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Suggestions to Rejuvenate the
USA Economy .
By Garvin Karunaratne,
Ph.D., Michigan State University
Contents
Summary 1
Text 2-14
Index 13
The Author 15
Suggestions to Rejuvenate the USA
Economy .
Summary
Current fiscal and monetary measures, as well as the US President's
Stimulus Package offering $ 700 billion to rejuvenate the ailing corporations,
approved by Congress on October 3, 2008,` is unlikely to bring prosperity
to the USA economy in the long term. The current paradigm being followed-
to leave the economy to be handled by the Private Sector-Monetarism,
with the State having little or no control has been found to be a non-runner.
Laissez-faire and de-regulation have proved to be non developmental.
This malaise has worldwide repercussions.
The following suggestions are made:
1. Move away from theories of Monetarism- Freemarket Laissez-faire Economics,
which have failed as a paradigm to bring about development. Search for
a new paradigm for development.
2. Get down to basic concepts of development- production and trade,
self reliance, self sufficiency. Cull down globalization to be developmental.
Handle development through development planning aimed at increasing
productivity and full employment with the aim of having a prosperous
country annihilating poverty.
3. Concentrate on Microenterprises
4. Use theories of Community Development and Non-Formal Education to
develop the abilities and capacities of entrepreneurs, community leaders
etc. to attend to development tasks.
5 `The Universities should attend to develop the local and national
economy in the role of the Land Grant Universities. The Cooperative
Extension Service should take on the role of rural and urban planning
and coordinating all development efforts by Universities, training institutes
and State Departments of Economic Development
6. Regulate the stockmarket mechanism to function in a developmental
manner by channeling funds into production, ensuring that the executives
cannot draw unlimited funds through the sale of stock options. .
It has to be a multipronged interdisciplinary effort.
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Suggestions to Rejuvenate the
USA Economy .
By Garvin Karunaratne, Ph.D., Michigan State
University
Introduction
The USA, the richest country in the world has been mired in a recession
for the past several years. The aim of this Paper is to explore possible
solutions to end the recession. Is it not necessary to rethink the current
monetary and fiscal measures and also explore additional strategies
in order to revive the economy?
Today's Situation
The collapse of prestigious multinational companies and financial institutions
of repute has become commonplace. The USA's second largest Bank, the
Bank of America found its profits plunge 95% due to the sub prime mortgage
debacle and the defaults are spreading to all type of loans. Currently
the recession has had to be admitted as fact with the demise and the
nationalization of Freddie Mac and Fannie Mae, the $ 5 trillion mortgage
companies that are involved in funding over half the US mortgage market..
The USA economy is in dire straits with people not being certain even
of the savings they have deposited in banks. This malaise has spread
to the UK and to Europe and around the World.
The main cause for the demise of the US Economy as well as the earlier
demise of the Giants of East Asian Economies in 1977 lies in the Milton
Friedman -Freemarket Laissez-faire Economic Theory that has been followed
since the days of President Regan and Premier Thatcher which deregulated
and offered unreined supremacy to private enterprise. Fed Chair Volker
was dropped by Regan because Volker did not want to de-regulate. Greenspan
was a deregulator and the current crisis can be related to the lack
of controls. It was hoped that the development of private enterprises
would emerge with deregulation, usher prosperity through trickle down
economics and act in the national interest. This has now been proved
wrong.
The US economy has seen production fall with the loss of jobs. An additional
cause for the recession is offshore-resourcing, where work that was
once done in the USA is being done abroad. Developments in communication
technology- e mail, videoconferencing etc. enable easy and cheap communication
links to get things done abroad standing to benefit from low wages in
the Third World. This results in unemployment in the USA.
Looking at the structure of imports and exports of the US, one finds
a serious deficit. In 2003 the US exports of manufactured goods amounted
only to $ 627.1 billion while the imports of goods to the US amounted
to as much as $ 1.03 trillion. This deficit of $ 403 billion increased
to $ 666 billion in 2004. By 2006 this deficit increased to $ 764 billion.
To finance this shortfall, the USA is compelled to borrow US $ 1 billion
daily from foreign borrowers. The total public debt of the USA is a
staggering $ 10 trillion. Further foreign holdings of US assets has
increased from $ 1.2 trillion in 1994 to as much as $ 6.3 trillion by
June 2005.
