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Abstract
This paper describes a number of automatic feedback mechanisms operating in the world economy. Some are desirable insofar as they promote economic
growth and greater income equality. Others are undesirable because they produce recessions, unemployment, and tend to lead to growing inequality. Some regulatory interventions that can strengthen desirable and
control undesirable trends are explored.
1. Introduction
What seemed like a 'minor glitch', the devaluation of Thailand's currency in Summer 1997, has grown into a huge tidal wave of devaluations, capital
flight and loss of employment in many Asian countries and begins to affect Russia and Latin America. If not reversed, it may soon lead to a global depression. What corrective measures can be taken now, and what new
institutions and policies may help avoid or at least alleviate global economic crises in the future? This paper seeks to address these questions.
Too much faith had been placed in free markets, assuming they would automatically correct any imbalances in the world economy. Market forces often do
have beneficial results. They lead investors to channel funds into the most profitable industries anywhere in the world, which tends to maximise global economic growth. The fact that companies prefer to build new
plants in countries where wage rates are lowest, allows them to maximise profits, increases the demand for labour in low-wage countries and tends to equalise wage rates across countries over time. Price increases
for goods in short supply encourage their conservation and attract more suppliers. If currency exchange rates are allowed to float freely according to supply and demand, countries with trade deficits experience
devaluations of their currencies, making their exports cheaper and imports more expensive, thus restoring a balance of trade.
But these are not the only mechanisms operating in an unregulated global market economy. There is also the danger of vicious cycles. (1) If a country's
currency rises in value, even if it has already exceeded an equilibrium that would balance imports and exports, speculators may wish to buy that currency, to be able to sell it at a higher price later. The demand
for that currency then pushes its exchange rate even higher, and this attracts more currency speculators. Once the value begins to drop, there is a rush to sell that currency before its value drops further. This
selling pressure causes a further decline in the value of the currency, persuading even more investors to sell their holdings of that currency. These mechanisms form a vicious cycle that causes instability in
exchange rates, and as a consequence also in the economies of whole regions.
Another vicious cycle is caused by the fact that rich people can afford to invest part of their wealth in profitable ventures, whereas poorer people
have difficulty meeting their basic needs and cannot save or invest part of their income. This leads to growing inequality. Inequality today has reached such extreme proportions that about 400 billionaires own more
than the poorer half of humanity. This also reduces overall economic growth, because those who have urgent needs lack the purchasing power to buy the goods they need, and those who are wealthy can hardly consume
more than they already have. This reduces demand for goods, leading to slow or negative economic growth, idle capacity and high unemployment.
The following sections discuss a number of mechanisms that cause instability in the world economy and explore how they may be overcome.
2. Reducing fluctuation in currency exchange rates
To dampen excess volatility of currency exchange rates, James Tobin (2) proposed a small tax (a fraction of 1 percent) on every currency exchange. This
would hardly inhibit international trade that typically faces much higher tariffs, or at least transportation costs. But it would slow down the speculative flow of huge sums to take advantage of small currency
fluctuations. This sort of 'friction’, to use a mechanical analogy, would have the effect that currency exchange rates gradually adjust to new levels made necessary by trade imbalances, but would be less volatile
and more predictable.
A currency exchange tax (or Tobin tax), collected by each nation in its territory, would have two additional advantages. First, greater stability in
exchange rates would make profits from international trade and foreign investment more predictable and less risky, and thus encourage an expansion of world trade and investment. Second, the revenue from such a
currency exchange tax could be partly used for assistance to less developed regions and disaster relief, for international peacekeeping and to save the global environment. (3)
This proposal, made by Tobin over twenty years ago, has never been tried. Given the latest disruptive movements in the exchange rates of some Asian
currencies, it may be time to test it. It is not necessary to reach universal agreement, which is always difficult. One country could lead the way, and if the tax has the beneficial effects expected from it, others
will join in due time.
