Today, April 22, people across the world will be observing Earth Day registering their concern about deteriorating state of environment and pronouncing resolve to arrest the detrimental trend.
On April 22, 1970, Earth Day was first observed in the USA. It was, "one of the most remarkable happenings in the history of democracy..." commented the American Heritage Magazine, in its October 1993 issue.
What is the purpose of Earth Day? How did it start? These are the questions most frequently asked. Actually, the idea for Earth Day evolved over a period of seven years starting in 1962. For several years, it had been troubling Senator Gaylord Nelson that the state of US environment was simply a non-issue in the politics of the country. Finally, in November 1962, an idea occurred to Nelson that was, he thought, a virtual cinch to put the environment into the political "limelight" once and for all. The idea was to persuade President Kennedy to give visibility to this issue by going on a national conservation tour. He flew to Washington to discuss the proposal with Attorney General Robert Kennedy, who liked the idea. So did the President. The President began his five-day, eleven-state conservation tour in September 1963. For many reasons the tour did not succeed in putting the issue onto the national political agenda. However, it was the germ of the idea that ultimately flowered into Earth Day.
Nelson, continued to speak on environmental issues to a variety of audiences in some twenty-five states. All across US, evidence of environmental degradation was appearing everywhere, and everyone noticed except the political establishment. The environmental issue simply was not to be found on the nation's political agenda. The people were concerned, but the politicians were not.
Six years had passed before the idea that became Earth Day occurred to Senator Nelson, while on a conservation speaking tour out West in the summer of 1969. At the time, anti-Vietnam War demonstrations, called "teach-ins," had spread to college campuses all across US. Nelson took this opportunity -- why not organise a huge grassroots protest over what was happening to our environment?
He was convinced that if he could tap in the environmental concerns of the general public and infuse the students' anti-war energy into the environmental cause, he could generate a demonstration that would force this issue onto the political agenda. It was a big gamble, but worth a try.
Then, at a conference in Seattle in September 1969, he announced that in the spring of 1970 there would be a nationwide grassroots demonstration on behalf of the environment and invited everyone to participate. The wire services carried the story from coast to coast. The response was electrifying. It took off like gangbusters. Telegrams, letters, and telephone inquiries poured in from all across the country. The American people finally had a forum to express concern about what was happening to the land, rivers, lakes, and air -- and they did so with spectacular exuberance. For the next four months, two members of his Senate staff, Linda Billings and John Heritage, managed Earth Day affairs out of his Senate office.
Five months before Earth Day, on Sunday, November 30, 1969, The New York Times carried a lengthy article by Gladwin Hill reporting on the astonishing proliferation of environmental events: "Rising concern about the environmental crisis.
Billy is a columnist & researcher from Bangladesh. He writes regularyly in English dailies in Bangladesh and overseas, both for print and electronic media. Billy is seeking a media agent to sell and promote his columns and articles on mutual understanding. More interested in copy editing and proof reading. services available at competative rate.
Article Source: http://EzineArticles.com/31588
Friday, 12 February 2016
How Much Cash Does James Bond Carry?
First let's start with how much cash Americans carry.
Under $ 20 ....... 32%
$ 21--$ 50 ....... 43%
$ 51--$100 ....... 18%
$101--$500 ....... 6%
$501--$999 ....... .6%
$1,000+ .......... .5%
So, if you want to be in the rare 6%, just carry over a hundred bucks in your money clip and wallet. But that's not even enough to take care of a sudden overnight trip.
'My name is Bond, James Bond. If you'll wait for me to find an ATM machine, I'll take you to dinner.' Sound strange? That's right. Bond would have the cash and credit cards in his wallet to do whatever he needed to do. But some places don't take credit cards, or the right ones.
And what about emergency's? Such as your car breaking down on a trip. You don't want to have your family sitting in the car at midnight on a lonely road.
Many will say that they are worried about being robbed, so they don't carry much cash. But anyone that's been robbed will tell you that he was glad to give something to the robber. Robbers have said that they work up so much energy before they mug someone, that if the person has nothing to give them, they get very angry and violent.
On the lighter side, Wayne Newton told the story about a date he was on at Denny's in New York and he didn't have enough cash to pay the bill. So he kept telling the girl to order more and secretly called his brother to bring him some cash. It took an hour because it turned out that there were four Denny's on that corner, all with three floors. Wayne's brother had to search every one of them. So Wayne had to really sweat it out until his brother arrived with the face saving cash. This sound funny, but not when you're in that situation yourself.
So now, How much cash does Bond carry? Enough to get any sudden job or entertainment done without checking to see if the place he's going to takes credit cards.
Article Source: http://EzineArticles.com/31812
Under $ 20 ....... 32%
$ 21--$ 50 ....... 43%
$ 51--$100 ....... 18%
$101--$500 ....... 6%
$501--$999 ....... .6%
$1,000+ .......... .5%
So, if you want to be in the rare 6%, just carry over a hundred bucks in your money clip and wallet. But that's not even enough to take care of a sudden overnight trip.
'My name is Bond, James Bond. If you'll wait for me to find an ATM machine, I'll take you to dinner.' Sound strange? That's right. Bond would have the cash and credit cards in his wallet to do whatever he needed to do. But some places don't take credit cards, or the right ones.
And what about emergency's? Such as your car breaking down on a trip. You don't want to have your family sitting in the car at midnight on a lonely road.
Many will say that they are worried about being robbed, so they don't carry much cash. But anyone that's been robbed will tell you that he was glad to give something to the robber. Robbers have said that they work up so much energy before they mug someone, that if the person has nothing to give them, they get very angry and violent.
On the lighter side, Wayne Newton told the story about a date he was on at Denny's in New York and he didn't have enough cash to pay the bill. So he kept telling the girl to order more and secretly called his brother to bring him some cash. It took an hour because it turned out that there were four Denny's on that corner, all with three floors. Wayne's brother had to search every one of them. So Wayne had to really sweat it out until his brother arrived with the face saving cash. This sound funny, but not when you're in that situation yourself.
So now, How much cash does Bond carry? Enough to get any sudden job or entertainment done without checking to see if the place he's going to takes credit cards.
Article Source: http://EzineArticles.com/31812
Healing Anger and Violence in Our Society
I have counseled individuals, couples, families and business partners for the past 35 years and authored eight published books. All this experience has resulted in the development of a profound six-step healing process, called Inner Bonding, which anyone can learn and use throughout the day (FREE course available - see resource box).
The violence in Littleton, Colorado sparked many discussions regarding the cause of such horrifying behavior on the part of two teenage boys. I would like to address this in terms on Inner Bonding.
In my experience, it is not possible for us as human beings to be violent when we are connected to our true, core Self and to a source of spiritual guidance. When we do the work we need to do to develop a spiritually connected loving adult self, we have an inner adult who places limits on our behavior regarding harming ourselves and others.
However, it is very common in our society for people to lose touch with their true, core Self. Since our core Self holds our intrinsic feelings of compassion and empathy for others, losing touch with this aspect of ourselves may cause us to be able to harm others without feeling any pain or remorse over it. The question is, then, how do we lose our connection with our core Selves?
Many child development experts state that those people who disconnect from their empathy and compassion, generally do so between the ages of two and four. If our parents lacked empathy and compassion for our feelings and needs, we might have chosen to be caretakers and take care of their needs, or we might have chosen to become like them and not care about others' feelings and needs. We may have had no role modeling for maintaining our own inner connection. If our parents shut themselves down to our pain and their own, we may have learned to shut down to our own and others vulnerable feelings. If, in addition, we were physically, sexually, emotionally or verbally abused or neglected, we may have shut down to survive.
Some children, whose parents were shut down or abusive, manage to stay connected with their core Selves through contact with animals such as dogs or horses, while others stay connected through contact with relatives or friends with whom they identify. But many young children just disconnect to survive. When in this disconnected state, if they watch violence on TV or practice violence through video games, they may further train themselves to numb out against compassion, empathy, and the pain of harming others.
Likewise, if children grow up with no personal connection with a source of spiritual guidance, they may not know that we are all one, and they may not consider the possibility that the consequences of their actions may follow them into their lives after death.
Without connection with their core Self and their spiritual guidance, they are left with only their wounded selves. If they happen to be operating from an enraged wounded self, this self can certainly act out in angry and violent ways. With no loving inner Adult to set limits, the harm to themselves or others can be disastrous, as we have seen.
While limiting guns is certainly a good thing to do, it will not stop the violence. This violence will not stop until we no longer need to learn, as very young children, to barricade our hearts. As parents and teachers we need to be practicing a healing process such as Inner Bonding so that we can reclaim our core Selves and our deep connection with God. Only by doing our own inner work will we be able to be the loving role models that our children need. The change in our society must come from within each of us.
Margaret Paul, Ph.D. is the best-selling author and co-author of eight books, including "Do I Have To Give Up Me To Be Loved By You?" She is the co-creator of the powerful Inner Bonding healing process. Learn Inner Bonding now! Visit her web site for a FREE Inner Bonding course: http://www.innerbonding.com or mailto:margaret@innerbonding.com. Phone sessions available.
Article Source: http://EzineArticles.com/32337
The violence in Littleton, Colorado sparked many discussions regarding the cause of such horrifying behavior on the part of two teenage boys. I would like to address this in terms on Inner Bonding.
In my experience, it is not possible for us as human beings to be violent when we are connected to our true, core Self and to a source of spiritual guidance. When we do the work we need to do to develop a spiritually connected loving adult self, we have an inner adult who places limits on our behavior regarding harming ourselves and others.
However, it is very common in our society for people to lose touch with their true, core Self. Since our core Self holds our intrinsic feelings of compassion and empathy for others, losing touch with this aspect of ourselves may cause us to be able to harm others without feeling any pain or remorse over it. The question is, then, how do we lose our connection with our core Selves?
Many child development experts state that those people who disconnect from their empathy and compassion, generally do so between the ages of two and four. If our parents lacked empathy and compassion for our feelings and needs, we might have chosen to be caretakers and take care of their needs, or we might have chosen to become like them and not care about others' feelings and needs. We may have had no role modeling for maintaining our own inner connection. If our parents shut themselves down to our pain and their own, we may have learned to shut down to our own and others vulnerable feelings. If, in addition, we were physically, sexually, emotionally or verbally abused or neglected, we may have shut down to survive.
Some children, whose parents were shut down or abusive, manage to stay connected with their core Selves through contact with animals such as dogs or horses, while others stay connected through contact with relatives or friends with whom they identify. But many young children just disconnect to survive. When in this disconnected state, if they watch violence on TV or practice violence through video games, they may further train themselves to numb out against compassion, empathy, and the pain of harming others.
Likewise, if children grow up with no personal connection with a source of spiritual guidance, they may not know that we are all one, and they may not consider the possibility that the consequences of their actions may follow them into their lives after death.
Without connection with their core Self and their spiritual guidance, they are left with only their wounded selves. If they happen to be operating from an enraged wounded self, this self can certainly act out in angry and violent ways. With no loving inner Adult to set limits, the harm to themselves or others can be disastrous, as we have seen.
While limiting guns is certainly a good thing to do, it will not stop the violence. This violence will not stop until we no longer need to learn, as very young children, to barricade our hearts. As parents and teachers we need to be practicing a healing process such as Inner Bonding so that we can reclaim our core Selves and our deep connection with God. Only by doing our own inner work will we be able to be the loving role models that our children need. The change in our society must come from within each of us.
Margaret Paul, Ph.D. is the best-selling author and co-author of eight books, including "Do I Have To Give Up Me To Be Loved By You?" She is the co-creator of the powerful Inner Bonding healing process. Learn Inner Bonding now! Visit her web site for a FREE Inner Bonding course: http://www.innerbonding.com or mailto:margaret@innerbonding.com. Phone sessions available.
