The Media’s Impact on the American Red Cross Fundraising and Volunteerism Efforts During Natural Disasters

A Literature Review

Abstract:

Mass Communication technology has changed the way of communication from public relations practitioners to media users. Generally, most people often feel compelled to donate during a disastrous event or render aide even though they may have no connection to the event.In return they are contributing to the efforts of the American Red Cross mission.

The results provide a public relations model through media users among them social media becoming the largest. This study explores how different media methods are providing the American Red Cross with the availability to easily promote fundraising and volunteerism in particular during natural disasters.

The study will look further into the traditional and digital media thriving philanthropy efforts as well as answer three hypotheses, provide support through research methods, and connection to a theoretical basis of analysis.

Introduction:

The American Red Cross began on May 21, 1881 by Clara Barton. Her mission was “a humanitarian organization led by volunteers and guided by its congressional charter and the fundamental principles of the International Red Cross Movement. [It] provide[s] relief to victims of disasters and help[s] people prevent, prepare for, and respond to emergencies.” (Groscurth, 2011)

The American Red Cross is a nonprofit 501(c)(3) charitable organization that is “organized, operated, and controlled by Americans’ in the United States.” (Groscurth, 2011)

The organization has seven fundamental principles including: humanity, impartiality, neutrality, independence, voluntary service, unity, and universality.

Over the last 100 years the Red Cross has become a leader in natural disaster response and a partner with FEMA (Federal Emergences Management Agency). Given their active support the American Red Cross uses the media to reach out to the public for volunteers and funding.

“Almost 185 times a day the American Red Cross disaster workers help a family that has been touched by disaster” (redcross.org). In 2010, they spent almost 270 million for the fiscal year “from July 1, 2009 through June 30, 2010 on disaster readiness and relief through the United States.”(redcross.org)

American Red Cross is built among local chapters that create and maintain a local disaster plan and resources for the needs of their region. In addition, chapters also participate in response training, preparedness meetings, and partner planning activities. One of the most important resources is corporate sponsorship which is thriving the Red Cross growth through the media.

The American Red Cross in 2010 developed the Annual Disaster Giving Program (ADGP) which gained 25 organizations including FedEx, John Deere, and Morgan Stanley. From partnerships to donations to the millions of American Red Cross members rending aid during a disaster and the media is providing a viral source in Barton’s mission.

Literature Review:

1.1 Fundraising:

Fundraising is essentially “the management of relationship between a charitable organization and its donor publics.” (Waters, 2008) The general population views fundraising as a primarily financial contribution, but in fact the principal is to build long-term relationships through trust and communication.

The efforts of the American Red Cross provide support to victims in natural disasters often leads to support by communities and country wide initiatives. Fundraising is the essential life line of the American Red Cross mainly foremer agencies. Media has definitely changed the way charitable nonprofits handle public relations and provide assistance to the public. Through research the use of media has changed the way the American Red Cross contributes to receiving monetary funds from donors.

Cindee Archer is the Online Media Manager for the American Red Cross in Washington, D.C.  says, “the Internet has definitely changed how the whole organization thinks.” (Sanborn, 2000) Archer continues to say during “ disaster time is crunch time for the Red Cross website, as it must not only handle monetary donations but also help visitors locate their local Red Cross shelter, find relatives in the disaster areas, get information on blood donations and volunteering, and keep up with breaking news all at the same time.” (Sanborn, 2000)

The use of media, in particular, social media is benefiting the American Red Cross through donations and donors by lending more access in a number of different methods in lending aid through monetary funds. The use of financial support in contributing to more volunteerism throughout the U.S is supporting to the American Red Cross efforts.

1.2 Volunteerism:

Along with fundraising volunteerism too is being reached more promptly with media. In 2010 the American Red Cross launched “a new learning management system that will host the many online training opportunities the Red Cross makes available.” (American Red Cross website)  The average American Red Cross volunteer is 50 to 59 but ages range from 10 to 80. Mainly, Caucasian females but a new study found the new strategic initiatives from the American Red Cross is receiving a more diverse set of volunteers.

The program is available to anyone regardless of location or age and the Red Cross is being able to identify the gaps in training though statistics. Before 9/11 people caught in a natural disaster would call the American Red Cross information hotline and request a disaster welfare information packet.

But, today traditional and digital media are changing the Red Cross system entirely. The American Red Cross basic training for volunteers is provided through five direct services including:  mass care, family services, health, mental health, and disaster welfare information also called (DWI).

The American Red Cross has provided traditional brochures for disaster victims and volunteers in several different languages and age groups. During times of emergences the mental health functions works with public affairs providing radio, television, and film interviews. Media has had an impact on the Red Cross as well as volunteers of the organization. During 9/11 American Red Cross dealt with a new type of disaster- man made destruction.

After a conducted survey provided by volunteers the Red Cross was able to identify key issues, successes, and failures in the planning and preparedness of the event. Through technology since 9/11 the American Red Cross has been able to develop stronger programs to support and train volunteers. With digital media the Internet and social networking are connecting volunteerism and Red Cross with longer-term relationships.

1.3 Traditional Media:

The traditional media used to be the primarily way of giving through mail or over the phone, especially during natural disaster. However, fundraising as a response to emergencies is generating to digital media for a larger, faster response to aid more conveniences. The use of publications through mail has went online to save on printing and paper, but the quality of information still provided in print is proving effectively for the American Red Cross.

In terms of reaching a variety of different generations, ethical groups, and incomes the use of traditional media has not faded completely but is becoming more transparent. The form of surveys, newsletters, mailers, and fliers are still a beneficial way of providing promotional event marketing to the various groups that may have limited access to the wave of new technology of the Internet.

While there was limited access to data on how effectively the traditional media is serving the American Red Cross it still proves to be available but less active than it was a few years ago.

1.4 Digital Media:

Social media is growing popularity and is effectively contributing to the American Red Cross philanthropy efforts. Through the Internet, social media networks, blogs, emails, and podcast the American Red Cross is benefiting thorough more valuable resources in reaching out to the public. The Red Cross is using the media to generate texting-to-donate, social networks, and the Internet to promote fundraising and volunteerism.

“Red Cross realized that social media played a big role in giving ordinary people the ability to communicate their perceptions of the relief organization.” (Cass, 2008) The American Red Cross’s ability to create a “social media program has enabled the organization to track sentiment about Red Cross-related issues, respond to misconceptions when they emerge, and support praise for the Red Cross where it exists.” (Cass, 2008)

Marcia Stepanek, New Media Adviser at New York University Heyman Center for Philanthropy and Fundraising said, “Non-profit organization are very interested (in mobile apps) and there’s a lot of experimentation- but it’s still in the baby steps mode.”(David, n.d.) American Red Cross and other nonprofits are finding it difficult to merge social media into their campaigns in fear of not reaching out to the older generations, which tends to be their main volunteer basis.

But, in all the American Red Cross received 30 million dollars from cell phones users. This is referred to as texting-to-donate program where people can send a text message that authorizes their wireless providers to pass along donations through their phone bills. It first reached success during the 2010 catastrophic earthquake in Haiti. Within two days 2.3 million people texted “Haiti” to the Red Cross phone number to give ten dollars.

The American Red Cross raised three million dollars, Wendy Harman, Social Media Director at the American Red Cross said, “People weren’t just tweeting, they were taking action-they were texting to donate.” (Manjoo, 2010)The opportunity of the Haiti campaign presented an easy way for the public to make a small contribution that went along way. Jonathon Aiken, Director of Media Relations at American National Red Cross said, “it didn’t require donors to mail a letter, call a toll-free number, wait on line or use their credit cards.” (Bush, 2010)

What the American Red Cross learned through Haiti and the text-to-donate campaign will be a continue effort for natural disaster response with these key principles: keep it going, follow the crowds, get comfortable, and choose wisely.