A similar modest sales tax on stock market transactions could help reduce the volatility of stock markets and replace other forms of taxation, some of
which hinder economic growth.
3. Maintaining investor confidence
One of the mechanisms responsible for the current turmoil in many Asian economies has been capital flight, precipitated by unsound banking practices.
Many banks have overextended their lending with borrowed money into potentially very profitable but highly risky ventures without adequate security precautions. In addition, there have been cases where bank managers
lent money on the basis of personal acquaintance without examining the financial situation of the firms receiving huge loans (so-called 'crony-capitalism’). If investors begin to doubt that a bank in which they have
deposited funds will be able to remain solvent, they will wish to withdraw their deposits before the bank goes bankrupt. This leads to a run on that bank, accelerating its demise. To prevent such a loss of
confidence, regulations are needed that oblige banks to maintain a certain amount of liquid holdings. 8 percent of total lending has recently been adopted as a legal minimum in South Korea.(4) Compliance with such
regulations must be verified by independent outside auditors and strictly enforced.
Unless such regulations are in force, global banking resembles the infamous pyramid schemes that brought down the Albanian government in 1997:
investors were promised fantastic rates of return, which could be paid out for a while from new deposits, but sooner or later the pool of potential new investors was exhausted. Many latecomers lost their lifetime
savings when everyone wanted to withdraw their holdings, and the banks had no more funds to make good on their unrealistic promises, causing the bubble to burst.
4. Preventing depressions
Some measures intended to alleviate a recession can in fact make matters worse. For example, after the stock market crash of 1929, some companies went
bankrupt and U.S. tax revenue fell. Economists advised the Hoover administration that to restore a balanced budget, it was necessary to cut government spending. This increased unemployment, reduced demand for
consumer goods, led to more bankruptcies and even lower government revenue. The administration applied the same therapy repeatedly in a vicious cycle until unemployment in the U.S. exceeded 25 percent.
President Franklin Delano Roosevelt reversed course with the New Deal, which financed massive public works programs to build roads and hospitals with
deficit spending. Better transportation networks can give people in underdeveloped regions improved access to markets and can thus help reduce inequality among regions. Roosevelt also created a social safety net
that provided a fixed income to retired people. This helped reduce poverty, increased consumer spending and thus generated new jobs. This approach, championed by Lord Keynes, stimulated economic activity, increased
private demand, gave rise to the reopening of closed enterprises and the emergence of new ones, and in the end generated new tax revenue to pay back the temporary government debt.
More than half a century after the Great Depression, the International Monetary Fund still clings to some of the discredited prescriptions of cutting
government spending across the board. This drives some countries even deeper into economic stagnation and recession. A distinction ought to be made between wasteful spending for arms or prestige projects (such as
Saddam Hussein's collection of presidential palaces), which unnecessarily burden the economy and should be cut, and productive government investments in infrastructure, education, health care and anti-poverty
programs. Reducing such productive investments does not restore economic growth, but stifles it in the longer run. An effective policy to deal with an incipient recession should not eliminate programs to meet basic
needs, but rather expand them and instead reduce real waste.
5. Global anti-trust legislation
As is well-known, monopolies and to a lesser extent oligopolies can maximise their profits by reducing output to be able to raise prices and create
artificial shortages. Similarly, monopolies have the power to pay lower prices than if there were several competing buyers for the same good. Most countries have anti-trust legislation that prevents too small a
number of firms to control buying or selling in one industrial sector. But some multinational corporations are so big that they escape national control.
For example, Indonesia, Malaysia and the Philippines export tropical timber. Some of the large multinational timber companies not only pay low prices
for logging rights, they have also clear-cut vast areas of forest. Heavy rains then wash away the soil, which prevents the forest from regenerating and can cause severe floods. If one of the countries protests these
practices, the companies can threaten to take their business elsewhere. National legislation alone cannot cope with that problem, only common regulations among all the major timber-exporting countries. The same
principle applies to other industries.
