Government Reform

Impact of Globalization on Indian Financial Services Industry

BY

Dr.V.V.S.K.PRASAD.,M.Com.,M.B.A.,Ph.D.,

Professor and Head

E-Mail: vskprasad.vempati@gmail.com

ABSTRACT

Reforms of the financial sector constitutes the most important component of India’s programme towards economic liberalization.  The recent economic liberalization measures have opened the door to foreign competitors to enter into our domestic market. Deregulation in the form of elimination of exchange controls and interest rate ceilings have made the market more competitive.  Innovation has become a must for survival.

Many  of the providers and users of capital have changed their roles all over the world.  Financial intermediaries have come out of their traditional approach and they are ready to assume more credit risks.  As a consequence, many innovations have taken place in the global financial sector which have its own impact on the domestic sector also. The emergences of various financial institutions and regulatory bodies have transformed the financial services sector from being a conservative industry to a very dynamic one. In this process this sector is facing a number of challenges.

In this changed context, the financial services industry  in India has to play a very positive and dynamic role in the years to come by offering many innovative products to suit the varied requirements of the millions of prospective investors spread throughout the country.

Overview

Reforms of the financial sedctor constitutes the most important component of India’s programme towards economic liberalization.  The recent economic liberalization measures have opened the door to foreign competitors to enter into our domestic market. Deregulation in the form of elimination of exchange controls and interest  rate ceilings have made the market more competitive.  Innovation has become a must for survival.

Many  of the providers and users of capital have changed their roles all over the world.  Financial intermediaries  have come out of their traditional approach and they are ready to assume more credit risks.  As a consequence, many innovations have taken place in the global financial sector. Which have its own impact  on the domestic sector also. The emergence of various financial institutions and regulatory  bodies have transformed  the financial services sector from being a conservative industry to a very dynamic one. In this process this sector is facing a number of challenges.

Growth in financial services (comprising banking, insurance, real estate and business services), after dipping to 5.6% in 2003-04 bounced back to 8.7% in 2004-05 and 10.9% in 2005-06. The momentum has been maintained with a growth of 11.1% in 2006-07.

Impressive progress in information technology (IT) and IT-enabled services, both rail and road traffic, and fast addition to existing stock of telephone connections, particularly mobiles, played a key role in such growth.

      Because of Globalization, the financial services industry is in a period of transition. Market shifts, competition, and technological developments are ushering in unprecedented changes in the global financial services industry. Organizations in this highly competitive and increasingly regulated industry will especially need to focus on making themselves more:

Ø      Adept to face increasing transaction volumes, regulation and the integration of previously disparate global markets

Ø      Agile at identifying and managing risk

Ø      Operationally efficient

Ø      Customer – centric

Ø      Optimized in both business & technology

In this scenario, spearheading IT initiatives has become critically important.

Major spending initiative priorities tend to focus on automation to reduce costs and lessen risk, along with using BPO to gain efficiency and allow internal IT organizations to focus on strategic initiatives. Delivery of these capabilities at a high efficiency level but at low costs is one of the major success factors for any financial services business.

OBJECTIVE:

The objective of the present paper is to  examine the status of Financial Services Industry in India and to study the challenges before this industry due to globalization

          To enhance their competitive advantage in this changed environment, financial services institutions are increasingly harnessing new technologies to provide superior customer offerings and streamline internal processes. Today’s dynamic marketplace demands that financial services providers emphasize on technologically advanced, feature-rich solutions, that can operate in real-time and with the highest degree of precision and reliability.

Information technology is increasingly being considered as critical to the strategic direction and the day-to-day operation of financial services firms.

Growth in financial services is being bolstered by the opportunities of demography, emerging markets and ever more innovative products and services. Yet, organisations also face the challenges of mounting competition, more complex regulation and ever more exacting customer expectations. Effective growth strategies are therefore likely to cut across all operating processes and functional boundaries. Key priorities include ensuring that the business model takes full account of customers’ needs, tax, financial and regulatory considerations and the organisation’s capacity to change the way it does business. In turn, the objectives and criteria for success need to be clearly measured.

                    A survey of more than 250 financial services executives carried out by PricewaterhouseCoopers in 2006, found that respondents believe that existing customers will be their main source of organic growth. Creating operations that can retain and deliver profits from customers through their lifetime will demand a significant investment in data gathering and relationship management and may therefore require a shift in the prevailing cost-income model. This includes a re-think of training, reward and performance management strategies including a move from volume-based incentives to rewards geared to client satisfaction and the profitability of the customer over the lifetime of the relationship. Success will also require timely and insightful metrics on customers’ evolving attitudes and preferences.

The  Financial Services & banking industry is changing at a fast pace. These changes are throwing up fresh challenges like managing complex technological divergence in a converging market. Banks strive to constantly offer more to the existing customer base. To achieve this, they emphasize on more targeted technology investments and high-quality service. To remain competitive, financial institutions will have to renew their commitment to investing in new technology strategically — to reduce costs, improve efficiencies, and boost revenue-generating initiatives.

Taking full note of these challenges, OFS puts together its banking practice to help financial institutions improve enterprise performance, comply with regulatory mandates, boost operational efficiency, and better serve their customers through OFS’ spectrum of solutions and services derived from proven track record of domain expertise.

The Challenges

Among the key IT challenges facing the Financial Services industry today is:

• Preserving investments in old systems while leveraging new technologies to drive down transactions costs, expand and improve customer service
• Integrating enterprise wide disparate systems to gain operational efficiencies
• Substantially reducing time for deployment of new systems
• Reducing IT costs and obtaining better ROIs for new investments in the long-term

                Only a carefully thought out long-term IT strategy backed by execution, implementation and support capability can meet these challenges successfully.

Today’s financial services firms face mounting pressures on all fronts:

• Credit markets are creating industry turmoil
• Tightening credit guidelines that threaten revenue streams
• Growing reporting and risk management obligations like Sarbanes-Oxley, Know Your Customer and Basel II
• The difficulties of sustaining growth in overly-saturated markets
• Innovative products that address the needs of a diverse client base such as retirees and young emerging and ethnic segments
• Growing concerns over customer data security and identity management
• Increasing competition not just from traditional competitors, but from other organizations that expand their service offerings
• The complexities that arise from mergers and acquisitions and from expanding into the global marketplace

          Whether we are trying to maintain competitive advantage, looking for ways to position our self better for mergers or acquisitions or expanding into the global marketplace, the challenges are as complex as they are varied. And while we deal with these fundamental concerns, we are met with increasing demands from investors, regulators and customers.

The Answers

How do we succeed in this environment? The first step is to ensure that we have the infrastructure and solutions to support our business strategy. With the right systems in place, our organization can more rapidly comply with regulations, operational risk and security issues. We can also open up new product offerings, reduce customer turnover and minimize fixed costs and maximize productivity. In addition, the companies can leverage outsourcing opportunities to reduce overhead, while still enjoying the scalability they need to support future growth or new initiatives.

The process of globalization has paved the way for the entry of innovative and sophisticated financial products into our country.  Since the Government is very keen in removing all obstacles that stand in the way of inflow of foreign capital, the potentiabilities for the introduction of innovative international financial products in India are very great.   Moreover, India is likely to enter the full convertibility era soon.  Hence, there is every possibility of introduction of more and more  innovative and sophisticated financial services in our country.

Realizing all these factors, the Government of India has initiated many steps to reform the financial services industry.

Ø      The Government has already switched over to free pricing of issues from pricing issues by the Controller of capital issues.

Ø      The interest rates have been deregulated

Ø      The private sector has been permitted to participate in banking and mutual funds and the public sector undertakings are being privatized.

Ø      The Finance Act, 1992 has brought into effect large scale amendments in the tax structure of long term capital gains.

Ø      The Finance Act, 1994 has given a further boost by lowering the lock – in period from 3 years to 1 year, in order to get the entitlement as a long – term capital asset.

Ø      The SEBI  has liberalized many stringent conditions so as to boost the Financial Services Industry.

In this changed context, the financial services industry  in India has to play a very positive and dynamic role in the years to come by offering many innovative products to suit the varied requirements of the millions of prospective investors spread throughout the country.

                                                            *****

Dr.V.V.S.K.PRASAD
http://www.articlesbase.com/finance-articles/impact-of-globalization-on-indian-financial-services-industry-737929.html

Changing Employment Laws in 2009: What You Need to Know

For many, the dawn of 2009 holds a great deal of uncertainty, while for others it represents a chance at a fresh start and the potential for improvement – whether personal, professional, financial, or some combination of the three. For the human resources industry, 2009 will undoubtedly be a year in which changes in our government and our economy will be noticeably reflected in changes to employment law. The election in 2008 played host to a huge number of ballot issues regarding hiring processes and worker benefits. Such issues are again at the top of the incumbent legislature’s agenda in 2009, and will have a direct impact on not only the American worker, but on the employers and HR professionals responsible for their pay and benefits.

After examining a number of the bills proposed and voted into action for 2009, leading research indicates some overall legislative trends emerging in three major areas of human resources:

Healthcare Reform

As the number of Americans without insurance continues to rise, finding a way to provide individuals with better access to affordable healthcare was at the forefront of heated issues in the 2008 election. While already a major issue in 2008, the incoming Congress has recently announced that healthcare reform will be among its top priorities this year. Just prior to the start of 2009, for example, Congress passed the Mental Health Parity Act, a measure requiring many employers to broaden their mental health and substance abuse coverage for employees.

