Israel’s Arabs want more industrial zones


This article originally appeared on The Media Line.

Moded Yunis, the mayor of the Arab Israeli town of Ar’ara in northern Israel, recently offered 20 jobs in nursery schools in the town. Although not particularly well-paying, more than 250 women in the town of 23,000 in northern Israel applied.

“Because of the lack of jobs, some women leave their homes at 5 am and travel hours to southern Israel to work,” Yunis told The Media Line, saying the town had opened special day care centers with longer hours to accommodate them. “It is very frustrating for anyone who graduated college and then can’t find a job.”

The lower employment levels, along with lower municipal budgets showcase a pattern of consistent discrimination against Israel’s Arab minority. The Mossawa Center, the Advocacy Center for Arab Citizens in Israel, says that about 60 percent of Israel’s Arabs are poor, and 65 percent live below the poverty line.

Mossawa invited Yunis and other mayors to a conference at Israel’s Knesset, also hosted by long-time Arab parliamentarian Ahmed Tibi focusing on the need for more industrial zones in the Arab sector. While Arabs are more than 20 percent of Israel’s populations, just 3.5 percent of all areas designated for light and heavy industry are in Arab towns. These industrial zones bring both money and jobs to the areas where they are located.

“We want to get concrete answers for the Ministry of Finance and Ministry of Industry to budget for new industrial zones,” Jafar Farah, the director of Mossawa told The Media Line. “There is no possibility of economic independence without this.”

Participation in the labor force is significantly lower in the Arab sector than the Jewish one, especially among women. More than 60 percent of Jewish women work outside the home, while among Arab citizens of Israel it is half of that.

Part of the reason is that Arab women prefer to work closer to home, both because of traditional modesty concerns, and because there are fewer day care facilities in Arab towns. Building industrial zones would solve some of these problems.

“The socioeconomic situation of many Arabs is very difficult,” Knesset member Ahmed Tibi who chaired the session told The Media Line. “The government must fight poverty with a holistic plan to improve the existing infrastructure in Arab towns.”

Israeli government officials who spoke at the government session said the government has invested tens of millions of dollars in the Arab sector and has plans for more.

“In the last decade the government has invested $140 million in the non-Jewish sector over the past decade,” Yigal Tsarfati of the Ministry of Finance told the session. “There are 55 industrial zones in non-Jewish areas and we are planning more. There is no doubt that an industrial zone is an important way to move the economy forward.”

Some of the Arab parliamentarians said that appealing to the Israeli government had not worked for decades and there was little chance it would work now.

“We have to start a public campaign, going out into the streets and holding protests,” Arab MK Ayman Odeh told the session.

Israeli officials agree there is a problem. In a recent report, State Comptroller Yosef Shapira said that efforts to integrate Arab citizens into the workforce were “broken, ineffective and deficient.” He also said that goals set by the government itself were not being met.

Building industrial zones is a long-term project but has already proven that it works. In the town of Nazareth, Israeli Jewish industrialist Stef Wertheimer has built an industrial zone that has both Arab and Jewish companies and has created more than 1000 jobs over the past few years.

The West Bank and Gaza: Give economics a chance


In the wake of this summer’s war between Israel and Hamas, it is evident that neither party achieved its military or political objectives. And while a cease-fire is currently in place, fundamental steps to resolve the conflict aren’t on the agenda. Given a history of costly and recurrent armed conflict, it is clear that both parties are in need of a paradigm shift.  

Perhaps it is time to give economics a chance. Both Israelis and Palestinians would be well served by aggressive efforts in economic development of the West Bank and Gaza. This idea is not new. In 2013, U.S. Secretary of State John Kerry proposed a plan to invest $4 billion in the West Bank. Currently, a sparkling, privately developed Palestinian new town called Rawabi, replete with amphitheater, piazzas and multiplex theater, is about to open in the West Bank. Israeli social-impact entrepreneurs are seeking to bring venture capital and high-tech success to the West Bank. Discussions are also underway for an economic federation encompassing Israel, the Palestinian Authority and Jordan that would bolster trade, tourism, economic development and energy deployment for the benefit of all three parties.  

A broad-based initiative for economic development of the West Bank and Gaza could take a page out of the post-World War II U.S. Marshall Plan playbook. The program provided $160 billion (2014 dollars) for the reconstruction of a war-ravaged Europe. The plan included a rebuilding of infrastructure and trade, amelioration of hunger and poverty, creation of economic opportunity and suppression of competing Soviet economic doctrines. The vanquished and disarmed Germany received substantial aid under the Marshall Plan.  

