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Issue No. 147 09 August 2002  

A Call to Action
While there has been a lot of angst, anger and no shortage of tub-thumping over Simon Crean's push to cut union influence in the ALP, the end result of the Hawke-Wran review is that it is a call to action for unions to reclaim their party.


Interview: Save Our Souls
Labor's superannuation spokesman Nick Sherry expands on his recent discussion paper into the industry.

Unions: Rats With Wings
As the Cole Commission continues to sidestep safety, another Sydney building accident puts workers at risk this week, Jim Marr reports

Bad Boss: If The Boot Fits
Royal Commission favourite and S & B Industries top dog, Barbara Strong, carts off this week�s Bad Boss nomination.

History: Political Bower Birds
Rowan Cahill looks at a new resource detailing the fading history of the Communist Party of Australia

International: No More Business as Usual
Global unions are stepping up their campaign against corporate rip-offs

Corporate: The Seven Deadly Sins of Capitalism
Shann Turnbull outlines a new set of rules that should govern capital in the post-Enron environment

Industrial: Stiffed!
A backyard horror story has left funeral workers worrying about mooted changes to industry regulations, Jim Marr reports

Review: Prepare To Bend
If it�s a feel good flick that you want, Bend It Like Beckham is sure to satisfy on every level, writes Tara de Boehmler

Satire: Bush Boosts Sharemarket Confidence: Shares his Cocaine Stash
President Bush has rushed to re-establish confidence in the US market by distributing cocaine from his own Presidential stash to Wall Street.


 Mainstream Media Vacates IR

 Ten Click Walker 'Unfit for Work'

 Unions Push for Baby Nest

 Casino Workers Overtime Jackpot

 Abbott�s Task Force �Rank Hypocrisy�

 Shipping Policy Blamed for Reef Damage

 Dropping The Ball On Training

 Combet Pushes Consultative Vehicle

 Maternity Leave for Pacific Workers

 Hit List of Forced Closures

 Magistrate Endorses Health and Safety Rights

 Contracts a Thorn in Workers' Side

 Fringe Success for Workers� Pick

 Activists Notebook


Workers on Film
Last issue we asked you for your ideas on a union film script to match Ken Loach's The Navigators. Here are the best responses.

The Soapbox
Driving Together
ACTU Secretary Greg Combet argues that the Australian car industry needs a partnership between business and labour.

The Locker Room
Dogs And Underdogs
Phil Doyle explains why losers are half the equation in each and every sporting contest

Week in Review
Filfthy Rich and Claptrap
While Labor and the Democrats are tearing themselves to shreds, Little Lachie and Rich Ray address the main game �

Muddy Waters
It was a week when the Prime Minister washed his hands despite mounting evidence that the corporate world is out of control.

 Fraser No Workers' Hero
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The Seven Deadly Sins of Capitalism

Shann Turnbull outlines a new set of rules that should govern capital in the post-Enron environment


New policies are required to cure the seven deadly sins of capitalism that make it;

  1. inefficient,

  2. inequitable,

  3. exploitive,

  4. covert,

  5. alienating,

  6. insensitive,

  7. and , undemocratic.

Some of the sins could be cured by a tax incentive that would also reduce the protests against globalisation.

The first and most ironic sin of capitalism

is that it is inconsistent with the fundamental assumption that justifies a market economy. The assumption is that capitalism is efficient because competition will control the creation of excessive profits.

However, the current form of corporate capitalism is highly inefficient because it allows the insidious creation of surplus profits that are not measured by accountants and so not noticed by economists. Surplus profits are the cash flows captured by investors after the time period that they require to obtain a return of the money that they invested plus profits to cover the risk of loosing their investment.

Because investors are not fortune-tellers they will not rely on obtaining any cash back after the foreseeable future that is described as their "time horizon". Direct equity investors generally have time horizons of less than ten years and it is usually much less. The time horizon get shorter as perceived risks increase. But in any event, any cash expected after ten years is discounted at a compound rate to diminish its value into insignificance.

For investments that have an operating life of say 20 years, the surplus profits generated in the last ten years could have a value greater value than the investment! It is by this insidious process that wealth gets concentrated and/or permits corporate executives to cream off so much for themselves with excessive salaries, shares and options. The value of options alone has been estimated to be worth over 25% of the value of all shares in the Standard & Poors New York Stock Exchange Index.

The solution is to transfer the ownership of corporations after ten years to the citizens on whom enterprise depends to sustain their operations. In this way, voting citizens who are corporate stakeholders as workers, management, customers, and suppliers could acquire ownership and control. This would phrase out foreign ownership and control of the productive wealth of a country as well as democratising it.

To encourage shareholders to agree to change corporate constitutions to create stakeholder shares, a tax incentive could be introduced. Because investors discount the value of distant uncertain cash so much, only a small tax incentive is required to provide shareholders with a bigger, more certain quicker profit in return for giving up long-term ownership. Ironically, government tax revenues would increase as corporate ownership transferred to voters who pay tax at a higher rate than the current owners who are mostly institutions, corporations and alien investors.

The second sin

of capitalism is that it is inequitable. The overpayment of investors with surplus profits is but one example. The solution is not to tax these profits but distribute them through the private sector as explained above. The system of owning real estate is also inequitable. It allows taxpayers money invested in infrastructure services to create private windfall gains for property owners. However, the gains are not shared with the tenants who create the consumer demand to push up prices for the owners.

The third sin

of capitalism is that it is insidiously exploitive. The most blatant costly example arises from governments licensing private banks to create public money for private profit. While governments creates notes and coins this represents only around 5% of the money supply, the other 95% is created by the banking system. The value of the special profits obtained by private banks from this privilege was between 4.5% to 15% of the total tax revenues collected by central governments in OECD countries in 1998 according to Robertson & Huber .

As a result, only half a dozen banks create one third of the value of all the 1,200 companies listed on the Australian stock exchange!

The fourth sin

of capitalism is that it does not create fully informed or fair markets. Owners of wealth hide their identity behind nominee companies and trusts and so become socially unaccountable for any harms and problems their wealth may create.

Shareholders can unwitting purchase second hand shares from insiders or sell their shares to someone willing to pay a higher price to take over the company. The government should withdraw the licence for any stock exchange that does not disclose to the public the ultimate beneficial owners of any shares traded. The present system protects covert exploitation of insider trading and creates costly complex ineffective laws and monitoring systems.

The fifth sin

of alienation arises because corporate owners and controllers are not accountable to the employees, customers, suppliers and host community whose lives they affect. This alienation is aggravated when corporate owners and controllers reside outside the host community, region or nation. Stakeholder ownership and control as described above provides a way to cure this problem on a localised democratic basis.

The sixth sin

of capitalism of being insensitive would likewise be mitigated with stakeholder ownership as this would make corporations accountable not only to their employees but also to their other strategic stakeholders on whom they depend for their existence and profitability.

The seventh sin

of capitalism is that it is undemocratic in many ways. First, corporate voting is plutocratic. Second, the separation of ownership from control denies the ability of local stakeholders to make corporations directly accountable to them. Third, the ownership of corporations is held largely through superannuation funds for members who cannot vote.

The distribution of corporate ownership to stakeholders in their host communities would allow citizens to directly participate in the control of corporations. Citizen ownership would democratise corporate governance. This would enrich democracy and eliminate a number of concerns about globalisation. Stakeholder governance would also underpin political democracy by countering superannuation fund socialism. Just as importantly it would also align corporate constituencies with local political constituencies.

Dr. Shann Turnbull is the author of Democratising the Wealth of Nations and A New Way to Govern: Organisations and society after Enron


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