The housing market has had to bear the brunt of the downturn in employment.
The situation was exacerbated by the sub prime mortgage crisis. This
was primarily due to Banks giving loans on a liberal basis to as much
as 125% of value. Federal Reserve Chair Mr. Bernanke in his testimony
to Congress in 2007 has said that the potential losses can be estimated
at $ 100 billion and this amount could increase further. He has been
proved wrong as the commitment is far more.
Looking deeper into the sub-prime mortgage crisis, on my visit to the
USA in June 2008, I find that the primary cause for the sub prime mortgage
crisis is not the loss of jobs and earnings. The manipulation of interest
rates in itself has caused a burden on people who were enticed to take
mortgages and other loans when the interest rates were low. In May 2000
the interest rate was 6.5% and this was gradually reduced to 1.0% by
June 2003. Next, the rate was gradually increased to 5.25% in June 2006
and thereafter reduced to the level of 1.0% today(Nov 3,2008) As the
interest rates were increased the loanees found it difficult to pay
the mortgages as their incomes did not increase and foreclosures were
inevitable. This sub prime crisis is thus primarily caused by the indiscriminate
manipulation of interest rates. Our financial experts sought at times
to spur investment by reducing interest rates and at other times to
reduce inflation by increasing interest rates. The experts failed to
understand human psychology. They failed to fathom the repercussions
that would be caused by the incessant manipulation of interest rates.
In the process the sub prime mortgage crisis was an unwanted result.
Other methods have to be utilized to spur investment and obviate inflation.
In my opinion had the interest rate remained stable and steady the housing
price slump could have been caused only by a loss of earnings. The loss
of earnings- unemployment is something that could be tackled, but when
it is linked to the process of sub prime mortgages and in addition,
to the fall in the value of houses and there is an overall lack of confidence
and uncertainty in finance caused by the collapse of financial institutes
of repute, the total situation defies any easy solution.
In January 2008 the President of the USA has announced an Economic Stimulus
Package of $145 billion to be spent on tax cuts and it was hoped that
a tax cut of $ 300 to 600 to each tax payer will boost consumer spending.
In my experience a tax cut of $ 600 is unlikely to create any investment
that will lead to any increase in productivity. Consumer spending will
only increase imports. Currently, the stimulus package of $ 700 billion
approved by Congress and the Senate on October 3, 2008is unlikely to
bring prosperity in the long term unless it is worked on a new paradigm
for ensuring development goals. Economists should be really addressing
the economy itself. What is really required is incentives for long term
increases in productivity which is the aim of this Research Paper. Many
attempts are being made today to tackle the problem of sub prime lending,
little knowing that the sub prime mortgage crisis is only one of the
results of the downturn in the economy and not a cause of the downturn
of the economy.
Bailing out banks with finance will not bring long term results. It
is like pouring water into a bucket full of holes. The holes need to
be blocked.
It is of interest to note that when the Sub Prime Mortgage Crisis hit
the USA in 2008 and Countrywide had to be bailed out by the Bank of
America for only $ 4.1 billion, the Chief Executive- the founder Angelo
Mozilo got a compensation package of $ 22.1 million in 2008. Though
far less that his emolument package of $ 121.5 million in 2007, it is
forgotten that his maladministration was the cause for the sub prime
mortgage crisis at Countrywide. Freddie Mac's Chair Richard Syron earned
$ 14.5 million in 2007 while Fannie Mae's Chair earned $ 14.2 million
in the same year while the giant companies were near collapse..
