Economic Empowerment for a Culture of Peace

Rev. Dr. Walter Fauntroy
Former Delegate to the US House of Representatives from the District of Columbia

(Speech presented at a conference on “Renewing the United Nations and Building a Culture of Peace,” Session Four: “The UN and Freedom from Poverty,” Report from the Interreligious and International Federation for World Peace, Assembly 2000, New York, August 2000.)

Thank you, Mr. Betancourt, my distinguished co-panelists, ladies and gentlemen. After listening to Dr. Norman Bailey, I am tempted to title my presentation, “How to make the world’s poor fishermen-owners of the fishing companies.

I ask you to evaluate what I have to say to you today against a background of what I call the “arrogance of old age” and the wisdom that has flowed from 40 years at the core of every major change in public policy in the United States affecting people of African descent. You have to evaluate what I suggest to you as the Economic Paradigm for the 21st Century against the background of three things:

First, I’m a minister of the gospel, anointed of God to declare good news for the poor, bind up the broken-hearted and give liberty to those that are bound. I sought to do that with Dr. Martin Luther King, Jr. in fashioning the Civil Rights Act of 1964 and the Voting Rights Act of 1965; as a member of Congress with my arrest at the South African embassy in 1984; and as a founding member of the Congressional Black Caucus during my twenty-year tenure in the US. House of Representatives. I continue to seek to declare “Good News to the poor” today as the head of the National Black Leadership Roundtable of the Congressional Black Caucus.

You have to evaluate my suggestions, second, against my background of 20 years on the Banking, Finance and Urban Affairs Committee of the House. For six years I was Chairman of the Subcommittee on Domestic Monetary Policy and for four years Chairman of its Subcommittee on International Development, Finance, Trade, and Monetary Policy, which had responsibility of overseeing our nation’s participation in the multilateral development banks of the world: the World Bank, the IMF and the various regional development banks.

Third, you have to evaluate what I have to say against the background of my work with the Center for Economic and Social Justice, headed by Dr. Norman Kurland, which has focused its attention upon what I call the “Economic Paradigm for the 21st Century,” as has the World Institute for Development and Peace with Antonio Betancourt.

Let me tell you, therefore, what I believe to be the basic problem confronting the world and what I believe to be its solution. The basic problem confronting the world as I’ve experienced it in the United States is “Anxiety over a lack of adequate and secure income.” People in the United States, and it is increasingly so around the world, are anxious because they feel the income they now have is not adequate, and that it will not be there for them in the future. When people are anxious over a lack of adequate and secure income, there’s a tendency for them to turn on one another instead of to one another.

In the United States, we found that this anxiety is based upon three well-founded fears.

The first reason is the flight of jobs to cheaper labor markets abroad–some 2 million American jobs a year over the last 20 years. Every time a factory closes down in the United States and re-opens in a cheaper labor market abroad, people in this country get anxious. “I wonder if I’m next to get a pink slip.” The essence of the role of asset managers in the capitalist system is to move capital toward cheap labor; and there’s not very much anyone can do about it. Capital will always follow cheaper labor.

The second reason people are anxious over a lack of adequate and secure income is that advancing technologies are rapidly displacing people from gainful employment opportunities. Here in the United States, if you call 411 for information, you get a robot that says, “What city, please?” You speak and it says, “What listing, please?” and you get your number. Every time that robot speaks, understand that hundreds of thousands of communication workers, who had jobs saying, “Thank you for calling AT&T’ and “Thank you for calling Bell Atlantic,” are out of work! The Communications Workers of America are now striking in these United States because those technologies are rapidly advancing.

Chrysler Corporation five years ago announced that it would save its investors $70 million in labor costs that year because it had just acquired a new technology that enables them to design its automobiles into the future without the need of auto design engineers. As a consequence, over the last five years nearly 70 Ph.D.’s in auto design engineering in these United States were out of work. Up to that time, they had been confident in their suburban homes with their two-car garages and their adequate incomes, confident that they would be able to educate their children in the future. Now, due to advancing technology they are told, “You are obsolete. Go find another job.’

As a consequence, those auto engineers did two things. First they joined the Michigan Militia, and second, they concluded that affirmative action has got to go. Because if I’ve got to compete with blacks and minorities and women for jobs, it’s not fair.

You can’t stop advancing technologies. The Luddites tried to stop it in the 19th century but couldn’t then, and you can’t stop it now. So as jobs are fleeing rapidly to cheaper labor markets abroad, and as technologies are displacing human skills, people get anxious.

The third reason that people are anxious is that “Time is running out on the welfare state.” The welfare state redistributes income from those who are making money to those who are too old, too young, too sick or too poor to acquire the basic needs of life. Yet all over the world you are hearing about government downsizing. Voices are saying that it’s not fair to take from those of us who have to provide for those who are not able to have income generation, education, health care, housing and justice.