Along with mobile device giving, social networks Twitter, Facebook, LinkedIn, and BlogSpot have made giving both donations and time to the American Red Cross valuable. “It’s a fundamental shift in how nonprofits do their work,” said Beth Kanter, the Co-Founder of the book The Networked Nonprofit: Connecting with Social Media to Drive Change continued to say, “Until now we’ve mostly been in a transactional mode- ‘give us money.’ Butt social-networking audiences demand more than that. They want the nonprofits to ask for feedback, to listen to ideas and to keep providing new reasons to stay engaged.” (Manjoo, 2010)

Social networking is becoming beneficial to the American Red Cross through building existing relationships while creating new relationships. The organization is also collaborating ideas with the public, providing educational programs and services as well as addressing needs through management functions. But there are some principles to follow when using the Internet as a source for effective communications by including: useful information onsite, updating regularly, making the site easy to navigate and strive to keep publics active on the site.

Another successful campaign is the Causes app through Facebook that “cracks the code for how you get regular people, not the super wealthy, to give money” said Joe Green, the co-founder of Causes. (Manjoo, 2010) “Causes is just one method for nonprofits to press for more action from their audiences. When thinking about how to appeal to people online, nonprofits mention a ‘ladder of engagement’ – a path for users to climb toward ever-higher levels of participation.” (Manjoo, 2010)

Causes and other apps through various sites have transformed into peer-to-peer fundraising through social websites Green’s Facebook app has raised about 25 million from the 100 million people who have used it, he says “empowering individuals… to unlock the power of their social network can transform fundraising.” Green continues to say, “Technology is irrevocably changing philanthropy, and charities must find ways to participate.” (Judy, n.d.)

Social media is contributing to the availability of users when and how they want to give. It is also providing organizations like American Red Cross to build stronger relationships through two-way dialogues and feedback. It is changing the public relations functions of the Red Cross with measuring goals, communication, and the reputation of the organization.

It also has proven to be away for American Red Cross to receive tangible measurements through metrics and environmental scanning. Social media users are very well becoming an active participate in public relations activities. Ultimately, Facebook, Twitter, and blogs are connecting the American Red Cross with users through communication, trust, and relationship building.

The Internet has transformed since the 1990s. What used to be a big fat screen with a modem, keyboard, and mouse is now available in a small tablet and is easily portable. But, “the interactive features on the Internet and blogosphere have become a staple in society with two-thirds of the world’s Internet population having visited a social networking site.” (Briones, 2010) The way of the Internet is connecting nonprofits such as the American Red Cross with potential stakeholders, volunteers, donations, governmental funding, and much more.

Click-to-donate sites are increasing the availability of donations through the Internet and not leaving behind those who have yet to converge to the iPhone or Blackberry. This led to the American Red Cross “online gifts catalog” in 2009. Gail J. McGovern said, “In the past we haven’t made the ‘ask’ unless there was a national disaster” but “ this is our way of getting in front of the American public so they know that we do much more than simply respond to disasters like Katrina.” (Strom, 2009)

The catalog is a first for the American Red Cross and is hoping to revive the organizations 33 million deficit. The “charitable organization says the potential for online organizing and fundraising seems almost limitless, but they caution that using technology to give is new and represents only a modest slice of their donations. A survey of 203 non-profits organization by the Chronicle of Philanthropy found that online giving accounted for less than one percent of donations in 2008 for 101 of the groups.”(Judy, n.d.)

Along with the Internet the use of satellite has also provided quick assistance with the iDirect system. The iDirect system is set up to deliver satellite access to support equipment, medical assistance, and online databases. The system went viral during Hurricane Katrina. David Craig from the American Red Cross said, “ iDirect’s quick response allowed us to immediately begin serving families in need across the Gulf region and its communications services continue to be a key component of our success today.” (iDirect)

1.5 Challenges:

While the American Red Cross is blooming through digital media it has also been presented with some challenges. The generation gap is among the largest concern for the Red Cross and others using social media as a connection tool. Green said, “It’s easier to type your credit card a into a computer than it is on a mobile device.”(David, n.d.) There is also an issue for Apple users since “Apple’s rules governing fundraising apps for its popular iPhone and iPad tablet computer. The company says it only allows fundraisers to offer apps that link to a website – not an automated donations.” (David, n.d.) The American Red also faces the generation gap due to the largest number of volunteers come from the elderly including ages 50 to 80 years-old.

But the generation gap is not the only concern but the issue among race, income, and education maybe a factor in including those who may not be connected through mobile devices. During Hurricane Katrina a majority of the victims did not have access to the high technological devices available to them leaving the Red Cross to contribute to resources in a different way.

The most frequent barrier with digital media and the American Red Cross is time and staff. Since Katrina, the Red Cross hired Wendy Harman to support the digital media aspects to grow the Red Cross. Since then they have now added an assistant to support Harman, Gloria Huang. Wendy Harman has been with the American Red Cross since 2006. Before joining the Red Cross she attended Law school and worked for the “musicians’ rights at the Future of Music Coalition and Lawyers for the Arts.” (PRNewswire, 2011)

1.6 Hypotheses:

1. The American Red Cross gains effective fundraising and volunteerism through the media in particular during natural disasters?

-       Yes, research is providing evidence that the American Red Cross is receiving active roles from donors and volunteers through the participation of the media in particularly social media networks.

-       During past natural disasters, a crisis communications plan has proven to be actively supporting through fundraising tools such as click to donate or text to donate as well as finding missing people through Facebook pages. Beside from donations the use for volunteers and training through the media during a disaster is also increasing due to the support through the web.

-       Wendy Harman said, “Social media is becoming an integrated part of disaster response.” (redcross.org)

-       Please see the appendix section for the resource article More American Using Social Media and Technology in Emergencies.

1. The more advanced technology we have today is providing a positive support system to the Red Cross through faster connections and free publicity?

-       Yes and No the advanced technology is providing support for the American Red Cross to get the word out faster and too more people especially those missing. But, it is also serving as a way of communication and monitoring heavy form of content from users and the American Red Cross communications team.

-       Free publicity while helpful may not also ways be the best tool to use for an organization and in the American Red Cross efforts the use of social media is viral when a disaster hits for both positive and negative publicity rather free or not.

-        Harman said, “I think the goal was to have someone stay on top of any bad news that was leaking out so that we could address it right away before it became a big news story.” (Cass, 2008)

1. Lastly, people are more willing to help a larger non-profit with more connections than a smaller non-profit due to limited connections?

- No, research showed no evidence that smaller nonprofits are suffering due to connections and in fact most small organizations are keeping up with nonprofits like the Red Cross as a guide.

- While it may be true that the Red Cross is benefitting from the connections of the Internet it too has had some down times with the technology. For example, during Hurricane Katrina the use of text to donate was a failure not being able to get enough response out there in time to aid the victims of the series of hurricanes in the region. But, by the time the earthquake in Haiti hit the text to donate prove to be a viral success and has been ever since.

- Sometimes an organization can jump the gun and be too early on something most people have not caught onto yet. But, since the Haiti disaster the use of text to donate and other forms of technological devices supporting the American Red Cross and with more than likely is here to stay.

1.7 Methods:

With a nonprofit as large as the American Red Cross the opportunities for research methods seemunlimited. Had this study been fully evaluated the use of all research methods would have provided more in-depth basis of information in evaluating the literature review. The use of historical research provides background information, past disasters success and failures, and the direction of social media is offering a better look into the organizations’ public relations with the media.

The historical research contributes to the literature review by presenting digital media, in particular social media as being a key aspect of the American Red Cross. Media has allowed the Red Cross to use the historical mission and expand it to the general public, not just the wealthy. Further, research into the resources of the historical method for the Red Cross could continue to be of use for volunteerism and fundraising research building.

The quantitative research method would contribute by the surveys, content analysis, and statistics to enhance the information from its history to success today. Surveys have proven already been successful for the Red Cross in the past when looking to develop better support in preparing for disasters. The use of case analysis and statistics has been provided to the Red Cross before and could further research more on how the media is representing the Red Cross mission and business functions.

Lastly, using the qualitative research method would provide interview, observations, field experience, and case studies for to the best opportunity on how the media is playing an essential role in non-profit organizations’ business measures. The use of these types of research methods could allow the process of the Red Cross preparedness planning to be uncovered, reviled and revamped into a developing non-profit organization that is expanding.