Poverty in the US is on the increase, with increasing unemployment,
loss of people's earnings due to the recession. Many workers have had
to hold on to their jobs by agreeing to cuts in pay and perks. A mass
of some 37 million were in poverty in 2004. This was an increase of
1.1 million over the earlier year. As much as 45.8 million people were
without health insurance coverage. This was an increase from the 45.0
million people in 2003.(US Dept.of Commerce:2004)
In fact the New York Times(Dec 02 2007) states "You need
not be a Wall Street chieftain to feel the anxiety that has wrapped
its arms around the American economy. The stockmarket seems locked in
a downward spiral as one bank after another suffers its day of reckoning
with bad mortgages. Companies are sharply cutting profit forecasts as
the sense takes hold that American consumers are finally too loaded
with debt to buy the next flat screen television. The dollar has fallen
to inglorious depths. One unpleasant word hovers large: recession"
Economist Nouriel Roubini says that The evidence is now building
that an ugly recession is inevitable."(Ibid)
It appears necessary to search for a solution where there is employment
and prosperity for all Americans. It is imperative that corrective measures
have to be taken immediately before the USA slumps down further
The Stockmarket ensured that there were ample funds for the various
companies that were floated. Allowing investors to make profits through
speculative trading was the strategy used to enable corporations to
obtain funds for development. However certain weaknesses are evident
in the stockmarket mechanism. As investors poured in and bought stock,
there was no mechanism afloat that could ensure that the funds available
to the company could be used for productive development. In the words
of Professor Joseph Stiglitz: Corporate scandals dethroned the high
priests of American capitalism; the CEOs of some of America's largest
enterprises seem to be enriching themselves at the expense of their
shareholders and workers. Unregulated greed among investors enabled
hedge funds to gain millions even as markets collapsed by shorting stocks
and shorting had to be stopped by the Securities & Exchange Commission
in September 2008. Hedge Funds gained a billion pounds in profits from
the collapse of Northern Rock in the UK in 2008. The working of the
stockmarket needs to have more regulations to ensure that the money
created when a share price goes up is invested for further technological
advancement and product development. The stockmarket continues to be
the chief method of financing development and the expansion of industries
and every attempt has to be made to develop this method further.
The current economic crisis in the US has to be understood in the global
context..It is my opinion that the East Asian Economic Crisis of
1997 which spread to include the Asian Giants- Malaysia, Thailand,
the Phillipines, South Korea, Indonesia and then spread to Russia, Argentina
and Brazil has had an adverse effect on the economies of the Developed
Countries and the current recession of the US also comes within this
context. It is important to note in this connection that other than
Malaysia all other countries that were involved in this crisis had to
have their economies rejuvenated by the injection of foreign aid, including
a rescheduling of their debt- in short the countries were given a further
lease of life. Other Asian and African countries also have ailing economies
that have to be annually bolstered with aid from the Developed Countries.
The slump in the sales of manufactured products comes from the lack
of sales and very few countries have funds to buy manufactures. The
economies of the Developed Countries depends on their manufactures and
unless sales can be found, there will be unemployment-loss of jobs and
poverty and deprivation will inevitably creep in. A part of the present
cause for the downturn of the US economy lies in the US depending on
the rest of the world as a source of income ( through investment, sales,
offering services, opening up the rest of the World for US multinationals,
etc) and finding such incomes dry up. It is necessary to develop resources
within the U.S.A. in a self sustaining manner. The USA is sufficiently
large and has a store of undeveloped resources which can help building
up a self sustaining economy.
Travelling through a large number of States in the USA in the latter
part of 2004 and 2005(clocking 28,000 miles in my RV) I have seen many
microenterprises established in the homes of people. These are small
businesses providing self employment to a single person. Many such small
entrepreneurs have told me that their earnings are meager and insufficient
even to meet the cost of paying their health insurance premium. This
is a core of interested and patriotic entrepreneurs who are willing
to spurt into activity given a chance..
Attempts to bring about development
in the USA.
The Sixties and Seventies saw major initiatives aimed at development.
Community Development Corporations (CDC) were once mooted
to attend to the social and economic needs of communities.
Beginning in 1967, by 1973, 36 CDC were receiving funds. The aims of
the CDC in the words of the National Advisory Council on Economic Opportunities
was to break the cycle of poverty in low income communities by arresting
tendencies toward dependency, chronic unemployment and community deterioration.(AnnReport,:1973:16)
This was to be done through self help and the mobilization of the community
at large with appropriate Federal assistance (to) improve the quality
of life of their economic and social participation in community life
in such a way as to contribute to the elimination of poverty and the
establishment of permanent economic social benefits.(AnnReport:1977:60)
It was a genuine attempt for bringing impoverished communities into
the economic mainstream(AnnReport:1978:108) This attempt was designed
to develop entrepreneurial and management skills(AnnReport:1977:60)
The CDC Program with a core funding of $ 86.7 million was projected
to have available as much as $ 750 million through various organizations.