Meanwhile, a number of states and municipalities introduced new legislation addressing employers’ responsibilities concerning the health of their employees. Washington, DC and Milwaukee, for instance, passed initiatives mandating that employers provide paid sick leave for workers. New Jersey joined the movement by signing into law a bill requiring employers to give six weeks paid leave to staff members caring for a sick relative or new child.

However, in light of the economic crisis, further healthcare legislation may not increase quite as dramatically as once expected – on the state level, at least. The Society for Human Resource Management (SHRM) predicts that in light of “widespread budget shortfalls predicted in nearly half of the nation, health care reform is likely to be less of a front-burner issue in the states.” Instead, SRHM predicts that cash-strapped state legislatures will be looking to the new administration to handle this issue on a federal level.

Immigration Reform

A hot-button issue with immediate implications for employers and HR professionals, immigration was the topic of a significant number of bills introduced in 2008. A total of 26 states passed new legislation addressing immigration concerns, many of which imposed new penalties on companies employing undocumented aliens.

Playing a large role in much of the new immigration legislation was E-Verify, the government’s Employment Eligibility Verification System. In 2009, all federal contractors and subcontractors will be required to use the system. Likewise on the state level, many immigration bills passed in 2008 require employers to use E-Verify or similar systems to ensure they are not hiring illegal workers.

Unlike the issue of healthcare reform, immigration legislation is predicted to continue occurring mainly at the state level while, according to SHRM, any sort of comprehensive reform at the congressional level is considered “unlikely.” Again, however, due to the budget shortfalls and the economic crisis it is difficult to predict whether states across the country will see a continued push for immigration reform. However, in some more conservative U.S. regions like the South and Midwest, employer penalties for hiring illegal workers may be more severe.

Workplace Safety

Concerns about workplace safety and efforts to increase employee health and wellness were evident in a number of new state laws put into effect in 2009. Safety concerns ranged from matters such as office air quality to more grave issues like gun control in the workplace.

On a federal level, increased attention to workplace safety was made clear in a large increase in government money directed toward the Occupational Safety and Health Administration (OSHA) for its 2009 fiscal year. OSHA received a budget increase of $15.7 million, part of which is being used to conduct increased workplace inspections in 2009. Likewise, the incoming presidential administration has touted workplace safety as a priority, and is predicted to take a second look at several previously failed workplace safety bills, including the regulation of combustible dusts in the workplace and mandating stricter ergonomics requirements for employees working in the healthcare industry.

On a state level, Oregon passed a law requiring all workplaces to be “smoke free,” prohibiting smoking within ten feet of the entrance to a building or worksite. In the meantime, eight other states, concerned with a growing number of gun-related incidents in the workplace, have enacted various laws concerning an employer’s right to limit the possession of weapons on company property.

While only time will tell how these potential changes to federal and state policies will play out over the course of the next year, staying aware and informed of proposed legislation can help employers and HR professionals prepare in advance for new regulations, develop appropriate contingency plans, and ensure a smooth and compliant transition if and when the changes occur.

Elizabeth Rice, SPHR
http://www.articlesbase.com/law-articles/changing-employment-laws-in-2009-what-you-need-to-know-747598.html

Immigration, Integration, And Criminalization

I was born and raised in the west. To say I knew illegal aliens were an understandment. These people were mostly Mexican fresh from the border. Having crossed over, they sought any kind of employment they could. For many years, they became known to us by a demeaning name as “wetbacks”.

They would risk life and limb, swimming the river to get to the USA. As I grew up, I became a professional in the Restaurant field. It was here, that these people came to mean more than just a poor worker from Mexico. In the course of managing, working, and keeping staff, they played an integral part of my business. Yes, even if they were illegal.

They stopped being “wetbacks”. I do not like the term, it is a demeaning word. I use it here to illustrate the bad rap many of them received. They became close friends to me, good workers, and family men. Yes, there were bad apples, trouble makers, and the rest. You always have that. But overall, the ones who helped run my businesses and worked hard were simply family men and women trying to find a better life.

According to the Center for Immigration studies, during the 1990s, an average of more than 1.3 million immigrants from both sides of the field -legal and illegal- settled in America. From January 2000 and March 2003 an additional 3.3 million immigrants arrived. Not all of them Mexican. They come from all spectrums, all nations, and all tongues. The United States Census Bureau projects that in less than 50 years the population of the USA will increase from its present 288 million to more than 400 million. The question bares asking. What are we going to do with them all?

Within this group, you can be sure terrorists will also arrive. These people are bad seeds among the many good people who arrive with them. I have no problem with immigrants. My great-grandfather was one as well. On my grandmothers side, the generation goes back to the revolutionary period. Our family line in one way has been here along time. Great men and women from many nations came to this country to form a new nation. The real area of concern according to the Center for Immigration Studies Director of Research, Steven Camarota, says is that “every part of our immigration system has been exploited by terrorists”. This is true, but then Camarota goes on to suggest that we “cannot reform in just one area, but must address the problem throughout”. Within his statements are the reasoning that we must check not only Middle Easterners visas and backgrounds, but must “carefully check the backgrounds of all visa applicants, better police the borders, strictly enforce the law within the country, and, most importantly, reduce the level of immigration to give government agencies the breathing space necessary to implement fundamental reforms.”

There is no way we can round up 13-14 million illegal immigrants or whatever the number is actually. Who really knows. The authorities have numbers, but then they don’t know either. The point is, no one really knows how many illegal people are here in the USA. No one knows how many terrorists have entered along with them. No one knows really what to do. The only thing everyone agrees on is we must do something. So we debate in Congress, put together legislation, then can’t come to a reasonable solution. Our borders are still open and the flood gates of people are coming in. While we focus on the southern border, our other borders are porous as well.

The National Immigration Forum conducted interviews of illegal people living in Los Angeles, Miami, and Chicago. A Total of 233 such interviews were done in Spanish by trained interviewers. The main premise here is”would undocumented immigrants come forward, get legal, learn English, pay taxes, pay fines, and become US Citizens”. 81% said yes they would live and work in the U.S. the rest of their lives if they were able to legalize their status. 98% said they would make an effort to become legal over remaining undocumented if the U.S. would approve a new law that would allow them to become legal. Also within the questionnaire, the respondents said they would provide accurate information, become fingerprinted, have a criminal background check, pay a fine, learn English, notify the government of change of their address. 90% interviewed said they would become United States citizens if allowed.

No matter what you or I think, this is a big issue. The longer we do nothing about it, the more we have to lose. Making millions of illegal aliens criminals won’t work. They are here already illegal. This makes them a criminal right now according to our law. Many are afraid. Some are terrorists. Still, others are just family men and women working hard to survive. We need to try to legally integrate them into society. They are in our society but they are illegal. This makes them susceptible to crooks and evil men. They need protection of our laws. If they stay outside the law, our system can’t help them. I urge you to contact your congressman or woman and tell them to do something to solve this problem today. The longer we wait, the worse it will get. It will also provide ample opportunity for someone to enter that will cause terror. These kinds of people don’t care whom they kill, just as long as they kill someone living in America. Our future, the future of our kids, and our nation depends that we solve this issue now.

Dana Smith
http://www.articlesbase.com/motivational-articles/immigration-integration-and-criminalization-24270.html

Is Poverty a Black Thing?

The poor performance of African economies and economies where the people are of colour other than whites have prompted people to ask whether poverty is a black or a colour thing.

This question about poverty being a black thing has gained credence in many circles. This question is also asked about Africa because it is the poorest continent on earth. It is a continent where for 30 years there has not been any concrete economic development compared to the rest of the world. It lags behind all the other continents in terms of economic and social development. Most if not all the countries African continent have similar economic problems namely high unemployment, high inflation, higher deficits, poor state of economic and social infrastructures including roads, harbours, education, airports, telecommunication, health and sanitation and rail system. Africa is a continent where people die for lack of food, water, and against common preventable diseases. It is a continent full of misery, desperation and hopelessness. It is a continent where very few children under the age of five survive the menace of the six killer diseases. It is a continent where people have no access to basic necessities of life. It is a continent where people walk several miles for water and children have no access to education and medical services. It is a continent where rural life is nothing but a condemnation to abject poverty. It is a place where people live in mud/thatched houses with bamboo/raffia leaves as roofing sheets. It is a continent full of wars and armed conflicts. It is a continent of dictators and kleptocrats, a continent where corruption is rewarded and achievement is shunned, a continent where entry into public life/service is seen as a means to acquiring wealth and a means of getting top positions. It is a continent where life expectancy is low and corruption very high.

So is it a colour or race thing? I must say that I do not agree or subscribe to the notion that poverty has any colour inferring in it and that the underdevelopment and impoverishment which is prevalent on the African continent is deeply rooted in centuries of slavery and colonialism, coups, armed conflicts, brain drain, endemic corruption and mismanagement, dictatorial rule, Kleptocracy, foreign interventions and the fight for control of the natural resources.