1.8 Theory:

One study presented the examination of Festinger’s Cognitive-Dissonance theory during crisis fundraising, which focused on “individuals’ reactions to inconsistent mental states.” (Waters, 2008) After a disaster “specifically, the theory’s initial hypotheses opportunities that if an individual felt psychologically uncomfortable then he or she would be motivated to reduce the feelings of discomfort to restore the mental balance.” (Waters, 2008)

It found that while the actual disaster had an impact on the individual the media’s response also carried an impact. They tested 712 participates with a survey of 27 questions: 23 closed-ended questions and found 55 percent (394 people) donated during the recent 2010 tsunami relief efforts. In the end the study supported that “donors experience strong feeling of dissonance when learning of crisis situations and that making donation restores the mental balance.”

It continued by approving “Festinger’s original hypothesis that individuals would avoid situations that would increase their feelings of dissonance. By reducing news consumptions, individuals were able to avoid seeing the repeated footage of the devastating tsunami.” (Waters, 2008)The story behind Hurricane Katrina shaped a vivid image of the American government response as well as the aid supported by the American Red Cross. The thoughts of agenda-setting in this idea that the “media does not tell people what to think, but what to think about.” (Baran, 2009, p.293)

Maura Kennedy has worked as a speechwriter for the American Red Cross for two years she said, “We discovered that there was a lot of misinformation about the Red Cross being spread via social media, but we didn’t quite know what to do about it. We then figured out that social media allowed for two-way communication and that we didn’t just to sit back and see this misinformation spread, especially misinformation that might hurt people affected by Katrina… That’s very different from dealing with traditional media.” (Cass, 2008)

Walter Lippmann wrote in his book Public Opinion “that people do not deal directly with their environment as much as they respond to [the] pictures in their heads.” (Baran, 2009,p.293) This image held true for the American Red Cross during Katrina after a study proved the resistance of aid to New Orleans residents lead to conflicts between volunteers and actual victims who had lost everything.

Several studies on agenda-setting seem to show the media does have an effect on its audience, especially during disasters. The McCombs and Shaw report “implie[d] a direction of influence from media to audience- that is, it implies causality.” (Baran, 2009, p.295) But was later announced with some limitations in the use of interaction between the media and the audience can have an effect on the actual “news” on an organization.

The American Red Cross during 9/11 and Katrina learned a valuable lesson through media exposure. Iyengar and Kinder found that people “view of their society and nation are powerfully shaped by the stones that appear on the evening news.” (Baran, 2009,p.295)  As in Katrina we saw people living on roofs waiting for aid, thief raising through the towns, and violence on the streets as people had no place to go. Their study also presented the media as exposing the use of bad publicity on the organization and state governmental regulations.

What the media portrayed as a disastrous event in American history and the question through most American minds was where the help of the government was? And why does it seem like we help other countries more than our own? The perception through the media made perceiving agenda-setting was at work in setting ‘stereotypes’ or ‘labels’ to the actual events taking place.

But, actually the Red Cross study on Katrina presented a different factor on what was really going on in New Orleans besides the media exposure. The study presented that the lack of training for volunteers put them exposure to being mistreated by victims and not knowing what information to provide to certain victims. The Red Cross was present on the ground right after the disaster passed, but no media portrayed the goodness of non-profits and individuals assistance due to the lack of wiliness to send aid from state officials.

The form of using agenda-setting has been widely debated about the comparison of framing theory in relation with agenda-setting. McCombs the pioneer for agenda-setting  expanded his theories with framing as the ‘second order’ to agenda-setting by attributing ‘frames’ as the agenda to the ‘framing process’ and the overall influence. Kevin Carragee and Wim Roefs gave their theory against McCombs through:

“reducing frames to story topics also characterizes framing research inspired by the agenda-setting perspective. McCombs, Llamas, Lopez-Escobar, and Rey (1997) claimed that framing is the second level of agenda-setting. They contend that ‘both the selection of objects for attention and the selection of attributes for thinking about these objects are powerful agenda-setting roles” (Baran, 2009, p.298).

Framing theory is broken into many different parts explaining the process of the audience’s expectations to the media’s influence on our reaction. “Most of [the] framing research has focused on journalism and on the way news influences our experience of the social world.” (Baran, 2009,p.336)

In context, framing plays an important role on the American Red Cross by building relationships for fundraising and volunteerism. Red Cross may have learned from 9/11 and Hurricane Katrina but the wave of media is now helping lend support to become closer to those relationships while perceiving a frame on the organization.

Every day the Red Cross is experiencing the downshift and upshift frames that take place from opinions being altered due to the media’s influence. Social media flaws could be to play on the reputation of the American Red Cross in times of disaster one negative comment could change the ‘frame’ for the public to lend support.

For example, when Harman responded positively during the text to donate campaign of Haiti the influence of the public played an important role in shaping the Red Cross social media initiatives.

The American Red Cross advertising campaign is a great example of hyperritualized representation of social actions for the public. Agenda-setting and framing has several perspectives that make great examples of how the media is influencing the public’s perspectives on the American Red Cross during disasters.

The communication process can be a complex process of rules and the nature of human behavior is to become so consumed with standards the organization’s mission can become blurred. The Red Cross methods for fundraising and volunteerism during a disaster will continually be examined for growth but the use of research on the framing theory, cognitive-dissonance, and agenda-setting provide explanation on the stages and processes on human behavior and the media’s role on the American Red Cross will be of benefit to the organizations management and communications roles.

1.9 Limitations and future research:

Findings during the literature review were conducted successfully and provided insights on the American Red Cross organization management functions in regards to media affairs. Further, exploration into the research methods and theatrical basis are needed in order to complete results and find a defined development into the organization.

Harman’s first goal starting the American Red Cross was a study on the ‘image of the American Red Cross’ which produced negative and positive communication she found “it just seems like its human nature to reach out and be in touch with the people who support you our donors, our supporters, our volunteers. We have to connect with these people in order to remain a viable organization.” (Cass, 2008)

Integrated communication is providing success at this time but needs stronger measurements to continue to be considered an organizational tool. While digital media is just beginning its long thrive of technology the presents of data, context, and timeframe should be evaluated to uncover the effects on the public relations models of opportunities with risk, relationship building, and interactivity. With the use of theoretical basis the American Red Cross has some addition goals that are being measured by the moment.

Conclusion:

The American Red Cross developmental programs have built more than 56,000 shelters, carried more than 90,000 trained volunteers, and raised more than 50,00 in 2010. Compassion, dedication, and team building is providing the soul of the American Red Cross. But with the help of traditional and digital media the Red Cross is providing even more training, preparedness, and aid to citizens affected by disasters. The availability of technology for the American Red Cross seems endless in the 21^st century.

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Note: This article was submitted to proutjournal.org via email. Editors of proutjournal.org do not necessarily endorse and are not responsible for the content of the article and any statement written in it.

There is a monumental disconnect between the pace of change in Australia and the needed adjustment in a carbon over-loaded world. In all likelihood this shortfall is true for most of the world.

The climate change report for the Australian government by Ross Garnaut (2008) recommends a reduction of 70-90% to achieve a sustainable carbon footprint. Lets say what is needed by 2050 is a reduction of 80%. (1)

Many people put their faith in the use of alternative energy sources such as solar power, wind energy etc.

Graeme Pearman (CSIRO) says using renewable energy sources will relatively easily provide a reduction of 25%. To go beyond that will be difficult. (2)

In Australia in 2007 Kevin Rudd (prime minister) went to the election with a promise of 25% reduction. In Government he reduced that to 5%. Julia Gillard has held with this 5% target.

It is a long way from the required 80%.

If this reluctance to change is reflected around the world we can be sure that the impact of climate change will be felt strongly.

What are the effects we will reap? There will be increases in storms especially of the catastrophic variety. There will be an increase in the sea level. And rainfall patterns will change. There will be more in some places and less in others, but agricultural industries will be upset.

It is impossible to be specific about the details of the impacts. Just where will the impacts be felt most? Where will the tornadoes strike?