Article Source: http://EzineArticles.com/32337
The Good, the Bad and the Ugly: Employee and Management Owned Firms
Margaret Thatcher started a world trend during her tenure as Prime Minister is Downing Street. It is called: Privatization. It consisted of the transfer of control of a state-owned enterprise to the Private Sector. This was done by selling the shares of the company. At times, the control itself was maintained by the state - but the economic benefits emanating from the ownership of shares was partly sold to privates. Such economic benefits are comprised of the dividend yield of the shares plus the appreciation in their value (due to the involvement of the private sector) known as capital gains.
But the privatization process was not entirely homogeneous, uniform, transparent, or, for that matter, fair.
The stock of some of the enterprises was sold to an individual, or group of individuals, by a direct, negotiated sale. A "controlling stake" (nucleus) was thus sold, ostensibly yielding to the state a premium paid by the private investors for the control of the sold firm.
This method of privatization was criticized as "crony capitalism". For some reason, a select group of businessmen, all cronies of the ruling political elite, seemed to benefit the most. They bought the controlling stakes at unrealistically low prices, said the critics. To support their thesis, they pointed to the huge disparity between the price at which the "cronies" bought the shares - and the price at which they, later, sold it to the public through the stock exchange. The "cronies" cried foul: the difference in the prices was precisely because of privatization, better management and financial control. Maybe. But the recurrence of the same names in every major privatization deal still looked suspiciously odd.
Then there was the second version: selling the shares of the privatized firms directly to the public. This was done using either of two methods:
An offering of the shares in the stock exchange (a cash method), or
The distribution of vouchers universally, to all the adult citizens of the country, so that they could all share the wealth accumulated by the state in an equitable manner. The vouchers are convertible to baskets of shares in a prescribed list of state enterprises (a nonchash method).
But a smaller group of (smaller) countries selected a whole different way of privatizing. They chose to TRANSFORM the state-owned firm instead of subjecting them to outright privatization.
Transformation - the venue adopted by Macedonia - is the transfer of the control of a firm and / or the economic benefits accruing to its shareholders to groups which were previously - or still are - connected to the firm.
In this single respect, transformation constitutes a major departure - not to say deviation - from classical privatization.
Ownership of the transformed firm can revert to either of the following groups, or to a combination thereof:
The employees of the firm, through a process called Employee BuyOut (EBO)
The management of the firm, in the form of a Management BuyOut or Buy In (MBO / MBI)
A select group from within the firm. Such a group uses the assets - current and future - of the firm as collaterals, thus enabling them to get the credits necessary to purchase the shares of the firm. This is called a Leveraged BuyOut, because the assets of the firm itself are leveraged in order to purchase it (LBO).
Finally, the creditors of the firm can team up and agree to convert the firm's debts to them into equity in the firm, in a Debt to Equity Swap (DES).
Sometimes, the state continues to maintain an interest in privatized - as well as in transformed - firms. This is especially true for natural monopolies, utilities, infrastructure and defence industries. All the above are considered to be strategic matters of national interest. Some countries - Russia and Israel, for ones - continue to own a "Golden Share". This highly specific type of security allows the state to exercise decision making powers, veto powers, or, at least, control over business matters that it considers vital to its security, financial viability, or even to its traditions. Israel's golden share in the national air carrier, EI AI, allows it to prevent flights in and out during the religiously holy day of Sabbath! Until very recently the common (economic) wisdom in the West had it that Transformation was - in the best case - a sterile, make - believe exercise. The worst case included cronyism and corruption. One thing was to privatize and another was to privateer. But there were some grounds for some solid criticisms as well: (1) The main ideological thrust behind privatization was the revitalization of stale and degenerated state firm. Badly managed, wrongly financially controlled, applying an incoherent admixture of business and non business (political, social, geopolitical) considerations to their decision making process - state firm were considered as anachronistic as dinosaurs. Many preferred to see them as extinct as those ancient reptiles. An injection of private initiative acquired the status of ideological panacea to the corporate malaise of the public sector. But this is precisely what was missing in the Transformation version. It offered nothing new: no new management, no new ideas (were likely to come from the same old team) and, above all and as a direct result of this preference of old over new - no new capital. To this, the supporters of Transformation answer that the one thing which is new - personal capitalistic incentives - far outweighs all the old elements. Incentive driven initiative is likely to bring in its wake and to herald the transformation - in the most complete and realistic sense - of the state firm. Change, renovation and innovation - say the latter - are immediate by products of personal profit motivation, the most powerful known to Mankind. (2) The process of Transformation blurred the distinction between labour, management and ownership. Employees acted as potential managers and as co-owners in the newly transformed companies. The very concept of hierarchy, clear chains of authority (going down) and of responsibility (going up) - was violated. A ship must have one captain lest it sinks. It is not in vain that the management function was separated from the ownership function. Employees, managers and owners, all have differing views and differences of opinion concerning every possible aspect of corporate governance and the proper conduct of business. Employees want to maximize employment and the economic benefits attached to it - managers and shareholders wish to minimize this parameter and its effects on the corporation. Managers wish to maximize their compensation - employees and owners wish to minimize or moderate it, each group for its own, disparate reasons. This break in the "chain of command", this diffusive, fog like property of the newly transformed entity lead to dysfunction, financial mismanagement, lack of clarity of vision and of day to day operations, labour unrest (when the unrealistic expectations of the workforce are not met). So, at the beginning, during the 1980s, the West preferred to privatize state owned firms - rather than to transform them. A fast accumulating body of economic research demonstrated unambiguously that privatization did miracles to the privatized firms. In certain cases, productivity shot up 6 times. Between 60 to 80 percent of GNPs in the West are private now and a vigorous trend to privatize what remains of the public sector still persists. But the same studies revealed a less pleasant phenomenon: only a select group of businessmen benefited from privatization. The paranoid allusions of the critics of this process were completely substantiated. Something was very corrupted in implementation of the seemingly wholesome idea of privatization. The public - as a whole - economically suffered. This led to the emergence of a new social consciousness. It was provoked by the unacceptable social costs of capitalism: more people under the poverty line, homelessness, a radicalization in the inequity of the distribution of income among different strata of society. But this trend was enhanced by the apparent corruption of the privatization process. This new social consciousness converged with yet another all important and all pervasive trend: the formation of small businesses by small time entrepreneurs. The latter functioned both as owners and as employees in their firms. There were 16 million such owners-workers in the USA alone (1995 figures). About 99% of the 22 million registered businesses in the USA were small businesses. No economic planner or politician could ignore these figures. Employee owned firms became the majority in the service and advanced technology sectors of the economy - the fastest growing, most lucrative sectors. In its own way, as a result of these two trends, the West was moving back to transformation and away from privatization, away from separation of ownership and labour, away from differentiation between capital and workforce. This is a major revolution. The OECD (the organization of the richer countries in the world) established an institute which follows trends in the poorer parts of the world, politely called "Economies in Transition". This is the CCET. According to the CCET's latest report, privatization continues in an uneven pace throughout the former Eastern Bloc. Some countries nearly completed it. Others have claimed to have completed it - but haven't even started it in reality. Some countries - Macedonia amongst them - have sold the shares of state owned firms (=businesses with social capital) to managers and workers - but the managers and workers have largely not paid for these shares yet. It is by no means certain that they will. If the managers and workers default on their obligations to pay the state - the ownership of the company will revert back to the state. This is paper privatization, a transformation of expectations. No one can seriously claim that the transformation is completed before the new owners of the firms respect their financial obligations to the state. In all, privatization the world over, proceeded more rapidly with small firms. Selling the bigger firms was much more difficult. Most of this behemoths were composed of numerous profit centres and loss making business activities. A solidarity of accounts and guarantees existed between the various operations. The more profitable parts of a company supported and subsidized the less competent, the losing parts. This was not very attractive to investors. The official figures are heart warming. In parentheses - the percentage of firms privatized: Albania , Czech Republic , Estonia , Hungary , Lithuania, Poland and Slovakia all privatized 90% of their small firms. In Russia and Latvia, the figure is 70%. The picture is more clouded with the larger firms: Czech Republic (81%), Hungary, Estonia (75%), Lithuania (57%), Russia (55%), Latvia and Slovakia (46%), Mongolia (41%), Poland (32%), Moldavia (27%), Romania (13%), Belarus and Bulgaria (11%), Georgia (2%). But what hides behind the figures? The Czech Republic is infamous for its cronyism and for the massive transfer of wealth to the hands of a few people close to government circles. On the face of it, the situation in Poland looks a bit better: a universal voucher system was instituted. People were allowed to deposit their shares with 14 management funds. These funds also bought some of the shares, making them part owners. They control now 500 enterprises, which make up 5% of the country's GNP. Some of these funds are 50% foreign owned, so their management and moral standards are Western. But, even there, rumours abound and not only rumours. So, what is better - privatization or transformation? Maybe the lesson is that we are all human. There is no method immune to human fallacies and desires, to corruption or to allegations of it. Transformation tends to benefit more people - so, maybe it looks more just. But long term it is inefficient and leads to the ruining of the firms involved and to permanent damage both to the economy and to the workers-owners. Is it better to be the owner of a bankrupt firm - or to work in a functioning firm, where you have no ownership stake? This is not an ideological or a philosophical question. Ask the employees of the Pelagonija Construction Group. Privatization, on the other hand, is much more open to manipulation - but at least it secures the continued existence of the firms and the continuous employment of the workers. Sometimes, in economic reality, we have to give up justice (or the appearance of it) - in order to secure the very survival of the workers involved. I, personally, prefer privatization over transformation.
Sam Vaknin is the author of "Malignant Self Love - Narcissism Revisited" and "After the Rain - How the West Lost the East". He is a columnist in "Central Europe Review", United Press International (UPI) and ebookweb.org and the editor of mental health and Central East Europe categories in The Open Directory, Suite101 and searcheurope.com. Until recently, he served as the Economic Advisor to the Government of Macedonia.
Article Source: http://EzineArticles.com/32556
But the privatization process was not entirely homogeneous, uniform, transparent, or, for that matter, fair.
The stock of some of the enterprises was sold to an individual, or group of individuals, by a direct, negotiated sale. A "controlling stake" (nucleus) was thus sold, ostensibly yielding to the state a premium paid by the private investors for the control of the sold firm.
This method of privatization was criticized as "crony capitalism". For some reason, a select group of businessmen, all cronies of the ruling political elite, seemed to benefit the most. They bought the controlling stakes at unrealistically low prices, said the critics. To support their thesis, they pointed to the huge disparity between the price at which the "cronies" bought the shares - and the price at which they, later, sold it to the public through the stock exchange. The "cronies" cried foul: the difference in the prices was precisely because of privatization, better management and financial control. Maybe. But the recurrence of the same names in every major privatization deal still looked suspiciously odd.
Then there was the second version: selling the shares of the privatized firms directly to the public. This was done using either of two methods:
An offering of the shares in the stock exchange (a cash method), or
The distribution of vouchers universally, to all the adult citizens of the country, so that they could all share the wealth accumulated by the state in an equitable manner. The vouchers are convertible to baskets of shares in a prescribed list of state enterprises (a nonchash method).
But a smaller group of (smaller) countries selected a whole different way of privatizing. They chose to TRANSFORM the state-owned firm instead of subjecting them to outright privatization.
Transformation - the venue adopted by Macedonia - is the transfer of the control of a firm and / or the economic benefits accruing to its shareholders to groups which were previously - or still are - connected to the firm.
In this single respect, transformation constitutes a major departure - not to say deviation - from classical privatization.
Ownership of the transformed firm can revert to either of the following groups, or to a combination thereof:
The employees of the firm, through a process called Employee BuyOut (EBO)
The management of the firm, in the form of a Management BuyOut or Buy In (MBO / MBI)
A select group from within the firm. Such a group uses the assets - current and future - of the firm as collaterals, thus enabling them to get the credits necessary to purchase the shares of the firm. This is called a Leveraged BuyOut, because the assets of the firm itself are leveraged in order to purchase it (LBO).
