privatizing education

Privatizing Government Services in the Era of ALEC and the Great Recession – Section II, ALEC

note:  this is the third in a series of articles published by the University of Toledo Law Review written by Ellen Dannin

PRIVATIZING GOVERNMENT SERVICES IN THE ERA OF ALEC AND THE GREAT RECESSION

II.   THE AMERICAN LEGISLATIVE EXCHANGE COUNCIL (ALEC)

The American Legislative Exchange Council was, until recently, a little-known but very powerful and influential organization.  ALEC’s most important role is drafting model legislation. 20   According to ALEC, it “has nearly 1,000 pieces of model legislation.” 21   More than 200 of ALEC’s model bills were enacted in 2009. 22   Until April 17, 2012, ALEC’s model legislation was developed and promoted by nine national task forces.  On that date, ALEC announced that it was eliminating its Public Safety and Elections task force in order to focus on economic issues.23   The remaining task forces are Civil Justice; Commerce, Insurance and Economic Development; Communications and Technology; Education; Energy, Environment and Agriculture; Health and Human Services; International Relations; and Tax and Fiscal Policy. 24

According to ALEC, its task forces “also commission research, publish issue papers, convene More →

Parents Across America on “Won’t Back Down” movie

As hype for the “Won’t Back Down” movie heats up, PAA sent this message to entertainment media:

In case you are preparing to interview the stars of the controversial new film “Won’t Back Down,” or review the movie, Parents Across America would like you to be aware of the following facts:

1.       Walden Media which produced the film also co-produced the movie “Waiting for Superman”.  The people at Walden Media have admitted that they had a specific political agenda in making this film.  In an interview in the NYT, Walden’s CEO said they realized “there were inherent limitations of the documentary format,” of W4S, and they wanted to reach a larger audience through characters who struggle with issues that are “ripped from the headlines.”

2.       While the film doesn’t mention the “Parent trigger” law by name, the ads describe the film as being “inspired by actual events” and depict parents signing a petition to take over a struggling school.  Michelle Rhee and others have been showing the film in screenings around the country to promote the Parent Trigger legislation, which calls for similar measures.  In our FAQ on the movie, we provide some background about how the Parent Trigger legislation was first developed, how it has been disseminated by the right-wing group ALEC, and how it has never successfully worked to bring about true parent empowerment and why it is unlikely to do so in the future.

To read more about who to contact if you have questions about Parent Trigger laws, or if you would like to know more about Parent Trigger Laws and other practical information about our public schools, please click here

Saving the Post Office: Letter Carriers Consider Bringing Back Banking Services

On July 27, 2012, the National Association of Letter Carriers adopted a resolution at their national convention in Minneapolis to investigate the establishment of a postal banking system. The resolution noted that expanding postal services and developing new sources of revenue are important components of any effort to save the public post office and preserve living-wage jobs; that many countries have a long and successful history of postal banking, including Germany, France, Italy, Japan and the United States itself; and that postal banks could serve the nine million people who don’t have a bank account and the 21 million who use usurious check cashers, giving low-income people access to a safe banking system. “A USPS [United States Postal Service] bank would offer a ‘public option’ for banking,” concluded the resolution, “providing basic checking and savings – and no complex financial wheeling and dealing.”

What is bankrupting the USPS is not that it is inefficient. It has been self-funded throughout its history. But in 2006, Congress required it to prefund postal retiree health benefits for 75 years into the future, an onerous burden no other public or private company is required to carry. The USPS has evidently been targeted by a plutocratic Congress bent on destroying the most powerful unions and privatizing all public services, including education. Britain’s 150-year-old postal service is on the privatization chopping block for the same reason, and its postal workers have also vowed to fight. Adding banking services is an internationally tested and proven way to maintain post office solvency and profitability.

Serving an Underserved Market Without Going Broke

Many countries operate postal savings systems through their post offices, providing depositors without access to banks a safe, convenient way to save. Great Britain first offered this arrangement in 1861. It was wildly popular, attracting over 600,000 accounts and £8.2 million in deposits in its first five years. By 1927, there were twelve million accounts – one in four Britons -with £283 million on deposit.