6. Seeking full employment
Employment is not only a source of income, but also of self-esteem. Unemployment can cause depression, divorce, even suicide. For this reason alone, it
is important to strive for full employment.
It is also better for the economy as a whole if there is high employment. People with jobs can afford to buy the goods they need, which generates sales
and increases per capita income. Henry Ford paid his workers good wages, arguing "cars don't buy cars". For a very large company, the size of its wage bill may make a difference in its sales, but smaller
companies sell mostly to the employees of other firms. They would prefer others to pay good wages, and pay as little as possible themselves.
This resembles a prisoners’ dilemma game, where each decision-maker acts in his or her own selfish interest, but they mutually hurt each other and are
worse off than if they co-operated. A government can help make everybody better off by rewarding socially beneficial decisions and taxing harmful ones.
Currently, employers pay unemployment insurance proportional to the number of people they hire. This penalises the wrong employers. Those who eliminate
jobs should rather contribute to help pay for a safety net for the unemployed.
Forcing people who can and want to work stay home idle is a terrible waste. Automation and computerisation has simplified a great deal of work and
eliminated jobs. This can increase the productivity of the economy, but only if those who lost their jobs can do some other work. There are plenty of labour-intensive activities that would be highly desirable but
which we cannot afford today because of a shortage of labour. Such jobs include cleaning up the environment, teaching preventive health care, taking care of the sick and elderly, spending time with children instead
of leaving them without supervision, where they are tempted to join street gangs, and many more. Automation in industry and services can free more people to perform that type of work, but only if society creates
such jobs. Many of these jobs represent a public service and cannot generate income directly. They need to be publicly financed. The higher productivity of automated industries can generate the necessary revenue to
pay for such jobs.
Creating full employment does not mean that we should revert to more labour-intensive production processes, but rather that we should employ the labour
freed by automation in long-neglected activities. To maximise output, it is better to employ all available labour, even if it is of low productivity. (5) This does not mean that products should be made in
inefficient ways, but that the amount of goods and services cannot be maximised unless all resources are used to the fullest extent possible, including labour.
7. Promoting greater equality
A free market structure has a built-in tendency to create inequalities in income and wealth. Like in the popular game of monopoly, whichever player has
a slight random advantage can buy property and collect rent from others. In the game, a single player in the end owns everything. Reality is not quite that extreme, but close. The richer people are, the more they
earn from returns on investment and interest, whereas those who are poor can barely pay for the most urgent necessities, and often sink deeper and deeper into debt. The same applies not only to individuals, but also
to nations.
Karl Marx expected that public ownership of the means of production would end exploitation and the growing gap between rich and poor. But some of the
bureaucrats who were expected selflessly to serve the people instead amassed power and enriched themselves, creating a 'kleptocracy’. Unless there is a free press that can uncover and expose abuses of power and
corrupt practices, and public officials are subject to free elections, where people have an opportunity to replace those who betray the public trust, abuse is bound to occur.
Another problem with state ownership of enterprises is that the state typically collects the profits from well-run and thriving enterprises, and uses
the revenue to subsidise poorly-managed enterprises that suffer losses. If those who run their enterprises well are penalised by having to hand over their profits to the state, and those who mismanage their
enterprises are rewarded by receiving subsidies, it is not hard to predict that inefficiency will become rampant.
A more reliable way to promote greater equality at the domestic level is to help create jobs for everyone who wants to work, if necessary by reducing
the work week, so that the amount of work to be done is more equally distributed. Progressive taxation can provide the funds necessary to create jobs in education, public safety, improving a country's
infrastructure, and protecting the environment.
A progressive income tax can only slow down the growing disparity between rich and poor, not reverse it. A progressive tax on wealth could gradually
help reduce inequality over time.
Poor people often need only a very small initial loan to help them escape the poverty trap. Mohammad Yunus, the founder of the Grameen Bank in
Bangladesh, found that a small loan to buy a tool or farm animal can often help people become independent income earners and free them from an exploitative relationship. (6)
Among sources of international inequality are old trade patterns, in which former colonies export unprocessed raw materials in return for much higher
priced finished goods. This perpetuates unequal development. The advanced industrial countries can afford to spend more on research, and if they keep the results confidential, the technology gap between rich and
poor countries widens, and so does the income gap.