In the wake of the Marshall Plan, Europe witnessed two decades of unprecedented economic growth. The vastly improved economic conditions also resulted in political stability, substantially diminished interest in communism and a rise in Western culture.  

In the Palestinian application, the idea would be to direct concerted foreign investment for purposes of peaceful economic development of the West Bank and Gaza. At the outset, efforts should leverage the $2.7 billion just pledged by the international community for the postwar rebuilding of Gaza. Funding should bolster vocational and higher education to provide young Palestinians with technical job skills. Private investment and job creation could then proceed consistent with accretions to human capital. Subject to strict controls on weaponry and related supplies, roadblocks should be removed in the West Bank and a modern train system built to enable efficient movement of people and goods both within and between the West Bank and Gaza. Ultimately, a new port in Gaza could play a major role in connecting the West Bank, Gaza and Jordan to markets around the globe.  

A critical component of the plan would be the dismantling of Palestinian refugee camps and the resettlement of their inhabitants. The refugees have too long been pawns in the political struggle. Since 1948, those camps have served to reinforce a cycle of abject poverty and to foment terror activity. In their place, industrial parks, education and health campuses, and other for-profit real estate should be developed. Foreign investors should be encouraged to build facilities in those parks. The refugees should benefit from returns to such development and from newfound employment opportunities.  

As security threats fade, borders should be opened to allow trade, movement of population and creation of economic linkages. In this new environment, investment partnerships among Israelis and Palestinians could serve to rebuild grass-roots ties and leverage resources. Beyond economics, social benefits would include increased interaction and reduced demonization among conflict participants. As in Europe, the aim would not only be elevated economic activity, but also a change in fundamental culture. Growing economic opportunity could bring with it the creation of widespread and popular vested interests in entrepreneurship, individual advancement and prosperity, education, legal and human rights, and rejection of competing fundamentalist and confrontational leadership and ideologies.  

Why would such an effort have a chance of success? The encouraging element of such a plan is the limited scale of the effort. In stark contrast to Europe, whose 1950 population was roughly 350 million, the population of the West Bank and Gaza currently numbers only about 4.5 million. That’s just one-quarter the population of the L.A. metro area. Similarly, the land area of the West Bank and Gaza is only half that of L.A. There is little doubt that a concerted global effort could significantly enhance economic opportunity among Palestinians. The scale and size of the Palestinian entity make the prospects of game-changing investment highly promising.

Foreign direct investment has the potential to materially improve the lives of Palestinians in a manner that could be a game-changer for conflict resolution. Investment in the Palestinian sector, however, should be limited to partners who are publicly and unequivocally committed to mutual recognition and peaceful conflict resolution.  

This vision of economic advancement and hope for Palestinians in both the West Bank and Gaza should be presented to all Palestinians. For it to succeed, the Hamas rulers of Gaza, who engender substantial popular support in both Gaza and the West Bank, must accept this vision and act as partners in its implementation. Indeed, it is Hamas who can change the Palestinian vision from the destruction of Israel to the building of a prosperous Palestine. For Israel, the benefits of such a plan could become evident in trade, economic cooperation, creation of a Western-leaning, vested Palestinian middle class and reduced Palestinian support for radical rejectionist ideology.  

Both Palestinians and Israelis have tried the stick. It doesn’t seem to work. It’s time to try the carrot.


Stuart A. Gabriel is professor of finance and Arden Realty Chair at UCLA Anderson School of Management. Rabbi Ed Feinstein is senior rabbi at Valley Beth Shalom in Encino.

Rich still getting richer


The rich get richer. Andrew Jackson may have been the first to register the complaint in those terms. “When the laws undertake … to make the rich richer and the potent more powerful, the humble members of society… have a right to complain of the injustice to their Government.” 

The phrase was popularized in a sarcastically titled hit song from 1920, “Ain’t We Got Fun?”: “The rich get rich and the poor get poor / In the meantime, in between time / Ain’t we got fun?”

But sadly, it was never more true than today. 

Perhaps the leading American scholar of economic inequality — a fine academic phrase but a lousy message — is professor Emmanuel Saez, a Berkeley economist who has charted waxing and waning wealth concentration beginning in 1913.

