Here’s How You Help the Poor Without Soaking the Rich

AFGHANISTAN-SOCIETY-TULIPS
Afghan children Malik, 8, and Popal, 11, wait at a roadside with wild tulips for sale to potential customers driving through the Shamali plains, north of Kabul. SHAH MARAI—AFP/Getty Images

We have to clear our minds of a fallacy about poverty alleviation: Helping the poor does not mean welfare. This isn’t to say that we don’t need welfare. Ignoring the unfortunate who can’t put enough food on the table or afford proper education or healthcare is not just cruel, it’s bad economics. The impoverished make either good consumers or productive workers.

But government aid can only reduce the suffering of the poor; it usually can’t make them escape poverty permanently. We know that from watching what has happened in the developing world over the past half century. Those countries that have tried to use wide-scale state programs to alleviate poverty—such as India—have not achieved results as quickly as nations that did not, such as Singapore and South Korea. (See my recent piece on this subject.) Generally, the high-performance economies of East Asia didn’t fight poverty by playing Robin Hood—soaking the rich and handing out cash to the poor. There is no reason why we’d have to do that today.

Instead we have to give the downtrodden better jobs, more opportunities, more tools to improve their incomes and fairer treatment in economic policy.
That means we must improve the climate for investment. I’m pretty sure you didn’t expect me to write that when you started reading. There is a widespread assumption that what’s good for companies is bad for the little guy. But if Asia’s example teaches us anything, it’s that there are two ways to end poverty: (1) create jobs and (2) create more jobs. The only way to do that is to convince businessmen to invest more.

That’s why it is imperative to make investing easier. We should press ahead with free-trade agreements like the Trans-Pacific Partnership to bring down barriers between countries and encourage exports and cross-border investment. Though CEOs complain far too much about regulation—the sub-prime mortgage disaster, the recent General Motors recall, or Beijing’s putrid air all show that we need to keep a close eye on business—we should also streamline regulatory procedures, standardize it across countries and thus make it less onerous to follow.

We also need to improve infrastructure like transportation systems to bring down the costs of doing business. I think it is a national embarrassment for the U.S. to allow the Highway Trust Fund to run out of money at a time when the country needs both jobs and better roads. The environment for investment shouldn’t just improve for Walmart and Apple, but also entrepreneurs and small companies. In many parts of the world—in certain European countries, for example, and China—there’s too much red tape involved in starting a company, and not enough finance available.

We also need to invest in the workforce. U.S. Senator Marco Rubio, in an attack on a proposed minimum-wage hike, said that “I want people to make a lot more than $9—$9 is not enough.” He’s right, but that just won’t magically happen on its own. To get people’s paychecks up, workers have to possess better skills. We are simply not doing enough to improve schools, teachers and job training programs. We should also be doing more to make higher education more affordable.

While overall U.S. spending on education is among the highest in the world, it still lags in important ways. Take a look at this data comparing education spending across countries. U.S. public expenditure on education has remained more or less stable, at 5.1% of GDP in 2010, but that’s lower than a lot of other developed countries, from Sweden to New Zealand. What is also interesting is how the cost of education is pushed onto the private sector in the U.S. much more than in most other countries.

Spending is also heading in the wrong direction. The U.S. Census Bureau calculated that in fiscal 2011, expenditure per student dropped for the first time since statistics have been kept.

Clearly, the U.S. spends so much money on education already that we should be getting more bang for our buck. Reform is crucial to put all those billions to better use. But slicing spending isn’t the answer, either. The latest budget from U.S. Congressman Paul Ryan streamlines some U.S. education programs he considers wasteful and recommends measures that would add to the financial burden of going to college for some families. Meanwhile, he’s leaving the military budget generally unscathed. Do Ryan and his colleagues believe the Pentagon isn’t wasteful? Apparently not enough to put the military on a diet.

The fact is we have the money to do more for education. U.S. federal spending is about $3.5 trillion—roughly the size of the entire economy of Germany. The problem is how we choose to spend it.

We also must restore performance-based pay. The idea that people should benefit from their hard work is a cardinal belief of capitalism, but there is ample evidence that it hasn’t held true for quite a while. Productivity growth has far outpaced wage increases in the U.S. going back to the 1970s.