Living standards throughout the world could improve enormously if a global organisation were to conduct research and make its results universally
available. A 'Network of Advanced Technical Universities and Research Establishments’ (NATURE) could link the secretive think tanks left over from the Cold War, which are still devising new ways how we can most
efficiently kill one another, into a global network co-operating on common problems. They may include preventing global climate change, conserving exhaustible resources, preserving biological diversity, reducing
pollution and cleaning up toxic waste sites, increasing the global food supply in an ecologically sound, sustainable way, finding affordable cures for diseases, disarmament and global peacekeeping, economic
conversion, the safe dismantling of chemical, biological and nuclear weapons, to name just a few.
Unlike physical resources, which must be given up by someone to be given to someone else, knowledge, once discovered, can be copied without limit at
almost no additional costs. For that reason, scientific and technical knowledge is perhaps the most under-used resource for development. If everyone on earth had access to the least polluting and least energy-,
resource- and labour-intensive production methods, everyone could be much better off. Making the Internet with its wealth of information universally accessible could become an important tool to reduce poverty around
the globe.
In past centuries, and in some countries still today, a source of inequality is unequal access to education. As long as only the rich can afford to
give their children good education with private tutors, they will have an advantage in finding high-paying jobs and managing the economy. Free and compulsory education is an important step toward giving everyone an
equal opportunity in seeking jobs. It should not be limited to primary school only, but be extended to secondary and higher education. Admission to university should be based on academic, not financial
qualifications. Women should have equal access to education as men. John Kenneth Galbraith observed that countries with a high rate of adult literacy have considerably higher per capita incomes than countries with a
low literacy rate.
Some have argued that income differences are essential for economic growth, because they provide people with an incentive to earn more by working
harder. But in fact equality does not inhibit high welfare. In Sweden and Switzerland, which have among the world's highest per capita incomes, the rate of poverty is very low, and income differences are less
pronounced than in many poorer countries.
8. A World Treasury
Jan Tinbergen observed that to almost every ministry at the national level, there exists a corresponding international organisation, such as the World
Health Organisation corresponding to a ministry of health, or the Food and Agriculture Organisation to a ministry of agriculture, etc. Most well-governed countries have three main financial institutions: a reserve
bank, an investment bank and a treasury. Corresponding to a reserve bank, we have the International Monetary Fund at the global level, although its functions could be expanded to that of a global reserve bank.
Corresponding to an investment bank, we have the World Bank. Corresponding to the treasury, there is nothing at the global level. Yet the treasury, which collects revenue to finance all the other operations of a
government, is the most essential branch of any government; without it any government would soon collapse.
Tinbergen therefore advocated the creation of a World Treasury that would collect revenue at the global level to pay for the operation of all
international organisations, and could allocate funds according to the greatest needs. The present situation, where each international organisation has its own fund-raising efforts, depending largely on voluntary
donations, is chaotic and inefficient. It leads to unnecessary competition among international organisations. Also, voluntary contributions are an unsatisfactory way to raise funds for global public goods. Kenneth
Boulding once jokingly made the following disarmament proposal: If all contributed to the military as much as they wish, military establishments would soon disappear everywhere.
Tinbergen pointed out that if a region within a country is less developed, the central government will not let the people of that region take out loans
to build industries and infrastructure, and then have them pay back the loans with interest. It will simply allocate funds from the national treasury to bring that region closer to the national average in terms of
employment opportunities and per capita income. He suggested that the same ought to be done at the global level, by allocating funds to less developed countries, instead of burdening them with long term debt. If the
richer countries are unwilling to help improve living conditions in the poorer countries, they will some day become inundated by streams of economic refugees.