Today, the wealthiest 10 percent of Americans take home a larger share of the nation’s income than at any point since data became available. The earlier high preceded the Great Depression. But from the mid-1940s until 1980, the richest 10 percent garnered about 33 percent of America’s total income. Their share then began a dramatic climb, culminating in 2012 (the most recent data available), when the wealthiest 10 percent received more than half — 50.4 percent — the nation’s income.

Most of those riches are further concentrated in the top 1 percent, who take home more than 20 percent of the country’s income — a percentage double what it was from 1948 to 1978.

These data answer one question clearly — it does not have to be this way. 

Some inequality is inevitable. But America and Americans did quite well in the post-World War II era with vastly less inequality than we have now. 

Putting the point more sharply, in terms often used by Republicans, the wealthy do not need to be rewarded at this level to be “job creators.” They are willing to make more money for themselves even if they have to share a bit more with everyone else. In fact, U.S. growth rates were higher in the decades before 1980, when equality was greater, than they have been since inequality took off. 

Another often-proffered rationalization for inequality is that “a rising tide lifts all boats” (which, combined with “the rich get richer and the poor get poorer,” illustrates “Mellman’s First Law of Aphorisms” — for every aphorism, there is an equal and opposite aphorism). Economic tides haven’t worked that way. 

During the economic expansion of the Bush years, incomes of the wealthiest 1 percent swelled by 61.8 percent, while incomes for everyone else increased by just 6.8 percent. And in the current recovery, incomes for the 1 percent increased 31.4 percent, but that was no help to others for whom the tide only rose by 0.4 percent.

Former President Bill Clinton demonstrated that the economy can be made to work for everyone. During his term, the 1 percent did nicely, seeing their incomes jump by a healthy 98.7 percent, but the rest of the country got a real benefit, too, with incomes growing 20.3 percent. The rich got much richer, but the rest of the country captured some of the benefit. 

If inequality is not inevitable, why has it increased? In part, it’s because taxes for the wealthiest Americans have gone down. From 1953 to 1973, when the top marginal tax rates were 70 percent or higher, income growth for both the top 1 percent and the “bottom” 99 percent was strong. When top tax rates began to slide, income for the 1 percent surged, while the rest of the country began to stagnate. 

The rich are richer than ever, but that is neither necessary to produce growth, nor does it trickle down. Equally important, the concentration of wealth in the hands of the richest 1 percent is not a natural or inevitable consequence of the free market; it is aided and abetted by government policy. 

It’s time, as Jackson advised, for Americans “to complain of the injustice to their Government.”

Reprinted courtesy of The Hill. 


Democratic pollster Mark S. Mellman is president of The Mellman Group.

Israeli economics 101


Ofek Lavian has two passions: business and Israel, his native land.

What he felt that he was missing when he went to college at the University of Southern California was an opportunity to learn about his home country while interacting with people who shared his same interests in it.

“I found myself really struggling to find an organization on campus that was tailored to my passions,” said the 20-year-old, who moved to Silicon Valley when he was 4. “I found a lot that were related to Judaism were political, religious, and/or cultural. As a business major and an entrepreneur, I wanted to look at Israel through another lens.”

Then he heard about the TAMID Israel Investment Group, a multi-phased program on college campuses connecting American students with the Israeli economic landscape. It seemed like the perfect way to merge his interests and learn about them in a new way.

When Lavian, now a junior, helped start a chapter at USC in 2011, there were 25 members. By the end of this semester, the group expects to have 40. To set it up, Lavian received $3,500 in funding from The Jewish Federation of Greater Los Angeles; now, all the funds are solicited from private donors.

The origins of TAMID date back to 2008, when a group dedicated to providing American students with access to Israeli businesses launched at the University of Michigan. Since then, it has expanded to eight other campuses across the country, including USC and the University of California, Berkeley. In the fall, a handful of others is expected to be added, one of which may be University of California, Los Angeles, according to Max Heller, TAMID’s executive director of business development.

The goal is to “further advance and strengthen the connection between the United States and Israel,” he said. “We pioneer the next generation of American commitment to Israel by reaching out by future leaders on campuses.”

Students studying business, entrepreneurship, economics and similar subjects are eligible to join TAMID when they are undergraduates. Those selected take one semester of education in the fall on general business principles and the relationship between the United States and Israel from an economic perspective. The education component is divided among member-driven presentations and lectures from venture capitalists, professors and individuals well-versed in Israel’s economic scene. 