This appears to be a global phenomenon. The International Labor Organization (ILO) looked at 36 countries and figured that average labor productivity has increased more than twice as much as average wages since 1999. Some have disputed this argument, but we can’t deny that wages are going nowhere. According to the Bureau of Labor Statistics, real weekly earnings in the U.S. in March were a mere $1.82 higher than a year earlier. Generally, workers are losing ground to capital globally. The ILO has shown that wages’ share in GDP has decreased in recent decades, meaning that the regular worker isn’t benefiting as he should from economic growth.

There are many factors behind this trend, including the formation of an international labor market. But globalization itself isn’t the problem—it’s how the benefits are being allocated. Corporate management doesn’t seem to care so much about shareholder value when paying themselves. Professor Steven Kaplan noted that in 2010 the average CEO of a major U.S. company earned more than $10 million, or about 200 times more than the typical household.

Companies also have the money to raise wages: They just choose not to give it to their employees. Rating agency Moody’s recently reported that U.S. non-financial companies are sitting on $1.64 trillion in cash. Companies also spent $476 billion buying back their stock in 2013, 19% more than the year before.

The question is: How get management and shareholders to disgorge more corporate profits to their employees? There isn’t an easy answer. William Galston, former advisor to President Bill Clinton, once suggested tax rates should be linked to a company’s worker compensation strategy (though that strikes me as a bit too intrusive). The ILO recommends we support stronger collective bargaining to allow workers to fight for their fair share of corporate profits.

But the crux of the problem is the idea of shareholder value. How do we convince shareholders and management that higher wages are positive for the long-term prospects of their corporations? Maybe we should consider altering the way we tax capital gains. Rather than breaking them down into two main categories—short and long term—it might help to decrease the rate the longer the asset is held. That would encourage longer-term shareholding, and perhaps make owners more interested in the long-term outlook for the companies in which they hold shares. I also think we should rebalance tax rates between capital and labor. I understand the principle that low capital-gains taxes reward people for wise investments. But what about rewarding people who work hard at their jobs every day? The Organization for Economic Co-operation and Development noted in a report this month that the tax burden on wage earners has increased in most of its member states in recent years.

These are just suggestions, and I’m interested in hearing more of them. The basic point is that we have to take steps to improve both the outlook for corporations and the many ordinary employees who work for them. The game should be win-win, not zero-sum.

Pictures of the Week: April 11 – April 18

From the sinking of a South Korean passenger ferry to the first anniversary of the Boston Marathon bombing, to Passover in Jerusalem and Holy Week around the world, TIME presents the best photos of the week.

Mexico

Magnitude-7.5 Earthquake Shakes Mexican Capital

(MEXICO CITY) — A powerful earthquake shook central and southern Mexico on Friday. The U.S. Geological Survey calculated its magnitude at 7.5 and said it was centered near the Pacific resort of Acapulco, where many Mexicans are vacationing for the Easter holiday.

An Associated Press reporter said it was felt strongly in the resort city but there were no immediate reports of injuries or damage.

The quake shook Mexico City for at least 30 seconds, with buildings swaying as people fled high rises and took to the streets. Because of the Easter holiday, that city was less crowded than usual.

Mexico City is vulnerable even to distant earthquakes because much of it sits atop the muddy sediments of drained lake beds that quiver as quake waves hit.

The magnitude-8.1 quake in 1985 that killed at least 6,000 people and destroyed many buildings in Mexico City was centered 250 miles (400 kilometers) away on the Pacific Coast.

France

French President Hollande’s Top Aide Resigns

(PARIS) — The French president’s top adviser resigned Friday following allegations of a past conflict of interest, striking a new blow to the already unpopular Francois Hollande.

Aquilino Morelle —Hollande’s political adviser and head of his communication staff — had denied allegations by the news website Mediapart that he worked for the government pharmaceutical regulator in 2007 while also lobbying for the drug industry.

The report also criticized Morelle’s supposed lavish lifestyle at a time when the government is making cuts in public spending.

Hollande sought to distance himself from the new scandal, telling reporters while on a visit to Clermont-Ferrand “I am not the judge of what he did before.”

“What happened before, it’s up to him alone to answer for,” Hollande said, adding that he’d accepted Morelle’s resignation “immediately.”

Hollande’s approval rating has recently hit a new low of 18 percent despite a cabinet reshuffle three weeks ago.

