Re: POV-RED: COG working group listserv: poverty reduction

[Mbindnerdc@aol.com]

Ravi,

Thank you for opening the discussion.  My name is Michael Bindner, Director of 
the Iowa Center for Fiscal Equity and Coordinator of COG's Expanding Ownership 
Through Social Insurance discussion group.

I propose that there are seven possible ways poverty may be reduced, four of 
which involve expanding ownership.

The first is the evolutionary way which is likely to happen even without 
reform.  It starts out real ugly, with industrial exploitation of peasant 
workers.  As industrialization progresses, the need for more highly skilled 
workers and a consumer surplus results, leading to the creation of a lower 
middle class. With their basic needs met, the lower middle class will 
radicalize for better pay and working conditions for themselves and for lower 
class workers.  As in the U.S. and the U.K., a trade union movement will emerge 
through struggle (just as there was and is struggle here, even today - 
especially to unionize immigrant workers in agriculture and hospitality).  
Eventually, the workers, who are many, will win out and wages and working 
conditions will improve and government programs for workers will evolve, 
including social security.

The second is capital homesteading ala CESJ organized indigenously rather than 
from the developed world.  I am sure Norm Kurland will describe his efforts in 
his own words (so I will allow him to).

The third and fourth are also evolutionary - although they are new enough to be 
called revolutionary.  They come with the "spread of ownership" from the 
developed world.  

The third will come about as these firms adopt employee ownership (which can 
come through capital homesteading, the privatization of social insurance - with 
a portion of the funds privatized going to ownership, or through the investment 
of pension funds in the firms where employees work rather than in diversified 
portfolios), the employee owners will extend whatever system they benefit from 
to their overseas divisions in the developing world (so as not to be outbid by 
their own employees).  As firms in the developing world are so converted, 
competing firms will be forced to adopt the same system to compete for workers 
or investors.  

The fourth is for employee owned firms to make a concious effort to find the 
most talented workers in unexpected places, both in the developed and the 
developing world.  Often individuals from disadvantaged ethnic groups and women 
receive less educational preparation or no preparation.  Employee-owned firms 
who disregard these stereotypes and actively look for talent among these 
populations and then train these individuals to their full potential will gain 
a competitive advantage.  As in the third possible way, other firms will do 
likewise to compete.  The real challenge in development is how to find a 
rationale for the funding of education for the entire population.  Things like 
infrastructure and capital investment are secondary (which supply side 
economists in the current regime in the US don't seem to understand).

The fifth is to do four and five without relying on firms in the developed 
world, although this is harder although not impossible.

The sixth is to change currency exchange rates so that they are no longer 
exploitive.  There are two ways to do this.  One is to adopt a new Bretton 
Woods type arrangement where wage rates are claimed to some common factor.  
CESJ has a proposal involving the wage rate paid to the lowest class of worker. 
 The Iowa Center suggests linking it to a common market basket of goods in each 
country.  The other way of doing this is to compute the cost of the 
hypothetical market basket and publish these results for each country, 
acknowledging the effects of government and trade policy and pointing out the 
difference between what the exchange rate is and what it should be (and 
identifying what effects can be changed through government action or the ending 
of government action).  Such information would change both trade policy and 
would impact the currency market with better information.  Of course, if this 
happens, cheap foreign labor won't be so cheap - so more work will be done in 
factories in the developed world, leading to higher prices all around.  Of 
course, employee-owned firms will be less likely to rent seek through 
exploitive trade arrangements. Such rent seeking is a common practice in the 
current system. One need only look at the U.S. sugar subsidy and the extent to 
which the families who control US sugar contribute to both political parties 
here.  

This leads to the seventh - election finance reform in the U.S., which allows 
oligopolistic industry to dominate key issues and get a pass on exploiting 
workers and consumers at home and abroad (through preventing workers rights 
provisions from inclusion in international trade agreements).


Best regards,

Michael Bindner
Director, Iowa Center for Fiscal Equity

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