Students showcase their research on certain aspects of business, and in the past they’ve hosted speeches on how the nuclear threat from Iran might affect Israeli businesses, as well as what changes might occur after the discovery of oil reserves in Israel. 

TAMID also gives students the opportunity either to invest in Israeli securities using money they raise from donors or do pro-bono consulting work for Israeli startups. 

During the summer, TAMID, which is based at the University of Michigan, hosts a fellowship trip to Israel. When it was first offered in 2010, five students went. There were eight in 2011, and last summer the number grew to 17. Students partook in internships in finance, energy sustainability and technology, and worked at various startups. Next summer, 40 fellows will have the chance to go and gain real world experience.

Although most of the students are Jewish, it is becoming diversified. Heller said that the larger a certain program grows, the more non-Jewish students get involved. The largest mix of students is currently at Michigan. 

“We pride ourselves on working with talented and motivated students,” Heller said.

Lavian started his own T-shirt business with a fellow fraternity brother called Campus Ink in fall 2010. But he wanted to meet other self-starters. Through TAMID, he’s accomplished this while learning about Israel’s contributions to alternative energy, medicine and technology.

Last summer, Lavian secured a venture capital internship in Tel Aviv and lived alongside the program’s other students from around the country. He also met with the entrepreneurs behind Doweet, which coordinates meet-ups with friends and event planning, and Peer5, a startup that focuses on helping video content providers deliver the best viewing experience. 

Now, USC consultants from TAMID are working with these companies. The students assist the startups with learning about the American economy and demographics, while they, in turn, have the chance to see what it takes to build a business. 

“[Since there are] 7 million people in Israel and [more than] 300 million in the United States, for any Israeli company to be successful, they need to have their target market be global or in the U.S.,” Lavian said. “A lot of them have the technology in Israel but they need to target the U.S. market. That’s where TAMID comes in.”

Avior Ovadya, 25, who came to America from Israel to attend college four years ago, has been in TAMID for one semester at USC. Unlike his classes, which focus on the U.S. market, TAMID meetings give him the opportunity to understand what’s happening in the Israeli business world. 

“Other than being a platform for students to learn about Israel, it’s also about understanding a little bit about what Israel is like, and why it’s such a pioneer in the technology field,” he said. “The group of people we have now is swell. They make our weekly meetings fun. We share everything from how our weeks were to our opinions on Israel.” 

Jared Fleitman, co-founder of USC’s TAMID program and current president, said his time spent with the group has been the most enriching he’s had at USC.

“I’ve met more contacts through developing the curriculum than through any of my coursework,” said Fleitman, who is majoring in mechanical engineering, economics and mathematics. “It’s very useful for me. It’s very positive and I feel like I am part of a special community here.”

Like Fleitman, Lavian said that he has learned more from the practical experience gained through TAMID than he ever did in a classroom. 

“Some things are really hard to learn in a classroom setting,” he said. “You need to get your hands dirty and your feet wet and do some hands-on learning. That’s exactly what TAMID does.” 

Is an annuity right for you?


Grandpa’s fixed pension, that sweet and steady stream of income that started on the day he retired, is nearing extinction. Most Americans today will retire not on company checks, but on personal savings and Social Security. With interest rates low, the stock market jumpy and Congress pinching pennies, it is no surprise that 87 percent of Americans, according to one recent survey, worry about running out of money. 

That concern explains the popularity of annuities—financial products designed to generate steady cash flow, sort of like Grandpa enjoyed. But today’s annuities are different from yesterday’s pensions, says Christopher Jones, CFP, president of Las Vegas-based Sparrow Wealth Management. “Commercial annuities can certainly help some meet their retirement income needs, but these products can also be very expensive and complicated,” he said. “They certainly are not for everyone, and choosing the right one is crucial.”

Whether an annuity is right for you, and if so, what kind of annuity, can in itself be a complicated matter. Here are few guidelines to help you decide:

You are probably a good candidate for an annuity if you’ve determined that to pay your basic expenses in retirement—food, shelter—you’re going to need more money than you’ll get from Social Security, and more than you can take comfortably from savings. Say you crunched the numbers and calculated that you’ll need to tap $1,000 every month from personal savings, but that’s a bit more than your savings can handle.