Finally, the creditors of the firm can team up and agree to convert the firm's debts to them into equity in the firm, in a Debt to Equity Swap (DES).
Sometimes, the state continues to maintain an interest in privatized - as well as in transformed - firms. This is especially true for natural monopolies, utilities, infrastructure and defence industries. All the above are considered to be strategic matters of national interest. Some countries - Russia and Israel, for ones - continue to own a "Golden Share". This highly specific type of security allows the state to exercise decision making powers, veto powers, or, at least, control over business matters that it considers vital to its security, financial viability, or even to its traditions. Israel's golden share in the national air carrier, EI AI, allows it to prevent flights in and out during the religiously holy day of Sabbath! Until very recently the common (economic) wisdom in the West had it that Transformation was - in the best case - a sterile, make - believe exercise. The worst case included cronyism and corruption. One thing was to privatize and another was to privateer. But there were some grounds for some solid criticisms as well: (1) The main ideological thrust behind privatization was the revitalization of stale and degenerated state firm. Badly managed, wrongly financially controlled, applying an incoherent admixture of business and non business (political, social, geopolitical) considerations to their decision making process - state firm were considered as anachronistic as dinosaurs. Many preferred to see them as extinct as those ancient reptiles. An injection of private initiative acquired the status of ideological panacea to the corporate malaise of the public sector. But this is precisely what was missing in the Transformation version. It offered nothing new: no new management, no new ideas (were likely to come from the same old team) and, above all and as a direct result of this preference of old over new - no new capital. To this, the supporters of Transformation answer that the one thing which is new - personal capitalistic incentives - far outweighs all the old elements. Incentive driven initiative is likely to bring in its wake and to herald the transformation - in the most complete and realistic sense - of the state firm. Change, renovation and innovation - say the latter - are immediate by products of personal profit motivation, the most powerful known to Mankind. (2) The process of Transformation blurred the distinction between labour, management and ownership. Employees acted as potential managers and as co-owners in the newly transformed companies. The very concept of hierarchy, clear chains of authority (going down) and of responsibility (going up) - was violated. A ship must have one captain lest it sinks. It is not in vain that the management function was separated from the ownership function. Employees, managers and owners, all have differing views and differences of opinion concerning every possible aspect of corporate governance and the proper conduct of business. Employees want to maximize employment and the economic benefits attached to it - managers and shareholders wish to minimize this parameter and its effects on the corporation. Managers wish to maximize their compensation - employees and owners wish to minimize or moderate it, each group for its own, disparate reasons. This break in the "chain of command", this diffusive, fog like property of the newly transformed entity lead to dysfunction, financial mismanagement, lack of clarity of vision and of day to day operations, labour unrest (when the unrealistic expectations of the workforce are not met). So, at the beginning, during the 1980s, the West preferred to privatize state owned firms - rather than to transform them. A fast accumulating body of economic research demonstrated unambiguously that privatization did miracles to the privatized firms. In certain cases, productivity shot up 6 times. Between 60 to 80 percent of GNPs in the West are private now and a vigorous trend to privatize what remains of the public sector still persists. But the same studies revealed a less pleasant phenomenon: only a select group of businessmen benefited from privatization. The paranoid allusions of the critics of this process were completely substantiated. Something was very corrupted in implementation of the seemingly wholesome idea of privatization. The public - as a whole - economically suffered. This led to the emergence of a new social consciousness. It was provoked by the unacceptable social costs of capitalism: more people under the poverty line, homelessness, a radicalization in the inequity of the distribution of income among different strata of society. But this trend was enhanced by the apparent corruption of the privatization process. This new social consciousness converged with yet another all important and all pervasive trend: the formation of small businesses by small time entrepreneurs. The latter functioned both as owners and as employees in their firms. There were 16 million such owners-workers in the USA alone (1995 figures). About 99% of the 22 million registered businesses in the USA were small businesses. No economic planner or politician could ignore these figures. Employee owned firms became the majority in the service and advanced technology sectors of the economy - the fastest growing, most lucrative sectors. In its own way, as a result of these two trends, the West was moving back to transformation and away from privatization, away from separation of ownership and labour, away from differentiation between capital and workforce. This is a major revolution. The OECD (the organization of the richer countries in the world) established an institute which follows trends in the poorer parts of the world, politely called "Economies in Transition". This is the CCET. According to the CCET's latest report, privatization continues in an uneven pace throughout the former Eastern Bloc. Some countries nearly completed it. Others have claimed to have completed it - but haven't even started it in reality. Some countries - Macedonia amongst them - have sold the shares of state owned firms (=businesses with social capital) to managers and workers - but the managers and workers have largely not paid for these shares yet. It is by no means certain that they will. If the managers and workers default on their obligations to pay the state - the ownership of the company will revert back to the state. This is paper privatization, a transformation of expectations. No one can seriously claim that the transformation is completed before the new owners of the firms respect their financial obligations to the state. In all, privatization the world over, proceeded more rapidly with small firms. Selling the bigger firms was much more difficult. Most of this behemoths were composed of numerous profit centres and loss making business activities. A solidarity of accounts and guarantees existed between the various operations. The more profitable parts of a company supported and subsidized the less competent, the losing parts. This was not very attractive to investors. The official figures are heart warming. In parentheses - the percentage of firms privatized: Albania , Czech Republic , Estonia , Hungary , Lithuania, Poland and Slovakia all privatized 90% of their small firms. In Russia and Latvia, the figure is 70%. The picture is more clouded with the larger firms: Czech Republic (81%), Hungary, Estonia (75%), Lithuania (57%), Russia (55%), Latvia and Slovakia (46%), Mongolia (41%), Poland (32%), Moldavia (27%), Romania (13%), Belarus and Bulgaria (11%), Georgia (2%). But what hides behind the figures? The Czech Republic is infamous for its cronyism and for the massive transfer of wealth to the hands of a few people close to government circles. On the face of it, the situation in Poland looks a bit better: a universal voucher system was instituted. People were allowed to deposit their shares with 14 management funds. These funds also bought some of the shares, making them part owners. They control now 500 enterprises, which make up 5% of the country's GNP. Some of these funds are 50% foreign owned, so their management and moral standards are Western. But, even there, rumours abound and not only rumours. So, what is better - privatization or transformation? Maybe the lesson is that we are all human. There is no method immune to human fallacies and desires, to corruption or to allegations of it. Transformation tends to benefit more people - so, maybe it looks more just. But long term it is inefficient and leads to the ruining of the firms involved and to permanent damage both to the economy and to the workers-owners. Is it better to be the owner of a bankrupt firm - or to work in a functioning firm, where you have no ownership stake? This is not an ideological or a philosophical question. Ask the employees of the Pelagonija Construction Group. Privatization, on the other hand, is much more open to manipulation - but at least it secures the continued existence of the firms and the continuous employment of the workers. Sometimes, in economic reality, we have to give up justice (or the appearance of it) - in order to secure the very survival of the workers involved. I, personally, prefer privatization over transformation.
Sam Vaknin is the author of "Malignant Self Love - Narcissism Revisited" and "After the Rain - How the West Lost the East". He is a columnist in "Central Europe Review", United Press International (UPI) and ebookweb.org and the editor of mental health and Central East Europe categories in The Open Directory, Suite101 and searcheurope.com. Until recently, he served as the Economic Advisor to the Government of Macedonia.
Article Source: http://EzineArticles.com/32556
The Greatest Stedilnica Crisis in History
A crisis the size of the TAT crisis, is, inevitably, political. It involves thousands of citizens, many decision makers from every walk of life and the very economic and financial fabric of the country.
But, the TAT crisis pales in comparison with other, similar, crises in other countries in the world.
In Israel in 1983, ALL the banks collapsed on ONE October day, for instance!
The biggest crisis of savings and loans institutions (=Stedilnicas) in history happened in the USA in the years 1986-1987.
A Savings and Loans Association (SLA), or a THRIFT, was a strange banking hybrid, very much akin to the Building Societies in Britain. On the one hand, it was a sort of a bank, allowed to take in deposits. On the other hand, it was allowed to land money only to current or prospective homeowners on the basis of a mortgage on their house. It was really a mortgage bank and only that. This limitation on the nature of their asset portfolio, increased the risk associated with their lending. The SLAs could not diversify their portfolio into other kinds of assets and so were exposed to the vicissitudes of the residential real estate markets in their respective regions. Sure enough, when the real estate markets experienced a normal business cycle slump, the SLAs were disproportionately affected. Regional economic shocks (such as down spiralling commodity prices) rocked the value of real estate and the stability of these lending institutions. The coup de grace was delivered through the inordinately volatile interest rates. SLAs had to pay short term depositors high interest - while collecting lower income, in the form of interest payments on their old loans. This negative spread between the cost of funds and the assets' yield - eroded the operating margins of the SLAs. When they discovered that the securities that they were holding were much less valuable than the loans that they were intended to secure - panic ensued.
Hundreds of thousands of depositors crowded to draw their funds. Hundreds of SLAs (out of a total of more than 3,000) were rendered insolvent, unable to pay their depositors. They had to shut up their gates and were put to siege by angry - at times, violent - clients who lost their life savings.
The illiquidity spread like fire. One stedilnica after the other collapsed, leaving in their wake major financial crises, ruined businesses and homeowners, devastated communities. The crisis reached gigantic proportions and threatened the stability of the whole banking system all over the USA.
The Federal Savings and Loans Insurance Corporation (FSLIC) - which insured the deposits in SLAs - could no longer pay the claims and, in effect, went bankrupt. This single event had a chilling effect on the Federal government. True, the government did not guarantee the obligations of the FSLIC. Still, it was perceived to be an arm of the Federal Government and the public shock and outrage were beyond description.
So, the Federal Government was forced to step in. A hasty $300 billion (!) package was put in place to save what could still be saved. This was the first step, a right and proper reflex: the injection of liquidity through a special agency, the FHFB. Everyone involved postponed the mutual accusations, the criminal charges, the resignations and recriminations to a later stage. First and foremost the system had to be stabilized and it could be stabilized only through the restoration of public trust. Public trust could be restored only with money - and with a lot of it. The visible, unambiguous involvement of the top level authorities had a positive, long term effect. The "full faith and credit of the USA" was now behind the SLAs and that was good enough for everyone.
Now, that the storm was over, it was time for more farfetched, structural changes.
First, the supervision of banks and banking operations was taken from the Central Bank, the Federal Reserve. This separation of functions was long overdue: the Central Bank can hardly be expected to supervise a game the rules of which it dictates. There was bound to be a bias in its analysis of its "clients" (not to mention the close personal relationships fostered in years of common work).
Thus, the following complex structure emerged:
The Federal Deposit Insurance Corporation (FDIC) operates the Bank Insurance Fund (BIF) and the Savings Associations Insurance Fund (SAIF), separate insurance funds for banks and SLAs.
Banks pay premiums at one rate to BIF - SLAs pay at another to SAIF.
FDIC is designed to be independent in two ways. Its money comes from premiums and earnings of the two insurance funds, not from Congressional appropriations. Its board of directors has full authority to run the agency. The board has laws to follow, but no boss.
The FDIC regulates banks and SLAs with the aim to avoid insurance claims by depositors. When an institution becomes unsound, the FDIC can lend it money or take it over. If it takes over, it can run it and then sell it as a going concern. It has the authority to close it, pay off the depositors and try to collect the loans. Often the borrowers cannot pay, so the FDIC ends up owning collateral for loans, say real estate and trying to sell it.