Slavery and Colonialism

Centuries of slavery and colonialism deprived the continent of her able human and economic resources. The able men and women were carried away to work in the plantations of the Americas (in all about 30 – 40 million people) and they helped to make America and Europe what they are today. Millions of young Africans were forced to abandon the continent of their origin and were transported several thousands of miles away unto a land where they had no historical attachment with. They travelled in very deplorable conditions, without adequate food, water and air. When they reached the so called new worlds they were made to work from morning till sun set the only time they had on their own was Sundays in which they had to everything that they needed on their own such planting their crops, repairing their homes. It was a very nasty experience having to work for ours without pay. Some even worked till they dropped dead. The slave trade deprived the continent of her energetic men and women a vital resource in any development process and sunk the continent into intellectual wilderness.

Looting of Resources

About the same time that slavery was being vigorously pursued, the natural resources including timber, gold, diamond, tin ore, ivory and many more were looted in large quantities by the European countries namely Belgium, Britain, France, Germany, Portugal, Spain and Italy. After slavery was abolished the looting of the natural resources continued. The irony is that virtually all the income from these resources was used to finance the economic and the infrastructural development of the European countries with little or nothing at all being used to develop the various countries where these resources came from. A clear example is the case of Democratic Republic of Congo where King Leopold II of Belgium enslaved the Africans, forced them to work without pay, killed about 10 million and looted the country of her resources and virtually nothing was used to invest in the country except guns which the Belgium army used to terrorise and kill the Africans. When the DRC was transferred from Leopold II to the Belgium state the looting and killing continued till DRC gained her independence in the 1960s. In fact DRC (Congo Free State) was the main supplier of rubber a vital raw material for the tyre industry and all the money from the sale of the rubber went to Belgium. King Leopold II was able to transform Belgium as one of the poorest countries in Europe into one of the wealthiest courtesy the enslavement and looting of Africans and their resources.

Belgium was not alone in what she did to the continent. Britain, France, Spain, Portugal, Germany and Italy all looted Africa of her gold, diamond, ivory, timber, cobalt, coltan, tin ore, bauxite, manganese and all the minerals you can think of. The Africans who resisted the illegal activities were killed in their millions as happened in South West Africa (now Namibia) where the Germans in 1904 to 1907 committed the first genocide of the 20th Century by killing the Herero and the Namaqua people. While Europe became richer Africa became poorer and the trend continued till the 1950s when the African countries started to gain their ‘independence’ beginning with Libya in 1951, Sudan, Morocco, Tunisia all in 1956 and Ghana in 1957.

With little or no investment in the continent the various post colonial governments inherited countries with practically no infrastructure: roads, rails, harbours, telecommunications, education, health and sanitation and airports. The only areas which saw some few infrastructure investments during the colonial days were those where raw materials were heavily extracted. The attainment of independence did not come on silver Plata. Algeria, Zimbabwe, Angola, Kenya, Namibia and to some extent South Africa all attained their independence from their colonial masters through arm struggles and in most cases the few infrastructures that existed were destroyed due to the conflicts.

Foreign Involvement

As if slavery, colonialism and the looting of the continent’s resources were not enough the continent became a battle ground during the Cold War as the two super powers and their allies battled for influence and control on the continent mainly for her resources. As a result many African governments who were deem to be pro-Russia or America were overthrown using the military. A case in point was the overthrow of Dr. Kwame Nkrumah of Ghana on February 24th, 1966. Another example is the overthrow and assassination of Patrice Lumumba of Congo on January 17th 1961.Other leaders such as Nelson Mandela was imprisoned for either advocating for independence or improvement of conditions of Africans.  CIA and the western intelligence community have been implicated for engineering the assassinations and overthrow of elected leaders of Africa. For example Larry Devlin, the CIA Station Chief in Congo during Patrice Lumumba’s  days spoke to Washington Post in December 2008 saying he refused an order to assassinate Patrice Lumumba but his refusal did not stop the CIA and the Belgium government from overthrowing and assassinating him. The assassination attempt on Gamal Nasser of Egypt on 24th October 1954 and the assassination of President Anwar Sadat in 1981 were alleged to be the work of Britain’s M16 due to their refusal to hand over the administration of the Suez Canal to the British.  

The CIA, KGB and their allies encouraged and financed wars and political instabilities throughout the continent. Angola became the battle ground for the CIA, KGB and the Chinese as each tried to gain control over the country, her people and resources. The civil war that engulfed Angola in 1975 only ended in 1991 after 26 years of conflict. When the war ended the few infrastructures that remained after the war of independence (1961-1974) were gone.

On March 7, 2004 Simon Mann a British citizen, a veteran mercenary and former officer of Britain’s elite Special Forces (SAS), and 69 other mercenaries were arrested at a military airfield outside Harare, Zimbabwe .Their destination was Equatorial Guinea in West Africa. Their mission was to overthrow Teodoro Obiang Nguema, president of oil-rich Equatorial Guinea, a nation of 600,000 people. During his defence he mentioned some powerful members of the British establishment as his financiers and backers including Jack Straw UK Justice Minister, Peter Mandelson former European Union Trade Commissioner and now Secretary of State for Business, Enterprise &Regulatory Reform, Sir Mark Thatcher a businessman and son of former British Prime Minister Margaret Thatcher, Jeffrey Archer a key Tory member who was convicted for perjury and Ely Smelly Calil a Lebanese oil trader accused of bankrolling the plot. Mark Thatcher was arrested in South Africa and charged with supplying the aircraft that carried Simon Mann to Harare. Mr. Thatcher pleaded guilty in South Africa and was later made to pay 300,000 pounds in exchange for a prison sentence. The coup plotters were to put Severo Moto, an opposition leader living in Spain in charge of the country. The coup was to give both the plotters and their backers unquestionable free access to the oil resource in the nation.  If the coup had succeeded Mann and his cronies would have turned Equatorial Guinea into one of the usual sad stories in Africa- bloodshed, corruption, mismanagement, poverty and what have you.  The governments of Spain, South Africa and others in the west were seriously implicated for being privy to the plot. Thanks to the vigilance of the Robert Mugabe regime the coup was nip in the bud. Unfortunately, most resource rich countries on the continent have not been all that lucky.

Among those mercenaries who sought to return Africa to their former colonial masters was Bob Denard. In fact, Simon Mann is just a small fish compared to Bob Denard, a French who made a career as a mercenary overthrowing leaders in Africa. When Bob Denard died in 2007, he had more than a dozen of coups to his credit. Four of those coups took place in Comoros Island alone. French author Jean Guisner, who has followed Denard’s career and written extensively about the French government, says Denard did nothing that was contrary to French interests – and he allegedly acted in close cooperation with intelligence services. Denard’s mercenary career took place between the 1950s and the 1980s. During that period, he is reported to have been involved in post independence Nigeria, Benin in 1977, Angola, Zaire – now DRC and the former Rhodesia – which is now Zimbabwe. Registering their frustration and lack of justice for the Comorians, Mr. Abdou Soule Elbak, former president of Grande Comoro said “This man sullied our history”, referring to Denard. “I regret he was not made to answer to all the crimes he committed in our country, the murders and the torture which he was guilty of,” said Moustoifa Said Sheikh, leader of the Democratic Front Party. All these mercenary activities took place on the continent because of the natural resources.

The product of all these were the political instabilities and the wanting destruction of lives and property that have bedevilled Africa till today. As the elected leaders of the continent were assassinated, overthrown and subjected to all forms of cold war tactics including bribery, arm twisting and blackmail the continent degenerated and faulted on all aspects of human endeavour. The new crop of leaders who replaced the post colonial independence leaders and who were largely puppets of the European and American governments became increasingly authoritarian and corrupt. Joseph Mobutu Sese Seko who became the choice of the Americans after they help to assassinate Lumumba ruled Congo for 32 years and in those years the country became poorer as Mobutu and his cronies got richer and the western countries notably USA and her allies had free hand looting the mineral resources most importantly cobalt a very important mineral needed for missile development. Little development activities was carried out by Mobutu. As a result Congo today can only be accessed by boats and canoes mainly through the River Congo.

As tyrants and dictators gained the support of western governments and did whatever they wanted with their economies without questions their people became poorer and hopelessness and desperation were the hallmarks of their lives. As the little money that came into government coffers were taken by corrupt government officials and civil servants there were almost no money to carry out infrastructural development and the poverty deepened. Poverty, desperation and hopelessness visited the people and coupled with their inability to change their leaders democratically, dissents were sowed among the population which serve as breeding grounds for more coups, civil wars and civil disturbances. This was evidence in Ghana, Nigeria, Niger, Ivory Coast, The Gambia, Liberia, Mauritania, Algeria, Gabon, Togo, Cameroon, Equatorial Guinea, Guinea Bissau, Central Africa Republic, Chad, Sudan, Ethiopia, Uganda and Sierra Leone all experienced coups in the 1960s, 1970s, 1980s and even in the early 1990s. These waves of coups were followed by civil wars that hit Liberia, Sierra Leone, Ivory Coast, Congo, Chad, CAR, Somalia, Uganda, Sudan, Angola, Niger and Guinea. These wars apart from it human cost also contributed to the destruction of roads, harbours, airports, rail lines, telecommunications, hospitals, schools and the livelihoods of the people. With the absence of infrastructures the countries have been unable to make any headway in terms of economic development.

World Bank, IMF & the Role of Foreign Corporations

The World Bank and the IMF (Bretton Wood Institutions) and foreign companies have also played their part in making poverty endemic on the continent. Most African countries incurred billions of debt through loans contracted from the Bank and IMF. Most of these conditional loans were used to service debts already owned by these poor countries. The loans were also used to pay foreign expatriates who came to the continent as ‘technical experts’.