The aims were lofty:
Build, rehabilitate and manage housing, day care, neighbourhood shopping
and other community facilities, serve as a catalyst for getting community
residents and businesses to coalesce around common issues and concerns
(and) to work in concert with other neighbourhood organizations to plan
and implement programs to address such issues as crimes, inadequate
child care, health care and youth unemployment (NCDI:March1994:13)
This was a development of the Seventies but unfortunately their activities
have been confined to tasks of attending to the social needs of the
communities. Their main contribution has been in the area of providing
housing.
I was involved in a similar community education program as the Senior
Community Education Worker in Wester Hailes, a problem area in the City
of Edinburgh, UK. The main thrust was at social development which we
did achieve through strengthening community organizations to attend
to social problems. No attempt was made to develop community organizations
to attend to the tasks of poverty alleviation through employment creation.
Though I requested approval to extend the program on those lines it
was not granted.
Another Program: The Comprehensive Employment and Training Act(CETA)
was established in 1973 .CETA replaces direct Federal funding
of categorical programs with the exception of Job Corps, with the funding
of State and local prime sponsors who have the option of continuing
the various programs or developing their own program thrusts. These
programs are no longer required to adhere to arbitrary and sometimes
irrelevant federal standards and can now be geared to local needs.(NACEO:1974:30)
Priority was given for programs for the unemployed, underemployed and
the disadvantaged. In 1977 the allocation was $ 5.6 billion and this
was increased to $ 9.5 billion by 1978. The CETA shifted the emphasis
from manpower programs to direct public service jobs. By 1980 half a
million people were enrolled in public service jobs.
The achievement of the CETA can be expressed in the words of Campagna:
Despite the problems of the CETA, there were some successes that
ameliorate the negative impressions gained from the abuses and mistakes.
Many people found jobs after participating in the program, welfare roles
dropped, women and minorities gained more than white males, income gains
were substantial for some participants and employment did increase as
about a third participants found permanent jobs. (Campagna:1995:59)
The CETA was more instrumental in the task of finding jobs for the disadvantaged
rather than in the creation of new enterprises. What happened was that
persons from among the disadvantaged were given preference for existing
jobs through additional training etc and there was no attempt at increasing
the totality of employment that existed. In almost every country there
are many programs that help the unemployed people to become employed.
There is a fine difference between the creation of employment and helping
people who are unemployed to find employment. In the former employment
opportunities are increased, while in the latter there is no employment
creation- it is only a reallocation of employment opportunities.
The CETA was replaced by the Job Training Partnership Act of 1982.
The Small Business Investment Act of 1958 was meant to improve
and stimulate the national economy. Small Business Development Centers
were established from 1977 and by 1990 there were 55 Centers operating
in 49 States. Small Business development was guided by The Senate Committee.
In their words: At a small cost to the Government the Microloan Program
offers both economic opportunity for borrowers with few or no alternatives
and an investment in a brighter economic future(Parris). In the words
of President Clinton the Small Business Program was to help those who
are suffering at the margins of society to help themselves, to become
self sufficient by using their own talents and energies and to become
full participants in and contributors to their communities(Committee
on Small Business, Hearings, March 17,1994) The Small Business activities
continues todate and deserves to be further concentrated on..
Another initiative was the Grameen Bank Model of Microfinance.
This Model offers funds to the poor without collateral security, without
any technical or vocational training and repayment is assured through
the application of peer pressure. Though a high percentage -over 95
% was repaid, there was no attempt to gear the loans to production targets.
The Grameen Bank was able to quote statistics of amounts disbursed and
repaid but the amount of production generated was forgotten. When the
Model was introduced into the USA it became a veritable tidal wave.
Many Microloan Programs were initiated in the USA where it was hoped
that by granting credit to the poor, without any training and guidance
they could be helped to emerge out of their trap of poverty. The US
Senate Committee on Small Businesses decided that training and technical
assistance should be provided to those who take loans.
However it was found that little headway was made. Pouring funds without
channelling it to production can lead to inflation. In the words of
Professor Richard P. Taub : Despite changes the managers of the Good
Faith Fund made and despite the success stories that can be told, the
problems that persist suggest that wholesale transplantation of the
Grameen Bank Model to the United State- in particular transplantation
of the specific practices of that model- simply will not work. In fact
Professor Jeffery Ashe, a pioneer in introducing the Grameen Bank Model
says that, microfinance as it is currently conceived isn't the silver
bullet for resolving the problems of poverty we thought it would be.