The Resolution Trust Corporation (RTC) is a direct result of the SLAs scandal. Prior to 1989, SLAs were insured by the now-defunct FSLIC. The FDIC insured only banks. Congress had to eliminate FSLIC and put the insurance of SLAs under FDIC. Still, a great number of SLAs were regarded as "special risk" cases. They were given over to the jurisdiction of the RTC. It took over SLAs that failed under FSLIC and later - until August 1992. It operated and sold SLAs - or paid depositors and closed the relevant SLAs (just like the FDIC does). The money to finance the RTC came from bonds sold by a new government corporation (Resolution Fund Corporation, RefCorp). RTC ceased to effectively operate last year.
The Office of Thrift Supervision (OTS) was also established in 1989 and it also supervises SLAs.
This used to be the function of the Federal Home Loan Board (FHLB), which was dismantled by Congress in 1989. OTS is a department within the Treasury Department, but law and custom make it practically an independent agency. It supervises around 1500 thrifts with assets of circa 1 trillion Dollars.
The Federal Housing Finance Board (FHFB) regulates and examines SLAs - but with emphasis on their liquidity. It aids their financial stability through lines of credit from twelve regional Federal Home Loan Banks (FHLB). Those banks and the thrifts make up the Federal Home Loan Bank System (FHLBS). Many FHFB regulations are intended to make sure that SLAs lend for housing - the reason that Congress created this bank-like system, separated from the banks.
FHFB gets its funds from the System and is independent of executive branch supervision.
A host of other supervisory and regulatory agencies and treasury departments is involved in the American banking system. But at least one thing was achieved: a clear, streamlined, powerful regulatory hierarchy. SLAs (and banks, for this matter) utilized the confusion generated by the overlapping areas of activity and authority of the numerous previous agencies. No one agency had the full picture. Now, all became obvious: insurance was the FDIC's job, supervision was the OTS's and liquidity was the realm of the FHLB. This may, arguably, be the biggest benefit which stemmed from this, otherwise, nerve - wrecking crisis.
The process was not devoid of mistakes. Healthy thrifts were coaxed and cajoled to purchase less sturdy ones. This weakened their balance sheets considerably and the government reneged on its promises to allow them to amortize the goodwill element of the purchase over 40 years. Despite all this, the figures are unequivocal:
Thrifts numbered 2,898 in 1989. Six years later, their number shrank to 1,612 and it is forecast to go down to less than 1,000 at the turn of the millennium. A process of consolidation is evident: SLAs merge, become bigger, stronger, better capitalized. They resemble banks, in this sense.
This last development was so overwhelming, that Congress decided to demand that each SLAs should have a bank charter by the year 1998. Paradoxically, the very success of the SLAs in healing themselves led to their elimination. Why have two kinds of banks if all the operational parameters are equal? Why use two names, two separate insurance and supervision bureaucracies and two sets of regulations to monitor and regulate essentially the same kind of entities? This was absurd. While in the height of the crisis the ratio of the SLAs equity to their assets was less than 1% - it reached almost 10% (!) in 1994 - better even than banks.
This remarkable turnarounds (one of the most stunning in human financial history) was brought about by serendipity as much as by careful planning. Interest rate spreads became highly positive (SLAs were able to collect interest - for, instance, by investing in government securities - which was much higher than the interest that they paid for their sources). The stock exchanges soared and enabled the SLAs to offer new stock at excellent prices. This, together with the persistent pruning of the weeds in the field of good SLAs, with downsizing of the bloated bureaucracies of the SLAs and with the on going consolidation process - led to the revitalization of these banking institutions.
The overall banking markets shrank as other types of financial intermediaries joined the fray - but the health of the SLAs was guaranteed.
As this new found health became more and more evident, the legislative bodies eased up. Congress began to implement the gradual repeal of the draconian Glas-Steagall law (which forbade banks from dealing with a whole range of financial activities). They realized that the more diversified the financial institution is - the healthier it is likely to be. Limiting a bank to certain types of assets or to a certain geographical location was dangerous. Congress began, therefore, to lift these restrictions.
One element need not be neglected in this discourse: the relative absence of political intervention in the handling of the crisis. It was managed by the Federal Reserve - an able, utterly professional, blatantly a-political body. This is the most autonomous central bank in the world. It is never afraid to face the two biggest powers in the world: the President of the USA and Public Opinion - and it does this often. It thrives not on conflict but on the proper, impartial management of the economy.
This, by all means, is the biggest lesson to be learnt.
Sam Vaknin is the author of "Malignant Self Love - Narcissism Revisited" and "After the Rain - How the West Lost the East". He is a columnist in "Central Europe Review", United Press International (UPI) and ebookweb.org and the editor of mental health and Central East Europe categories in The Open Directory, Suite101 and searcheurope.com. Until recently, he served as the Economic Advisor to the Government of Macedonia.
Article Source: http://EzineArticles.com/32551
But, the TAT crisis pales in comparison with other, similar, crises in other countries in the world.
In Israel in 1983, ALL the banks collapsed on ONE October day, for instance!
The biggest crisis of savings and loans institutions (=Stedilnicas) in history happened in the USA in the years 1986-1987.
A Savings and Loans Association (SLA), or a THRIFT, was a strange banking hybrid, very much akin to the Building Societies in Britain. On the one hand, it was a sort of a bank, allowed to take in deposits. On the other hand, it was allowed to land money only to current or prospective homeowners on the basis of a mortgage on their house. It was really a mortgage bank and only that. This limitation on the nature of their asset portfolio, increased the risk associated with their lending. The SLAs could not diversify their portfolio into other kinds of assets and so were exposed to the vicissitudes of the residential real estate markets in their respective regions. Sure enough, when the real estate markets experienced a normal business cycle slump, the SLAs were disproportionately affected. Regional economic shocks (such as down spiralling commodity prices) rocked the value of real estate and the stability of these lending institutions. The coup de grace was delivered through the inordinately volatile interest rates. SLAs had to pay short term depositors high interest - while collecting lower income, in the form of interest payments on their old loans. This negative spread between the cost of funds and the assets' yield - eroded the operating margins of the SLAs. When they discovered that the securities that they were holding were much less valuable than the loans that they were intended to secure - panic ensued.
Hundreds of thousands of depositors crowded to draw their funds. Hundreds of SLAs (out of a total of more than 3,000) were rendered insolvent, unable to pay their depositors. They had to shut up their gates and were put to siege by angry - at times, violent - clients who lost their life savings.
The illiquidity spread like fire. One stedilnica after the other collapsed, leaving in their wake major financial crises, ruined businesses and homeowners, devastated communities. The crisis reached gigantic proportions and threatened the stability of the whole banking system all over the USA.
The Federal Savings and Loans Insurance Corporation (FSLIC) - which insured the deposits in SLAs - could no longer pay the claims and, in effect, went bankrupt. This single event had a chilling effect on the Federal government. True, the government did not guarantee the obligations of the FSLIC. Still, it was perceived to be an arm of the Federal Government and the public shock and outrage were beyond description.
So, the Federal Government was forced to step in. A hasty $300 billion (!) package was put in place to save what could still be saved. This was the first step, a right and proper reflex: the injection of liquidity through a special agency, the FHFB. Everyone involved postponed the mutual accusations, the criminal charges, the resignations and recriminations to a later stage. First and foremost the system had to be stabilized and it could be stabilized only through the restoration of public trust. Public trust could be restored only with money - and with a lot of it. The visible, unambiguous involvement of the top level authorities had a positive, long term effect. The "full faith and credit of the USA" was now behind the SLAs and that was good enough for everyone.
Now, that the storm was over, it was time for more farfetched, structural changes.
First, the supervision of banks and banking operations was taken from the Central Bank, the Federal Reserve. This separation of functions was long overdue: the Central Bank can hardly be expected to supervise a game the rules of which it dictates. There was bound to be a bias in its analysis of its "clients" (not to mention the close personal relationships fostered in years of common work).
Thus, the following complex structure emerged:
The Federal Deposit Insurance Corporation (FDIC) operates the Bank Insurance Fund (BIF) and the Savings Associations Insurance Fund (SAIF), separate insurance funds for banks and SLAs.
Banks pay premiums at one rate to BIF - SLAs pay at another to SAIF.
FDIC is designed to be independent in two ways. Its money comes from premiums and earnings of the two insurance funds, not from Congressional appropriations. Its board of directors has full authority to run the agency. The board has laws to follow, but no boss.
The FDIC regulates banks and SLAs with the aim to avoid insurance claims by depositors. When an institution becomes unsound, the FDIC can lend it money or take it over. If it takes over, it can run it and then sell it as a going concern. It has the authority to close it, pay off the depositors and try to collect the loans. Often the borrowers cannot pay, so the FDIC ends up owning collateral for loans, say real estate and trying to sell it.
The Resolution Trust Corporation (RTC) is a direct result of the SLAs scandal. Prior to 1989, SLAs were insured by the now-defunct FSLIC. The FDIC insured only banks. Congress had to eliminate FSLIC and put the insurance of SLAs under FDIC. Still, a great number of SLAs were regarded as "special risk" cases. They were given over to the jurisdiction of the RTC. It took over SLAs that failed under FSLIC and later - until August 1992. It operated and sold SLAs - or paid depositors and closed the relevant SLAs (just like the FDIC does). The money to finance the RTC came from bonds sold by a new government corporation (Resolution Fund Corporation, RefCorp). RTC ceased to effectively operate last year.
The Office of Thrift Supervision (OTS) was also established in 1989 and it also supervises SLAs.
This used to be the function of the Federal Home Loan Board (FHLB), which was dismantled by Congress in 1989. OTS is a department within the Treasury Department, but law and custom make it practically an independent agency. It supervises around 1500 thrifts with assets of circa 1 trillion Dollars.
The Federal Housing Finance Board (FHFB) regulates and examines SLAs - but with emphasis on their liquidity. It aids their financial stability through lines of credit from twelve regional Federal Home Loan Banks (FHLB). Those banks and the thrifts make up the Federal Home Loan Bank System (FHLBS). Many FHFB regulations are intended to make sure that SLAs lend for housing - the reason that Congress created this bank-like system, separated from the banks.
FHFB gets its funds from the System and is independent of executive branch supervision.
A host of other supervisory and regulatory agencies and treasury departments is involved in the American banking system. But at least one thing was achieved: a clear, streamlined, powerful regulatory hierarchy. SLAs (and banks, for this matter) utilized the confusion generated by the overlapping areas of activity and authority of the numerous previous agencies. No one agency had the full picture. Now, all became obvious: insurance was the FDIC's job, supervision was the OTS's and liquidity was the realm of the FHLB. This may, arguably, be the biggest benefit which stemmed from this, otherwise, nerve - wrecking crisis.
The process was not devoid of mistakes. Healthy thrifts were coaxed and cajoled to purchase less sturdy ones. This weakened their balance sheets considerably and the government reneged on its promises to allow them to amortize the goodwill element of the purchase over 40 years. Despite all this, the figures are unequivocal:
Thrifts numbered 2,898 in 1989. Six years later, their number shrank to 1,612 and it is forecast to go down to less than 1,000 at the turn of the millennium. A process of consolidation is evident: SLAs merge, become bigger, stronger, better capitalized. They resemble banks, in this sense.
This last development was so overwhelming, that Congress decided to demand that each SLAs should have a bank charter by the year 1998. Paradoxically, the very success of the SLAs in healing themselves led to their elimination. Why have two kinds of banks if all the operational parameters are equal? Why use two names, two separate insurance and supervision bureaucracies and two sets of regulations to monitor and regulate essentially the same kind of entities? This was absurd. While in the height of the crisis the ratio of the SLAs equity to their assets was less than 1% - it reached almost 10% (!) in 1994 - better even than banks.
This remarkable turnarounds (one of the most stunning in human financial history) was brought about by serendipity as much as by careful planning. Interest rate spreads became highly positive (SLAs were able to collect interest - for, instance, by investing in government securities - which was much higher than the interest that they paid for their sources). The stock exchanges soared and enabled the SLAs to offer new stock at excellent prices. This, together with the persistent pruning of the weeds in the field of good SLAs, with downsizing of the bloated bureaucracies of the SLAs and with the on going consolidation process - led to the revitalization of these banking institutions.