Some of these loans were also used to undertake projects and programmes that benefited only the rich. Again part of the loan was also siphoned away by corrupt politicians and civil servants.

The structural adjustment programme (SAP) forced on the poor African countries by the Bank and the IMF forced the various governments to abandon their support for the public sector with serious consequences. The withdrawal of farm subsidies in particular has made it difficult for farmers to compete with their Western counterparts who receive millions of dollars of government subsidies every year. The unrests and disturbances over food shortage and high food prices that occurred in Egypt, Haiti, Ivory Coast, Liberia, Mauritania, Indonesia, Afghanistan, Eritrea, Somalia and Sierra Leone in 2008 were the direct result of the Bank and IMF bitter pills prescribed to these poor countries.

Due to SAP and other policies of the Bank and IMF investment in education, health, transportation and other sectors of the economy declined considerably. The governments were also forced to privatise state owned companies. The sad aspect of this exercise was that almost all the companies went to foreigners and the proceeds used to settle debts already owned by these poor nations. Unable to pay their debts and more cash trapped these poor countries turned to the bank and IMF for more loans and the Bank response was open up your markets for foreign goods and accept globalisation. As a result the continent has become a dumping ground for foreign goods. Unable to compete with the influx of cheap foreign goods most local firms have no choice but to close down, laying off several millions of workers and devastating many families.  Mr. John Jenkins the author of the ‘Confessions of an Economic Hit Man’ has written extensively about how the Bank, IMF and the various big cartels and corporations conspired to keep Africans and the developing world in the state in which they are today. Please watch John Jenkins on youtube as he tells his extraordinary story on youtube. http://www.youtube.com/watch?v=yTbdnNgqfs8

The presence of companies such as Shell, Mobil, Chevron, BP, Total, Rio Tinto, Texaco, BHP Billiton, Anglo-American and others have contributed to the high poverty levels on the continent. These companies who are mostly resource extraction in nature have destroyed the once rich soils of Africa, forcing many farmers to abandon their farms and loosing their livelihoods. Rivers, wells and streams used by the people for their everyday activities such as washing and drinking have been polluted by these profit making companies. Fishing in most mining and oil drilling communities has ceased as pollution has killed fish stocks in these rivers and lagoons rendering the fishermen unemployed. Communities which were once beaming with life are now ghost communities as land, rivers, lagoons and wells have been destroyed. Respiration, nausea and other mining related diseases are on the increase in many communities where mining and oil drilling are taking place but these profit making companies have abandon their corporate social responsibilities which they owe to the people. In August 2006 a Dutch company called Trafigura dumped highly toxic waste in Abidjan, Ivory Coast killing 17 people and sickening thousands. Such inhumane acts byTrafigura is just a tip of the iceberg.

Brain Drain

The poverty on the continent has also come about as result of serious brain drain that has hit the continent in recent times. The flight of doctors, engineers, architects, lawyers, judges, bankers, accountants, teachers, nurses, planners, agricultural experts and others have limited our ability to implement development projects and programmes. The flight of these intellectuals has rendered many government agencies very weak. In some communities there are hospitals without doctors and nurses. In others there are universities and colleges without lecturers and teachers. Countries like Malawi, Zimbabwe, Nigeria, Ghana, and Liberia have lost so much of their professionals to the very rich countries of Europe and America so much so that many of their sectors have resorted to hiring foreign expertise in order to cope. For example there are more Malawi doctors in Manchester City alone than the whole of Malawi combined. The irony is that governments use scarce resources to train these intellectuals only for them to leave the country for greener pastures abroad. Britain and the US are major recipient of these brain drain and even though they are aware of the tremendous negative effect it is having on these poor developing countries, they have done nothing to discourage it, in most cases they have encouraged it.

Corruption and Mismanagement

Corruption is another cancer that has tragically made the continent very poor. From South Africa to Egypt there is no country where corruption is not endemic.  According to the Africa Union (AU) around $148 billion are stolen from the continent by its leaders and civil servants. In 2006 Forbes’ list of most corrupt nations had 9 out of the first 16 countries coming from Africa.  Since oil was first discovered in Nigeria about 50 years ago, several billions of dollars have been realised from its but today the whole population continue to live in abject poverty and the country has nothing to show for it. As a result able men and women are battling dangerous seas just to enter Europe and try their luck. Others have resulted to 419 a popular scam used to trick people into given out their money and valuables. Those who seem to have benefited from the oil are corrupt politicians, civil servants and the big oil corporations such as Shell, Mobil, BP and their American counterparts. In fact Nigeria has consistently featured in the top 1% of the most corrupt nation on the planet. Between 2005 and 2007 several state governors and their immediate families were arrested by Scotlandyard in London on corruption and money laundering charges. Among them are James Ibori of oil rich Delta State and his wife Theresa who had their 35 million dollar asset frozen by the English court. Mr. Ibori earns about a thousand dollars a month but during his eight years as a state governor he managed to acquire wealth to the tune of $35m and was a key financial contributor to the campaign of the current president of Nigeria. He owns a private jet and lavish London home.  Another corrupt governor is Diepreye Alamieyeseigha, governor of oil-rich state of Bayelsa who was also arrested in London for money laundering charges. Mr. Alamieyeseigha broke his bail conditions and evaded capture in Britain by dressing up as a woman. When Police conducted a search in his London home they discovered one million pounds worth of cash in his home.   Another governor who was arrested in England was Joshua Dariye of Plateau State. He was arrested in a London hotel for stealing money meant for development of his state. In South Africa Jacob Zuma is still battling it out with the court for his part in the multi-billion arms deal in 2001 in South Africa. He was forced to resign as Deputy President of South Africa. The late Mobutu in his 32 years as President of Zaire, now DR Congo amassed several billions of dollars belonging to the Congo people. In 2006 former president of Malawi Bakili Muluzi was arrested for pocketing $12m donated to his poor country by foreign governments. Again former Zambia president Frederick Chiluba was arrested together with two business men Aaron Chungu and Faustin Kabwe and charged with 11 counts of stealing money meant for the Zambia’s development. In Equatorial Guinea where oil export has earned the country billions of dollars, the 600,000 people living in the country continue to live in poverty while Teodoro Obiang Nguema and his cronies continue to siphon the oil revenue with no accountability. Gabon and Angola both Oil exporting countries are no different. In fact, the governments in Gabon and Equatorial Guinea can best be described as Kleptocracy that is government by thieves. In countries such as Nigeria, Egypt, Cameroon, The Gambia, Sudan, Uganda, Libya, Tunisia a Kleptocracy class of people have replaced anything democracy. In these countries very few people continue to remain in power and the people have no say in the way their country is govern or run. For example Gaddafi of Libya has been in power for 39 years now. Omar Bongo of Gabon 31 years, Teodoro Obiang Nguema of Equatorial Guinea 28 years, Robert Mugabe of Zimbabwe 28 years, Hosni Mubarak of Egypt 27 years, Paul Biya of Cameroon 26 years, Yoweri Museveni of Uganda 22 years, Omar Al Bashir of Sudan 19 years, Iddriss Derby of Chad 17 years, Yahya Jammeh of Gambia 14 years, and the list is unending. What is clear is that these unelected leaders continue to amass wealth at the expense of their poor countries and continue to mismanage whatever remains of their corrupt acts. Because most of the leaders are former military officers or former rebels with no grasp of economics and management, they are unable to formulate any good economic policies that will make their economies grow hence poverty has become a part of the people but their leaders know not what poverty is. A visit to the Niger Delta region of Nigeria shows that majority of the people are unemployed. Years of oil spills have made the soil unfit for any agricultural activity. Their streams and wells are polluted and the people have no access to basic necessities of life even though billions of dollars is realised from the sale of oil from that region every year. In the 1990s economic hardship, abject poverty,  and destruction of the environment forced the people of Ogoniland to demand a say in which Shell operates but the military regime led by Gen. Sani Abacha arrested the environmentalists led by Ken Sorowiwa and executed them. It is these monies meant for the development of the states that these state governors were caught trying to bank away in Europe. Every effort to get the Nigeria government to develop the oil rich areas fell on death ears until the unemployed youth took up arms against the federal state. They kidnapped foreign oil workers and demanded ransom before their victims were released. They disrupted the oil production forcing the oil companies to move several miles offshore for their own safety but they were not safe either. Eventually, the companies had to reduce their output by 25% in 2007-8. These disruptions affected supply of oil in the world market forcing the price to skyrocket to $140 a barrel in the summer of 2008.

In DR Congo it is estimated that gold and diamond deposits alone could fetch the country 23 trillion dollars not to mention the abundance of timber and other several minerals that are found in large quantities such as columbo-tantalite (coltan) and cassiterite (tin ore) yet years of corruption, mismanagement, conflicts and foreign involvement have made this resource rich nation one of the poorest in the world. Coltan for example is used in every mobile phone and a number of electronic devices in the world. Cassiterite used in electronic circuit boards is the most traded metal on the London Stock Exchange. It is often said that western nations cannot maintain their current level of lifestyle without Congo and most corporations in the west can easily go bust without Congo. The question is if Congo is the blood line of the west and the west is rich because of Congo then why is Congo so poor? And where are the billions of dollars from the sale of these minerals? The answer lies in the history of the nation which is corruption, slavery, colonialism, assassinations, armed conflicts and foreign involvements. Since her independence from Belgium in 1960 there has not been peace in the country. Several millions of Congolese have died about 4 million of them in the last eight years alone and most of the dead are civilians. The conflict in Congo is largely about who controls the vast resources in he country. The huge size of the country has made its administration very difficult. And the problem is exacerbated by weak, ill-trained, undisciplined and very corrupt Congolese army who abduct, terrorise, rape and murder the people instead of protecting them.