While financing tiny businesses can help, a more comprehensive approach
is required to move impoverished regions out of poverty.(Jeffery Ashe,
May 2002)
With the inroads of the Friedman Freemarket Laissez-faire Economic
Theory during the Regan Presidency, no further attempt was made to bring
about prosperity in the long term. This Monetarism Theory was based
on a libertarian philosophy which reduced the role of Governments- banned
development planning by the State and instead enthroned the private
sector through deregulation..
The attempt at prosperity was also to be achieved by encouraging US
investors, especially Multinationals to invest overseas- in Emerging
Economies and the Third World countries, open up their assets for exploitation
and bring riches to the USA. The prosperity in the Clinton years was
mainly achieved through this method. It is now a fact that this paradigm
has severe limitations.
Unbridled capitalism that has been followed since the Friedman Monetarists
were enthroned in the Seventies has failed to bring about development.
George Soros warned us of this :
Markets can work in unexpected ways and become chaotic. I am afraid
that the prevailing view which is one of expanding the market mechanism
to all domains has the potential of destroying society. Unless we review
our concept of markets they will collapse because we are creating global
markets without understanding their true nature.(Financial Guardian,
UK, Oct 30, 1997)
What Can be done today?
As stated by Juan Somavia, the Director General of the International
Labor Organizaion: We need an economic rescue plan for working people
and the real economy, with rules and policies that deliver decent work
and productive enterprise. We must better link productivity to salaries
and growth to employment.(Asian Tribune Oct 23, 2008)
The thrust on the development of microenterprises has to be strengthened.
Microenterprise Development is already being done through many voluntary
organizations that avail themselves of funding from the SBA, various
Foundations and certain Universities. This is guided by the Senate Committee
on Small Business Development . The current effort of the Small Business
Administration to help small entrepreneurs has to be strengthened by
the provision of an infrastructure to study local needs and available
resources, find methods of developing enterprises at the local community
levels.
Microenterprises are units that need not incur high overhead costs and
need not have high earnings to provide dividends for non- working investors.
The aim of the entrepreneurs should be to work for one's self- an earned
income as opposed to providing an unearned income for non-working people
who invest and earn on account of the investment.
Community Development and Community Economic Development
There should be a yeoman attempt at finding the needs of communities,
studying the resources available within communities to solve the needs
of the communities, find additional resources that are required to achieve
such tasks and build up the abilities and capacities of people as well
as the communities as they try to attend to their own development. The
needs of the communities has to be assessed in the context of State
and National needs so that overproduction can be avoided.
In this attempt the thrust has to be on building community expertise
through the theories of Community Development and Non Formal Education.
Community Development is a US Theory of the Sixties. Though practised
in the Third World it was thought that Community Development was not
required for the US because the US was prosperous. However today's economic
crisis militates that Community Development and Non Formal Education
theories should be re-kindled to bring about development.
In the words of Professor Murray Ross, Community Development is the
process by which the community identifies its needs and objectives,
develop the will to work at the needs and the objectives, finds the
resources to deal with these needs and objectives, take action to get
them done and in doing so develop cooperative and collaborative attitudes
and practices in the community.(Ross:1967)
The development of the communities can only be brought about by building
up the abilities and capacities of community leaders. This has to be
done through the utilization of non-formal education techniques. Non
Formal Education refers to a number of educational processes- community
development, discussion, deliberation, self help, leadership development,
conscientization, participation, sequences of decision making, etc that
function simultaneously and complementarily to cause experiential learning..
The people should play a positive role in the needs assessment, in the
plan formulation, in finding resources and in contributing their mite
for the program, managing the program with their full responsibility.
This entire continuum of action is the educational process leading to
the development of the initiatives and responsibility in the people.(Karunaratne:1984)
Once the premier Universities in the world concentrated on teaching
strategies for development. This was aimed at equipping administrators
to take charge of the development of the Developing Countries. I was
one of the Sri Lankan administrators trained in Community Development
at the University of Manchester. While the University of Michigan taught
Community Development, MIT(Massachussets Institute of Technology) and
Michigan State University in the USA concentrated on Non Formal Education.