TIME 100

Justin Bieber Loses Top Spot on TIME 100 Reader Poll to Laverne Cox

Laverne Cox
Actor Laverne Cox participates in the Academy of Television Arts & Sciences Presents 10 Years After "The Prime Time Closet - A History Of Gays And Lesbians On TV" panel, on Monday, October 28, 2013, at the Leonard H. Goldenson Theatre in North Hollywood, Calif. (Photo by Frank Micelotta/Invision for Academy of Television Arts & Sciences/AP Images) Frank Micelotta—Frank Micelotta/Invision/AP

Pop star Katy Perry and India's Aam Aadmi Party leader Arvind Kejriwal move into second and third, pushing the Canadian singer to fourth.

Updated April 18, 2014, 10:46 a.m.

Transgender actress Laverne Cox ignited her fan base when she retweeted the TIME 100 Reader Poll, launching her ahead of pop star Justin Bieber, who had previously occupied the top spot. Though the controversial Canadian songster held second place Friday morning, he had soon dropped to fourth–and has earned more votes against him than for, making him the most polarizing figure on the reader poll.

Though the final TIME 100 list of the most influential people of the year worldwide is ultimately chosen by the editors, TIME seeks the input of readers in an online poll.

Pop star Katy Perry and India’s Aam Aadmi Party leader Arvind Kejriwal currently outrank Bieber, though Perry has a considerable share of votes against her. Of those in the poll’s top five, Oscar-winner and fashion darling Lupita Nyong’o garnered the least percentage of votes against her–even less than Beyonce. Egyptian presidential candidate Abdul Fattah al-Sisi, who almost took Bieber’s top spot earlier this week, has slipped to seventh.

Don’t like what you see? Voting’s still open–if not for long. Polls close at 11:59 p.m. on April 22. The final winner announced April 23. We’ll announce our official TIME 100 list on April 24.

Cast your vote in these categories: World, U.S. Politics, Business & Tech, Culture & Fashion, Movies & TV, Music, Media, and Sports.

This post was updated to reflect Bieber dropping to fourth place.

intelligence

Snowden: Putin Must Be Held Accountable for Surveillance, Too

Edward Snowden, displayed on television screens, asks a question to Russian President Vladimir Putin during a nationally televised question-and-answer session, in Moscow, Thursday, April 17, 2014.
Edward Snowden, displayed on television screens, asks a question to Russian President Vladimir Putin during a nationally televised question-and-answer session, in Moscow, Thursday, April 17, 2014. Pavel Golovkin—AP

The NSA leaker says he questioned the Russian president on live television to “get his answer on the record, not to whitewash him”

Edward Snowden says he asked Vladimir Putin on live TV if Moscow conducts NSA-style surveillance on Russian citizens in order to get Putin’s answer on the record—not, as his critics charged, to be a prop for Kremlin propaganda.

“I was surprised that people who witnessed me risk my life to expose the surveillance practices of my own country could not believe that I might also criticize the surveillance policies of Russia, a country to which I have sworn no allegiance, without ulterior motive,” Snowden, the former NSA contractor who leaked details of its mass domestic surveillance programs, wrote in an op-ed published in the Guardian on Friday.

Snowden was criticized after he asked Putin during an annual Q&A session on Thursday if Russia spies on its own citizens in a way similar to what the U.S. National Security Agency does. In that exchange, Putin denied Moscow conducts mass domestic surveillance, saying, “We do not allow ourselves to do this, and we will never allow this. We do not have the money or the means to do that.” Snowden was lambasted in some corners for apparently setting Putin up for a denial with a pre-packaged softball question.

But Snowden, who is living under temporary asylum in Russia says he asked the question knowing Putin would lie in his response in order to replicate the famous exchange between U.S. Sen. Ron Wyden and Director of National Intelligence James Clapper, in which Clapper falsely claimed the U.S. does not conduct mass surveillance on Americans.

“I asked Russia’s president, Vladimir Putin, a question that cannot credibly be answered in the negative by any leader who runs a modern, intrusive surveillance program,” Snowden wrote.

U.K.

Obama Political Guru Helping Britain’s Labour Party

Former White House advisor David Axelrod walks into the West Wing of the White House on Nov. 15, 2013 in Washington.
Former White House advisor David Axelrod walks into the West Wing of the White House on Nov. 15, 2013 in Washington. Brendan Smialowski—AFP/Getty Images

David Axelrod will serve as the party's "senior strategic advisor" to help get opposition leader Ed Miliband elected Prime Minister in 2015, but it won't be easy: Prime Minister David Cameron already hired Obama's former campaign manager for his own bid

The political strategist behind President Barack Obama’s White House victories is taking his talents across the pond to help Britain’s Labour Party.