The various militia groups operating in the east of the country have made life very difficult and unbearable for the civilian population. These armed groups with backing from Rwanda and Uganda have largely operated in the region with impunity – abducting, raping, massacring and stealing from the poor people. Jean Pierre Bemba who is now facing war crimes in The Hague was a notorious warlord whose activities have not escaped the international criminal court (ICC). Another notorious warlord who is still operating with impunity is Laurent Nkunda. A visit to Walikale town in the east of the country explains in vivid terms why the people are so tragically poor. People have abandoned their farms and moved to the mines but whatever is made from the mining is taken away from them by the Congolese army and the ever present predators i.e. the armed groups. These armed groups force the people to mine the minerals without pay. Unable to farm and not paid for their toil, most of them have to credit food in order to survive. Everyday in Walikale about 16 aircraft fly out of the city with loads of minerals bound for Rwanda. These stolen minerals further find their way in the western mineral market in London and Switzerland. The proceeds are shared by the warlords in Congo, the Generals, politicians and the businessmen in Rwanda and the rest is used to acquire weapons that are used to terrorise the people and prolong the war. Please click the link below to watch a video of Congo.

http://www.youtube.com/watch?v=Io8c81xHLmw

Recommendations and Conclusion

It is clear that several forces within and outside the continent have contributed to making the continent the poorest on earth. But there is no time to look back but a time to look forward and get our acts together, organise ourselves and start doing something. The progress that has been made by China, India, Korea, Taiwan, Singapore, Malaysia the Gulf countries including Bahrain, Kuwait, United Arab Emirates Saudi Arabia and Qatar over the last 30 to 50 years shows that poverty has got nothing to do with colour or race. Nations become poor because their leaders fail to formulate policies and programmes that address their problems.

To reverse the negative impact of centuries of slavery and colonialism on one hand and decades of coups, civil wars, corruption, mismanagement and foreign interventions on the other hand, the governments should focus their attention on reforming their democratic institutions and allow free and fair elections to be organised. They should do more to fight corruption and mismanagement, establish independent corruption watchdogs, strengthen the judiciary, and be accountable to the people.

They should curtail the power of the army and embark on concrete, sound and result driven policies and provide more incentives to discourage brain drain.

The governments should embark on building social and economic infrastructures – schools, hospitals, roads, rail lines, telecommunications, airports, harbours, markets, that will lay the foundation for economic and social development. They should establish research institutions to find out how best to use the various natural resources to benefit the people. As the saying goes ‘resources are not but they become’ that is to say you may have all the natural resources in the world but if you do not have the ability to convert them into useful commodities/ consumables to benefit the people they are nothing.

The AU should be more concerned about fighting poverty than just been a talking shop for corrupt, kleptocrats and dictators. 

Lord Aikins Adusei
http://www.articlesbase.com/education-articles/is-poverty-a-black-thing-728359.html

Anti Poverty

Anti Poverty in USA

                          Even the wealthiest nation in the world like the United States does not escape the problem of poverty. This paper takes a critical look at poverty and anti-poverty policies in the United States. In this paper, I have argued that poverty is caused by several factors. This paper also discusses the liberal and conservative perspectives for reducing poverty in America. The conservatives have focused on individual factors such as wide wage gaps, breakdown of family, racial factors and other reasons while the liberals have focused on the structural transformation of the American economy to explain the persistence of poverty.  Since 1960, both the federal and state governments have been responding with policies that address the problem with mixed results. In this paper, I have analyzed the policies and have also recommended the possible ways to deal with this intractable nature of poverty.

                   According to Sen (1981), ‘the poor are those people whose consumption standards fall short of the norms, or whose income lie below that line’. The word "poverty" suggests destitution, an inability to provide a family with nutritious food, clothing, and reasonable shelter. Over thirty-six million Americans live below the official U.S. poverty line (Blank, 2007). This means a family of three earns less than less than $ 16,000 or a single individual earns $10,300 per annum (Blank, 2007, p. 17). Millions more struggle each month to pay for basic necessities, or run out of savings when they lose jobs or face health emergencies. Job cuts, high rates of unemployment, foreclosures and high food and gas prices continue to stimulate policy formulation designed to improve the condition of the poor.

                     Poverty is integrally associated with misery and suffering. The lost potential of children in poor households and the lower productivity and earnings of poor adults are all intertwined with poor health, increased crime and broken neighborhoods. Childhood poverty typically leads to poor health care and high crime neighborhoods. Persistent childhood poverty is estimated to cost the United States $500 billion each year, or about 4% of the nation’s gross domestic product (Blank, 2007, p.1).

                    One in eight Americans lives in poverty and poverty in the United States is far higher than in many developed nations (Rebecca Blank, 2007, p1). Inequality has reached record high. The richest 1 percent of Americans in 2005 held the largest share of the nation’s income (19%) since 1929 (Rebecca Blank, 2007, p. 2). At the same time the poorest 20% of Americans held only 3.4% of the nation’s income (Rebecca Blank, 2007, p.2).

                    Colorado in spite of being surrounded by the beautiful Rocky Mountains and experiencing a cool, mountain climate has many homeless people. Scholars have identified that, a growing number of single parent households, a shortage of jobs for lower wage workers and a low rate of high school graduation have contributed to the growth of poverty in Colorado. The Colorado poverty rate has increased from 9.2% in 2000-2001 to 10.6% in 2005-2006 while the poverty rate of United States has increased from 11.5% in 2000-2001 to 12.5 % in 2005-2006 (Center on Law and Policy, 2006, p.1).  Most of these ill-fated poor people suffer from mental and health problems. 

Causes of Poverty

                        Policy analysts are trying to explore numerous perceived direct and indirect causes of poverty in the United States to formulate effective policies to alleviate poverty. The work of scholars such as Corley (2003), Sowell ( 2004), Iceland (2006), Jencks (1992), James Tobin (1993) and others have shown that the intractable nature of poverty is a result of not any one factor but of the interaction of a variety of causes. The breakdown of family and other social causes as well as the structural changes in the economy, have all contributed to society’s failure to eradicate poverty inspite of ardent efforts by policy analysts.

                   Individual Explanation of poverty mainly stresses the attitudinal or motivational factors and human capital factors. Thus lack of motivation among indigents causes poverty. Generous welfare programs sometimes affect the mind-set of recipients and they prefer to stay at home and enjoy the benefits rather than work outside. Murray (1984) argues that individuals prefer to remain on welfare because of insufficient motivation to come out from public welfare programs.

                  Formulation and proliferation of policies to alleviate poverty has been a major concern of the United States Government since 1960. Educational attainment is necessary to get a high paying job. Elementary school education, as well as lack of adequate skills and motivation among indigents to come out of the situation is the major causes of poverty. People well equipped with technical skills get high salaried jobs while people who are school drop outs get low pay on an hourly basis. During the 1960s when the then- President of United States Lyndon Johnson began to implement the United States ‘war on poverty’, he placed great emphasis on education (Jencks, 1992). The Lyndon Johnson administration even invested in programs like Head Start and occupational training to upgrade the skills of the poor and also to prevent future generations from working in low-paying jobs. Scholars like Sowell (2004) and Corley (2003) have emphasized individual level factors as the central causes of poverty. They argue that a person’s compensation is based on his or her educational qualification and marketable skills. Sowell (2004) argues that the lack of appropriate skills has affected the ability of many indigents to climb out of poverty. He also argues that there has been an increase in the poverty rate of unskilled Americans, who have lost jobs to Asian immigrants. Corley (2003) also supports the above argument and regards ‘lack of educational attainment’ as one of the entrenched sources of poverty. Low quality education from poorly funded inner-city schools results in few marketable skills which leads to low-wage jobs and other miseries associated with it such as less ability to pay for housing, food, clothing, medical care, bad neighborhoods, funding problems for schools, and increased risk of serious illness (Corley, 2003). 

                          Many scholars have argued that structural changes are the primary reason for the persistence of poverty in the United States. Structuralists emphasize issues such as joblessness, discrimination in education, institutional racism and economic transformations in explaining the causes of poverty. Scholars argue that the inability to provide decent paying jobs for some American families and the ineffectiveness of American public policy to reduce poverty are basically the result of structural failures and processes. Poverty is rooted in the structure of American society. Rank, 2004 supports the above view and argues that lack of human capital tends to place individuals in a vulnerable state when events and crises occur. The incidence of these events like loss of a job, family break-up and ill-health often result in poverty. These ill-fated people unable to handle these situations often end up in paying more. Scholars also argue that the acquisition of human capital is strongly influenced by the impact of social class on this process (Rank, 2004). Apart from poor family, race and gender also play a role in the acquisition of human capital (Mark Robert Rank, 2004).