Then the thinking was that the Developed World was prosperous and did
not require any further development. Things have changed today and sustainable
development is required in both the Developed as well as the Developing
Worlds.
My travels in Canada in 2004 amply confirm the necessity for community
controlled enterprises to emerge. When I entered Canada, I wanted to
see the manufacture of Blue Mountain Pottery, a fine pottery that adorned
the shelves of high class shops like Harrods in London. When I found
that the factory was to be closed down I made it a point to visit the
factory. I was interested as I had established many pottery centers
in Sri Lanka and was held responsible for their success. The Blue Mountain
products were very elegant and marketable and on my visit to the factory
I was told that the decision to close the factory was not that the factory
was incurring a loss. The answers I got to my repeated questions enabled
me to figure out that the profits created were insufficient to find
massive profits for the non-working owners. The decision to close has
caused unemployment to 143 workers and closed down a great pottery factory
for good, a factory that once turned out exquisite pottery. It was a
pottery that could have been developed to provide employment for thousands
of Canadians and bring in incomes for Canada. Blue Mountain Pottery
had the capacity to be developed like the Lladro figurines of Spain.
In Edinburgh I found that Edinburgh Crystal, a well established showpiece
enterprise, had closed down relegating the experienced and trained workers
to the unemployed heap.
This experience confirms that the strategy of community cooperatives
handling production is the alternative strategy that has to be concentrated
on for purposes of finding employment and poverty alleviation in the
rural areas. The current emphasis of individual enterprises- aimed at
persons becoming self employed and developing their enterprises have
to be expanded further with the community members taking charge of the
development of natural resources found in their own areas. Then we can
plan for the development of the rural areas on a firm basis. When individuals
develop their enterprises or establish worker cooperatives, with success
on their hands they can move from their moorings to areas of affluence
leaving behind the poverty stricken areas from where they sprang into
being.
The Community Development Corporations deserve to be rejuvenated in
every County, to study local resources and attend to the development
of microenterprises on a community cooperative basis. The County Councils
have to be helped by the leading Universities to equip them with skills
to assess their economic situation, plan to develop their resources
and to work in such a manner as to develop the abilities and capacities
of the community leaders and the people. It is here that community development
and other non-formal education processes come to the forefront.
Community Development, Non Formal Education and Community Economic
Development should be taught at Universities. Administrators should
understand these strategic theories and possess the skills to apply
when they attend to development tasks. This is a pre-requisite to make
people partners in development.
The thrust of Business Management Faculties of the various Universities
that now train students for the MBA. is not for the creation of employment,
not for productive development. Instead their aim is at efficiency,
teaching strategies for the creation of profits- how to make things
cheaper, how to get workers to work more. In this process the rich become
richer. Success is judged in terms of more profits created. Instead
the Business Faculties of Universities should take on a national development
outlook. The attempt should be for creating national production resulting
in poverty alleviation.
The role of the Cooperative Extension Service deserves to be expanded
to include development planning in both rural and urban areas, and attending
to the task of coordinating the efforts of Universities, training institutions,
efforts of State Departments of Economic Development and Community Councils.
This should also include guiding the trained to become commercially
viable entrepreneurs. Though this is a massive task in itself, this
is the only path towards sustainable development.
Development Planning in this context should not be confused with the
regimented planning so characteristic of the command economies of communist
countries. Instead it is only planning on a definite basis with room
for investment by the private sector as well as action on cooperative
development, aimed at producing the nation's requirements, achieving
full employment, alleviating poverty and creating prosperity. It is
only action on a definite planned basis that can be expected to lead
the USA out of the current economic downturn.
To enable this take off of Microenterprise Development, the development
of the abilities and capacities of community members in the Community
Development Corporations and in Community controlled enterprises, educational
institutes- the Universities and Colleges have to play a major role.
This attempt is akin to the Land Grant Universities that once did bring
about the development of America. Today unfortunately the Land Grant
Role is limited to Colleges of Agricultural Economics, activities limited
to a few projects, leaving the major tasks of production in the hands
of private enterprise. In his connection I can recall the role played
by Michigan State University in the Comilla Program of Rural Development
where the task was to find the best method of bringing about development
in rural Bangladesh. This was a grand success with the program achieving
full employment and doubling the yields of rice.
.