Sea level rise is more predictable. We know that some pacific island nations will be destroyed. But the more wrenching impact will come from the inundation of large parts of Bangladesh which is a very low-lying area. Their population of 100 million people could be decimated. Other parts of the world have specific vulnerabilities of monumental proportions.

The indifference of the developed world in dealing with this issue shows the moral bankruptcy of the capitalist economic ideology which guides the dominant nations.

Tim Flannery (The Weather Makers) claims that economists took the view that doing anything serious about climate change was too expensive to be worthwhile. (3) This amounts to ‘the effective murder of members of the world’s poorer populations.’ ( Meyer) (4)

According to Flannery civilization itself comes under threat: “With the impacts of extreme weather events, rising seas and storm surges, extreme cold or heat, water deprivation or flood, or even disease… cities will likewise begin to die…and by destroying our cities bring about the end of civilization.’

‘Humanity of course would survive such a collapse, for people will persist in smaller more robust communities such as villages and farms.’

So the global system is de-stabilized. Capitalism too is showing its vulnerability. European debt woes and the ‘Occupy Wall St ’ protest highlight the situation right now. Immanuel Wallerstein, veteran professor at Yale University says capitalism is coming to the end of its 500 year supremacy in the world of economics. It only remains to be seen what will replace it. (5)

The Progressive Utilization Theory (Prout) is starting to show its credentials as a plan for economics into the future.

A small minority of people across the world have seen the writing on the wall for some time. They are developing the tools of permaculture and so-operative economics to show the way for survival in a time of chaos. But they tend to be still tied to the apron strings of mainstream economics, as they are dependent on manufactured tools and machinery and commercial markets.

When breakdown occurs in the economy we will see the need to harness the energy of our communities, and to find ways to supply goods beyond farm produce. This need has been anticipated by Prout which sees fractions of the population in farm production, in equipping the farm sector for its work, and in using the products in food production. The rural situation becomes the central matter of economics, and other enterprises support it. Think of seeds, nurseries, fertilizer, tools, building and transport, as well as the need for education institutions and hospitals and medical institutions.

Ideally we would make the rational assessment – that capitalism is failing us and a progressive socialism should be built immediately. However as we have seen we are not addressing the issues rationally. We are waiting on the judgments of nature to prove we are making mistakes. In other words we can see that difficult times lay ahead. Most people struggle on trying to carve out a living in this collapsing edifice that is modern civilization. And the longer we put off the day, the more severe will be the chaos we have to live with, whether it is due to civil unrest, economic malfunction, or natural disasters.

A sprinkling of individuals have seen this crisis looming. Among the students of Prout philosophy some have understood that the rural survival centres have to be built now. Prout’s survival centres, known as Master Units, are intended to also be centres of culture. They have a bold agenda of organic farming and community living, spiritual inspiration, schools and social service activities. In this way Prout holds that the predictions of ‘the end of civilization’ are misplaced. Civilization will live on in decentralized rural communities across the globe. These centres, numbered in the hundreds, have been established in many countries of the world, and as the need is more widely recognized it is to be hoped that many more will be established.

In summary cities are in trouble and we would all do well to look to rural situations that can support food production for direct consumption. We need support not just from the land but from the community too, so look for communities where these ideals are prominent. And look up your nearest Prout ‘master unit’ and foster a connection for your mutual benefit!

1. Ross Garnaut, Garnaut Climate Change Review. Cambridge University Press, 2008

2. Graeme Pearman, Greenhouse: Coping with Climate Change, CSIRO Publishing, 1996

3. The Weather Makers, Tim Flannery, Text Publishing, 2005

4. Meyer, A., Contraction and Convergence, Schumacher Briefing No 5., Devon, 2000

5. Immanuel Wallerstein on the End of Capitalism, www.youtube.com/watch?v=nLvszWBf6BQ

Moti Teckchandani, a senior Proutist Universal member, was the one of 500 people who attended the “Occupy Wall Street“ protest in Hong Kong on October 8, 2011.

“The Occupy Wall Street Protest has been a global protest and PROUT was represented by me at the protest in Hong Kong,” Tekchandani said. “I was directing students and journalists to study PROUT as the only solution to the global economic woes. The objective of the protest was to raise awareness of the defective system of capitalism and how it has made us all slaves to our debts. This system cannot last much longer without further manipulation and printing of fiat currencies. There is no long-term solution better then PROUT.

Teckchandani said the protest was the Diwali, a Festival of Light, for PROUT’s awakening.

“I felt it was important for me to raise awareness of PROUT amongst the protestors as all had come to visit this event from different walks of life,” Teckchandani said. “In doing so I spread the word that PR Sarkar has been the greatest teacher of mankind in the last century and the theory that is based on PROUT will succeed.”

In 1978,  to the laughter of many and the derision of a few, I wrote a book called, The Downfall of Capitalism and Communism, which predicted that Soviet communism would vanish around the end of the century, whereas crony or monopoly capitalism would create the worst-ever concentration of wealth in its history, so much so that a social revolution would start its demise around 2010.  My forecasts derived from the law of social cycles, which was pioneered by my late teacher and mentor, P. R. Sarkar. Lo and behold, Soviet communism disappeared right before your eyes during the 1990s, and now, just a year after 2010, middle-class America, spearheaded by a movement increasingly known as “Occupy Wall Street (OWS),” is beginning to revolt against Wall Street greed and crony capitalism. Will the revolt succeed? It surely will, because the pre-conditions for its success are all there.
The first question is this: Why does rising wealth disparity create poverty? My answer is that it causes overproduction and hence unemployment and destitution. It is all a matter of supply and demand. Inequality goes up when official economic policy does not allow wages to catch up with the ever-growing labor productivity, so that profits soar and rising productivity increasingly raises the incomes and bonuses of business executives. I have detailed this process in an earlier article. Then money sits idly in the vaults of bankers and big-business CEOs and restrains consumer demand, leading to overproduction and hence layoffs. The toxic combination of mounting layoffs and absent job creation raises poverty, which, according to official figures, is now the highest in 50 years.

The next question is: how has the government either restrained wages relative to productivity or made the rich richer and the poor poorer? It is easy to see that almost all official economic measures adopted since 1981 and contained in the following list have devastated the middle class. The list includes:

1. The Reagan income tax cut of 1981 that benefited the rich, but made it necessary to sharply raise all other federal taxes, paid mostly by the poor and the middle class, to finance that tax cut.
2. Unenforced antitrust laws, leading to mergers among large and profitable firms, but killing high-paying jobs in numerous industries.
3. Permitting the oil industry mergers in the 1990s that are now preventing oil prices from falling in the middle of the worst slump since the 1930s.
4. Permitting relentless mergers among pharmaceuticals and health insurance companies, so that America, far more than any other nation, now spends almost 15 percent of its gross domestic product (GDP) on health care that is mediocre by European and Japanese standards.
5. Unchecked use of outsourcing that kills high-paying jobs in manufacturing and services.
6. Ignoring the growth of the trade deficit that has destroyed our manufacturing base.
7. The 1999 repeal of the Glass-Steagall Act under President Clinton that led to reckless lending by banks and an unprecedented housing bubble, which collapsed in 2007 to trigger the ongoing slump.
8. The Bush tax cuts and bailouts that further benefited the rich while nearly doubling the government debt.
9. And finally, the decimation of the real minimum wage by President Reagan and other Republicans. (In 1981 the hourly minimum wage bought $8 worth of goods compared to $6 by the end of Reagan’ presidency in 1988, and to mere $5.15 in 2006 under Bush.)
10. Looking at this nine-point list, is there any government program that a big business CEO would hate? Stated another way, is there any measure that has helped the middle class? I can’t think of any. Thus, over the past three decades whatever the government did, ostensibly to help the people, actually ended up hurting them. Mergers, outsourcing and free trade raise productivity, but also lower wages, whereas the other provisions of the above list directly enrich the wealthy. The nine-point list is really a list of exploitation.

Let us now look at President Obama’s record since January 2009 when he took office. The president’s first act was to engineer another bailout, à la George W. Bush. The idea was that the $800 billion package of assisting banks and faltering industries would save or create some four million jobs. Did the measure succeed in its avowed purpose?