The overall banking markets shrank as other types of financial intermediaries joined the fray - but the health of the SLAs was guaranteed.
As this new found health became more and more evident, the legislative bodies eased up. Congress began to implement the gradual repeal of the draconian Glas-Steagall law (which forbade banks from dealing with a whole range of financial activities). They realized that the more diversified the financial institution is - the healthier it is likely to be. Limiting a bank to certain types of assets or to a certain geographical location was dangerous. Congress began, therefore, to lift these restrictions.
One element need not be neglected in this discourse: the relative absence of political intervention in the handling of the crisis. It was managed by the Federal Reserve - an able, utterly professional, blatantly a-political body. This is the most autonomous central bank in the world. It is never afraid to face the two biggest powers in the world: the President of the USA and Public Opinion - and it does this often. It thrives not on conflict but on the proper, impartial management of the economy.
This, by all means, is the biggest lesson to be learnt.
Sam Vaknin is the author of "Malignant Self Love - Narcissism Revisited" and "After the Rain - How the West Lost the East". He is a columnist in "Central Europe Review", United Press International (UPI) and ebookweb.org and the editor of mental health and Central East Europe categories in The Open Directory, Suite101 and searcheurope.com. Until recently, he served as the Economic Advisor to the Government of Macedonia.
Article Source: http://EzineArticles.com/32551
Infrastructure and Prosperity
In the past, if you mentioned the word "infrastructure", the verbal reflex would be: "physical". Infrastructure was roads, telephone lines, ports, airports and other very tangible country spanning things. Many things were added to this category as time went by, but they all preserved the tangibility requirements - even electricity and means of communication were measured by their physical manifestations: lines, poles, distances.
Today, we distinguish three additional categories of infrastructure which were unbeknownst to our forefathers:
Social infrastructure - laws, social institutions and agencies, social stratification, demographic elements and other social structures, formal and informal.
It is amazing to think that previously no one thought of the legal codex as infrastructure. It has all the hallmarks of infrastructure: it spans all the country, it dynamically develops on the basis of a previous strata, without it no goal oriented human activity (such as the conduct of business) is possible. A foreign investors is more interested in the answer to the question whether his property rights are protected under the law - than in the availability and accessibility of electricity lines.
He can always buy a generator and produce his own electricity - but he can never enact his own laws unilaterally. A local citizen is bound to encounter the law (or resort to it) sometime in his life - even if he never travels a road or uses a telephone.
The second category of infrastructure is the human infrastructure. What is the mentality of the people? Are they lazy, industrious, submissive, used to improvise, work in groups, individuals, rebellious, inventive or stifled and so on? Are they conservative, open to the world, xenophobic, ethnically radicalized, likely to use brute force to settle disputes? Are they ignorant, educated, technologically oriented, consume information or reject it, trustful and trustworthy or suspicious and resentful?
An educated workforce is as much an infrastructure as any phone line.
The last category of infrastructure is the information infrastructure. It is all the infrastructure which tackles the manipulation of symbols of all kinds : the accumulation of data, it processing and its dissemination. Words are symbols - but so is money and computer bytes. So banks, computers, Internet linkups, WANs and LANs (Wide and local area computer networks), standardized accounting, other standards for gods and services - all these are examples of the information infrastructure.
The development of all these infrastructures is intimately linked. They usually develop almost concurrently. They form feedback loops. The slow or hindered development of one of them will disturb all the others.
This is really quite easy to understand. If the workforce is not educated, it will not be keen on the manipulation of data and symbols. It will buy less computers, use the Internet less, bank less and so on. This, in turn, will reduce the need for phone lines, office buildings and so on. There seems to be an "infrastructure multiplier".
This multiplier is a two way street: an increase or decrease in each type of infrastructure adversely or positively influences the others.
The West is in dire need of infrastructure itself. Its infrastructure is either old and crumbling - or overloaded and crumbling. Roads in large parts of the USA are in poorer condition than roads in many countries in Africa. America-On-Line, a major Internet provider was unable to provide services to its customers in the last few weeks because communication lines in the USA were totally blocked. Certain places in Israel could receive television signals only in the last few years, as infrastructure reached them. Infrastructure is a universal problem.
No surprise that the West invests in the infrastructure in developing countries in two venues only:
Through international finance organizations (such as the World Bank and the European Bank for Reconstruction and Development). The terms and conditions of this kind of financing are very lenient. Those are really grants more than credits.
The implementation of these infrastructural projects is awarded to contractors through international tenders, wherein bids are submitted from the world over.
Rarely, a local firm outbids its better financed, better equipped and better motivated first world rivals. Local firms usually have the lower hand.
The other possibility is that multinational firms get involved. But this kind of financing comes with a lot of strings attached. The multinationals expect to get back both their investment and a reasonable return on it. They come heavily subsidized by the governments of their countries. Their contribution to the local economy, during the construction of the infrastructure, is fleeting, at best. They prefer to employ their own crews and equipment. They do not trust the locals too much or too often.
But whichever way the infrastructure is created, problems arise to the host country.
International, multilateral, finance organizations inevitably think on a global scale.
They invest in infrastructure only if and when it services - or has the potential to service in the larger scheme of things - a cluster of neighbouring countries.
Clear benefits to regional groupings of countries has to be unequivocally demonstrated. Such finance organizations will forever prefer to invest in a cross-border highway. They will neglect, overlook, or outrightly reject an investment in a much needed local road, for instance. The benefit to the domestic economy of the local road could be appreciatively more sizeable. Still, the international fund would encourage the cross border highway. This is its charter - to promote multilateral investments - and this is what it does best. The interests of the host country are a secondary consideration.
On the other hand, the private sector invests only in countries with well developed infrastructure in all the aforementioned categories. That this is a tautology, no one seems to notice. If the infrastructure is already developed - an investment is not needed. When it is needed, the private sector will not supply it, unless it is already developed. The result is that proper investments of the private sector - not subsidized, not partial, not correlated by international funding - is limited to the developed, industrial world.
Research discovered four disadvantages of countries with under-developed infrastructure:
Such countries suffer from interminable bottlenecks in all the levels of economic activity, especially in the production phase and in the transportation of raw materials to the factories and of finished products from them to the marketplace.
This adversely affects the availability of the domestic product both in the domestic and in the foreign markets. Agricultural produce is most affected but, to a lesser extent, so are industrial goods. If the infrastructural problem is with lines of communication, the service sector is harmed and cannot provide its products (the services) to its customers.
A second issue is the distortion of the price mechanism. Prices are heightened due to the resources wasted on trying to overcome problems in infrastructure. Prices are supposed to reflect inputs and values and thus to assist the markets to optimally allocate its resources. If the prices reflect other, unrelated, issues - then they are distorted and they distort the economic activity.
The third problem is that a disadvantage of a country - is an advantage to its competitors, rivals, neighbours and enemies. Other countries, with better infrastructure benefit : they attract more foreign investment, they conduct more business, they export more, they have lower inflation (cheaper prices) and their economy is not distorted by irrelevant, ulterior, non business considerations.
The fourth - and maybe largest and longest term - handicap is when the country's image is affected. Infrastructure is much easier to fix than a country's image. If the country acquires a reputation of a mere transit area, an underdeveloped, inefficient, non productive, hopeless case - it will suffer greatly until this is amended. This - the image - has the gravest possible consequences: repelled investors, reluctant financiers, frightened bankers, disgusted foreign investors. All this amounts to an ex communication of the country.
There are eight known solution to the problems of a country with underdeveloped infrastructure:
It can start by privatizing its infrastructure (commencing with its energy and telecommunications sectors, which are the most attractive to foreign and domestic private investors alike).
Then, it can allow the business sector to operate parts of the national infrastructure. The usual arrangement is that the business sector invests in creating the infrastructure and then collects a fee for operating and maintaining it. The fees collected are large enough to cover both the investment and the maintenance costs. The most famous example are toll roads which are constructed by private sector firms.
Another way is to commercialize the infrastructure (to collect fees for using the telephony network, or highways) and to ploughback the proceeds exclusively into projects of infrastructure. Thus, all the income generated by cars passing in a highway will be dedicated to the construction of additional highways and not be funnelled to the general budget.
The fourth method is to adapt the prices of using the infrastructure to the real costs of constructing and of operating it. In most developing countries, consumers pay only a fraction of these real costs. Prices are heavily subsidized and the infrastructure is left to decay and rot away. This, obviously, is a political decision to be taken by the political echelons. In many countries it could create social unrest and have severe political ramifications.
The country could condition investments in multilateral infrastructure projects upon investments in its own, local infrastructure. A multinational firm wishing to invest in a highway (thus reaping considerable cash rewards) - should invest a portion of the future profits in local roads and other forms of infrastructure. A multinational fund which is interested to invest in a telecommunications project connecting three countries, must oblige itself to a "local investment" clause, a "local content purchase" clause or an "offset" (the purchase of local goods against any import of goods connected to the project to the country) clause.
The country must open its markets to domestic and foreign competition by de-regulating itself. It must dismantle trade barriers : tariffs, quotas, restrictions, anti-investment regulations, restrictive standardization and so on. Competition will both lower the costs of the infrastructure and improve its quality, as rival firms will strive to supply more value at less price.
An important condition is that the country does not promote one kind of infrastructure over another. All categories of infrastructure should be simultaneously and similarly stimulated. This will carry favour with the international business community and is bound to alter the image of the country for the better. It will also create a positive feedback loop whereby an improvement in one category of infrastructure will yield improvements in all the others.
Last - but far from being least - the country must promote international agreements which will facilitate reductions in the costs of cross-boundary transport of goods, services and information, packaged no matter in which form. Less documentation, less one sided fees, less bureaucracy - will reduce the costs of businesses and the total damage to the national economy. The less encumbered by red tape - the more a country tends to prosper.
Sam Vaknin is the author of "Malignant Self Love - Narcissism Revisited" and "After the Rain - How the West Lost the East". He is a columnist in "Central Europe Review", United Press International (UPI) and ebookweb.org and the editor of mental health and Central East Europe categories in The Open Directory, Suite101 and searcheurope.com. Until recently, he served as the Economic Advisor to the Government of Macedonia.
Article Source: http://EzineArticles.com/32554
Today, we distinguish three additional categories of infrastructure which were unbeknownst to our forefathers:
Social infrastructure - laws, social institutions and agencies, social stratification, demographic elements and other social structures, formal and informal.
It is amazing to think that previously no one thought of the legal codex as infrastructure. It has all the hallmarks of infrastructure: it spans all the country, it dynamically develops on the basis of a previous strata, without it no goal oriented human activity (such as the conduct of business) is possible. A foreign investors is more interested in the answer to the question whether his property rights are protected under the law - than in the availability and accessibility of electricity lines.
He can always buy a generator and produce his own electricity - but he can never enact his own laws unilaterally. A local citizen is bound to encounter the law (or resort to it) sometime in his life - even if he never travels a road or uses a telephone.
The second category of infrastructure is the human infrastructure. What is the mentality of the people? Are they lazy, industrious, submissive, used to improvise, work in groups, individuals, rebellious, inventive or stifled and so on? Are they conservative, open to the world, xenophobic, ethnically radicalized, likely to use brute force to settle disputes? Are they ignorant, educated, technologically oriented, consume information or reject it, trustful and trustworthy or suspicious and resentful?
An educated workforce is as much an infrastructure as any phone line.
The last category of infrastructure is the information infrastructure. It is all the infrastructure which tackles the manipulation of symbols of all kinds : the accumulation of data, it processing and its dissemination. Words are symbols - but so is money and computer bytes. So banks, computers, Internet linkups, WANs and LANs (Wide and local area computer networks), standardized accounting, other standards for gods and services - all these are examples of the information infrastructure.