                          Globalization, the expansion of credit markets leading to greater indebtness and foreclosures leading to recession in 2008 all point to the growth of poverty.  Iceland (2006) primarily focused on economic factors and has argued that poverty is also the product of deindustrialization. As the U.S. shifts from a manufacturing, industrial society to a service-oriented, high-tech society, many of the blue-collar jobs that required little education but paid well are disappearing or are being outsourced. Rural areas, such as Appalachia, suffer losses of mining jobs, and cities such as Detroit lose many manufacturing jobs to automation or overseas factories. Some people are unable to follow the jobs or commute to work are left in neighborhoods without employment or tax-basis to support needed social functions, such as schools, public transportation, police departments, and so forth. Others simply cannot find jobs because of the shift towards a service-based economy; in economic terms these people are structurally unemployed due to the changing skills needed. Tobin (1993) supports the above viewpoint and emphasizes on the disappearance of jobs in the 1900s as the main reason for the country’s failure to eradicate poverty. Recent employment data shows that the US housing slump and the crisis in America’s credit markets are threatening to increase poverty levels. Isidore (2008) mentions that the job losses  are widespread, with the battered construction sector losing 51,000 jobs and manufacturing employment falling by 48,000 in the year 2008 . Retail employment dropped by 12,000 jobs, and business and professional service employers cut staff by 35,000. The unemployment rate jumped to 6.1% in September from 4.9 % in January (Bureau of Labor Statistics, 2008).

                         Kelso (1994), argues that over the last forty years, there has been a major shift of American firms first to the west and then to the south. Part of this shift was due to the rise of the Cold War and the decision of the government to enlarge U.S. military power (kelso, 1994). He argues that as America elected to invest more in defense and in the aerospace industry, cities like Seattle and Los Angeles on the West Coast began to boom while the growth of a high technology and information based technology led to the growing affluence of California and the San Francisco Bay area. Later with the expansion of inter-state highway system and growth of jobs, markets were created in the south.

                         Iceland (2006) also argues that although the service sector of the economy has generated millions of jobs, but again polarized earning distribution based on educational attainment separates better paying jobs from poorer paying jobs. He supports a Marxian analysis of class conflict and exploitation and emphasizes on business owners favor hiring inexpensive labor to maximize profit. This also accounts for the inflow of cheap labor to the United States from Mexico and other countries. Greater access to credit has put cars, computers, credit cards, and even homes within reach for many more of the working poor. But this remaking of the marketplace for low-income consumers has a dark side. Roubini notes that, "Having access to credit should be helping low-income individuals, but instead of becoming an opportunity for upward social and economic mobility, it becomes a debt trap for many trying to move up (Grow and Epstein, 2007).

                          Inspite of public assistance and wide initiatives taken by both Federal and State governments, poverty still exists. Meticulous analysis of the situation and effective formulation of policies is needed to solve the problem of poverty in the United States. Scholars like Rank (2004), Blank (2007) and others have shown that the United States Government spends fewer funds addressed towards poverty than any other industrialized country. Thus a major structural failure is found at the political level (Rank, 2004). Most European countries provide a wide range of insurance programs, unemployment assistance, and wide universal health coverage along with considerable support for child care (Rank, 2004). Such social programs are far more generous than those in the United States (Rank, 2004). While, low-income families in the United States work more than those in other countries, they are still not able to make up for lower governmental income support relative to their European counterparts (Blank, 2007, 141-142).

                          The gross disparities among impoverished people in the United States along racial lines have led many scholars to speculate that institutional racism is responsible for much of the poverty in the United States. Racial discrimination in employment and   education contribute to the growth of poverty. Some scholars like Massey and Denton (1993) interpret the statistics in terms of institutional racism while others like Kelso (1994) interpret the statistics as evidence of deficiencies and suffering of blacks.   In spite of efforts to remove racism, slavery and Jim Crow segregation, Massey and Denton (1993) argue that racial segregation still exists and that the fundamental cause of poverty among African Americans is segregation. They argue that segregation has created and perpetuated a black underclass by limiting educational and employment opportunities. Massey and Denton (1993) have shown that Blacks were shown homes in racially mixed areas or areas adjacent to predominantly black areas.

                           Also, changing patterns of family formation are more pronounced among racial and ethnic groups. Family patterns are also one of the causes of poverty in the United States. There is a wide gender gap in wages. In 2004 the median income of FTYR male workers was $40,798, compared to $31,223 for FTYR female workers (DeNavas-Walt et al, 2005) Pearce (1978) argues that ‘poverty is rapidly becoming a female problem’. Iceland (2006) supports this statement and showed that in 2000, the female poverty rate (12.5%) was 26% higher than the male poverty rate (9.9%) (Iceland, 2006). According to Iceland, women have fewer economic resources than men, and they are more likely to be the head of single- parent families. It also leads to the greater likehood that single, divorced or widowed women will be poorer than their male counterparts because of less social security income or other retirement income in addition to higher female life expectancies. Women’s lower wages, lower retirement benefits and the increasing number of single mothers have led some scholars to talk about the “Feminization of Poverty.”

Federal policies

                       After the Second World War, by 1963, creation of jobs by President John F. Kennedy’s tax policies could not remove the problem of poverty. Poverty was still recognized as a major national problem. President Lyndon B. Johnson’s War on Poverty led to a host of programs that included Medicare, Medicaid, Food Stamps, Aid to Families with Dependent Children, and others. These entitlements eventually consumed half the federal budget and could not alleviate poverty. The U.S. economy had been devastated by the recession of 1979-83 when the United Statess manufacturing infrastructure was shattered by the Federal Reserve’s skyrocketing interest rates causing unemployment to shoot up by sixty-five percent in four years (Cook, 2007). By the end of the 1980s the economy was in another recession, leading to the election of Bill Clinton who in 1992 replaced the incumbent George H.W. Bush. The investment boom of the 1990s was fueled by foreign capital lured in by the Treasury’s strong dollar policies. Jobs were created as the dot.com bubble expanded, trade barriers fell, and utility trading giants like Enron took off. NAFTA was enacted to promote free trade, welfare-to-work brought low-income women into the job market, and the Earned Income Tax Credit was extended. The party ended when the stock market crashed in December 2000 and millions of people lost their retirement savings and other investments. Recession was returning even as George W. Bush was being declared president by the U.S. Supreme Court in December 2000. The economic crisis deepened after the September 11, 2001 attacks when $1.4 trillion in wealth vanished during the worst five days of the stock market since the Great Depression (Cook, 2007). Cook (2007) argues that today, poverty is becoming a national catastrophe. Cook (2007) argues that from 2002 through 2006 the economy was floated by the housing bubble, with many lower income people getting into homes of their own through the proliferation of sub prime mortgages. With the financial woes in late 2008, many American citizens are left with inflated home prices and no way to pay for them.

                      The 1960’s policy initiatives and declaration of ‘unconditional war on poverty’ by the then president Lyndon Johnson marked a discrete change in the federal government’s willingness to intervene for the purpose of improving the economic situation of poor Americans. Despite the billions of dollars spent on programs like CETA (Comprehensive Employment Training Act), The Manpower Development and Training Act, Head Start, and the Elementary and Secondary Education Act, the government efforts to deal with the origins of poverty have met with minimal success. During this period, implementation of the Social Security old-age program insured virtually all retired workers against the risk of outliving their savings. The Social Security Act of 1935 sought to protect the incomes of those who did not work because of age or a poor economy by establishing a federal framework for unemployment insurance, old-age benefits, and assistance to women. In early 1964, the two most pressing priorities of President Johnson’s antipoverty agenda involved passing a massive tax cut designed to stimulate the economy and organizing a task force to shape the ‘War on Poverty’. The Economic opportunity Act (EOA) signed by Johnson created a long list of programs designed to help individuals develop marketable skills, political power, and civic aptitude. But this anti-poverty legislation oversaw other programs like Community Action Program, Job Corps, VISTA, Head Start (1965), Legal Services (1965) which were not included in its framework. While extensive programs like the Food Stamp Program, Medicare for elderly, Medicaid applied to qualified poor residents, the Elementary and Secondary Education Act for poor students overshadowed the EOA. The Higher Education Act eased the financial burdens of millions of college students. The Civil Rights Act opened up new spaces in the American marketplace, while the Voting Rights Act did the same for the political marketplace. The Fair Housing Act established an important base of law to combat housing discrimination. As a result the EOA slowly lost importance. Again, Murray (1984) argues that welfare benefits had soared so high so as to make living in poverty a meaningful option for the poor. Even Burton (1992) has supported the above viewpoint and argues that the programs have done more to cause poverty than to alleviate it.

                          When Nixon assumed power, he tried to deal with poverty in a more direct way than emphasizing social programs. . Although President Nixon expressed dislike for much of the War on Poverty, his administration responded to public pressure by maintaining most programs and by expanding the welfare state through the liberalization of the Food Stamp program, the indexing of Social Security to inflation, and the passage of the Supplemental Security Income (SSI) program for disabled Americans (Rank, 2004). The Nixon administration also endorsed a “New Federalism” in which the federal government shifted more authority over social welfare enterprises to state and local governments. His plan to implement the ‘Family Assistance Plan’ (FAP) consisted of various income provisions, work provisions, and training provisions for those below the poverty line (Rank, 2004). It failed to pass the Senate much like the ‘Programs for Better Jobs and Income’ initiated by President Carter in later years.                                       Welfare reform continued as a focus of federal policy debates even after the legislative defeat of FAP. Even though a cash ‘Negative income Tax’ (NIT) for all poor persons never passed, the Food Stamp program provided a national benefit in food coupons that varied by family size, regardless of state of residence or living arrangements or marital status. The number of AFDC recipients increased from about 6 million to 11 million and the number of food stamp recipients, from about 1 million to 19 million during the Nixon administration (Danziger, 1999, p. 8). Danziger (1999) also argues that as higher cash and in-kind benefits became available to a larger percentage of poor people, the work disincentives and high budgetary costs of welfare programs were increasingly challenged. The public and policy makers came to view increased welfare recipients as evidence that the programs were subsidizing dependency and encouraging idleness.

