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A little "Socialism" goes a long way--A true story of one Family...

Every Tuesday, Roxanne and I spend two hours with our "Spanish language teacher", Alfonso.  Now, while it is true that we speak Spanish the whole time, this weekly session has evolved into a wide ranging discussion of what is going on in Ecuador, and what world events have the most impact...

In this last election cycle, one of the our US political parties tried to get the word "socialism" to be its new "hot button issue"--didn't quit work...

Well, there are a number of definitions of Socialism, but broadly it just means that the State owns the means of production of goods and services, usually for distribution for the common good...

Now, in the view of some, this is viewed as leftist or left-leaning--they all seem to ignore the fact that in the US, billions of dollars are flowing into boardrooms of banks, stock brokerage houses, insurance companies, and automakers--almost none is going to the small businessman or individual who is losing his house, or his one or two investment rentals.

This method of spending a trillion and a half dollars, mostly borrowed from China, is not working to end a recession--it is just making the fat cats richer, and helping the failed companies cover up disastrous financial decisions...

OK--now where am I going with all of this...well, listen to the story that Alfonso related to us yesterday--

He begins by telling us that the new Ecuadorean Constitution, passed overwhelming last year, provides for a different way for large companies to distribute profits...( I tried to find news articles relating to the story, but could not).

He says that these large companies are now required to keep half of their profits, and distribute the other half to all employees from the janitor on up.  Naturally, the more important or higher paid employees get more.  Now, this scheme is directly opposite to what is happening in the US--it reaches right down to the lowest employee, and gives him a check.

Alfonso is a talented guy, but his day job is to pack a pistol and be a guard at a bank branch located next to the Casa Blanca restaurant in Montanita.  So, it turns out that on Rox's birthday (April 29), he was called into the bank office, and given an envelope.  He says that he just about fainted when he opened it up and there was a check for $4,900.  So...let's take a look at what some of this money did...

1.  It enabled his wife, Elizabeth, to realize her dream of opening her own hair salon--I took this picture on her opening day...

2.  $800 went to completely pay all the tuition needed to keep four of his kids in an excellent private Catholic school--the local, public school only has a teacher for his kids 3.5 days a week--that story will come another day...

3.  He has contracted with his builder, brother in law, to build two additional bedrooms to his small house--five kids need more sleeping space.

4.  He has completely liquidated loans made to him from friends and relatives--just to pay tuition.

5.  His sister had two remaining car payments, and he paid those for her.

6.  And...since, he had quite a bit of money left over, he opened an account in his bank, and is saving the rest.

Now, anyone can see that the effect of his financial decisions has created more money for a bunch of people, and they will be putting it in the hands of more people, too--this is the "multiplier effect" in Economics, or what we just call "churning"..

So...let's say that there are many thousands of these small checks being issued all over Ecuador, and they each "churn" a little...here is what might be called a "trickle-UP" plan that could actually work to help ease hard times for many, and maybe increase the feeling of financial well-being for all.

Of course, any broad brush decision of any government will have its detractors, and here in Ecuador, it is no different--the super-rich are really upset that they have to share the trough with lower level workers...

But...I have to say...that this little amount of money did a world of good, and certainly it is better than a $1,000,000 retention bonus for an executive in a failed company, funded by taxpayers, who will never get it back.






Posted on Tue, May 19, 2009 at 10:06PM by Registered CommenterBob & Roxanne | Comments3 Comments

Reader Comments (3)

Great story, thanks for sharing.

May 21, 2009 | Unregistered CommenterChuck Watson

Aha! Trickle down economics done the right way. This was a great post!! My many conservative friends that shudder at the mere mention of the word socialism, happily cash their SSA checks monthly.

May 27, 2009 | Unregistered CommenterDavid Beasley

I wish to thank David and Chuck for their generous comments, and several of you who have sent supportive emails.
We found out yesterday, that Pilsner, the really huge beer company here in South America, will be distributing checks this week. They are extremely profitable, and they employ a lot of folks, so the anticipation is high that these checks will also begin "churning"--sort of like waiting for those annual Alaska oil profit checks...stay tuned...

May 28, 2009 | Registered CommenterBob & Roxanne

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