The three main public service functions to be financed by a World Treasury according to Tinbergen would be global development, protection of the global
environment, and international peacekeeping.
It would probably be difficult to reach universal agreement on a world income tax, but there are other potential sources of financing a World Treasury.
(7) Sources of revenue on which it may be easiest to agree are those which are incidental by products of a useful function performed by an international body, such as a Tobin tax to help stabilise currency exchange
rates, a carbon tax to help reduce global warming, a tax on chloro-fluoro-carbon emissions to preserve the ozone layer that protects us from carcinogenic ultra-violet radiation, etc. Another potential source is the
auctioning of limited resources, such as spots for geostationary satellites, rights to mineral exploitation on parcels of the deep ocean floor outside of national jurisdictions, etc. No government could arrogate to
itself the right to sell such global resources to other countries, yet someone needs to perform the function of creating an orderly allocation process to avoid future wars over those resources. Only the UN, or a
World Treasury on its behalf, could function as a neutral, universally acceptable auctioneer.
9. Fighting corruption and abuse of power
One of the greatest obstacles to economic development is corruption. As long as it is easier to get rich by using force and influence to extort money
from others than to produce what people want and need, the most enterprising people will tend to plot how they can seize power and control the army and police, rather than building profitable enterprises.
If the victims of corruption cannot find justice within their own country, because the government itself is corrupt and controls the courts, they need
to be able to bring their case before an international criminal court with the mandate to adjudicate such cases and the power to enforce its decisions.
Transparency International works with governments that seek to eliminate corruption by advising them how to be more effective. It also publishes an
annual list of countries, ranking them from the least corrupt to the most corrupt, according to a survey among international business people.
Greater openness can help fight corruption. A government official who can award big contracts without open bidding and public supervision may be
tempted to give them to friends or to those who pay a bribe. If the local currency is artificially overvalued, and many more people would wish to exchange it for hard currency than the amount the treasury has
available, those in control can allocate scarce foreign exchange to those who pay a kickback. If a currency is allowed to float freely, limited foreign exchange goes to the highest bidders, and there is no room for
bribery.
A free press and elections with secret ballots are essential to keep a government honest. A free press performs a role in society similar to that of
white blood cells in the human body, which constantly detect and eliminate disease germs. As soon as the immune system stops functioning at the time of death, a human body rapidly decays, and the same happens to
societies where people have no recourse against official abuses of power.
It is also important that money does not play a decisive role in election campaigns. All candidates who can collect a certain minimum number of
supporting signatures, whether rich or poor, should have fair access to the mass media, for example through free air time for public debates. If the outcome of elections and referenda is largely decided by the
advertising budgets of the various party, the democratic principle of 'one person, one vote’ is replaced by a 'plutocracy’, government by the rich, according to the principle 'one dollar, one vote’. That allows the
wealthy to exert undue influence over politics and is a form of corruption.
10. Reversing arms races
One of the heaviest burdens on economies is military spending. Some very poor countries spend much more for military purposes than for education and
health care combined. Military spending may be motivated by fear of external or internal opponents, or may simply be a way for an influential sector to divert funds from the public treasury to private profit. Let us
briefly examine each of these three causes. Each represents a type of vicious circle. One of the potential causes for military spending are competitive arms races. Suppose countries X and Y have a long standing
rivalry or border dispute. If X feels threatened by its opponent Y, it will wish to acquire more weapons and train a larger army for its defence. That in turn will be perceived as a threat by country Y, which will
then wish to catch up with X and preferably surpass it in terms of military power. That see-saw effort to achieve military superiority will lead to an escalating arms race. Both sides would be economically much
better off if they instead invested those resources in their civilian economies, and would also be far more secure if they both disarmed simultaneously. They are trapped in a 'prisoner’s dilemma’, where each side
acts in its own apparent short term interest, but they end up hurting each other.
