapitalism.org/scfacts.html#Call62
(3) Full text of the book available at
http://cog.kent.edu/lib/TurnbullBook/TurnbullBook.htm
(4) Refer to 'Stakeholder Governance: A cybernetic and property rights
analysis', first published in Corporate Governance: An International
Review, Blackwell, 5:1. pp. 11-23, January, 1997 and republished in
The history of management thought, Ashgate Publishing, 1999,
London, available from
http://cog.kent.edu/lib/turnbull6/turnbull6.html
Another example is 'Stakeholder Co-operation', Journal of Co-operative
Studies, Society for Co-operative Studies, 29:3, pp 18-52, (no.88),
Manchester, January, 1997. Full text from
http://papers.ssrn.com/sol3/paper.taf?ABSTRACT_ID=26238
(5) Refer to the Shared Capital Institute “Ownership
statistics: Why shared capitalism is needed” at ‘a closer look at
globalisation’ after reference 63 at
http://www.sharedcapitalism.org/scfacts.html#Call62
(6) Refer to my paper The competitive advantages of
stakeholder mutuals, presented to the
12th Annual Meeting of the Society for the
Advancement of Socio-economics, London School of Economics, July
9th, 2000.
http://cog.kent.edu/lib/Turnbull7/StkMut.htm
Abridged version forthcoming 2001 as Chapter 9 in The New
Mutualism, ed. Johnston Birchall, Routlegde, London.
(7) Refer to the Shared Capital Institute “Ownership statistics: Why
shared capitalism is needed” at ‘a closer look at globalisation’, refer
to note 36 at
http://www.sharedcapitalism.org/scfacts.html#Call62
(8) Review by Dr. Jim Cairns, the former Deputy Prime
Minister and Treasurer of Australia (Finance Minister) was published in
The Journal of the Securities Institute of Australia, (JASSA) No.
1, pp. 913, 1976. Archived at
http://cog.kent.edu/lib/cairns.html
(9) Refer to note 3
(10) Building Sustainable Communities: Tools and Concepts for Self-Reliant Economic Change, C. George Bennello, Robert Swann, Shann Turnbull, Edited by Ward Morehouse, Bootstrap Press of the Intermediate Technology Development Group of North America Inc. New York, New York, 1989, Revised second edition 1997. A TOES book available from http://members.optusnet.com.au/~sturnbull/index.html
Regards
Shann Turnbull
A more direct way of relating expanded ownership At 05:04 AM 28/9/2000, Karen May wrote:
Vic and trans-ients:
just to clarify, I am proposing that COG promote its policies as the
alternative to WB/IMF imposed structural readjustment as the condition
for debt relief or further borrowing -- a very specific response to
their practice. While we on this list may agree in the underlying
thesis of "broadened ownership as alternative to destructive
globalization" on general principal, I am proposing a very narrow,
constructive approach to disseminating our message, to engaging the
dialogue without "turning off" those inside the halls of power.
If we are about making an impact, I would argue that we are past the
point of fighting globalization per se, and have to fight for the
minutia of how it's done. We can back our arguments up with solid
economic theory and evidence that promoting broadened ownership is good
for domestic economies on the macro level, and good for people on the
micro-level (notwithstanding the issue over actual corporate control,
which is indeed important). Furthermore, it is a BETTER strategy than
structural adjustment, which suppresses wages and increases poverty,
defeating the purpose of debt relief in the first place. The World Bank
now acknowledges debt relief as a necessity, but they get around any
meaningful poverty-relief reforms by arguing that "if we relieve this
debt now unconditionally, these poor countries will just squander it,
and they'll be in the same position in 5 years anyway, so we HAVE to
impose belt tightening measures--its really for their own good." I
think we need to fight that patronizing message with something concrete,
simple, and positive, like "Forgive the debt conditional upon
strengthening economies with shared ownership." This is still pretty
threatening, and we will have to work hard to ensure that we are talking
about measures to ADD owners, versus an almost revolutionary implication
of taking the all-mighty property away from existing owners. Again,
crafting the message is critical, taking into consideration who are
target is, and what we want them to do. Then it becomes a question of
access--who has access to the decision-makers, how can we get that
access, and what are the points of leverage. I definitely sense a
window of opportunity here--let's go after it!