According to the latest estimate from the Congressional Budget office, the bailout created nearly 1.5 million jobs. Even if we accept the administration’s claim of four million, the bailout was extremely wasteful and enormously enriched the rich. Dividing 800 billion by four million yields 200,000. In other words, the government spent $200,000 to create one job. When the average wage is less than $50,000 per year, where did the other $150,000 go? This suggests that companies that hired those four million people received $150,000 for each job they created. Thus, three-fourths of the bailout, or $600 billion, went to businesses, and a mere one-fourth benefited the unemployed. This is the best case for the Obama measure. It is clear that the bailouts, Bush’s and Obama’s, were extremely wasteful and hugely enriched the opulent.

The fact is that government deficits are not working and have always benefited the wealthy. Not surprisingly, the fastest and the sharpest rise in income and wealth inequality has occurred since 1981, when the culture of mega-deficits first began. Lasting prosperity occurs only when wages rise in proportion to productivity, as was the case through much of American history, especially from 1940 to 1980. Whenever wages trail productivity, debt and profits soar, only to be followed by overproduction and soaring poverty and misery for the middle class. Such was the case in the 1920s and the 1930s and such again has been the case since 1981.
If President Obama really wants to create millions of jobs, then all the economic measures adopted since Reagan’s presidency must be abandoned. Of course, the Republicans would oppose him tooth and nail in this resolve; they would scream about the president hurting job creators, who in fact are job destroyers. Big business has decimated American jobs through mega-mergers, outsourcing, oil speculation and by shifting factories to Mexico and China. The nation can only prosper if the destructive ability of job destroyers is restrained through increased taxes or the creation of free markets.
When the government bails out mega banks and Wall Street firms, it amounts to shooting the economy in the foot. Our president seeks to bring about change, which was his campaign slogan. But once elected, he got sidetracked by thinking that change is possible through compromise. This has never happened before. Never in history have the exploited prospered by cooperating with the exploiter.
Compromise is what produced the government’s nine-point list of measures described above. The Republicans were able to impose these measures whenever some Democrats compromised with them. When Reagan raised the gasoline tax and excise taxes in 1982, it was through the cooperation of the Democrats, who cooperated again in 1983 when Social Security and self-employment taxes went up sharply to pay for the massive income tax cut of 1981. The repeal of the Glass-Stiegel Act, the Bush tax cuts and bailout were all the handiwork of Republican lawmakers and right-wing Democrats.
America does not need another dose of increased government spending, but a rational economic policy that generates free-market capitalism to take the place of the current monopoly capitalism. In 1776, the nation declared independence; coincidentally, the same year Adam Smith, the father of modern economics, demonstrated how small businesses generate lasting prosperity for all, not just a privileged few. That is what we need again. It is well known that small firms have created the bulk of American jobs in recent years. This is then the best argument for breaking up business conglomerates not only to create jobs, but also to lower the oil price and the cost of health care.
The government should also adopt strong, not toothless, measures to eliminate the trade deficit, which is now running at $500 billion per year. This alone will create five million manufacturing jobs. Eliminating the trade deficit will raise US GDP by the same amount, and to produce that much output, new workers will be needed. Suppose it costs a business $100,000 to hire a worker, including salary, benefits and profit. Dividing 500 billion by 100,000 yields five million. In other words, eliminating the trade shortfall will generate five million new jobs, paying the average wage and benefits. The trade deficit can be eliminated by setting up a low export-exchange rate, the way China and other Asian nations have done. But first, the government must see the value of balancing our trade and then proper economic policy can be devised to reach the goal.

Outsourcing is now the biggest job destroyer. The government should impose a hefty tax on this practice. This way, if a company has to outsource some work, it will compensate the nation for creating joblessness in the economy. Finally, we need to eliminate the federal budget deficit. This can be done by repealing the Bush tax cuts for the wealthy and by enacting a small tax on financial transactions, while preserving crucial programs for the retirees. There is no reason to cut Social Security and Medicare, because President Reagan raised taxes sharply to guarantee the benefits to retiring baby boomers. In short, President Obama should do away with the nine-point list of exploitation mentioned above. He will then be able to bring about the change that he promised during the election campaign in 2008.

Einstein once defined insanity as doing the same thing over and over again and expecting different results. By now, we should know that excessive government spending is one such insanity. It creates very few jobs and primarily benefits the rich. In fact, I have shown mathematically to some audiences that, under reasonable assumptions, increased government debt goes completely into the pockets of the opulent. As the latest piece of evidence, from September 2010 to September 2011, the deficit rose $600 billion, but only 400,000 jobs were added. I call upon the OWS movement to demand that the above nine-point list of exploitation be repealed, so that a free-market capitalism of small firms is reborn. This will strengthen the president’s hand and enable him to face Republican lies and tactics that are only meant to further weaken the economy and force the president out of power. We need to make sure that Mr. Obama is re-elected, provided he accepts the repeal agenda, because the Republicans always do the same thing over and over, namely make the rich richer and the poor poorer. Additionally, we should also work to defeat Republican incumbents and rightist Democrats who will compromise to maintain the status quo and possibly cut Medicare.

Our efforts are bound to succeed. I am an economist and historian and made many forecasts in the past about the economy and social change. While 5 percent of my economic forecasts have been wrong, to my knowledge I have never made an error about forecasting a revolution. My latest estimate is that monopoly capitalism will go the way of Soviet communism by 2016.  O’ brave protesters of the OWS movement, your effort will not only shape the 2012 elections, they will also end, once and for all, the brutality of the rich and powerful, who are responsible for the sorry state you are in. The change that you are about to bring will be glorified as what Abraham Lincoln did for black Americans. I hope that, with your support, Mr. Obama will be the harbinger of that change.

El economista Ravi Batra habla sobre PROUT y explica la causa de la pobreza mundial from Alternativa Proutista on Vimeo.

It is all a matter of demand and supply. A healthy economy requires a balance between these two forces, i.e., for an economy to create jobs and avoid recession, it is essential that

Supply = Demand

Please don’t be alarmed by this equation, because I am sure you have heard of these concepts and they need not be explained in detail. They offer great insight into what has happened over the past three decades. The main source of supply or production of goods is productivity, whereas the main source of demand are wages. Layoffs occur only when supply exceeds demand so that some goods remain unsold, profits fall, and businesses have to fire workers. Thus wages have to be proportionate to productivity if the supply-demand equation is to remain in balance, which in turn avoids unemployment.
Because of new technology and investment, productivity generally rises every year, which means production or supply increases every year. Then wages must also rise in the same proportion so demand keeps up with supply. Otherwise, supply exceeds demand and layoffs inevitably follow. This is the simple logic that governs the creation or dismissal of jobs.

Ever since 1981, when Reagan became president, government policies have changed so much that productivity has been outpacing wages. The policies of restraint over the minimum wage, free trade, outsourcing, among others, created an ever growing gap between wages and productivity. As supply grew faster than demand, the government began to print money and bring down interest rates to lure people into debt. Led by Fed Chairman Alan Greenspan, money growth jumped again and again and consumer debt grew sharply. This way the economic balance was maintained and joblessness avoided because now

Supply = Demand + Consumer Borrowing

However, the wage-productivity gap kept rising and even the ever growing consumer debt was insufficient to maintain economic equilibrium. So the government also had to raise its own spending year after year. In this case, layoffs were avoided because then

Supply = Demand + Consumer Borrowing + Government Budget Deficit

Now you can see why, and how, America became a nation of debtors at every level. In today’s world, the equation is no longer that supply equals demand, but that supply equals spending out of wages and new debt.
However, the debt creating measures cannot succeed forever. A time comes when consumers run out of good collateral such as home equity, and then banks stop lending. Such a time arrived in 2007, and a year later, since the economy had been running on debt for so long, supply massively exceeded demand, and large scale layoffs followed. With consumer borrowing screeching to a halt, government deficit had to sky-rocket to maintain the equation’s balance, and to keep the recession from turning into a depression. From a few hundred billion dollars a year, the deficit jumped into trillions, which in turn made the rating downgrade inevitable. With Standard & Poor’s downgrading many nations in Europe because of their high debt, it had to take similar action for the United States as well.