Other postal banks followed. They were popular because they serviced a huge untapped market – the unbanked and underbanked. According to a Discussion Paper of the United Nations Department of Economic and Social Affairs:

The essential characteristic distinguishing postal financial services from the private banking sector is the obligation and capacity of the postal system to serve the entire spectrum of the national population, unlike conventional private banks which allocate their institutional resources to service the sectors of the population they deem most profitable.

Serving the unbanked and underbanked may sound like a losing proposition, but numerous precedents show that postal savings banks serving low-income and rural populations can be quite profitable. (See below.) In many countries, according to the UN paper, banking revenues are actually crucial to maintaining the profitability of their postal network. Letter delivery generates losses and often requires cross-subsidies from the post’s other activities in order to maintain its network. One effective solution has been to create or expand the role of postal financial services.

One reason public postal banks are profitable is that their costs are low: the infrastructure is already built and available, advertising costs are minimal and government-owned banks do not award their management extravagant bonuses or commissions that drain profits away. Rather, profits return to the government and the people.

Profits also return to the government in another way: money that comes out from under mattresses and gets deposited in savings accounts can be used to purchase government bonds. In Japan, for example, Japan Post Bank is the holder of fully one-fifth of the national debt. The government has its own captive government lender, servicing the debt at low interest rates without risking the vagaries of the international bond market. Fully 95 percent of Japan’s national debt is held domestically in one way or another. That helps explain how Japan can have the worst debt-to-gross-domestic-product ratio of any major country and still maintain its standing as the world’s largest creditor. If you owe the money to yourself, it’s not really a debt.

Some Examples of Successful Public Postal Banks

Kiwibank

New Zealand’s profitable postal bank had a return on equity of 11.7 percent in the second half of 2011, with net profits almost trebling. It is the only New Zealand bank able to compete with the big four Australian banks that dominate the New Zealand financial sector.

In fact, Kiwibank was set up for that purpose. When the New Zealand postal banks were instituted in 2002, it was not to save the post office, but to save New Zealand families and small businesses from big-bank predators. By 2001, Australian mega-banks controlled some 80 percent of New Zealand’s retail banking. Profits went abroad and were maximized by closing less profitable branches, especially in rural areas. The result was to place hardships on many New Zealand families and small businesses.

The New Zealand government decided to launch a state-owned bank that would compete with the Aussie banks. To keep costs low while still providing services in communities throughout New Zealand, the planning team opened bank branches in post offices, establishing Kiwibank as a subsidiary of the government-owned New Zealand Post.

Suddenly, New Zealanders had a choice in banking. In an early version of the “move your money” campaign, 500,000 customers transferred their deposits to public postal banks in Kiwibank’s first five years – this in a country of only four million people. Kiwibank consistently earns the nation’s highest customer satisfaction ratings, forcing the Australia-owned banks to improve their service in order to compete.

China‘s State-Owned Postal Savings Bureau

With the assistance of the People’s Bank of China (the central bank), China’s Postal Savings Bureau was re-established in 1986 after a 34-year lapse. As in New Zealand, savings deposits flooded in, showing an extraordinary growth rate of over 50 percent annually in the first half of the 1990s and over 24 percent annually in the second half. By 1998, postal savings accounted for 47 percent of China Post’s operating revenues; and 80 percent of China’s post offices provided postal savings services. The Postal Savings Bureau has served as a vital link in mobilizing income and profits from the private sector, providing credit that is available to finance local development. In 2007, the Postal Savings Bank of China was set up from the Postal Savings Bureau and established as a state-owned limited company, which continues to provide postal banking services.

Japan Post Bank 

By 2007, Japan Post was the largest holder of personal savings in the world, boasting combined assets for its savings bank and insurance arms of more than ¥380 trillion (US$3.2 trillion). It was also the largest employer in Japan. As in China, Japan Post recaptures and mobilizes income from the private sector, funding the government at low interest rates and protecting the nation’s sovereign debt from raids by foreign speculators.

Switzerland‘s Swiss Post

Postal financial services are by far the most profitable activity of Swiss Post, which suffers heavy losses from its parcel delivery and only marginal profits from letter delivery operations.

India‘s Post Office Savings Bank (POSB) 

POSB is India’s largest banking institution and its oldest, having been established in the latter half of the 19th century following the success of the postal savings bank system in England. Operated by the government of India, it provides small savings banking and financial services. The Department of Posts is now seeking to expand these services by obtaining a license for the creation of a full-fledged bank that would offer full lending and investing services.