Conclusion
The current deployment of monetary and fiscal measures to guide and
bring about an upturn of the economy has proved to be insufficient to
address the multifarious problems that beset the American economy. Monetarism
has killed the Third World. The message of the Failure of the East Asian
Giants of 1997 was not taken seriously as indicative of the demise of
Monetarism and infusing funds from the Developed Economy Bankers was
thought to be sufficient a measure. This time in 2008 Monetarism has
been exposed in the recession in the USA and as I pen this paper the
Television announced that the State of California has no funds to pay
teachers next month.
At least it has to be understood now that the Friedman Monetarist Experiment
has exposed its inherent weaknesses. Friedman's Monetary Theory enshrined
the Law of the Jungle and the Wild Hounds, which concept allowed the
rich to become richer and the poor to be consigned to the dustbin. It
has to be understood that the Private Sector's main aim is profit and
not service. It is sad that the Friedman Monetary Theory has had to
decimate the US Economy before its fallacy has been really understood.
A New Paradigm for Development has to be sought.
A multi-pronged approach through the use of various strategies is required.
The development of microenterprises, the rejuvenation of Community Development
Corporations as well as the development of the capacities and abilities
of local community leaders through Community Cooperatives could form
this multipronged strategy.. The aim should be to study the local needs
and local resources, finding solutions encourage private entrepreneurs
and also work with the local communities to draft plans for microenterprise
development as well as for the establishment of community based cooperatives-
all aimed at tackling the problems of rural decadence and poverty. This
task would fall to the Cooperative Extension Service.
I am certain that this proposal is practical and can be successful within
a matter of a few years. I can vouch for this without any reservation
because I was involved in a similar program in Bangladesh as the Commonwealth
Fund Advisor on Youth to the Ministry of Labor and Manpower of the Government
of Bangladesh. Presented with the scourge of millions of unemployed
youth, and undeterred by the miserable failure of the ILO attempt to
establish a self employment program in Tangail, Bangladesh in 1978-1981,
in 1982, I designed the Youth Self Employment Program and guided Bangladeshi
administrators to implement it. This Program was based on guiding the
trained youths to develop their own self employment projects and guiding
them when they commence self employment activities till they become
commercially viable. No subsidies were offered but in addition to the
vocational training that was given, the youths were motivated to study
local resources and draft a self employment project which they established
with intensive guidance in entrepreneurship from the Department of Youth
Development. The Training Institutes were also charged with the task
of offering a technical extension service. This Program has been developed
over the years and since 1997 guides 160,000 a year to become commercially
viable entrepreneurs. By December 2005, over a million have been found
self employment on a commercially viable basis without any subsidies.
It is easily the largest program of employment creation today, a program
that has stood the test of time.
Both the Comilla Program as well as the Youth Self Employment Program
are the contributions of excellence in American academia- the Michigan
State University towards world development. This also proves the fact
that Universities do possess the expertise to pull up the American economy.
.
It is my fervent hope that a new paradigm has to be sought for the development
of the Superpower America and the suggestions made may please be looked
into by various authorities- the Universities and the Foundations as
well as the political personages in charge. I wish to be associated
with any new initiatives and can assure that success can be achieved.
References
Jeffery Ashe, Banking on the Poor Institute, Institute for Sustainable
Development,
Heller School, Brandeis University, May 2002.