“To ensure that your basic needs are covered, the annuity may be a good option,” Jones said. When you fork your money over to an annuity company, you guarantee yourself a steady cash flow. Bonds can do that, too. But you’ll get more cash from the annuity. That’s in part because of something called the ‘mortality premium,’ which is a polite way of saying that annuity providers will pay you more today because when you die, they, not your heirs, will grab your principal. The mortality premium gets larger for every candle on your birthday cake. The very best candidates for an annuity are 65 and older, and have expectations of living a long life. 

You are probably a bad candidate for an annuity if you have a good-size nest egg, are in little danger of running out of money and can stomach a bit of market risk.

“The return you’ll get on a diversified portfolio will very likely be much greater than what you’ll get on an annuity,” Jones said.

In addition, your heirs, not the annuity company, will get your money when you pass. The very worst candidates for an annuity are those who have lots of money, but suffer from health conditions that may lead to an early death. 

What kind of annuity to choose?

The fixed-income annuity is, by annuity standards, a fairly simple contract. You fork over a certain sum to an annuity company, and the company then agrees to give you X dollars a month for the rest of your life. For a guaranteed $1,000 a month, a fixed annuity today would cost a 65-year-old man roughly $165,000 (about $175,000 for a woman, because women usually live longer). You may choose to purchase various perks, such as a “joint-and-survivor” benefit, which allows your spouse to continue collecting if you die. Those perks reduce the cash flow.

The other kind of annuity is called a variable annuity. The variable annuity, unlike the fixed annuity, ties your cash payments to some underlying investments. It promises you both security and performance. But Jones warns that variable annuities, often pushed by aggressive salespeople, can be incredibly complex and expensive, and often don’t deliver as they promise. If you are considering a variable annuity, use “non-qualified,” rather than “qualified” money. In other words, use money you have in your taxable account to take advantage of the tax-deferral benefits of the annuity; don’t use money from an already tax-advantaged account, such as an IRA. 

How to annuity-shop wisely

Kerry Pechter, publisher of the online newsletter Retirement Income Journal, and author of “Annuities for Dummies” (Wiley, 2008), offers the following tips for buying any annuity:

  • Buy only from a strong company
  • You may be around for another several decades; you want a company that will be around, too. Choose only companies with the very highest credit ratings. The online shopping sources in the sidebar list company ratings. You can also find them on Web sites of the providers.

     

  • Comparison shop
  • Immediate annuity issuers change their prices frequently, and during any given month, the best deal might shift from one carrier to another.

    If you are worried about inflation (and you should be), don’t put all of your money into an annuity. Leave enough for a side fund to invest in stocks. Or buy an annuity with inflation protection. Or both.

    Since annuities pay you based on current interest rates, and interest rates are now very low, you might want to buy into your annuities over time. Put some money into an annuity today and consider another in a few more years. 

    You can start shopping annuities by looking on the Web. If you feel a bit lost, get an unbiased expert to help. Consider a fee-only financial planner. You can find one at napfa.org.


    Russell Wild, MBA, is a NAPFA-registered financial advisor who has written nearly two dozen books on finance, including “Index Investing for Dummies.”

    Das Happy Kapital


    Last Monday, I took my ticket from the parking valet at the Beverly Hilton Hotel, turned, and came face to face with John Kerry. He was standing beside me, staring at his cell phone.

    “Oh,” I said to the senator, at a loss. “Hi.”

    “Hi,” he said, and turned back to his phone.

    The doors to the hotel slid open. Former Secretary of Education William Bennett moved past me. We exchanged nods. I turned and ran into Paul Gigot, editorial page editor of the Wall Street Journal. Three steps behind him, Eli Broad whizzed by.

    Just another 30 seconds at the Milken Institute Global Conference, the annual gathering that attracts everybody you’ve ever seen on CSPAN, the MacNeil/Lehrer NewsHour and FOX, including the owner of FOX, Rupert Murdoch — I bumped into him coming out of the men’s room.

    The annual conference marked its 10th anniversary last week, with three days of lectures, keynotes and seminars on the topics and trends that organizers at the Milken Institute believe will shape our global future.

    The Los Angeles Times compared the gathering to the World Economic Forum in Davos, Switzerland or the Clinton Global Initiative Conference. But what makes this high-powered global conference different from all others is the audience: not mainly policy wonks and NGO do-gooders, not politicos and journos (though plenty of all of the above), but investors, corporate types, men and women who collect and distribute private and public capital.