                        Despite the failure to enact a guaranteed income program, both the number of recipients and the amount of money spent on welfare programs increased substantially during the 1970’s (Rank, 2004). Rank (2004) has given an overview of Reagan’s policies and noted that Reagan emphasized individual action unhampered by government interference, rejected the social engineering of the 1960’s and also supported federalism, that is, returning power to the states rather than centralizing them within the federal government. Reagan tried to address the problem and set the tone for welfare reform that occurred in 1990 during his successor’s administration. The Reagan administration thought eligibility for welfare benefits had increased so much, that many persons who were not “truly needy” were receiving benefits. The Reagan Administration opposed simultaneous receipt of wages and welfare benefits. Rather, it proposed that welfare become a safety net, providing cash assistance only for those unable to secure jobs.

                    The Earned Income Tax Credit (EITC), enacted in 1975, provides families of the working poor with a refundable income tax credit (i.e., the family receives a payment from the Internal Revenue Service if the credit due exceeds the income tax owed). Thus the EITC raises the effective wage of low-income families, is available to both one- and two-parent families, and does not require them to apply for welfare. The maximum EITC for a poor family was $400 in 1975 and rose to $550 by 1986 (Danziger, 1999, p. 14). The 1986 Tax Reform Act increased the EITC so that by 1990 a low-income working parent received a maximum credit of $953 (Danziger, 1999, p. 14). The number of families receiving credits increased from between 5 and 7.5 million families a year between 1975 and 1986 to more than 11 million by 1988 (Danziger, 1999, p. 14). Danziger, 1999 argues that as the expanded EITC supplements low earnings, it became easier for policy makers to emphasize welfare reform policies that could place recipients into any job, rather than training them for “good jobs.” Thus he argues that if a nonworking recipient took a low-wage job, a substantial EITC could make work pay as much as a higher-wage job would have paid in the absence of an EITC.

                         The Family Support Act (FSA) of 1988 expanded the scope of the AFDC program for two-parent families, instituted transitional child care and Medicaid for recipients leaving welfare for work, and added funds and required states to establish programs to move greater numbers of welfare recipients into employment. When the welfare rolls jumped in the late-1980s and early-1990s, from about 11 to about 14 million recipients, dissatisfaction with welfare again increased ( Danziger, 1999).    

                        President Nixon identified the two main economic problems, inflation and unemployment, that justify the need for economic recovery to the American worker. Reagan has emphasized despair caused by unemployment combined with high inflation. Reagan’s rhetorical construction of welfare recipients and the welfare system was aimed at reducing anxiety among Americans caused by increasing taxes, inflation and the continuous fear of losing jobs. To end this victimization, Reagan proposed a plan for economic recovery (Rank, 2004). Apart from cutting government spending, specifically spending on social programs, Reagan also proposed to have State governments assume control of Aid to Families with Dependent Children (AFDC) and the food stamps program in exchange for the Federal Government control of Medicaid. Although this proposal failed to reach the Congressional floor, his presentation of the proposal to exchange AFDC and food stamp program with Medicaid made poverty a local concern (Mark Robert Rank, 2004).  

                       Liberals and conservatives still disagreed on other goals of welfare-to-work programs. Liberals thought welfare reform should expand opportunities for welfare mothers to receive training and work experiences that would help them raise their families’ living standards by working more and at higher wages. Conservatives emphasized work requirements, obligations welfare mothers owed in return for government support whether or not their families’ incomes increased (Mead, 1992). 

                       In later years President Clinton’s approach also emphasized empowerment as a way of helping welfare recipients and to accumulate more savings without being penalized and expanding the earned income tax credit (Blank, 2007). By the mid-1990s, the focus of policy concern shifted from fighting poverty to reducing welfare dependence. President Clinton’s signing of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (the PRWORA) ended the entitlement to cash assistance and dramatically changed the nature of the social safety net. The Act created the Temporary Assistance to Needy Families Program (TANF). TANF began on July 1, 1997, provides cash assistance to indigent American families with dependent children through the United States Department of Health and Human Services (The Center for American Progress Task Force on Poverty, 2007).  Danziger, 1999 argues that each state can now decide which families to assist, subject only to a requirement that they receive “fair and equitable treatment.”  In instituting a block grant program, the PRWORA granted states the ability to design their own systems, as long as states met a set of basic federal requirements. The bill’s emphasis on ending welfare as an entitlement program, places a lifetime limit of five years on benefits paid by federal funds, and also aims to encourage two-parent families and discourages out-of-wedlock births. In granting states wider latitude for designing their own programs, some states have decided to place additional requirements on recipients. Although the law placed a time limit for benefits supported by federal funds of no more than 2 consecutive years and no more than 5 years over a lifetime, some states have enacted more stringent limits. All states, however, have allowed exceptions with the intent of not punishing children because their parents have gone over the time limit. Federal requirements have ensured some measure of uniformity across states, but the block grant approach has led individual states to distribute federal money in different ways. Certain states more actively encourage education, others use the money to help fund private enterprises helping job seekers. The PRWORA offers no opportunity to work in exchange for welfare benefits when a recipient reaches her lifetime limit of 60 months of federally-supported cash assistance. But the reform has certain limits. States may not use federal block grant funds to provide more than a cumulative lifetime total of 60 months of cash assistance to any welfare recipient, no matter how willing she might be to work for her benefits, and they have the option to set shorter time limits. States can grant exceptions to the lifetime limit and continue to use federal funds for up to 20 percent of the caseload. The extent of work expectations has also been increased. Single-parent recipients with no children under age one will be expected to work at least 30 hours per week by FY 2002 in order to maintain eligibility for cash assistance (Danziger, 1999, p 20). States can require participation in work or work-related activities regardless of the age of the youngest child. Thus PRWORA emerged from research that sought both to reduce poverty and welfare dependency (Danziger, 1999).  In the 1990s, following Clinton’s call to “end welfare as we know it,” policy makers escalated their demands for recipients to work and reduced government obligations toward and funds to serve them (Danziger, 1999).

                     When Bush took office in 2001, the U.S. was experiencing a national surplus, unemployment and poverty had been on the decline for years, and the economy was booming. Now, almost six years later, poverty is on the rise, healthcare coverage is on the decline, and the country is faced with the largest national deficit in history. Lower middle class families are slowly slipping below the poverty line and the poorest are becoming even more destitute. Most of these families are headed by women.

                      President Bush has extended the TANF. There has been a general economic stimulus policy initiative during the Bush administration but nothing targeting low income Americans has been enacted. President Bush signed the economic stimulus package (H.R. 5140) into law with the hope that it will provide a much-needed boost to the lagging economy. The package includes tax rebates for individuals, tax breaks for businesses, and a temporary increase of the Federal Housing Administration loans from $417,000 to $729,750 (White House report, 2008). More than 130 million people are expected to get tax rebates ranging from $300 to $1,200 per household for individuals earning $75,000 or less and couples earning up to $150,000 (White House report, 2008). While the stimulus package will provide much needed financial help to millions of people, it fails to target those most in need as it will not include an extension of unemployment benefits, energy assistance, food stamp benefits, or fiscal relief to states for Medicaid.                       

                  From the above analysis, the question arises whether poor are responsible for their own condition. The above analysis implies that recipients become dependent and lethargic due to vast welfare measures. Scholars such as Murray (1984) and Kilty and Segal (2006) have emphasized on individual factors. They argue that welfare measures and lack of spirit and motivation among indigents contribute poverty. Danziger, 1999 argues that during the Nixon era increased welfare measures encouraged idleness. Kilty and Segal, 2006 also argues that poor people can come out into a state of self-sufficiency from dependency by learning proper work attitude and skills. Kilty and Segal, 2006 argue the importance of welfare reform and a ‘tough love’ approach would ultimately help the poor by making them conscious of their condition and forcing them to take their own responsibility. Bill Clinton’s emphasis on ‘personal responsibility’ and measures to ‘end welfare as we know it’ in 1992 all supports the above argument.

                     Due to the implementation of TANF, the numbers of people on welfare have decreased. As a result more funds are accumulated. In 1996 the number of ADFC recipients was 12,644,076 while in 2001, the number of TANF recipients was 5,91, 811 and the poverty rate also reduced from 13.7 to 11.3 ( Kilty and Segal, 2006) and while in 2008 it is 1,628,422  ( US Dept of Health and Human Services). The share of single mothers on welfare (based on administrative caseload counts divided by population numbers) rose from 38 percent in 1969 to 48 percent in 1980, but had fallen to 30 percent by 1998 ( Kilty and Segal, 2006). These caseload changes are widespread, with every state in the country experiencing substantial caseload decline. This decline has been widely hailed by politicians as an indication that policies designed to reduce dependence on public assistance and move less-skilled adults into the labor market have been extremely effective ( Blank, 2007). But however Blank argues that declines in welfare do not affect the poverty rate. The poverty rate in 2007 was 12.5 percent, increasing slightly from its level of 12.3 percent in 2006. The poverty rate increased for four straight years from 2000 to 2004. In 2007, the poverty rate was 1.2 percentage points higher than it was in 2000 (Blank, 2007).     