David Axelrod will spend the next several months serving as the party’s “senior strategic advisor,” in an effort to get British opposition leader Ed Miliband elected as prime minister in May 2015. In a statement Friday, Axelrod said he had been impressed by Miliband’s ideas and says he has solid vision for the country’s future.

“Barack Obama articulated a vision which had, at its core, the experience of everyday people,” Axelrod said. “And everyday people responded, they organised and they overcame the odds. I see the same thing happening in Britain.”

Axelrod’s work in Britain won’t be a cakewalk. Prime Minister David Cameron hired Australian political guru Lynton Crosby and President Barack Obama’s former campaign manager Jim Messina to help advise during his 2015 campaign.

Aereo

Barry Diller Blasts Obama for Backing TV Broadcasters

Media tycoon Barry Diller attends the performance of "One Night Only" benefiting the Motion Picture and Television Fund in Los Angeles
Media tycoon Barry Diller. Phil McCarten / REUTERS

The billionaire says the Obama Administration is aligning itself "against competition, choice and the consumer" by supporting TV broadcasters aiming to kill Aereo

Billionaire mogul Barry Diller blasted the Obama Administration and the nation’s largest TV broadcasters on Thursday for trying to shut down Aereo, the upstart online video service backed by the media investor. Next week, Aereo will square off against the broadcasters in a landmark Supreme Court case with billions of dollars at stake that could transform the TV business.

Aereo uses thousands of dime-sized antennas to pick up free, over-the-air TV signals, which it transmits to customers over the Internet for a monthly fee starting at $8. The startup has angered the major broadcasters, including NBC, FOX, ABC and CBS, which claim the service is illegal because it’s ripping off their copyrighted TV signals. Aereo hit back on Thursday by launching a website designed to advance its argument that the service is legal.

In March, the Obama administration filed a friend of the court brief supporting the broadcasters and claiming that Aereo is “liable for infringement.” Several well-known public interest and technology advocacy groups have backed Aereo, including the Electronic Frontier Foundation, Public Knowledge, the Consumer Electronics Association, and Engine Advocacy. Dozens of prominent law professors and legal scholars are also supporting Aereo.

Last year, federal courts in New York and Boston agreed with Aereo’s argument that it is transmitting legally protected “private performances” to individual users over their own leased antennas, based on principles established by the important 2008 Cablevision decision, which allowed remote-storage DVR technology. But in February, a federal judge in Utah sided with the broadcasters, intensifying the legal uncertainty surrounding Aereo.

“The networks would like the court to expand copyright law far beyond what Congress intended,” says EFF Staff Attorney Mitch Stoltz. “The networks’ interpretation of the law would strip away the commercial freedom that led to the home stereo, the VCR, all manner of personal audio and video technology and to Internet services of many kinds.”

Diller’s broadside, which was published in a Wall Street Journal opinion piece, accused the TV networks of turning their back on a century-old agreement in which they were granted use of the nation’s public airwaves in exchange for delivering free, advertising-supported TV programming. In recent years, the TV networks have been able to extract billions of dollars in retransmission fees from cable and satellite companies for the right to broadcast their programming.

“Broadcasters make more money when consumers are steered away from over-the-air program delivery and toward cable and satellite systems that pay the broadcasters retransmission fees,” wrote Diller, who is on Aereo’s board of directors. “There’s nothing wrong with that. But it seems rich for them to forget the agreement they made to provide television to the consumer in return for the spectrum that enables their business.”

Diller also castigated the Obama Administration for aligning itself “against competition, choice and the consumer” by supporting the broadcasters. “In siding with the broadcasters, the administration has signaled that the preservation of legacy business models takes precedence over lawful technological innovation,” Diller wrote.

The Obama administration’s support for the broadcasters “ignores the government’s own previous legal positions and threatens to outlaw the entire cloud-computing industry,” Diller wrote, echoing a point made by Aereo CEO Chet Kanojia in a recent interview with TIME. That’s because Aereo’s cloud-based DVR service relies on the same legal principles as the entire cloud-computing industry, which enables consumers to store data on remote servers accessible by the Internet.