Let me give you examples of how the supply-demand logic has helped me make a variety of forecasts since 1999, when I wrote a book called, The Crash of the Millennium, predicting a stock market crash in 2000. In 1999 there was a rare budget surplus which caused supply to exceed demand, so profits fell and shares began to crash from January 2000. In fact, Greenspan, who knew no economics, had supported the creation of that surplus, thereby generating the supply-demand gap and the inevitable crash. A budget surplus is toxic in an environment of ever rising wage-productivity gap, but Greenspan was unaware of this logic. As I had expected, following the crash he printed oodles of money and sharply lowered interest rates that in turn spawned a housing bubble.
By this time I was fed up with his manipulation of money growth, and in 2005 published a book with a blunt title, Greenspan’s Fraud, where I argued that his policies were fooling experts all over the world but they would soon bring about a serious recession. Economists laughed at my gall and the title of my book and many actually endorsed Greenspan’s actions. I countered by writing another book in 2006 and called it The New Golden Age: The Coming Revolution against Political Corruption and Economic Chaos. In this I predicted that a major slump would start in mid-2007 with a housing crisis and then convulse the world through stock market crashes, soaring unemployment, mega bankruptcies and exploding budget deficits. However, eventually there would be a golden age of unprecedented prosperity, because a fed up public would throw out corrupt politicians and elect ethical candidates who in turn would introduce genuine economic reforms to fix the problems.
The first part of these forecasts, to my great sorrow, has already come true. The second half will likely materialize in the next four years. Let us take another look at the economic-balance equation:

Supply = Demand + Consumer Borrowing + Budget Deficit

Since even now productivity continues to rise, supply will keep rising for a while, but, with both wages and consumer borrowing flat, the budget deficit must rise further to maintain balance in the equation and hence the economy. As the deficit is going to fall, another round of imbalance and hence layoffs is inevitable. 2012 will look really bad.
The Federal Reserve could again pump up the money supply, and that could slow the coming slump temporarily, but things will only get worse after six months. The reason is that the Fed has been doing this for three years now, and all it has done is to boost share prices as well as oil. The oil price had dropped to about $32 per barrel by the end of 2008. Then came the Bush-bailout and a sharp jump in money supply, both of which stuffed the pockets of multimillionaires and billionaires, who in turn used the government money to stab us all in the back: they resumed speculating in oil. So by now, oil is hovering around $90 per barrel.
In the past, even in a minor recession or growth slowdown, oil would sink to around $10. This happened in 1986, 1989 and 1999. But not anymore. The biggest slump since the 1930s has produced a $90 oil. Such is the by-product of official corruption that has ignored anti-trust laws and permitted mergers among giant oil companies since the days of Bill Clinton. Exxon-Mobil among other behemoths, along with an army of hedge funds, is now busy speculating in oil, and in the process killing the global economy.
Ever since the early 1980s, American economy has been so mismanaged that it cannot live without the federal deficit. Add to this the phenomenon of oil speculation, and you have a perfect recipe for a prolonged recession. Major deficit cuts are scheduled in 2013, and if they really come to pass, then the recession could turn into a depression. At that point, even oil will collapse to $10. Gold perhaps will rise further especially if the Fed injects more money. Otherwise, gold could also collapse.
I am sorry for ruining your day, but hopes offered by experts and politicians cannot trump the supply-demand logic. The Soviet Union tried to violate the laws of supply and demand, and in the process it vanished. The saddest thing of it all is that the American economy can be easily fixed and brought back to full employment in less than 18 months by gradually decreasing the wage-productivity gap. I have discussed these reforms in detail in my books, but space does not permit me to explore them here. All I can say is that all the economic policies that the administrations have followed in the past 30 years must be scrapped or modified so that wages catch up with productivity. That indeed will be a revolution.

*Ravi Batra is a professor of economics at Southern Methodist University, Dallas, Texas. His website is ravibatra.com.

The Danish economist Bjorn Lombock argues for a carbon price of $100 to make a meaningful change in carbon consumption. Any less, he says, will fail to deal with the problem of carbon pollution ahead of changing climates. But –as the report points out – this price will cripple the economy!
Say this in another way – we can choose to have a depression due to carbon pricing or a depression caused by catastrophic impacts of climate change.

Economists are trying to put together a picture of a working economy for the future in a world of climate change.
Graeme Pearman CSIRO (Australia) said that we can reduce our carbon footprint by 20-30% relatively easily with adjustments such as new energy alternatives. Beyond that is difficult.
Ross Garnaut (in his climate change report for the Australian government) said that what is required is 90% reduction!
The bottom line is we can only do 30% reduction easily, but we have to make a reduction of 90%.
Or more dramatically – we can reduce to 70% of our present demand, but we need to reduce to just 10% of the present usage!

How can we make that adjustment?

I believe we have to discard the image of the modern industrial state as a model of our lives going into the future.

From the standpoint of Prout I think it is believable that our future can be rich and satisfying. But it might encompass huge changes that we have hardly started to recognize.

Usually when Prout is discussed other features are given prominence. But I would like to highlight one aspect of Prout which I believe is often overlooked – Agriculture.
“In order to build a sound economy thirty to forty percent of the people in an area – neither more nor less- should depend on agriculture” (P.R.Sarkar -Principles of Balanced Economy)
30-40% ! For those of us in the western world where we have between 4 and 7% of the workforce dedicated to agriculture this is surely a huge change.

P.R. Sarkar does not expound on the implications of this change for the many of us who are city living folk.

A world where agriculture has such universal prominence as this is not recognizable as a city as we know it!
What that means is that the cities of the world will have to restructure, be dismantled, move, depopulate or other wise adjust to the needs of basic physical necessities.

So in my mind I try to structure a picture for myself and family and community in which our suburban existence transforms into a rural community existence. Not just as a suburb alongside a city of a million people (Adelaide) but a ‘block’ on the outskirts of the metropolis reinventing itself as a self-reliant economy. No doubt a change like this will be chaotic.
Agriculture in the area beyond the suburbs here is dominated by wine grapes, beef cattle, olives. Little of it is meant specifically for local consumption. And what is in the shops has come from any and every corner of the world. How quickly can this be reshaped to make local production for local consumption?

Designing the block for the future is perhaps impossible at this time but let’s begin to shape our thoughts to accommodate this change when it becomes necessary.
And in the context of climate change let’s recognize that Prout’s block level planning provides an answer for the people who see the urgency of change but are offered only the creeping adjustments that will in no way be sufficient for the task at hand.

Spirituality is not a utopian ideal but a practical philosophy which can be practised and realized in day-to-day life, however mundane it be. Spirituality stands for evolution and elevation, and not for superstition in action or pessimism. All fissiparous tendencies and group or clan philosophies which tend to create the shackles of narrow-mindedness are in no way connected with spirituality and should be discouraged. That which leads to broadness of unison alone should be accepted. Spiritual philosophy does not recognize any distinctions and differentiations unnaturally made between one human being and another, and stands for universal fraternity.
Spirituality must inculcate sense in human psychology, and develop a natural affinity amongst this species of the creation. The approach of spirituality should be psychological and rational, and should offer a touching appeal to the deepest psychic sentiments of human beings. Human beings should appreciate by a rational analysis their relationship with the Cosmic Entity and recognize the most benevolent kindness of the most beloved Entity. Spirituality should lead human beings to the one Cosmic truth from which they have derived their selves, and which is the ultimate destiny. That ultimate and absolute ideal is the Cosmic ideal – an ideal beyond the scope of time, place and person. It is the Absolute, without and beyond relativity. It stands with its own lustre for all times and for every factor of the Cosmos, may it be a human being or a less-evolved animal. The Cosmic ideal alone can be the unifying force which shall strengthen humanity to smash the bondages and abolish all narrow domestic walls of fissiparous tendencies.