    “We run the number one high-yield bond fund in the country!” I heard a conference-goer bark into his cell phone. Many people I met told me they ran hedge funds, though I never did quite figure out what a hedge fund is.

    It’s a three-day return to university, if your university hired mostly Nobel laureates and your fellow students were all much richer than you. At about $1,000 per day, it’s just a bit pricier than an Ivy League college.

    On Wednesday I attended one of the general sessions in the hotel’s ballroom, at which most of the conference’s 3,000 participants heard the conference’s founder, Michael Milken, in discussion first with Gov. Arnold Schwarzenegger, then with a panel of Nobel laureates. The subject was global warming and energy independence.

    The governor laid out how California would lead the way in reducing the gases that cause global warming and developing green technologies. He threatened to sue the federal government if it prevents California from implementing a law reducing greenhouse gases from vehicles within six months. Then, under Milken’s questioning, he switched gears and spoke of “great economic opportunities for green technology.”

    Schwarzenegger challenged his audience to invest in California and in alternative energy technologies.

    “Everyone needs to look at this as a huge opportunity,” he said.

    In Milken’s conversation with the Nobel laureates in science and physics, he prodded them on where future energy investment opportunities lie.

    “People are not sitting still on the assumption that we’ll have an energy system based on carbon-based energy,” he said.

    But the panelists and Milken seemed to agree that opportunities need government to help out by passing stronger regulations on fuel emissions.

    That’s what consistently surprised me at a gathering birthed by a man who has, despite a lifetime in groundbreaking philanthropy, been interred in popular imagination as a poster boy for avarice. For one thing, you end up hearing a lot about alternative energy, the end of oil, the most effective means of Third World development, curing the world’s worst diseases, universal health care, and environmental rescue. And every other chance he gets, Mike Milken himself goes on about healthier eating through soy.

    Strip away the power suits and you’re back in a freshman dorm, circa 1978, hearing the campus lefties talk about saving the world.

    In fact, idealism infuses this conference. It is at root about doing well and doing good; and often, in the case of investment in energy alternatives and emerging markets, in doing well while doing good. “I’d like to think [government] can tilt the playing field so the private sector is rewarded for doing the right thing rather than the wrong thing,” the Nobel laureate Burton Richter of Stanford University, told Milken. But it was Milken who provided the graph that showed that in the past stronger government regulation has improved energy efficiency while allowing the economy to grow at unprecedented levels.

    Clearly, this is not your grandfather’s capitalism.

    As I wandered in and out of conference sessions, I discovered not the slash-and-burn mentality of go-go capitalism at work, but something actually closer to the earliest form of capitalism in the Middle Ages. Back then, private capital was a kind of new technology that enabled a nascent middle-class to use its funds to attain wealth previously accessible only to aristocrats. Back then, money in the hands of merchants and guilds challenged the feudal autocracy and funded invention, discovery and social development.

    At the Milken Conference, investment was presented as just that kind of engine of human ingenuity, and human capital as a foundation of wealth. The ultimate smart money, Milken and his conference presenters seemed to be saying, is on health and education: there’s no limit as to how much wealth a nation of smart healthy people can generate. At one luncheon, Milken flashed a chart — the man likes his statistics — showing the cost of early deaths caused by heart attacks and cancer.

    Invest millions of dollars into finding cures, said Milken — founder of FasterCures, a nonprofit that does just that — and free up trillions in lost wealth.

    Nowhere was this noble capital more apparent than in the Conference’s treatment of Israel.

    At a time when much of the world makes a special point of singling Israel out for disparagement — just witness the British National Union of Journalists, which last week called for a boycott of Israel after one of their own members was kidnapped by Palestinian terrorists — the Milken Global Conference holds Israel up as an exemplar of how a developing country can combine smart economic policies with investments in education and innovation to unleash enormous economic potential. Milken economist Glenn Yago hosted a nearly two-hour session titled, “Israel: Confessions of an Economic Growth Engine,” which dissected the country’s progress and problems.

    A Micro Solution to Macro Poverty


     

    The outpouring of international charity for the victims of the Asian disasters is a clear sign that we humans are capable of enormous empathy

    and generosity.

