Saturday, January 1, 2011

Poverty, job programs & new economics


Poverty has many primary and indirect causes including education, media messages and imagery, community values, personal behavior, national values, crime, alcoholism, drug use and more.
Here we’d like to just focus on some economic issues. 

Statistics on poverty
25.3 percent of Latinos are below the poverty line, this amounts to 12.3 million in poverty. This is compared to the national rate of 14.3%.

25.8 percent of Blacks are also below the official poverty level, this comprises 10.2 million people.

Native American poverty is at the rate of 25.9%. Asian American poverty is at 12.5%.

Of whites, the percentage of poor is much smaller, 10.8 percent. But the surprising statistic is that 26.4 million whites live in poverty!. This more than any other group.

In the current economic malaise, the numbers of the poor are growing as working class people are losing jobs and being thrown into the abyss of impoverishment.

The national poverty rate climbed from 13.2% in 2008 to 14.3% in 2009 and is growing. The total number of people below the poverty in 2009 was 44 million.

In addition, millions of middle class are in long term unemployment today, they too need jobs.
To solve the problems of poverty and unemployment today, we will have to think in very different terms from the past. The old programs of the Depression and the War on Poverty will only work partly.

Here are some new ideas for government programs:

Combination bank — This is a bank that acts somewhat like an investment bank and even a venture capitalist operation. A combination bank will not only provide or find funding for businesses; it will also find management, skilled and unskilled labor, buildings, offices, equipment, materials, working capital and more. A combination bank works with partners to help start a business with good chance of success thereby providing jobs and reducing poverty and unemployment. A combination bank may be directly run by the government or it can be run by government and private entities together. Combination banking would be most successful on a local level.

Local focus for the Federal Reserve -- Related to the idea of a combination bank is a new strategy for the Federal Reserve; this is to focus on putting money into local banking. Here is where job creation will be key. Loans and cash infusions to Wall Street firms tend to keep capital for use in the stock market. And this imports cash out of localities and even sends it out to international ventures.

Equity strategies – The government can create a program where it buys stock in companies, the exchange being a cash infusion for the corporation for the hiring of the unemployed into permanent jobs. When the price of stocks eventually goes up, the government can sell the stock for a profit, and then recycle the funds to create more jobs.

Apprenticeship programs – bonding a teacher and student together in an apprenticeship program can create the emotional impetus necessary to put a face on poverty and humanize the process of ending it.

Metric Economy
Lastly, the very best idea for ending poverty and unemployment is not a government program at all.

This would be a Metric Economy. In a metric economy, an entire spectrum of performance goals are created, these are all measured, hence, “metric”. One of these metrics can and should be reduction of poverty and unemployment in a surrounding community. If such a metric existed then firms would put this into their plans, communities would pressure firms to hire, investors would favor investing in corporations that had these metrics and had good scores in them, and consumers would not buy goods or services from businesses that did not have good metrics for hiring the unemployed.

When we have executives and managers working voluntarily to end unemployment for moral reasons and based on how the firm’s metric performance will be viewed, then we will see progress on this problem. When all of society in the form of investors, consumers and local communities are alert and communicative on these issues, pressure will come to bear on companies to do their part.

The Federal government has a budget of $3.55 trillion, the entire US GDP is $14.1 trillion. This is 3.97 times larger, business is four times the size of the Federal government. Further, there are 1.43 million government employees (excluding the military) vs. 140.5 million private sector workers.
The greatest power to end poverty and unemployment is in the private sphere, business is the greatest force. We should rely upon it. It is larger and it is a more direct way to hire people and reduce unemployment.


Cage Innoye

Article on metric economy, Will there be a recovery from capitalism?

Economics booklet, For a New Economics

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