States welfare initiatives

                      Most states took a significant decision about reform, and this decision was sensible in light of state goals and experience. A few states did not seriously make reform policy. New York was so deeply divided that it took no serious decisions about AFDC (Mead, 2002). Alabama and Missouri were pushed into reform by federal action and appeared to have little welfare policy of their own (Mead, 2002). In several other Southern states (Florida, North Carolina), policymaking appeared to be casual and personalized, with the governor or legislators offering reform plans with, apparently, little inquiry or evidence behind them( Mead, 2002) . Texas policymaking was incoherent as the state claimed to pursue work first but based its policy on an experimental program and focused far more on education and training (Mead, 2002). States have always emphasized on reform. But sometimes lower contribution towards these plans result in total failure of the program. Mead (2002) argues that in Florida and Georgia, however, officialdom was dragged into reform but showed little commitment to it. In Arizona and California, the agency or major localities had been heavily committed to a skills-oriented approach to welfare and resisted the shift toward work first. In Texas, welfare reform was a lower priority to administrators than rebuilding non-welfare employment programs and other initiatives. In Colorado and New Jersey, local agencies had a history of defiance toward the state government, and this prevented them from fully endorsing reforms decided in the capital. Mead (2002) argues that inspite of establishment of Employment Service (ES), a federally-funded job placement agency, and training programs under the federal Job Training Partnership Act (JTPA), poverty rate did not improve. After national welfare work programs were first enacted in 1967, the ES engaged in welfare practices. But because the ES’s routine stressed serving job seekers who came to it voluntarily, it generally performed poorly with welfare clients (Mead, 2002). These jobseekers came to it on a mandatory basis, as a condition of receiving aid. To succeed with them, the agency had to enforce work but also support employment with special services. The ES often found both these roles uncongenial (Mead, 2002). The ES was denoted to the role of contractor to welfare and later in 1988 the Workforce Investment Act (WIA) merged the ES, JTPA, and other non-welfare work programs. But this merging also created confusion. The problems included lack of clear procedures to refer clients to WIA, to serve them there, or to report results back to welfare. The states that lacked coordination and inadequate management information systems (MIS) were Massachusetts, Rhode Island, Tennessee, Washington, West Virginia, Florida, Georgia, and Tennessee.      

                         Colorado’s public reform has been associated with decline in poverty rate. By the close of 2000, Colorado’s unemployment rate dropped to 2.6 percent, personal income showed steady gains, state welfare cases declined dramatically, and State legislators wrestled with an estimated $833 million revenue surplus (Colorado Fiscal Policy Institute, 2001). But inspite of all the above facts poverty still persists as expenses like child care, out-of-pocket medical expenses and geo-graphic differences in housing costs increased. The increases occurred even after adjusting for income support such as tax relief, food stamps and school lunch programs, housing subsidies and energy assistance. A report published in 2001 by the Colorado Fiscal Policy Institute determined that a single parent with two small children living in Denver County would need to earn an annual salary of approximately $39,924 in order to meet their basic needs such as housing, food, health care, childcare and transportation without public or private assistance. Even child poverty rate is high in Colorado. About 180,000 children, 15.7 percent of the state total was living in poverty in Colorado in 2006, a 73 percent increase since 2000 (Frosch, 2008). The state of Colorado purchases childcare for income eligible families through the Colorado Child Care Assistance Program (CCCAP). The state allows individual counties to set the purchase price of childcare and make payments to providers from a combination of parental fees and federal, state and county funds. However, the Colorado Office of Resource and Referral Agencies (CORRA) found in a 2001 study that the average county payment fell below 75 percent of market value (Colorado Fiscal Policy Institute, 2001, pp 9). As a result counties forced providers to subsidize the cost of service to low-income families, which many were simply unwilling to do when limited slots could be filled with families that could afford to pay full rates. Other providers that chose not to simply refuse service to CCCAP families saved money by limiting the number of children on CCCAP that they would accept, cutting programs, or reducing workers’ wages. All of these actions limited availability and sacrificed quality of care to low-income children. Poverty still exists in Colorado despite initiatives to alleviate poverty as too many working families lives with incomes below the poverty line and more families earn wages simply too low to afford their basic needs. The Colorado government started the Common Good Caucus in 2007 to develop a 2009 agenda, emphasizing on K-12 education and determined to bring technologies out of the laboratory and into the marketplace by investing $4.5 million dollars in bioscience industry, supporting the Clean Energy fund to reduce high family utility costs , creating the Colorado Solar Incentive Program with $2 million to provide rebates for photovoltaic and solar thermal systems to help Coloradans join the new energy economy and cut their utility bills ( State Rep. Kerr Andy, 2008). Poor people cannot pay the full cost of heating and lighting their homes. Governments and social service agencies have long assisted low-income ratepayers in paying their bills through such programs as the Low Income Home Energy Assistance Program (LIHEAP), charitable fuel funds, levelized billing, discounts, home weatherization, energy efficiency, energy usage education and debt management. If all Americans live in weatherized and energy efficient homes and have the income to pay their full share of utility bills, all other ratepayers would save nearly $6 billion in poverty costs, including fuel assistance, lifeline and other rate assistance, weatherization and efficiency costs, the costs of late payments and service disconnections (Oppenheim and MacGregor, 2007).      

Recommendations  

              From the above analysis it is clear that poverty remains pervasive due to the economic system, social stratification and welfare measures. According to Iceland (2003) on one hand, economic growth and technological changes contribute to increase in wages and overall standard of living. Economic growth accompanied by rising education levels improves the condition of people. On the other hand, the market economy often exerts a contrary effect on poverty levels (Iceland, 2003). To maximize profits, businesses usually seek to pay low wage to workers which increase inequality and poverty. Again policy may increase or decrease the harmful effects of inequality. Combining the factors emphasized by both liberals and conservatives, poverty is multifaceted. I believe that a strong national effort would alleviate poverty. Employment opportunities for all so that that worker and their families can avoid poverty, meet basic needs and save for the future. Increasing hourly wages would definitely improve the condition of these people. A smaller share of unemployed low-wage workers, receive unemployment insurance benefits. I believe that states (with federal help) should reform “monetary eligibility” rules that screen out low-wage workers, broaden eligibility for part-time workers and workers who have lost employment as a result of compelling family circumstances. Workers should use this period of unemployment and the money received from the Unemployment Insurance System and upgrade their skills and qualifications. Thus adults should have opportunities throughout their lives to connect to work, get more education, and live in a good neighborhood and move up in the workforce.

                         Child care assistance to low-income families and emphasis on K 12 education would definitely reduce the rate of poverty in the United States.                          Low-income youth hardly attend college than their higher income peers. Pell Grants play a crucial role for lower-income students. Simplification of the Pell grant application process, and encouragement of institutions to do more to raise student completion rates would definitely improve the condition. Expansion of Pell Grants would make higher education accessible to residents of each state. The states at the same time should also develop strategies to make postsecondary education affordable for all residents. Expansion of the Saver’s Credit would encourage saving for education, homeownership, and retirement. As a result all Americans would have assets that would allow them to weather periods of volatility and to have the resources that may be essential for upward economic mobility. Apart from Saver’s credit, expansion of Earned Income Tax Credit would raise incomes and helps families build assets. Thus there should be opportunity for all so that children grow up in conditions that maximize their opportunities for success.

References:

Blank Rebecca (2007); Poverty to Prosperity; Center for American task force on Poverty;

www.americanprogress.org/issues/2007/04/pdf/poverty_report.pdf – Similar pages

Colorado Statewide Homeless Count (2007), School of Public Affairs, University of Colorado, denver.www.dola.state.co.us/cdh/Publications/Winter_2007_Statewide_PIT.pdf – Similar pages

Cook Richard (2007), Poverty in America

www.globalresearch.ca/index.php?context=va&aid=5905 – 61k – Cached – Similar pages

Corley Mary Ann (2003); Poverty, Racism and Literacy; ERIC Clearinghouse on Adult Career and Vocational Education

Danziger Sheldon (1999), Welfare Reform Policy from Nixon to Clinton, Institute for  for Social Research, University of Michigan.

De Navas-Walt, et al., “Income, Poverty and Health Insurance in the United States: 2005.

Diana Pearce Diana Pearce (1978) "The Feminization of Poverty: Women, Work, and Welfare," Urban and Social Change Review.

Iceland John (2006); Poverty in America; University of California Press

Isidore Chris (2008); the Trillion-Dollar Mortgage Bomb,

money.cnn.com/2008/04/21/news/economy/fannie_freddie/?postversion=2008042103 – 66k –

James Tobin (1993); Poverty in Relation to macroeconomic Trends, Cycles and Policies; Cowles foundation discussion paper.

Garima Dasgupta
http://www.articlesbase.com/politics-articles/anti-poverty-688499.html

What is your plan to reform government and elections to better serve American people?

How would you do it, think of the whole picture.

It’s easy, get off your butt and V O T E !!!!!