Such an arms race can be reversed through bilateral negotiations leading to verifiable and enforceable disarmament agreements. It can also be ended
unilaterally if one side (or both) shifts to purely non-offensive defence, sufficient to resist aggression, but not to carry out aggression. That can end the cycle of mutual fear.
One of the best ways to overcome old hostilities is mutually beneficial co-operation: close economic co-operation between Germany and France within the
European Union has ended their century old rivalry and cycle of wars, and the Helsinki talks on Security and Co-operation in Europe brought a thaw in East-West relations and finally helped bring an end to the Cold
War.
A second reason for heavy military spending may be a dictatorial regime's fear of a popular uprising. The more it relies on force to stay in power, the
more it will be hated by the people, and the more weapons it will need to oppress popular resistance. To overcome such a vicious cycle, outside diplomatic pressure may be needed to help restore democracy.
A third reason for heavy military spending is sometimes pure greed. It is much easier to persuade a government official with access to the public
treasury to spend money on wasteful and costly projects, including sophisticated arms, than it is to persuade many individuals to spend their hard-earned money on things they don't need. The richer military
contractors become, the more money they have available to lobby or bribe members of the government to drain the public treasury further with fat contracts. A free press that can uncover and expose such scandals, and
a vigilant public that replaces governments which are bought and paid for by the military industry with governments that serve the people's true interests can break that vicious cycle. However, if election campaigns
are funded by campaign contributions from rich individuals and firms, including military contractors, those who are able to drain the public treasury often have the means to keep things that way.
11. Saving the environment
A far greater threat to our future than any instability in the world financial system is the destruction of the physical environment that sustain life
on earth, through pollution and the depletion of natural resources. Shifts in climate can devastate agricultural production. Pollution of air, water or soil can cause illness. Radioactive waste can cause cancer and
birth defects. We have no right to pass on an uninhabitable planet to future generations for the sake of short term profits.
The primary reason why we see so much environmental destruction is that the harm done is not borne by those who cause it, but by others (in the present
or future), because of externalities. Therefore, the logical remedy is to internalise those externalities, through 'full cost accounting’, by making those who damage the environment bear the full social costs of
doing so.
Today, most countries tax desirable activities, like income from hard work and from creative, successful enterprises. Instead, we should tax
undesirable activities, like pollution and the depletion of limited resources, to discourage those activities.
Paradoxically, 'green taxes’ would also help lower the overall tax burden. The following thought experiment demonstrates this. Assume that gasoline was
available free of charge at the pump. Would this mean that we pay less for gasoline? On the contrary. Many people would start to waste gasoline and drive far more than necessary, and at the end of the year, the
total gasoline bill would have to be paid for anyway, out of taxpayer's money, where each individual's contribution would be independent of the amount of gasoline they had used during the year. We would end up
paying much more than if everyone pays only for what they use, which rewards conservation.
This is how we now treat our environment. As long as we pretend that clean air and water are free, we should not be surprised at their abuse. In the
end, we pay much more for cleaning up the environment than if we had prevented excessive pollution with pollution taxes. We may even have to pay with our health and survival.
Over-fishing has brought many species of ocean fish nearly to extinction. If we wish to preserve them, we must charge for the right to fish in the deep
ocean, commensurate to the damage done.
Green taxes would also be much easier and cheaper to collect. Instead of each individual having to declare how much they earned, with armies of
inspectors trying to catch cheaters, it would be sufficient to measure pollution at smoke stacks or depletion at mines and oil wells. The taxes charged for pollution and depletion would automatically work their way
through the rest of the economy. Those who buy products that use scarce materials or cause pollution in their manufacture would pay higher prices. This would encourage people to practice conservation and help reduce
pollution.
Environmental conservation and restoration is also a vast field for new employment opportunities for those whose current work becomes obsolete with
greater automation.
12. Conclusions
A global level free market is in many ways a beneficial force: consumers around the world can buy from those who supply the best quality goods and
services at the lowest prices. Investment flows to the best managed and most innovative firms. Wage differentials across countries tend to decline over time. People can gain access to information about the most
efficient methods of production.
