Re: Some responses

[Shann Turnbull <sturnbull@mba1963.hbs.edu>]

Dear Karen

I agree its a both/and proposition.  I support your argument for not 
letting the IMF/World Bank get off the hook.  I am providing another 
hopefully intellectually compelling argument for reforming their 
operations.  The World bank should be teaching countries how to development 
themselves on a self-financing self-determined basis (i.e. teach them how 
to fish) rather than extracting value from them in the form of interest and 
dividend payments by providing finance (i.e.giving them fish).  But before 
they teach them how to fish they need to show poor countries and those like 
my own of how to stop overpaying foreign investors which drains away 
economic values and foreign exchange.


There are many answers to your question as to what I want people to do.

The first priority is to educate economists, politicians, citizens 
generally and protestors in particular, that investors are getting overpaid.

This is a simple emotive message that should obtain a political mandate in 
all democracies.

My "Globalisation reform" essay provides a solid intellectual explanation 
of how and why investors get overpaid and so identifies a solution.

We need to establish intellectual respectability that the current dominant 
form of capitalism is inefficient, inequitable and non sustainable and we 
do not want to put up it any longer.  We need simple slogans to answer the 
protestor chants of "What do we want?"  (Stop investors getting overpaid) 
"When do want it?" (Now).

We want public policy influence leaders and political parties to compete 
for a political mandate to reform capitalism and the processes of 
globalisation.  It is a multi-dimensional interlinked program.  There are 
many pressure points to develop.

When the Australian government invited submissions last year on their 
approach to the MAI initiatives at the WTO, I suggested that they introduce 
an alternative initiative to establish a "world wide Community Investment 
Code" (CIC) as suggested in my essay on reforming globalisation.

I used the word "community" as a counter to my submissions 20 years ago 
suggesting a "World Corporate Code" which has the connotations of top down 
authority rather than bottom up initiatives.  But what ever works is fine.

Regards

Shann

At 08:59 AM 28/9/2000, you wrote:
>Shann, I think it's a "both/and" proposition.
>If individual countries adopt COG-recommended policies, fabulous.  We
>should be working in our home countries to get to that point.  I have no
>problem with your notion of the OTC, although I do think the message
>needs to be simplified.  But more importantly, who are you appealing to,
>and what exactly do you want them to do?  Reinvent international
>accounting standards?  Pass domestic legislation to incentivize the
>OTC?  Who has the authority to institute such policies, and what (other
>than pure merit--wish the world operated that way!) will appeal to their
>self-interest?  What is the point of leverage that will convince nations
>to adopt such legislation?
>
>GATT and other trade agreements, the World Bank, IMF, etc. etc, now make
>a regular practice out of strong-arming borrower and trading governments
>to change their policies in order to reap the benefits of the
>multilateral agencies and agreements--a point of leverage, with a
>significant degree of control over domestic-level policies, all over the
>world.  I am arguing that the debt-relief discussion has achieved a
>broad enough recognition that we can use it as a point of entry into the
>globalization debates and constituencies.  The international agencies
>are finally RESPONDING to the outcries of injustice, and are even
>running scared.  They know they need to respond--demonstrations are
>scheduled for every international finance meeting for the next year.  We
>should not let them off the hook.  And on the other side of the table,
>the movement folks are not offering a pragmatic alternative.  I think we
>need a top-down and bottom-up approach; give the movement something real
>to propose--a PACKAGE of ownership-expanding measures, and give the
>global decision-makers an alternative way out.
>
>so, bottom line, work at home, but also work on the international bodies
>that may be able to achieve change on a scale that could really impact
>the situation.
>
>Karen
>
>
>Shann Turnbull wrote:
> >
> > 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
> > http://members.optusnet.com.au/~sturnbull/index.html

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
http://members.optusnet.com.au/~sturnbull/index.html