The broadcasters claim that Aereo’s service amounts to blatant theft, and have warned that if Aereo prevails, they could remove their primetime shows from free TV and move them to pay channels like Showtime. The National Football League and Major League Baseball have threatened to take high-profile broadcasts like the Super Bowl and World Series to cable. Such a move by the broadcasters would “disenfranchise” millions of viewers who rely on antennas to receive TV programming, “just because they want to make more money,” Kanojia says.

Meanwhile, Aereo suffered a setback this week when the Supreme Court announced that Justice Samuel Alito, who had earlier recused himself from the case, will now be able to participate. Oral arguments are set for next Tuesday. (The high court doesn’t comment on why justices do or do not recuse themselves, but it’s often because of stock ownership in one of the parties.)

Alito’s participation gives the broadcasters a boost because it removes the possibility of 4-4 tie, which would have meant that a lower court ruling in favor of Aereo would stand. “With Alito no longer recused, broadcasters now have an additional avenue for scoring that fifth vote,” according to Scott R. Flick, a D.C.-based partner at the law firm Pillsbury. “In other words, it’s easier to attract 5 votes out of 9 than it is to get 5 votes out of 8.”

South Korea

Authorities Want to Arrest Captain of Capsized Ferry

The captain has been facing scrutiny for abandoning a ferry as it capsized with hundreds trapped on board

Officials in South Korea are calling for the arrest of the captain of the ferry that capsized this week with over 300 students on board.

Prosecutors and local police have also requested an arrest warrant for three crewmembers in a local court, AFP reports. “The joint investigation team of police and prosecutors asked for warrants to arrest three crew, including the captain,” a coast guard official told AFP.

The captain and most of the crew reportedly escaped the ferry that capsized Wednesday off the coast of South Korea, an accident that authorities think may have been the result of a shift in cargo after a sharp turn. Though the captain and crew escaped, hundreds remained trapped on board the sinking vessel, including students from the Danwon High School, outside of Seoul. On Friday, the death toll from the ferry disaster rose to 28 and hundreds are believed to still be in the ship. About 270 are still missing, CNN reports.

Hopes are waning among those waiting to hear of more rescues, and on Friday the vice-principal of the Danwon School, one of the 179 people rescued from the ferry, was found hanging from a tree in an apparent suicide.

Captain Lee Joon Seok apologized on Thursday saying, “I feel really sorry for the passengers, victims and families. … I feel ashamed.”

[AFP]

Ukraine

Pro-Russia Militants Defy Diplomatic Deal in Ukraine

Denis Pushilin, foreground center, spokesman of the self-appointed Donetsk People’s Republic, speaks to reporters inside the regional administration building seized earlier in Donetsk, Ukraine, April 18, 2014.
Denis Pushilin, foreground center, spokesman of the self-appointed Donetsk People’s Republic, speaks to reporters inside the regional administration building seized earlier in Donetsk, Ukraine, April 18, 2014. Sergei Grits—AP

Pro-Russian militants occupying government buildings in the restive region refuse to leave until the interim government in Kiev resigns

Pro-Russian militants refused on Friday to vacate government buildings they’ve been occupying in Donetsk, eastern Ukraine, defying a deal struck on Thursday to ease tensions along the border with Russia.

Diplomats from the U.S. and E.U. brokered a cautious with Ukraine and Russia to have all buildings illegally seized by the militants cleared out and all paramilitary groups disarmed. But the armed men allied with Moscow has demanded that the interim government in Kiev give up power first, the Associated Press reports.

“This is a reasonable agreement but everyone should vacate the buildings, and that includes [acting Prime Minister Aseniy] Yatsenyuk and [acting President Oleksandr] Turchynov,” said Denis Pushilin, a spokesman for the self-professed Donetsk People’s Republic. “[Russian Foreign Minister Sergey] Lavrov did not sign anything for us, he signed on behalf of the Russian Federation,” he added. Pushilin wants residents to be able to decide whether they want sovereignty, CNN reports.

The agreement, which was struck in Geneva, promises amnesty for militants and protesters who cooperate fully, though tensions remain high in eastern Ukraine. Secretary of State John Kerry and President Barack Obama were both reluctant to declare the effort a victory. “I think there is the possibility, the prospect, that diplomacy may de-escalate the situation,” Obama said Thursday. “We’re not going to know whether there is follow-through on these statements for several days.”

[AP]

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