There are, however, also a number of harmful trends that need to be controlled: inequalities in wealth become more extreme, as the rich get richer and
the poor poorer. Billions of people live in extreme poverty and cannot find employment. Investment bubbles can burst. Arms races drain resources from productive investments. The environment is being polluted and
exhaustible resources depleted. Many plant and animal species are rapidly becoming extinct, and humanity may follow unless we change course.
It is essential that in addition to giving market forces free rein where appropriate, deliberate policies be instituted to prevent disasters. Some
regulations are indeed stifling and counterproductive. For example, if a government fixes prices, there will be long waiting lines for goods priced too low, and goods priced too high will rot in warehouses. It is
necessary to allow prices to adjust to market forces. But other forms of regulation are indispensable. Laws to protect the environment and the health and safety of workers and consumers must be binding, not only
voluntary guidelines, otherwise those who observe them will be penalised and those who ignore them are rewarded
We need to create conditions where market forces naturally promote greater equality, including free and compulsory education, equal access to
information, and a policy of full employment. Conditions that promote growing inequality by keeping the poor trapped in poverty and helping the rich multiply their wealth need to be held in check.
The following analogy from physics may illustrate that challenge. If a gas is cold and thinly dispersed, as in the universe, any accidental slight
concentration will attract more gas from surrounding areas by the force of gravity, until a mass of gas is so highly concentrated that it forms a star. On the other hand, in a gas at room temperature and pressure,
any slight concentration will rapidly dissipate. We need to create analogous conditions in the world economy, so that any temporary inequality has the natural tendency to diminish over time.
References
(1)Fischer, Dietrich (1993) Nonmilitary Aspects of Security: A Systems Approach. Aldershot, UK: Dartmouth Publishing Company.
(2)Tobin, James (1978), "A Proposal for International Monetary Reform," Eastern Economic Journal, Vol. 4, pp. 153-159.
(3)Even a modest tax would generate substantial revenues. About $1.3 trillion are exchanged from one currency into another every business day. Even if
we assume that a 0.1% tax rate would cut that amount in half, this would still generate a revenue of $0.65 billion per day for 250 business days a year, or $162.5 billion, which is more than one hundred times the
annual budget of the United Nations.
(4)Oh, Jong Nam (1998) "Korea's Financial and Corporate Restructuring Program," Korea Economic Update, Vol. 9, No. 2.
(5)A simple example can illustrate this. Assume that to build an earthen dam requires the movement of one million tons of earth. A bulldozer costs
$100,000 and can be used by one worker to move 100 tons per day. A wheelbarrow and shovel cost $100 and can be used by one worker to move 1 ton of earth per day. If 1000 workers are available and $1 million in
capital, the job can be done either by buying 10 bulldozers and employing 10 people to complete the job in 1000 days. Alternatively, it can be done by buying 1000 wheel- barrows and shovels for $100,000, employing
all 1000 people, who can also complete the job in 1000 days. If however both the labor- intensive and capital-intensive method are used side-by side, one can buy 9 bulldozers and 991 shovels and wheelbarrows for
$999,100, which employs all 1000 workers and uses nearly all the capital available. This method (called "walking on two legs" by the Chinese) allows the job to be completed in 1,000,000/(900+991)=523 days,
nearly half.
(6)Yunus, Muhammad (1988), "Grameen Bank: Organization and Operations", Paper presented at the World Conference on Support for
Micro-enterprises, June 6-9. Washington, DC: The World Bank.
(7)Cleveland, Harlan, Hazel Henderson and Inge Kaul, eds. (1995) The United Nations: Policy and Financing Alternatives. Innovative Proposals by
Visionary Leaders. Washington, DC: The Global Commission to Fund the United Nations. See also Fischer, Dietrich (1997) "A World Treasury," in Economics of Conflict and Peace, ed. by Jurgen Brauer and
William G. Gissy. Aldershot, UK: Avebury Press, pp. 337-54.
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