Karen May
Vic Thorpe wrote:
>
> Dear Steve and eotrans Friends,
>
> I've been following the discussion over recent days and have a few comments
> I'd like to share:
>
> 1. I thought the discussion on multinational company share distribution
> schemes was a leg-pull until I saw that it was being taken deadly serious by
> several respondents. But when we got to the idea that Wal-Mart is a likely
> candidate for conversion to worker ownership I could contain myself no
> longer. It's true that, as the USA's biggest private-sector employer, with
> nearly 1.5 million employees (O.K. let's call them 'associates' - or
> 'colleagues' as the Brits do in ASDA - just to keep up the treacly-sweet
> imagery) or nearly 1% of the entire civilian workforce, it would be great
> news if that retail empire were planning to hand over control to its workers
> in any foreseeable future scenario.
>
> But, somehow, I don't think so.
>
> I scanned the www.wal-mart.com pages using searches for 'labor union',
> 'trade union', 'worker representative', 'worker representation' - even
> 'associate representation' - all without result. As a long-time union man
> that made me wonder about the organisation's real commitment to worker
> rights. Broader enquiry among friends involved in organising the sector
> also suggested that Wal-Mart is not an easy employer to organise. Then I
> discoverd the Wal-Mart Employee Abuse Forum
> http:/members.aol.com/walmopboy/abuse/index.html and later on the
> www.walmartsucks.com. (You can even find some others that have allegedly
> been chased around the web by the FBI - but maybe that's just paranoia!)
> Now there aren't many of even the world's biggest companies that engender
> that kind of unsolicited anti-testimonial from disgruntled employees. When
> I encountered an article from 'Time' magazine 2 November 1998, entitled
> 'Slaves of New York', describing illegal immigrant sweatshops producing
> goods under appalling conditions, 40 per cent of which allegedly ended up in
> Wal-Mart stores, my cup overflowed.
>
> Frankly, I've never encountered this company before, but it does look all of
> a piece with what I thought about employee share distributions all along.
> They are not a means (even to the most optimistic believer in gradualism) of
> opening up the process of company control to the workforce. They are rather
> a way to institutionalise paternalism in its 21st century form and keep the
> pressure on actual wages. Company executives read the reports on employee
> motivation too. They also know that linking a portion of wage distribution
> to profitability makes motivational and business sense (why would it not?).
> When objective market conditions are good, you can afford to be generous;
> when they turn bad (and they have been slowing a bit just recently at
> Wal-Mart) - "Hey, Sorry folks! But you just didn't work hard enough!"
>
> Surely we have to keep our eye on the ball - 'ownership' of the firm, I
> believe. Then we can make our own decision on when to congratulate
> ourselves on a job well done and when to tighten our belts. It's good to
> get a share in the economic wealth created by our labor, sure, but it's
> necessary not to be sidelined by pursuing the economic grail - that has been
> exactly the problem of labor unions over the years and why they now have to
> compete in the social marketplace with a myriad NGO pressure groups. We
> should be careful not to confuse the central aim of control with the latest
> motivational device of modern management. By the way, while Wal-Mart/ASDA
> was 'giving away' £3.5 million to its 'colleagues' in the UK, Wal-Mart USA
> was buying back $3 BILLION of its own shares off the market to distribute an
> altogether better class of rewards to its regular shareholders and
> directors.
>
> 2. All that's not to say that I don't agree that the multinationals will
> inevitably need to be transformed from solely profit-minded corporations
> into more socially oriented organisations. I do so believe. And I think
> it's happening. The expansion of ethical codes of conduct, social and
> environmental auditing and the shift in self-image from 'corporation' to
> 'organisation' (see 'Disney Organisation', for example), is all evidence of
> the shift in collective corporate consciousness that is taking place. If
> the corporations have inherited the earth they now have to decide what they
> want to do with it. Only the very short-sighted would decide to continue to
> rip it off as has been the case in the past. "Sustainability" is the name
> of the game for corporations too.