All the sentiment-provoking ideas should be firmly opposed. This does not mean an attack on those sentiments, traditions and habits which are innate in human beings and which do not hamper their Cosmic development. For example, the movement for uniformity in dress for all people will be but a ridiculous and irrational approach. Different selections of dress are the result of climatic factors and corporal necessities. Moreover, dissimilarity in dress is not detrimental to world fraternity.

There will also be many zonal or regional differences as regards other traditions and customs. These should be appreciated and encouraged for the indigenous development of society. But under no circumstances should there be a compromise in principle or yielding to tendencies detrimental to the inculcation of Cosmic sentiment.

The inspiration of Cosmic sentiment will depend upon certain objective physical problems which must be solved on a collective humanitarian basis. In the relative objective sphere the following few fundamental problems must be attempted at [tackled] and solved. These are:

1. Common philosophy of life
2. Same constitutional structure
3. Common penal code
4. Availability (production, supply, purchasing capacity) of the minimum essentialities of life

Common Philosophy of Life

A common philosophy of life demands a clear conception in the human mind that the development of the human personality means an evolution in all the three spheres – physical, metaphysical or mental, and spiritual. The logical analysis of spirituality is the summum bonum of life in all its aspects.

Those who think dharma to be an individual’s concern conceive it in a very narrow sense. Dharma leads to Cosmic unity, inculcating in the individual mind Cosmic idealism. Religion, in the sense of dharma, is the unifying force in humanity. Moreover, spirituality provides a human being and humanity at large with that subtle and tremendous power with which no other power can be compared. Therefore, with spirituality as the base, a rational philosophy should be evolved to deal with the physical, psychological and socio-philosophical problems of the day. The complete rational theory dealing with all three phases – spiritual, mental and physical – of human development shall be a philosophy common to humanity in general. This will be evolutionary and ever-progressing. Of course, small details may vary according to the relative environment of the age.

Same Constitutional Structure

Despite these obstacles, a social blending of humanity is in progress and needs a common constitutional structure to be evolved to cement the solidarity of the world. A world government is also very essential for exercising full control in certain spheres; for example, there should be only one world militia.

The world government should form certain autonomous units, not necessarily national (based on problems of education, food supply, flood control, public sentiment), which should look after mundane and supramundane problems. The boundaries of these units may be readjusted to suit any change in the environment – for instance, development in the techniques of communication. Development in the means of communication brings the different remote parts of the world nearer, and the world, therefore, grows smaller. With this well-developed swifter means of communication, units with bigger areas can work smoothly and efficiently.

A language must also be evolved as the lingua franca of the world. (At present English is most suitable for the purpose and no national sentiment should be encouraged to go against it.) But the local languages must be encouraged to help the indigenous literatures develop and contribute towards world progress, and thereby contribute to the common brotherhood of humanity.

Common Penal Code

A common penal code must be evolved. Legislation must be progressive and capable of gradual adjustment with the prevalent conditions. Any theory which does not hold a parallelism with the ever-changing conditions of time, place and person, is sure to decay and be lost in oblivion. Hence, there must be a never-ending effort for amendment with a view to rectification.

Crimes are acts forbidden by the law of the government concerned, and virtue and vice (puńya and pápa) are the outcome of traditional customs. The sentiments of the lawmakers are very much influenced by the prevalent traditions and customs regarding the concept of virtue and vice of the locality or of the people concerned. The sense of crime, therefore, has a parallelism with the concept of virtue and vice. The idea of virtue and vice is different in different countries. The aspirants of world fraternity should try to lessen the difference and reduce the gap amongst cardinal, moral and human laws. All those actions which help in the growth of the spiritual, mental and physical aspects of human beings in general should come under the category of virtuous deeds, and those actions which go against humanity in its spiritual, mental and physical development must come under “vice”. This conception of virtue and vice applies commonly to humanity in general.

Minimum Essentialities of Life

The availability of the minimum essentialities of life plays a vital part not only in achieving world brotherhood, but also in the development of human personality. This should be tackled on a world footing, and should be based on certain fundamental presumptions. Every human being has certain minimum requirements which he or she must be guaranteed. Guaranteed availability of foodstuff, clothing, medical assistance and housing accommodation should be arranged so that human beings may be able to utilize their surplus energy (energy up till now engaged in procuring the essentialities of life) in subtler pursuits. Side by side, there should be sufficient scope for providing other amenities of the progressive age. To fulfil the above responsibilities, enough purchasing capacity should be created.

If the supply of requirements be guaranteed without any conditions of personal skill and labour, the individual may develop the psychology of idleness. The minimum requirements of every person are the same, but diversity is also the nature of creation. Special amenities should, therefore, be provided so that the diversity in skill and intelligence is fully utilized, and talent is encouraged to contribute its best towards human development. It will, therefore, be necessary to make provision for special emoluments which can cater for special amenities of life according to the age and time. But at the same time, there should be a constant effort to reduce the gap between the amount of special emoluments and the bare minimum requirements of the average individual. The guaranteed supply of minimum requirements must be liberalized by increasing the provision of special amenities pertaining to the age and also, simultaneously, by bringing about a decrease in the provision of special emoluments given to the few. This never-ending effort of proper economic adjustment must ceaselessly continue at all times with a view to assisting the spiritual, mental and physical evolution of human beings, and to let humanity develop a Cosmic sentiment for a Cosmic ideal and world fraternity.

In this socio-economic set-up people are at full liberty in the spiritual and mental spheres. This is possible because the spiritual and psychic entities for which people can aspire are themselves unlimited, and the extent of possession in this sphere does not hamper the progress of others in their quests. But the supply in the physical sphere is limited, and hence any effort for disproportionate or unrestricted acquisition of physical objects has every possibility of creating a vast majority of have-not’s, and thus hampering the spiritual, mental and physical growth of the larger majority. So, while dealing with the problem of individual liberty, it must be kept in view that individual liberty in the physical sphere must not be allowed to cross a limit whereat it is instrumental in hampering the development of the complete personality of human beings; and, at the same time, must not be so drastically curtailed that the spiritual, mental and physical growths of human beings are hampered.

Thus, the philosophy of PROUT advocates the development of the integrated personality of the individual, and also the establishment of world fraternity, inculcating in human psychology a Cosmic sentiment. The PROUT advocates progressive utilization of mundane and supramundane factors of the Cosmos. The society needs a stir for life, vigour and progress, thereby progressive utilization of all factors. Those who support this principle may be termed “Proutists”.

The principles of Prout depend upon the following fundamental factors:

1. No individual should be allowed to accumulate any physical wealth without the clear permission or approval of the collective body.
2. There should be maximum utilization and rational distribution of all mundane, supramundane and spiritual potentialities of the universe.
3. There should be maximum utilization of physical, metaphysical and spiritual potentialities of unit and collective bodies of human society.
4. There should be a proper adjustment amongst these physical, metaphysical, mundane, supramundane and spiritual utilizations.
5. The method of utilization should vary in accordance with changes in time, space and person, and the utilization should be of progressive nature.

A WME is a short-term financial palliative that makes the rich richer but postpones economic troubles, while seeming to cure the problems of unemployment and dwindling family incomes. It tends to create debt in the economy, but most economists call it fiscal policy or monetary policy. Once the term “policy” is used, everybody shuts up and accepts the claims of WMEs’ beneficence, believing that a genius must have devised it. However, all it does is to generate more debt in the economy, and let the problems pile up, only to return with greater force in the future. Most nations have deployed it in the past 30 years, but various American administrations have been exceptionally adept in its use.

Let us see how a WME only postpones economic ills and also enriches the rich. I am sure you’ve all heard of supply and demand, even if you never took a course in economics. Supply and demand are like the two wings of an airplane; both have to be equally strong and weighty, or else the plane will crash.

What is the main source of supply? Productivity. What is the main source of demand? Wages. If you become more productive – through education or the use of better technology – you produce or supply more goods. If your wages rise, then you consume or demand more goods. For the economy to stay healthy, supply must be equal to demand, or:

Supply = Demand

Please don’t be alarmed by the use of a simple equation, because it will highlight the role of debt in a visual way and make it easily understandable. If supply is not equal to demand, then, like the airplane with unequal wings, the economy will crash some day. Here, supply refers to the value of goods produced in the entire economy, and demand means total spending or the value of goods consumed in the nation.