    But the near-instant world reaction should go even farther. Now, the world’s eyes are turned on an area of the globe where poverty, disease and underdevelopment cripple societies, whether the world is looking or not.

    The fact is there are more than 1.2 billion people living on less than $1 per day. The task of riding the world of the scourge of grinding poverty was long thought to be a problem too massive, too overpowering for any organized effort to even attempt to solve.

    However, in our world that today seems so destructive, so bitter and so sad, there is some good news. There is a highly effective worldwide anti-poverty program now operating that is called microcredit. This functions by creating small loans (some less than $50), primarily in Third World countries, with those loans targeted to the poorest of the poor.

    By conventional banking standards, these loans could never be made, and the charge is, if made, would never be repaid. Today there are more than 3,000 microlending organizations and over 80 million of these loans have been made in over 65 countries, with an average repayment rate in excess of 90 percent.

    More than 95 percent of these loans were made to women who in the past were chattels in a male dominant home, often beaten and badly abused. Now their empowerment and enhanced self-esteem resulting from this program have brought women prestige, power and respect in their families and in their communities.

    Although these microlending programs vary from country to country, depending on local cultures, most have a basic group of five borrowers, each with their own idea of what they might make, repair or collect to have a salable product. Since there is usually joint responsibility for the loans, this creates a functioning support system. Payments on the loans are made weekly.

    I have seen women proudly make their installments and recite a list of social objectives that are a part of the program.

    Tikkun olam, heal the world, is an ethic of our people, and there is no greater contribution to the repair of the world than combating this disease of world poverty. Microcredit is receiving increasing recognition as an effective anti-poverty weapon. And last month, the United Nations proclaimed the year 2005 as the International Year of Micro Credit.

    The organization in which I am deeply involved has a target of 5 million loans to be made within five years, which will reach 20 million people and raise 10 million out of poverty. A remarkable goal — and we are on schedule.

    I have visited microlending programs in China, Bangladesh, in Vietnam and, last month, in India. As an example of the work being done, I asked a woman in a village what microfinancing had done for her life.

    She pulled me over to a tree and said that before she had taken her first loan, she lived under that tree for five years with no shelter whatsoever. She told me she used the loan to buy seeds and raise vegetables, which she sold. Then she took me to a tin-roofed hut and proudly showed me her home for herself and her family, which she had created from her business profits.

    This remarkable program was created by professor Muhammad Yunus. He was teaching economics at a university in Bangladesh and visited a neighborhood village, where he saw a woman making reed baskets. He asked her how much she was earning, and she said five cents per day.

    Amazed, he asked her why so little, and she replied that she bought the reeds from a man who required that she sell the completed baskets to him. Since he set both the buy and sell price, what she had left was five cents.

    When Yunus asked her if she could sell the baskets herself, she replied yes, that is no problem. Then he asked her how much money she needed to be independent.

    She said that she was one of 42 women working together and asked him to wait while she discussed it with her friends. She came back after a few minutes and said they needed $27 total for all 42 women to be independent.

    Amazed, he gave her the money out of his pocket, came back a few weeks later and found her functioning very effectively and profitably. That was the inspiration for the creation of the Grameen (village in Bangali) Bank that today has more than 2 million borrowers and has made more than $4 billion in loans to the poorest of the poor.

    A remarkable story about a remarkable man.

    This work is a fulfilling experience at both the micro and the macro levels. The micro in that you are pulling people out of poverty one by one, totally changing the lives of these individuals and their families. Macro in that you are attacking a massive, worldwide problem that was once thought to be impossible to even approach.

    A unique aspect of contributing to this cause is that the funds get used over and over. It is not like a normal charity, where no matter how wonderful it is, once the funds are given they are used, and there the chain stops without new funding.

    But in microlending, the funds are repaid, then lent again and again. Thus, the programs have the potential and, in many sites around the world, are self-sustaining and need no further funding except for expansion purposes.

    The images on our TV screens this past month should be a reminder of the awesome force of nature but also of the abiding poverty that afflicts too much of the world. There is no more appropriate and noble work than helping the poorest of the poor climb out of poverty and live happy, productive lives.

    And there is no more effective way to do it on a personal level than microloans.

    Richard Gunther is member of the board and former president of Americans for Peace Now, a member of the State of California’s Commission on Aging and founding chair of the Israel Economic Development Task Force in Los Angeles. He is also a board member of The Jewish Journal.

     

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