Economic Paradigm for the 21st Century

Now I know I have painted for you a pretty poor picture. And were it not that I have benefited from the thoughts of Norman Bailey, Norman Kurland and Antonio Betancourt on the economic paradigm which I now lay before you, 1, too, would be discouraged. I have a solution! What is the solution? I’m glad you all asked that question because I came prepared to answer. The solution is to enable those who are being displaced by job flight, displaced by advancing technologies and displaced by government downsizing, to become part owners of the new technologies and companies that are displacing them.

We call it capital homesteading. Capital homesteading comes to me as a result of my six years as Chairman of the Subcommittee on Domestic Monetary Policy overseeing the Federal Reserve System. For the Federal Reserve System, this country’s central bank, was designed to homestead capital for investment in productive activity. Homesteading is not a new concept in the United States. In 1862, one year before President Lincoln signed the Emancipation Proclamation, he signed the Homestead Act. It launched a new government policy based on the thesis that the way to expand the economy was to make land available, free, to people who would produce on it.

Hence, as a matter of public policy we organized armies in this country and sent them across the land from sea to shining sea, driving the Native Americans off the valuable land and onto reservations. Then, we called back to Europe we said, “Give us your tired, your poor, your huddled masses yearning to breathe free,” and give us your thugs! We will give them 160 acres of land free if they will work it for five years. That’s because the Harrimans were building a railroad from sea to shining sea, and they understood that if you could get people to produce on both sides of the continent, it would enable America to become the most powerful nation in the history of the world. America has done that because we decided to homestead land back in 1862.

By 1913 we had so many opportunities to expand the economy as a result of that policy that the existing pool of capital in the world was not sufficient to finance growing production enterprises. Our politicians then got a great idea. “Let’s create a lender of last resort. Let’s create a central bank–the Federal Reserve Bank. The bank shall have the role of “homesteading capital” to those who have identified investment and productive opportunities, but who cannot finance them out of the present pool of capital available for investment. Article 13 of the 1913 Federal Reserve Act did just that.

Unfortunately, as Norman Bailey will tell you, not long after the act became law and the Federal Reserve System was created, World War I came along. How would we finance that war? Somebody said, “You know, we can’t get enough money from the American people by selling them savings bonds. Let’s use the Federal Reserve to create capital and loan it to the government.” The Federal Reserve Bank has financed government deficit spending ever since.

Capital Homesteading Today

We have an opportunity now to deal with our anxieties over a lack of adequate and secure income. With so many exciting new technologies available to us, we can homestead capital to those who are being displaced by job flight, by technology advances and by government downsizing.

Let me give you one example, and then I will be done. We in the United States, through tax-supported research and development for our defense and space agencies, have created one particular technology that is very intriguing to me. It is a technology that transforms human waste and solid waste into pure water and energy. NASA has utilized it very effectively in our space program.

Have you ever wondered how it is that we can keep people in space for months, even though we cannot send enough water and fuel into space with them to last for months? How it is that we can keep space ships orbiting the earth for months without having to carry up the fuel to energize the rockets that keep the ships in space? The answer is that we have a technology that enables the space ship to convert human waste, and toxic waste generated by the rockets that go up, into pure water and energy.

You may recall a few years ago when we sent our first woman up into space; she stayed about six months. And when she was scheduled to come back they couldn’t bring her down, because the weather in Florida was bad. “Don’t worry,” NASA said, “stay in orbit another extra week and come back then.” Where would the ship get the extra water and fuel to enable her to orbit for another week? The ship had on board a process for converting her human waste into pure water and fuel cells that fire the ship by the light of the sun.

I’m not talking space-age foolishness here; I’m talking fact. And at this point we have in Washington an idea, thanks to Kurland and Bailey and others, to enable hundreds of thousands of poor citizens in the District of Columbia to become part owners of this clearly productive technology by homesteading capital to them. By implementing Section 13 of the Federal Reserve Act of 1913, we would homestead the capital to them, the loan being repaid out of future profits. They will then become part owners of a machine that we know we can produce to sell around the world.

Can you imagine how valuable one of those machines would be in a drought in Africa? You could tell the people bring all of their waste and put it in the machine. Then tell them to go to the other end of the machine to pick up pure drinking water, along with a fuel cell that they could put in their houses that would generate enough power for their washing machines, TV sets and the computers that they would pay for out of the dividends from the investment to which they have homesteaded.

I’m talking what is possible through public policy. I tell you this having been for 20 years on the board of directors of the most powerful policy-making body in the world, the U.S. House of Representatives. For public policy determines who gets how much of what, when and where in five areas: Who gets how much income generated for them; who gets how much education to make money; who gets how much health care to live long enough to enjoy it; who gets how much housing or shelter from the elements; and who gets how much justice, so that if you have the income, education, health care and housing, nobody can take it from you with impunity.

By the year 2021, only 2 percent of the American people will be producing the durable goods that the others consume. Yet I’m telling you there is a way by which the plight of those who are left behind, displaced and moved around, can be solved. By homesteading the new technologies to the least of God’s children, making them part owners of the very technologies that are displacing people.

That, in my view, is the way we address the question of world peace and the eradication of poverty, through the Economic Paradigm of the 21st Century.