Anthony C. Campagna, Economic Policy in the Carter Administration Greenwood,
1995,
Garvin Karunaratne Non Formal Education: Theory and Practice at Comilla,
The
Bangladesh Academy for Rural Development, 1984
Garvin Karunaratne Microenterprise Development: How the USA is Micromazed
(Mimeo), Submitted to Senator Mr Dale Bumpers, Chairman of the US Senate
Committee on Small Business, December 1994
Garvin Karunaratne, Strengthening Microenterprise Development in the
USA(Mimeo) Submitted to Vice President Mr Al Gore, June 1996
NCDI-National Community Development Initiative, Fact Sheet, March 1994
Addison W. Parris, The Small Business Administration, Praeger, 1968
Murray Ross Community Organization: Theory and Practice, Harper &
Row, 1967
C Juan Somavia, Restoring Trust- Time to rescue the real economy. In
The Asian
Tribune, October 23, 2008
Richard P.Taub:Making the Adaptation Across Cultures and Societies:
A Report on
An attempt to clone the Grameen Bank in South Arkansas. University of
Chicago15/09/2003
Garvin Karunaratne, Ph.D. (Michigan State University)
November 8, 2008,
Center for Global Poverty Alleviation, London SW16 1NA, The UK
gamkga@aol.com Phone 00442086772664
INDEX
Argentina- 4
Ashe, Jeffery- 7,12
Bangladesh- 10
Bank of America- 2,3
Bangladesh Academy for Rural Development- 12
Bernanke, Ben- 2
Blue Mountain pottery- 9
Brazil- 4
Bumpers, Dale, Senator- 12
Campagna, Anthony- 6
Canada- 9
Clinton, William, President- 6,7
Comilla Program of Rural development- 10,12
Community Development- 8,9,10
Community Development Corporations- 5,10
Community Economic Development- 8,10
Comprehensive Employment & Training Act- 6
Cooperative Extension Service- 1,10,11
Countrywide- 3,
East Asian Economic Crisis- 2,4,11
Edinburgh, City of- 6
Edinburgh Crystal- 9
Fannie Mae- 2,4,
Financial Guardian- 8
Friedman, Milton- 7,11
Freddie Mac- 2,3
Globalization- 1
Good Faith Fund- 7
Gore, Albert, Vice President- 12
Grameen Bank- 7
Karunaratne, Garvin- 8
Greenspan, Alan- 2
Indonesia- 4
International Labor Organization- 11
Korea, South- 4
Land Grant Universities- 1,10
Malaysia- 4
Massachussetts Institute of Technology- 9
Michigan State University- 9,12
Mozilo, Angelo- 3
National Advisory Council on Economic Opportunities- 5,6
National Community Development initiative- 5,12
New York Times- 4
Non Formal Education- 8,10,12
Northern Rock- 4
Parris, Addison, W.- 6,12
Philippines- 4
President Regan- 2,7
Prime Minister Thatcher- 2
Ross, Murray- 8,12
Roubini, Nouriel- 4
Russia- 4
Securities & Exchange Commission- 4
Small Business Development Centers- 6,8
Small Business Investment Act- 6
Somavia, Juan- 8,12
Soros, George- 7
Stiglitz, Joseph- 4
Stockmarket- 4,
Sub Prime Mortgage Crisis- 3
Syron, Richard- 3
Taub, Richard P- 7,12
Thailand- 4
University of Manchester- 9
University of Michigan- 9,
USA Congress- 1,3
USA Health Insurance- 4
USA Poverty- 4,
USA Senate- 3
USA Senate Committee on Small Business- 6,7,8,
USA- The President- 3
Volker, Paul- 2
Youth Self Employment Program of Bangladesh- 11,12
The Author
Garvin Karunaratne
Academic Qualifications
B.A.Hons. & M.A. University of Sri Lanka at Peradeniya,1954 &
1958
Diploma in Community Development(Distinction) University of
Manchester,UK,1970
M.Ed in Community Development, University of Manchester, UK 1975
Ph.D. in Non Formal Education & Agricultural Economics, Michigan
State
University, 1979
M.Phil in Agricultural; Economics, University of Edinburgh, 1985
Executive Experience
Member of the Sri Lanka Administrative Service 1955-1973
Commonwealth Fund Advisor in Community Education & Youth to the
Government
Of the Bahamas Jan 1976- Dec 1977
Commonwealth Fund General Advisor on Youth Development to the Government
of
Bangladesh 1981-1983
Lecturer in Community Development, Westminster Adult Education Institute,
London 1989-1995
Publications
Administering Rural Development in the Third World, The University Press,
` Dhaka, Bangladesh 1983
Non Formal Education: Theory and Practice at Comilla, Bangladesh Academy
for
Rural Development, 1984
Microenterprise Development; A Strategy for Employment Creation &
Poverty
Allleviation in the Third World: The Way Out of the IMF Stranglehold,
Sarasavi. 1997
How the IMF Ruined Sri Lanka & Alternate Programs of Success, Godages,
2006
The Administrative Bungling that Hijacked the 2000 US Presidential Election,
The University Press of America, 2004
The Electronic Stealing of the 2004 US Presidential Election,
Booksurge/Amazon.com, 2007
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