It so happens that, because of investment and new technology, productivity and, hence, supply rise year after year. This means that wages and, hence, demand must also rise year after, and in the same proportion. Otherwise, there is an imbalance, and unexpected problems arise. If wages trail productivity growth, supply exceeds demand, leading to overproduction. Businesses are unable to sell all that they produce and layoffs follow. Hence, the only cause of unemployment in an advanced economy is the rise in the gap between what you produce and what your employer pays you.

However, joblessness creates problems not only for the unemployed but also for elected officials, because the unemployed have the right to vote. Politicians seek to face a happy electorate and be re-elected. They don’t like unemployment anymore than you or I, which means they have to create ways to raise national spending to the level of supply. They face two choices: either to follow policies to raise your salary proportionately to the level of your productivity – which is only fair and ethical – or to adopt measures to lure you into larger debt, so that you spend more not out of a pay raise, but from increased borrowing.

Luring the public into debt in order to get re-elected, I believe, is crass corruption. It is also corruption because the politician, ever in need of campaign donations, wouldn’t dream of offending business interests that are all for low wages. With wages trailing productivity since 1981, elected officials have been following what is known as monetary policy, which tempts people into larger debts. This eliminates unemployment as spending rises to the level of supply, because now,

Supply = Demand + New Consumer Debt

With monetary policy, the Federal Reserve prints more money to bring down the rate of interest, and lower interest rates induce people to increase their borrowing or their debt. However, the wage-productivity gap has been rising so fast that the government also had to raise its own spending and debt constantly, so that total spending matched rising supply. In this case:

Supply = Demand + New Consumer Debt + New Government Debt

Raising government debt to postpone the problem of unemployment is called “fiscal policy.” Now you see why our nation is awash in debt at both the consumer and the government level. Elected officials have frequently used debt-creation policies to get re-elected, while creating the impression that they are doing American workers a favor by preserving their jobs. Are they doing you a favor? Absolutely not. Instead, they are simply enriching the rich. Let us see how.

First, job creation occurs through the cooperative action of both producers and consumers. Producers only create supply and, indeed, hire workers, but if their goods remain unsold, they lose money and workers are laid off. Second, joblessness occurs only if your boss doesn’t pay you enough to match your productivity. If you work hard and still get fired, then it is the employer’s fault, not yours. You are doing your job of being productive on the one hand and creating demand out of your salary on the other. If your demand falls or does not rise enough, then it is because your boss has not given you a raise or has cut your wages. At the macro level, insufficient national demand only means that workers have produced so much for their companies that supply exceeds demand, so that some people have to be laid off. Where then is your fault in this entire process? It is your employer’s greed that generates joblessness, not you.

Once the government has generated enough new debt to increase spending to the level of supply, the unemployed are called back to work, usually at lower wages. But the debt increase is large enough to eliminate overproduction even at puny wages. As overproduction vanishes, profits jump. You can see this clearly from the above equation. If your wages and, hence, your demand are constant, then the entire increase in debt goes into the pockets of suppliers. Without this debt growth, employers would have suffered losses due to overproduction; but with the creation of new debt, all their goods are sold, and profits soar, while your salary is either constant or grows very little; it may even fall, if you were laid off and had to find a new job. Thus, if the budget deficit is $1trillion, then corporate profits plus executive bonuses jump by $1 trillion. If the deficit is $2 trillion, then businessmen’s incomes rocket by the same amount.

This is exactly what has occurred during the Great Recession that started at the end of 2007. Millions of people were fired because the likes of General Motors, IBM, Microsoft and Goldman Sachs could not sell all they had produced. Then President Bush sharply raised the budget deficit, and the Federal Reserve printed tons of new money to bail out failing businesses. As a result, the economy stabilized in 2009 and began to grow in 2010. However, real wages fell, while profits sky-rocketed. Why? Because, the entire increase in government debt went into the coffers of producers. This is how Goldman Sachs alone could give bonuses of over $20 billion to its executives in 2009, while millions were still being laid off. Consumer debt actually fell, but the government debt rose so much that executives received hefty extra compensation.

Eliminating the Budget Deficit

It should be clear by now that our so-called monetary and fiscal policies are enriching the rich while not doing much for the jobless. What should we do? For the solution, let us take a look at the American economy in the 1950s and the 1960s, the golden decades of high growth and growing prosperity for all. GDP growth averaged over 4 percent as compared to less than 3 percent since 1981, while real wages went up to match rising productivity. The top bracket income tax rate at the time averaged above 80 percent, and corporations paid 25 percent of the total tax revenue or about 5 percent of GDP. The middle class paid low taxes, and there was practically no budget deficit.

Why was GDP growth so high back then? The answer lies in high taxation of wealthy individuals and corporations. Thus, for the 1950s and the 1960s:

Supply = Demand + Near Zero New Debt

Since real wages grew as fast as productivity, new debt was practically zero. People met their needs mostly out of their rising salaries. Demand rose in a natural way to match increasing supply. It may be noted that supply comes primarily from the rich, but demand comes primarily from the poor and the middle class. Since taxes were low on low-income groups, consumer demand grew as fast as salaries; but from 1981 on, thanks to President Reagan and his advisers such as Alan Greenspan, the tax burden was transferred from the rich to everyone else. Income tax rates sank for wealthy individuals and corporations, while most, if not all, other federal taxes jumped. The self-employed small business person, for instance, saw a rise of 66 percent in their tax rate. Taxes also rose on gasoline and tires. The crippling tax burden on lower incomes naturally reduced the growth in demand, so GDP growth (growth in supply or output) fell sharply below that in the 1950s and the 1960s. Even the oil-shocked 1970s produced higher growth of 3.3 percent.

All this suggests that we should move toward the tax structure of the 1950s and 1960s. Today, the top-bracket income tax rate is 35 percent. Suppose we were to raise this rate to 45 percent for annual incomes above $250,000, and to 70 percent for incomes above one million, then the income tax yield would rise from $1 trillion to $1.5 trillion, or by $500 billion. Thus, any dollar earned above $250,000 will be taxed at the rate of 45 percent; similarly, any earned above a million will face a rate of 70 percent, so that average tax rates will be well below the top rates, which will still be below those in the 1960s. For corporations, we could go back to the old rate of 45 percent tax on corporate profits, while eliminating loopholes. We would then collect about 5 percent of GDP or some $750 billion, which would bring in extra revenue of $600 billion. Thus, higher taxes on affluent families and businesses will raise our revenue annually by $1.1 trillion. Slashing defense spending and oil and agricultural subsidies would reduce government spending. This way we can almost eliminate our budget deficit, which is currently running at an annual rate of $1.2 trillion.

Eliminating the Trade Deficit

Eliminating the budget deficit would quickly revive our comatose economy. The first benefit would be felt in the fall of our trade deficit, especially that with China, which has become our foremost lender. America would no longer have to borrow money from anyone, and China would not be able to use its surplus dollars to buy more US government bonds. Such a move would cause a major appreciation in the value of the Chinese yuan, which, in turn, would reduce, possibly eliminate, our trade shortfall with China. Our manufacturing would revive and thousands of new jobs would be created, raising the tax revenue further.

The next step would be to reduce the tax burden on lower incomes by cutting the self-employment tax to 12 percent from the current 15 percent; we could also eliminate the Social Security tax on the minimum wage. Our increased tax revenue would pay for these cuts, which would further raise consumer demand and, hence, GDP growth. Note that the trade deficit is also a WME, because it tends to lower wages, while stuffing the wallets of the CEOs of multinational corporations. Just look at the fat pay checks of such CEOs in the aftermath of our trade with China.

Another WME that our government has systematically used to reduce our living standard is outsourcing; we can impose a stiff tax on this practice and raise even more revenue. This would also enable us to trim the tax burden of low-income groups.

In short, the American economy can be easily fixed if our government would stop using its vast arsenal of WMEs against us. I believe that, in just 12 to 18 months, we can bring the nation back to an unemployment rate of 6 percent, which is close to full employment.