Russia‘s PochtaBank

Russia, too, is seeking to expand its post office services. The head of the highly successful state-owned Sberbank has stepped down to take on the task of revitalizing the Russian post office and create a post office bank. PochtaBank will operate in the Russian Post’s 40,000 local post offices. The post office will function as a banking institution and compete on equal footing not only with private banks, but with Sberbank itself.

Brazil‘s ECT

Brazil instituted a postal banking system in 2002 on a public/private model with the national postal service (ECT), forming a partnership with the largest private bank in the country (Bradesco) to provide financial services at post offices. The current partnership is with Bank of Brazil. ECT (also known as Correios) is one of the largest state-owned companies in Latin America, with an international service network reaching more than 220 countries worldwide.

The US Postal Savings System

The now-defunct US Postal Savings System was also quite successful in its day. It was set up in 1911 to get money out of hiding, attract the savings of immigrants accustomed to saving at post offices in their native countries, provide safe depositories for people who had lost confidence in private banks and furnish depositories that had longer hours and were more convenient for working people than what private banks provided. The minimum deposit was $1 and the maximum was $2,500. The postal system paid two percent interest on deposits annually. It issued US Postal Savings Bonds in various denominations that paid annual interest, as well as Postal Savings Certificates and domestic money orders. Savings in the system spurted to $1.2 billion during the 1930s and jumped again during World War II, peaking in 1947 at almost $3.4 billion.

The US Postal Savings System was shut down in 1967, not because it was inefficient, but because it became unnecessary after the profitability of catering to the unbanked and underbanked became apparent to the private financial sector. Private banks then captured the market, raising their interest rates and offering the same governmental guarantees that the Postal Savings System had.

Time to Revive the US Postal Savings System? 

Today, the market of the unbanked and underbanked has grown again, including about one in four US households, according to a 2009 FDIC survey. Without access to conventional financial services, people turn to an alternative banking market of bill pay, prepaid debit cards and check cashing services, as well as payday loans. The unbanked pay excessive fees for basic financial services, are susceptible to high-cost predatory lenders  and have trouble buying a home and other assets because they have little or no credit history. On average, a payday borrower pays back $800 for a $300 loan, with $500 purely going toward interest. Low-income adults in the US spend over five billion dollars paying off fees and debt associated with predatory loans every year. People with access to banks are better able to resist these services and break the cycle of poverty.

Another underserviced market is the rural population. In May, a move to shutter 3,700 low-revenue post offices was halted only by months of dissent from rural states and their lawmakers, who said the cost cutting would hurt their communities. Banking services are also more limited for farmers following the 2008 financial crisis. With shrinking resources for obtaining credit, family farmers and ranchers are finding it increasingly difficult to stay in their homes.

Postal banking could be a win-win in these circumstances, providing jobs and income for the post office along with safe and inexpensive banking services for underserviced populations. Countries such as Russia and India are exploring full-fledged lending services through their post offices; but if lending to the underbanked seems too risky, a US postal bank could follow the lead of Japan Post and use the credit generated from its deposits to buy safe and liquid government bonds. That could still make the bank a win-win-win, providing income for the post office, safe and inexpensive depository and checking services for the underbanked and a reliable source of public funding for the government.

Sunday, 12 August 2012 | by Ellen Brown

Copyright, Truthout.org.  Reprinted with permission.
http://truth-out.org/news/item/10812-saving-the-post-office-letter-carriers-consider-bringing-back-banking-services

 

 

Gates Foundation Reveals its Dark Side After Ditching ALEC

While funding $218 million polio and measles immunization research, the foundation also invested $400 million in 69 of North America’s worst polluting companies and $423 million in companies like Royal Dutch Shell, Exxon Mobil Corp, and Chevron – oil firms responsible for pollution which has caused  respiratory problems in local African populations. In 2005, the foundation held $1.5 billion worth of stocks in drug companies who price their products beyond the reach of AIDS patients in Africa and are widely criticized for creating barriers to the flow of medicines to Third World countries.

Read more about a number of the less than savory activities of the Bill and Melinda Gates Foundation here.