The development of all these infrastructures is intimately linked. They usually develop almost concurrently. They form feedback loops. The slow or hindered development of one of them will disturb all the others.
This is really quite easy to understand. If the workforce is not educated, it will not be keen on the manipulation of data and symbols. It will buy less computers, use the Internet less, bank less and so on. This, in turn, will reduce the need for phone lines, office buildings and so on. There seems to be an "infrastructure multiplier".
This multiplier is a two way street: an increase or decrease in each type of infrastructure adversely or positively influences the others.
The West is in dire need of infrastructure itself. Its infrastructure is either old and crumbling - or overloaded and crumbling. Roads in large parts of the USA are in poorer condition than roads in many countries in Africa. America-On-Line, a major Internet provider was unable to provide services to its customers in the last few weeks because communication lines in the USA were totally blocked. Certain places in Israel could receive television signals only in the last few years, as infrastructure reached them. Infrastructure is a universal problem.
No surprise that the West invests in the infrastructure in developing countries in two venues only:
Through international finance organizations (such as the World Bank and the European Bank for Reconstruction and Development). The terms and conditions of this kind of financing are very lenient. Those are really grants more than credits.
The implementation of these infrastructural projects is awarded to contractors through international tenders, wherein bids are submitted from the world over.
Rarely, a local firm outbids its better financed, better equipped and better motivated first world rivals. Local firms usually have the lower hand.
The other possibility is that multinational firms get involved. But this kind of financing comes with a lot of strings attached. The multinationals expect to get back both their investment and a reasonable return on it. They come heavily subsidized by the governments of their countries. Their contribution to the local economy, during the construction of the infrastructure, is fleeting, at best. They prefer to employ their own crews and equipment. They do not trust the locals too much or too often.
But whichever way the infrastructure is created, problems arise to the host country.
International, multilateral, finance organizations inevitably think on a global scale.
They invest in infrastructure only if and when it services - or has the potential to service in the larger scheme of things - a cluster of neighbouring countries.
Clear benefits to regional groupings of countries has to be unequivocally demonstrated. Such finance organizations will forever prefer to invest in a cross-border highway. They will neglect, overlook, or outrightly reject an investment in a much needed local road, for instance. The benefit to the domestic economy of the local road could be appreciatively more sizeable. Still, the international fund would encourage the cross border highway. This is its charter - to promote multilateral investments - and this is what it does best. The interests of the host country are a secondary consideration.
On the other hand, the private sector invests only in countries with well developed infrastructure in all the aforementioned categories. That this is a tautology, no one seems to notice. If the infrastructure is already developed - an investment is not needed. When it is needed, the private sector will not supply it, unless it is already developed. The result is that proper investments of the private sector - not subsidized, not partial, not correlated by international funding - is limited to the developed, industrial world.
Research discovered four disadvantages of countries with under-developed infrastructure:
Such countries suffer from interminable bottlenecks in all the levels of economic activity, especially in the production phase and in the transportation of raw materials to the factories and of finished products from them to the marketplace.
This adversely affects the availability of the domestic product both in the domestic and in the foreign markets. Agricultural produce is most affected but, to a lesser extent, so are industrial goods. If the infrastructural problem is with lines of communication, the service sector is harmed and cannot provide its products (the services) to its customers.
A second issue is the distortion of the price mechanism. Prices are heightened due to the resources wasted on trying to overcome problems in infrastructure. Prices are supposed to reflect inputs and values and thus to assist the markets to optimally allocate its resources. If the prices reflect other, unrelated, issues - then they are distorted and they distort the economic activity.
The third problem is that a disadvantage of a country - is an advantage to its competitors, rivals, neighbours and enemies. Other countries, with better infrastructure benefit : they attract more foreign investment, they conduct more business, they export more, they have lower inflation (cheaper prices) and their economy is not distorted by irrelevant, ulterior, non business considerations.
The fourth - and maybe largest and longest term - handicap is when the country's image is affected. Infrastructure is much easier to fix than a country's image. If the country acquires a reputation of a mere transit area, an underdeveloped, inefficient, non productive, hopeless case - it will suffer greatly until this is amended. This - the image - has the gravest possible consequences: repelled investors, reluctant financiers, frightened bankers, disgusted foreign investors. All this amounts to an ex communication of the country.
There are eight known solution to the problems of a country with underdeveloped infrastructure:
It can start by privatizing its infrastructure (commencing with its energy and telecommunications sectors, which are the most attractive to foreign and domestic private investors alike).
Then, it can allow the business sector to operate parts of the national infrastructure. The usual arrangement is that the business sector invests in creating the infrastructure and then collects a fee for operating and maintaining it. The fees collected are large enough to cover both the investment and the maintenance costs. The most famous example are toll roads which are constructed by private sector firms.
Another way is to commercialize the infrastructure (to collect fees for using the telephony network, or highways) and to ploughback the proceeds exclusively into projects of infrastructure. Thus, all the income generated by cars passing in a highway will be dedicated to the construction of additional highways and not be funnelled to the general budget.
The fourth method is to adapt the prices of using the infrastructure to the real costs of constructing and of operating it. In most developing countries, consumers pay only a fraction of these real costs. Prices are heavily subsidized and the infrastructure is left to decay and rot away. This, obviously, is a political decision to be taken by the political echelons. In many countries it could create social unrest and have severe political ramifications.
The country could condition investments in multilateral infrastructure projects upon investments in its own, local infrastructure. A multinational firm wishing to invest in a highway (thus reaping considerable cash rewards) - should invest a portion of the future profits in local roads and other forms of infrastructure. A multinational fund which is interested to invest in a telecommunications project connecting three countries, must oblige itself to a "local investment" clause, a "local content purchase" clause or an "offset" (the purchase of local goods against any import of goods connected to the project to the country) clause.
The country must open its markets to domestic and foreign competition by de-regulating itself. It must dismantle trade barriers : tariffs, quotas, restrictions, anti-investment regulations, restrictive standardization and so on. Competition will both lower the costs of the infrastructure and improve its quality, as rival firms will strive to supply more value at less price.
An important condition is that the country does not promote one kind of infrastructure over another. All categories of infrastructure should be simultaneously and similarly stimulated. This will carry favour with the international business community and is bound to alter the image of the country for the better. It will also create a positive feedback loop whereby an improvement in one category of infrastructure will yield improvements in all the others.
Last - but far from being least - the country must promote international agreements which will facilitate reductions in the costs of cross-boundary transport of goods, services and information, packaged no matter in which form. Less documentation, less one sided fees, less bureaucracy - will reduce the costs of businesses and the total damage to the national economy. The less encumbered by red tape - the more a country tends to prosper.
Sam Vaknin is the author of "Malignant Self Love - Narcissism Revisited" and "After the Rain - How the West Lost the East". He is a columnist in "Central Europe Review", United Press International (UPI) and ebookweb.org and the editor of mental health and Central East Europe categories in The Open Directory, Suite101 and searcheurope.com. Until recently, he served as the Economic Advisor to the Government of Macedonia.
Article Source: http://EzineArticles.com/32554
The Sickly State of Public Hospitals
There are many types of hospitals but the most well known are the Public Hospitals. What sets them apart is that they provide services to the indigent (people without means) and to minorities.
Historically, public hospitals started as correction and welfare centres. They were poorhouses run by the church and attached to medical schools. A full cycle ensued: communities established their own hospitals which were later taken over by regional authorities and governments - only to be returned to the management of communities nowadays. Between 1978 and 1995 a 25% decline ensued in the number of public hospitals and those remaining were transformed to small, rural facilities.
In the USA, less than one third of the hospitals are in cities and only 15% had more than 200 beds. The 100 largest hospitals averaged 581 beds.
A debate rages in the West: should healthcare be completely privatized - or should a segment of it be left in public hands?
Public hospitals are in dire financial straits. 65% of the patients do not pay for medical services received by them. The public hospitals have a legal obligation to treat all. Some patients are insured by national medical insurance plans (such as Medicare/Medicaid in the USA, NHS in Britain). Others are insured by community plans.
The other problem is that this kind of patients consumes less or non profitable services. The service mix is flawed: trauma care, drugs, HIV and obstetrics treatments are prevalent - long, patently loss making services.
The more lucrative ones are tackled by private healthcare providers: hi tech and specialized services (cardiac surgery, diagnostic imagery).
Public hospitals are forced to provide "culturally competent care": social services, child welfare. These are money losing operations from which private facilities can abstain. Based on research, we can safely say that private, for profit hospitals, discriminate against publicly insured patients. They prefer young, growing, families and healthier patients. The latter gravitate out of the public system, leaving it to become an enclave of poor, chronically sick patients.
This, in turn, makes it difficult for the public system to attract human and financial resources. It is becoming more and more destitute.
Poor people are poor voters and they make for very little political power.
Public hospitals operate in an hostile environment: budget reductions, the rapid proliferation of competing healthcare alternatives with a much better image and the fashion of privatization (even of safety net institutions).
Public hospitals are heavily dependent on state funding. Governments foot the bulk of the healthcare bill. Public and private healthcare providers pursue this money. In the USA, potential consumers organized themselves in Healthcare Maintenance Organizations (HMOs). The HMO negotiates with providers (=hospitals, clinics, pharmacies) to obtain volume discounts and the best rates through negotiations. Public hospitals - underfunded as they are - are not in the position to offer them what they want. So, they lose patients to private hospitals.
But public hospitals are also to blame for their situation.
They have not implemented standards of accountability. They make no routine statistical measurements of their effectiveness and productivity: wait times, financial reporting and the extent of network development. As even governments are transformed from "dumb providers" to "smart purchasers", public hospitals must reconfigure, change ownership (privatize, lease their facilities long term), or perish. Currently, these institutions are (often unjustly) charged with faulty financial management (the fees charged for their services are unrealistically low), substandard, inefficient care, heavy labour unionization, bloated bureaucracy and no incentives to improve performance and productivity. No wonder there is talk about abolishing the "brick and mortar" infrastructure (=closing the public hospitals) and replacing it with a virtual one (=geographically portable medical insurance).
To be sure, there are counterarguments:
The private sector is unwilling and unable to absorb the load of patients of the public sector. It is not legally obligated to do so and the marketing arms of the various HMOs are interested mainly in the healthiest patients.
These discriminatory practices wreaked havoc and chaos (not to mention corruption and irregularities) on the communities that phased out the public hospitals - and phased in the private ones.
True enough, governments perform poorly as cost conscious purchasers of medical services. It is also true that they lack the resources to reach a substantial segment of the uninsured (through subsidized expansions of insurance plans).
40,000,000 people in the USA have no medical insurance - and a million more are added annually. But, there is no data to support the contention that public hospitals provide inferior care at a higher cost - and, indisputably, they possess unique experience in caring for low income populations (both medically and socially).
So, in the absence of facts, the arguments really boil down to philosophy. Is healthcare a fundamental human right - or is it a commodity to be subjected to the invisible hand of the marketplace? Should prices serve as the mechanism of optimal allocation of healthcare resources - or are there other, less quantifiable, parameters to consider?
Whatever the philosophical predilection, a reform is a must. It should include the following elements:
Public hospitals should be governed by healthcare management experts who will emphasize clinical and fiscal considerations over political ones. This should be coupled with the vesting of authority with hospitals, taking it back from local government. Hospitals could be organized as (public benefit) corporations with enhanced autonomy to avoid today's debilitating dual effects: politics and bureaucracy. They could organize themselves as Not for Profit Organizations with independent, self perpetuating boards of directors.
But all this can come about only with increased public accountability and with clear measuring, using clear quantitative criteria, of the use of funds dedicated to the public missions of public hospitals. Hospitals could start by revamping their compensation structures to increase both pay and financial incentives to the staff.