>
> 3. So, by that rather long-winded route, I come to an accord with Karen
> May. We have to be prepared to promote worker ownership as THE alternative
> to destructive globalisation of competition, under which the poorest and
> most exploited can labor in hope of inheriting the dirtiest, least paid and
> least protected jobs. We can also persuade the corporation that it needs to
> ensure its dynasty for the ages to come through a new kind of 'open door
> policy'. Not one that leads onto the street for those that do not share the
> company culture ("Are YOU a Wal-Mart Person?"); but one that leads from the
> workplace to the boardroom - AND back again! The corporation must become a
> community owned economic AND socio-cultural organisation, or it will have to
> buck the trend for as long as it can hold out. There's a real job there for
> the few of us who think we see where it should be headed.
>
> 4. As to micro-finance, I strongly agree that there are opportunities there
> to encourage growth of exemplary organisations. But the past efforts of the
> IMF and World Bank do not suggest that they are well equipped to act as the
> agencies of that kind of transformation without root and branch reform.
> Their record is in preparing the ground for multinational capital to run
> riot in the Third World and for that they've done a remarkable job.
>
> There's a crossroads at the entry to Ahmedabad in middle India with five
> water standpipes, around which are encamped some 200 families, living in
> various kinds of shelter - from cardboard and tin, up to hardened mud and
> the odd brick or two. The standpipes were courtesy of an external NGO aid
> program some years back. Aid too supplied the money with which each of the
> 200 or so shacks equipped itself with a little furnace and anvil. The
> kids - and there are many - are fully occupied finding fuel for the furnace
> for which they must venture ever further afield, of course. Mum typically
> oversees the fuel collection and operates the bellows at the fire. Dad
> squats from dawn to dusk at the anvil hammering small pieces of iron into
> specially twisted shapes as fast as he can. Twice a day an overseer comes
> round with a large handcart (its probably motorised by now for efficiency -
> this was all four years ago). He inspects the twisted pieces of metal and
> rejects a depressingly large number. He takes the rest and marks the number
> off on a control sheet. He drops off some more flat pieces of metal and
> moves on. The pieces of twisted metal find their way to a large local parts
> supplier to the motor industry.
>
> That's the bottom end (and I do mean that in every sense of the word) of
> globalisation and the 'aid chain'.
>
> On the other hand, there is also in Ahmedabad a wonderful organisation
> called the Self Employed Women's Association (SEWA). Formed of the Ghandian
> tradition, it is founded on the principles of cooperativism and self-help,
> but is not above receiving a bit of aid from the outside world when it comes
> without strings. Under the watchful eye and inspiring leadership of Sister
> Ela Bhatt, the group has organised people such as the paper pickers (those
> who pick up paper from the streets, sort it and sell it on to a scrap
> merchant), bidi rollers, rag pickers, water carriers, hod carriers and
> others into a cohesive social force that now boasts its own public market,
> housing cooperative, credit bank, day-care service and so on. The group has
> changed also the working lives of its members by arranging collection of
> office waste paper direct from source, negotiating rates with big growers of
> tobacco for the bidi rollers, taking care of the kids while Mum and Gran get
> on with earning money for the family... The group is run on democratic
> lines and members decide what should be prioritised next and what should
> happen to any funds received or earned. Previous 'untouchables' have
> emerged as powerful spokeswomen for their group. Kids without hope of a
> future have been educated. A whole community has been given dignity in the
> face of despair.
>
> There's a world of difference between these two kinds of aid. Let's just be
> sure we keep our reality spectacles on when we view the works of the
> multinational and multilateral givers of aid.
>
> As I said above - a real job to be done out there. Let's get to it!
>
> Vic Thorpe
> Just Solutions
> Belgium
Shann Turnbull
P.O. Box 266 Woollahra, Sydney, Australia, 1350
Phone: 02 9328 7466 office; 02 9327 8487 home
Fax: 02 9327 1497 home & office. Mobile 0418 222 378
Outside Australia, replace first "0" with "61" after international access code
Life long E-mail: sturnbull@mba1963.hbs.edu Alternate:sturnbull@optusnet.com.au
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