Current one-fits-all compensation systems deter talented people. Pay must be linked to objectively measured criteria. The Hospital's top management should receive a bonus when the hospital is accredited by the state, when wait times are improved, when disrollment rates go down and when more services are provided.
To implement this (mainly mental) revolution, the management of public hospitals should be trained to use rigorous financial controls, to improve customer service, to re-engineer processes and to negotiate agreements and commercial transactions.
The staff must be employed through written employment contracts with clear severance provisions that will allow the management to take commercial risks.
Clear goals must be defined and met. Public hospitals must improve continuity of care, expand primary care capacity, reduce lengths of stay (=increase turnaround) and meet budgetary constraints imposed both by the state and by patient groups or their insurance companies.
All this cannot be achieved without the full collaboration of the physicians employed by the hospitals. Hospitals in the USA form business joint ventures with their own physicians (PHO - Physicians Hospital Organizations). They benefit together from the implementation of reforms and by the increase of productivity. It is estimated that productivity today is 40% less in the public sector than in the private one. This is a dubious estimate: the patient populations are different (sicker people in the public sector). But even if the figure is incorrect - the essence is: public hospitals are less efficient.
They are less efficient because of archaic scheduling of patient-doctor appointments, laboratory tests and surgeries, because of obsolete or non-existent information systems, because of long turnaround times and because of redundant lab tests and medical procedures. The support - which exists in private hospitals - from other (clinical and nonclinical) personnel is absent because of impossibly complex labour rules and job descriptions imposed by the unions. Most of the doctors have split loyalties between the medical schools in which they teach and the various hospital affiliates. They would tend to neglect the voluntary affiliates and contribute more to the prestigious ones. Public hospitals would, therefore, be well advised to hire new staff, not from medical schools, share risks with its physicians through joint ventures, sign contracts with pay based on productivity and put physicians in the governing boards. In general, the hospitals must shrink and re-engineer the workforce. About half the budget is normally spent on labour costs in private hospitals - and more than 70% in public ones. It is no good to reduce the workforce through natural attrition, mass layoffs, or severance incentives. These are "blind", nondiscriminating measures which affect the quality of the care provided by the hospital. When compounded by work rules, seniority systems, job title structures and skewed grievance procedures - the situation can get completely out of hand.
The government must contribute its part. Public hospitals cannot comply or compete with the demands of national, publicly traded HMOs with political clout and the capacity to raise capital to finance hyper-sophisticated marketing. Public policy must be written to support "safety net" institutions. They must be allowed to organize their own MCOs (Managed Care Organizations of patients), to insure patients and to market their services directly to groups of potential consumers. This way they will save the 20% commission that they are paying HMOs currently. If they become more efficient and reduce utilization, they will absorb the full benefits, instead of ceding them to contracting groups of patients and insurance companies or even to the government's medical insurance plans. The hospitals will thus be able to construct their own networks of suppliers and share their risks with their physicians or with the insurance companies as best suits their objectives.
An example: a Public Hospital with its own healthcare plan is likely to make use of all its specialists and facilities, increase capacity utilization and profits - whereas today only its primary care, less lucrative, services are used by independent HMOs.
The government can limit the total number of healthcare plans available, so that the one propagated by the public hospital will stand out and not be swamped by hundreds of other plans. Such a public hospital plan could also be declared the "healthcare plan of default" - anyone who has not selected a plan will be automatically referred to and included in the public hospital plan.
Not every hospital can start an HMO plan. Only the big ones can support the necessary insurance payments, the reserve requirements and the marketing and administrative costs. The paradox is that big public hospitals are already committed to HMOs, insurers, other patient groups, or government-sponsored MCOs. These resist the inclusion of hospitals which own competing healthcare plans - in their networks. This is natural: a hospital with a plan - is a direct competitor of a private provider of healthcare management and insurance. Another obstacle is that governments are very reluctant to encourage the public sector on account of the private one. This is definitely out of fashion nowadays.
So, an alternative strategy looks more viable:
Public hospitals can act as direct contracting networks. They can team up, pool their resources, exercise political lobbying, relegate administrative and audit functions (data processing, claim processing, payment system, accounting, legal services) to a common centre. This will eliminate the need for middlemen like the HMOs. These joint networks will be able to negotiate contracts with other contractors: physicians, pharmacies, specialized laboratories and so on. This will assist the public hospitals to preserve a loyal and stable (low churning) patient base.
Finally, public hospitals are large employers with political muscle. All they lack is the will to exercise it. They should do it to force governments to adopt some unpopular decisions: offer incentives to HMOs which will refer patients to public hospitals, require HMOs to use all the range of services (both primary and speciality), compensate public hospitals directly for nonpaying patients.
But the public hospitals must begin to behave as public entities: they must open their decision making processes and make them community-oriented. They must shift from relying on contractual language to relying on administrative law (regulations) - except when it comes to employment. In a nutshell: they should be business oriented, on the one hand - and publicly accountable on the other.
There is the little matter of Public Relations and advocacy. Public Hospitals have a terrible image and they are doing very little to change it. They do not even collaborate with researchers trying to establish a factual fundament concerning "safety net medical and social care". In a world where images count more than realities this may well be the public hospitals biggest mistake.
Eight Ways to Improve the Operation of Public Hospitals
A public hospital can lease physical space or temporal slots, or computer equipment or any other equipment which suffers capacity underutilisation - to their physicians for private practice.
The lessee physicians will undertake to pay the hospital - either in the form of fixed fees or in the form of participation in the income (franchise arrangements).
They will also commit themselves to provide community-oriented, non profit services in return for the right to use what is, essentially, community property.
Another method of using the excess capacity is to sell it, rent it, or lease it to entrepreneurs who are not members of the hospital staff. There are many such possibilities: small laboratories, speciality medical services, primary care and specialist practitioners. All these would love to use the superior infrastructure of the hospital. The right to use this infrastructure can be given in the form of a concession, a franchise, a rental arrangement, or any other arm's length mode of collaboration. Professionals are likely to jump on the bandwagon when they realize that the hospital provides them with a "captive market" of patient. This is very much like the relationship between an "anchor" in a shopping mall and the small retail shops surrounding it. The small shops benefit from the business diverted in their direction from the big "anchor" outlets.
The next logical step would be to sell products and services to the community on a commercial, competitive basis. The hospital does not have to limit itself to the sale of medical goods and services. It can also sell medical legal services, use its print shop to offer print jobs, organize its social services as a profit centre and sell them to the community or to individuals, offer medical consultancy on a fee per service basis, even sell food from the hospital kitchen through a catering service or data to researchers from its archives. A natural extension of this approach would be "internal privatization".
A hospital is a collection of small (to medium) size businesses operating under one organizational roof. Laundry, cleaning, kitchen, the provision of television sets and telephones to patients, a business centre for the hospitalized businessmen - these are all profit or loss generating centres.
Internal privatization entails the transformation of the hospital into a holding company. This holding company will own and operate a host of corporations. Each corporation will constitute a separate contractor which will provide the hospital with a service or a product. Thus, all laundry will be done by a corporation which will charge the hospital for its services. The same will go for the kitchen, the printshop, the legal services and so on. These corporations will employ the former staff of the hospital. This way, the knowledge and experience accumulated within the hospital will not be lost. The corporations owned by the former employees will have a "right of first refusal" in the first five years following the transformation. The employee-owned corporations will be allowed to match the best offers in yearly tenders that the hospital will conduct for the services that they are offering.
These corporations will also be allowed to offer their services to other clients. Thus, they will reduce their dependence on one employer, the hospital. They will become truly entrepreneurial entities, competing for profits in a market environment.
A part of the re-engineering process is to determine which of the functions that the hospital fulfils are "core functions", indispensable functions without which the hospital will cease to exist or will change its identity to such an extent that it will no longer will be recognizable as a hospital. All other, "noncore", functions should be tendered out (a concept called "outsourcing"). They should be awarded in a tender to the most competitive bidders, regardless of their identity and previous allegiance. The hospital is likely to benefit from the transfer of functions, in which it has no relative competitive advantage, to outsiders whose expertise these functions are. This is somewhat akin to international (free) trade, where each nation optimizes its resources and passes the (beneficial) results of this optimization process to its trading partners.
To control this kind of transformation, medical information management systems need to be introduced. Many are available and they improve both the quality and the quantity of data available to the management of the hospital and, as a result, the decision making process. This will make it easier for the management to pinpoint which areas require doing what. For instance: the management of the hospital will be able to determine what kind of incentives should be provided to which members of the staff, where could costs be cut and where and how could productivity be improved.
Finally, a novel concept is emerging. Universities and hospitals are two important repositories of human knowledge and experience. Virtually every hospital somehow collaborates with an academic institution, or with a medical school.
There is symbiosis between hospital and medical and social researchers.
Hospitals should actively encourage this. It improves their image, it contributes to their ability to provide quality services. But should not do it for free. They should be contractual partners to the commercial exploitation of the results of research conducted within their premises or with their co-operation. There is a vast field for pharmaceutical, medical, genetic and bioengineering research - and a lot of opportunities to make money for the benefit of the entire community. By not getting commercially involved - hospitals give up money which really is not theirs to give up.
Sam Vaknin is the author of "Malignant Self Love - Narcissism Revisited" and "After the Rain - How the West Lost the East". He is a columnist in "Central Europe Review", United Press International (UPI) and ebookweb.org and the editor of mental health and Central East Europe categories in The Open Directory, Suite101 and searcheurope.com. Until recently, he served as the Economic Advisor to the Government of Macedonia.
Article Source: http://EzineArticles.com/32553
Historically, public hospitals started as correction and welfare centres. They were poorhouses run by the church and attached to medical schools. A full cycle ensued: communities established their own hospitals which were later taken over by regional authorities and governments - only to be returned to the management of communities nowadays. Between 1978 and 1995 a 25% decline ensued in the number of public hospitals and those remaining were transformed to small, rural facilities.
In the USA, less than one third of the hospitals are in cities and only 15% had more than 200 beds. The 100 largest hospitals averaged 581 beds.
A debate rages in the West: should healthcare be completely privatized - or should a segment of it be left in public hands?
Public hospitals are in dire financial straits. 65% of the patients do not pay for medical services received by them. The public hospitals have a legal obligation to treat all. Some patients are insured by national medical insurance plans (such as Medicare/Medicaid in the USA, NHS in Britain). Others are insured by community plans.
The other problem is that this kind of patients consumes less or non profitable services. The service mix is flawed: trauma care, drugs, HIV and obstetrics treatments are prevalent - long, patently loss making services.
The more lucrative ones are tackled by private healthcare providers: hi tech and specialized services (cardiac surgery, diagnostic imagery).
Public hospitals are forced to provide "culturally competent care": social services, child welfare. These are money losing operations from which private facilities can abstain. Based on research, we can safely say that private, for profit hospitals, discriminate against publicly insured patients. They prefer young, growing, families and healthier patients. The latter gravitate out of the public system, leaving it to become an enclave of poor, chronically sick patients.
This, in turn, makes it difficult for the public system to attract human and financial resources. It is becoming more and more destitute.
Poor people are poor voters and they make for very little political power.
Public hospitals operate in an hostile environment: budget reductions, the rapid proliferation of competing healthcare alternatives with a much better image and the fashion of privatization (even of safety net institutions).
Public hospitals are heavily dependent on state funding. Governments foot the bulk of the healthcare bill. Public and private healthcare providers pursue this money. In the USA, potential consumers organized themselves in Healthcare Maintenance Organizations (HMOs). The HMO negotiates with providers (=hospitals, clinics, pharmacies) to obtain volume discounts and the best rates through negotiations. Public hospitals - underfunded as they are - are not in the position to offer them what they want. So, they lose patients to private hospitals.
But public hospitals are also to blame for their situation.
They have not implemented standards of accountability. They make no routine statistical measurements of their effectiveness and productivity: wait times, financial reporting and the extent of network development. As even governments are transformed from "dumb providers" to "smart purchasers", public hospitals must reconfigure, change ownership (privatize, lease their facilities long term), or perish. Currently, these institutions are (often unjustly) charged with faulty financial management (the fees charged for their services are unrealistically low), substandard, inefficient care, heavy labour unionization, bloated bureaucracy and no incentives to improve performance and productivity. No wonder there is talk about abolishing the "brick and mortar" infrastructure (=closing the public hospitals) and replacing it with a virtual one (=geographically portable medical insurance).
To be sure, there are counterarguments:
The private sector is unwilling and unable to absorb the load of patients of the public sector. It is not legally obligated to do so and the marketing arms of the various HMOs are interested mainly in the healthiest patients.
These discriminatory practices wreaked havoc and chaos (not to mention corruption and irregularities) on the communities that phased out the public hospitals - and phased in the private ones.
True enough, governments perform poorly as cost conscious purchasers of medical services. It is also true that they lack the resources to reach a substantial segment of the uninsured (through subsidized expansions of insurance plans).
40,000,000 people in the USA have no medical insurance - and a million more are added annually. But, there is no data to support the contention that public hospitals provide inferior care at a higher cost - and, indisputably, they possess unique experience in caring for low income populations (both medically and socially).
So, in the absence of facts, the arguments really boil down to philosophy. Is healthcare a fundamental human right - or is it a commodity to be subjected to the invisible hand of the marketplace? Should prices serve as the mechanism of optimal allocation of healthcare resources - or are there other, less quantifiable, parameters to consider?
Whatever the philosophical predilection, a reform is a must. It should include the following elements:
Public hospitals should be governed by healthcare management experts who will emphasize clinical and fiscal considerations over political ones. This should be coupled with the vesting of authority with hospitals, taking it back from local government. Hospitals could be organized as (public benefit) corporations with enhanced autonomy to avoid today's debilitating dual effects: politics and bureaucracy. They could organize themselves as Not for Profit Organizations with independent, self perpetuating boards of directors.
But all this can come about only with increased public accountability and with clear measuring, using clear quantitative criteria, of the use of funds dedicated to the public missions of public hospitals. Hospitals could start by revamping their compensation structures to increase both pay and financial incentives to the staff.
Current one-fits-all compensation systems deter talented people. Pay must be linked to objectively measured criteria. The Hospital's top management should receive a bonus when the hospital is accredited by the state, when wait times are improved, when disrollment rates go down and when more services are provided.
To implement this (mainly mental) revolution, the management of public hospitals should be trained to use rigorous financial controls, to improve customer service, to re-engineer processes and to negotiate agreements and commercial transactions.
The staff must be employed through written employment contracts with clear severance provisions that will allow the management to take commercial risks.
Clear goals must be defined and met. Public hospitals must improve continuity of care, expand primary care capacity, reduce lengths of stay (=increase turnaround) and meet budgetary constraints imposed both by the state and by patient groups or their insurance companies.
All this cannot be achieved without the full collaboration of the physicians employed by the hospitals. Hospitals in the USA form business joint ventures with their own physicians (PHO - Physicians Hospital Organizations). They benefit together from the implementation of reforms and by the increase of productivity. It is estimated that productivity today is 40% less in the public sector than in the private one. This is a dubious estimate: the patient populations are different (sicker people in the public sector). But even if the figure is incorrect - the essence is: public hospitals are less efficient.
They are less efficient because of archaic scheduling of patient-doctor appointments, laboratory tests and surgeries, because of obsolete or non-existent information systems, because of long turnaround times and because of redundant lab tests and medical procedures. The support - which exists in private hospitals - from other (clinical and nonclinical) personnel is absent because of impossibly complex labour rules and job descriptions imposed by the unions. Most of the doctors have split loyalties between the medical schools in which they teach and the various hospital affiliates. They would tend to neglect the voluntary affiliates and contribute more to the prestigious ones. Public hospitals would, therefore, be well advised to hire new staff, not from medical schools, share risks with its physicians through joint ventures, sign contracts with pay based on productivity and put physicians in the governing boards. In general, the hospitals must shrink and re-engineer the workforce. About half the budget is normally spent on labour costs in private hospitals - and more than 70% in public ones. It is no good to reduce the workforce through natural attrition, mass layoffs, or severance incentives. These are "blind", nondiscriminating measures which affect the quality of the care provided by the hospital. When compounded by work rules, seniority systems, job title structures and skewed grievance procedures - the situation can get completely out of hand.
The government must contribute its part. Public hospitals cannot comply or compete with the demands of national, publicly traded HMOs with political clout and the capacity to raise capital to finance hyper-sophisticated marketing. Public policy must be written to support "safety net" institutions. They must be allowed to organize their own MCOs (Managed Care Organizations of patients), to insure patients and to market their services directly to groups of potential consumers. This way they will save the 20% commission that they are paying HMOs currently. If they become more efficient and reduce utilization, they will absorb the full benefits, instead of ceding them to contracting groups of patients and insurance companies or even to the government's medical insurance plans. The hospitals will thus be able to construct their own networks of suppliers and share their risks with their physicians or with the insurance companies as best suits their objectives.
An example: a Public Hospital with its own healthcare plan is likely to make use of all its specialists and facilities, increase capacity utilization and profits - whereas today only its primary care, less lucrative, services are used by independent HMOs.
The government can limit the total number of healthcare plans available, so that the one propagated by the public hospital will stand out and not be swamped by hundreds of other plans. Such a public hospital plan could also be declared the "healthcare plan of default" - anyone who has not selected a plan will be automatically referred to and included in the public hospital plan.
Not every hospital can start an HMO plan. Only the big ones can support the necessary insurance payments, the reserve requirements and the marketing and administrative costs. The paradox is that big public hospitals are already committed to HMOs, insurers, other patient groups, or government-sponsored MCOs. These resist the inclusion of hospitals which own competing healthcare plans - in their networks. This is natural: a hospital with a plan - is a direct competitor of a private provider of healthcare management and insurance. Another obstacle is that governments are very reluctant to encourage the public sector on account of the private one. This is definitely out of fashion nowadays.
So, an alternative strategy looks more viable:
Public hospitals can act as direct contracting networks. They can team up, pool their resources, exercise political lobbying, relegate administrative and audit functions (data processing, claim processing, payment system, accounting, legal services) to a common centre. This will eliminate the need for middlemen like the HMOs. These joint networks will be able to negotiate contracts with other contractors: physicians, pharmacies, specialized laboratories and so on. This will assist the public hospitals to preserve a loyal and stable (low churning) patient base.
Finally, public hospitals are large employers with political muscle. All they lack is the will to exercise it. They should do it to force governments to adopt some unpopular decisions: offer incentives to HMOs which will refer patients to public hospitals, require HMOs to use all the range of services (both primary and speciality), compensate public hospitals directly for nonpaying patients.
But the public hospitals must begin to behave as public entities: they must open their decision making processes and make them community-oriented. They must shift from relying on contractual language to relying on administrative law (regulations) - except when it comes to employment. In a nutshell: they should be business oriented, on the one hand - and publicly accountable on the other.
There is the little matter of Public Relations and advocacy. Public Hospitals have a terrible image and they are doing very little to change it. They do not even collaborate with researchers trying to establish a factual fundament concerning "safety net medical and social care". In a world where images count more than realities this may well be the public hospitals biggest mistake.
Eight Ways to Improve the Operation of Public Hospitals
A public hospital can lease physical space or temporal slots, or computer equipment or any other equipment which suffers capacity underutilisation - to their physicians for private practice.
The lessee physicians will undertake to pay the hospital - either in the form of fixed fees or in the form of participation in the income (franchise arrangements).
They will also commit themselves to provide community-oriented, non profit services in return for the right to use what is, essentially, community property.
Another method of using the excess capacity is to sell it, rent it, or lease it to entrepreneurs who are not members of the hospital staff. There are many such possibilities: small laboratories, speciality medical services, primary care and specialist practitioners. All these would love to use the superior infrastructure of the hospital. The right to use this infrastructure can be given in the form of a concession, a franchise, a rental arrangement, or any other arm's length mode of collaboration. Professionals are likely to jump on the bandwagon when they realize that the hospital provides them with a "captive market" of patient. This is very much like the relationship between an "anchor" in a shopping mall and the small retail shops surrounding it. The small shops benefit from the business diverted in their direction from the big "anchor" outlets.
The next logical step would be to sell products and services to the community on a commercial, competitive basis. The hospital does not have to limit itself to the sale of medical goods and services. It can also sell medical legal services, use its print shop to offer print jobs, organize its social services as a profit centre and sell them to the community or to individuals, offer medical consultancy on a fee per service basis, even sell food from the hospital kitchen through a catering service or data to researchers from its archives. A natural extension of this approach would be "internal privatization".
A hospital is a collection of small (to medium) size businesses operating under one organizational roof. Laundry, cleaning, kitchen, the provision of television sets and telephones to patients, a business centre for the hospitalized businessmen - these are all profit or loss generating centres.
Internal privatization entails the transformation of the hospital into a holding company. This holding company will own and operate a host of corporations. Each corporation will constitute a separate contractor which will provide the hospital with a service or a product. Thus, all laundry will be done by a corporation which will charge the hospital for its services. The same will go for the kitchen, the printshop, the legal services and so on. These corporations will employ the former staff of the hospital. This way, the knowledge and experience accumulated within the hospital will not be lost. The corporations owned by the former employees will have a "right of first refusal" in the first five years following the transformation. The employee-owned corporations will be allowed to match the best offers in yearly tenders that the hospital will conduct for the services that they are offering.
These corporations will also be allowed to offer their services to other clients. Thus, they will reduce their dependence on one employer, the hospital. They will become truly entrepreneurial entities, competing for profits in a market environment.
A part of the re-engineering process is to determine which of the functions that the hospital fulfils are "core functions", indispensable functions without which the hospital will cease to exist or will change its identity to such an extent that it will no longer will be recognizable as a hospital. All other, "noncore", functions should be tendered out (a concept called "outsourcing"). They should be awarded in a tender to the most competitive bidders, regardless of their identity and previous allegiance. The hospital is likely to benefit from the transfer of functions, in which it has no relative competitive advantage, to outsiders whose expertise these functions are. This is somewhat akin to international (free) trade, where each nation optimizes its resources and passes the (beneficial) results of this optimization process to its trading partners.
To control this kind of transformation, medical information management systems need to be introduced. Many are available and they improve both the quality and the quantity of data available to the management of the hospital and, as a result, the decision making process. This will make it easier for the management to pinpoint which areas require doing what. For instance: the management of the hospital will be able to determine what kind of incentives should be provided to which members of the staff, where could costs be cut and where and how could productivity be improved.
Finally, a novel concept is emerging. Universities and hospitals are two important repositories of human knowledge and experience. Virtually every hospital somehow collaborates with an academic institution, or with a medical school.
There is symbiosis between hospital and medical and social researchers.
Hospitals should actively encourage this. It improves their image, it contributes to their ability to provide quality services. But should not do it for free. They should be contractual partners to the commercial exploitation of the results of research conducted within their premises or with their co-operation. There is a vast field for pharmaceutical, medical, genetic and bioengineering research - and a lot of opportunities to make money for the benefit of the entire community. By not getting commercially involved - hospitals give up money which really is not theirs to give up.
Sam Vaknin is the author of "Malignant Self Love - Narcissism Revisited" and "After the Rain - How the West Lost the East". He is a columnist in "Central Europe Review", United Press International (UPI) and ebookweb.org and the editor of mental health and Central East Europe categories in The Open Directory, Suite101 and searcheurope.com. Until recently, he served as the Economic Advisor to the Government of Macedonia.
Article Source: http://EzineArticles.com/32553
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