Things to reconsider NOW: economics, Part 1

uponreconsidering

Nov 5

In the early morning hours, at lunch time, and toward the end of the weekday, some of the most important people in our society are guarding school crosswalks and driving school buses. They have responsibility for the lives of our children and grandchildren, who hold in their young persons our love and our greatest responsibility, their own futures and ours, and the future of our society and country. For such enormous responsibilities these workers get paid very little. Why does their value not appear in terms of remuneration, as well as moral and medical and physical support and protection? Why do we continue to pay such essential people so little, while paying professional athletes, for example, so much?

This blog usually features information from new books about new discoveries about the present or future, or new discoveries or reinterpretations of the past. By contrast, this post will reconsider the role of economics in current events as recorded in daily news. The point will be that we need a new theory of economics now to deal with the current and future problems in Canada and elsewhere.

Current economics fails to provide for the basic needs of all. An example: a local hospital system has started not only prescribing basic housing for poorly housed and homeless patients, but providing it in new buildings on one of the three hospital campuses Why a hospital network is building affordable housing (thestar.com). Research showed that over the past ten years (notably beginning well before the plague), thousands of patient visits were attributable to around 230 people. It simply wasn't possible for them to be healthy without adequate shelter. Parts of Canada, including where I live and cities nearby, have too little housing for our current population, let alone the thousands of international students who come here to learn and perhaps seek permanent residence, the refugees, and the currently unhoused permanent residents. The capitalistic system of housing as a commercial venture rather than as a right for life, is not working here. And with the labour shortage, reduced supply of wood because of forest fires, and shortage of other building materials such as sand suitable for cement, we will have a very difficult time building the new housing, especially "affordable housing."

We are accustomed to having government step in to provide more stable income, to legislate minimum wages, and through legal requirements of the private sector and through government services, assist those with limited abilities. But the need of this intervention shows that the system outside government is inadequate to help all people flourish or even have the minimum shelter from cold, heat, precipitation and the ever-more-frequent severe weather; and good nutrition (our foodbank lines increase dramatically).

Economics and refugee immigration

As ever more people around the world relocate (International Organization for Migration | IOM, UN Migration) because of poor economies, political and social oppression, inadequate food because agriculture has become more precarious there, untreated diseases, wars, fires, and floods, Canada expects more refugees. Some of us expect increased immigration especially from the United States as more people's rights are violated because of sexual identity, ethnic background, unwanted pregnancy, and stark political oppression.

Financial aid for refugees is never enough, partly because there may not be sympathy for the politically or financially relocated, or for those relocated by wars. But hopefully there is sympathy for people displaced by earthquakes, droughts, heat waves, floods, wildfires, and volcanoes. But another significant reason for the inadequacy, is the frequency of such crises and their endlessness. Current economic theories do not permit governments to spend enough to help people survive, let alone flourish. This has been so for a long time. It is puzzling that we take economics so seriously: we allow such conditions because "we can't afford it."

Other causes:

Not all our problems are caused by only economics, of course. There is a mix. Humanity faces an array of grave, long-term challenges, including climate change, biodiversity loss, pandemics, widening economic inequalities, financial system instability, ideological extremism, and an escalating danger of nuclear war. These systemic risks are converging into a "global polycrisis" with its own emergent dynamics Polycrisis - Cascade Institute.

There are yet other causes as well. In Canada we are warned that there will not be enough medical people in the future because not enough people want to go into medicine and because the upcoming generations are smaller than their predecessors (see The Next Age of Uncertainty: How the World Can Adapt to a Riskier Future, by Stephen Poloz). We are warned that we will have to use technology (AI information-keeping and diagnostics, for example) to make up for the dearth. Economic theory will not solve that problem. We will have to accept what can be done with fewer people but more technology.

So it is not economics alone which keep us from flourishing, but the theories of economics certainly don't solve any of our problems. As it becomes continuously more obvious that the capitalistic idea of shelter as an investment keeps some people homeless, we know that in Ontario, for example, some 30% of home owners own at least one other residence somewhere, often rented out at high rates. Air BnB is now regarded as a barrier to adequate rental housing because it is for short-term (vacation) rent rather than actual housing for people on a long-term basis https://www.bloomberg.com/news/articles/2023-10-17/airbnb-faces-curbs-in-canada-after-sharp-rise-in-rental-costs. Fewer residences are being constructed now than during COVID because of inflation (which in Canada had been flat for a very long time) brought on by COVID's slowing supply chains; by pent-up demand; by costs of supplies; by the changing labour situation (workers are more selective about what jobs they will accept and at what wages); by the increasing clout of labour unions; and by the increased cost of borrowing to finance purchase and construction. The economic system interferes with helping people survive, let alone flourish.

Putin's insane war has driven governments to provide financial and military supply assistance at such rapid and unending rate, that the financial cost of it endangers their own supply of weaponry: arms manufacturers worry about meeting demand for replacement once governments figure out how to buy more for themselves as well as the Ukraine. Perhaps the new war between Israel and Hamas will exacerbate this problem.

Europe has had to find ways to heat homes and provide energy for factories without Russian gas, while Ukraine has difficulty shipping and transporting grain overland without interfering with other countries' grain sales (in unintended destinations), causing local unrest and resentment from assisting countries. It is not just economics which endangers food supplies. But it has impacts.

The inadequacy of money:

Money is, after all, a fiction,* a story we tell ourselves to form a system to get the things we need. It is worth what governments say it is, with some correspondence to purchasing power and relative value of other governments' monies. It used to be formally based on a precious metal, but that metal was mined in only a few countries – other countries had to use money to buy the metal on which the value of their money was based. This was weird.

Money is a commodity in itself: currency exchanges operate 24/7 so that money can be purchased and sold for profit without buying anything concrete. Crypto currency is only a little more fictitious. We have allowed this fiction of money to limit our solutions to our problems. We are stuck in this framework.

I don't have any grand economic theory to replace what we have now, although Modern Monetary Theory (MMT) appeals to me. Essentially it is a different fiction: that government does not need money from us because money comes from government. Government creates money and uses various systems such as banks and employment to distribute some of it to us. For some reason we give back some of it in the form of taxes. But if the money is government's to begin with, then it can't owe any of it to anyone. It makes no sense that it not only collects taxes but borrows more from us in the form of bonds and treasury bills, and borrows or buys money from other countries to purchase their products. Were government ownership of the money the generally accepted fiction, we would still have the potential problem of inflation, i.e., there must be a correlation between the "value" of money and what it can purchase. The cost of what it can purchase must be kept within bounds. But, allowing for that, MMT would at least eliminate the idea of government debt which so often limits what it can do.

After all, if government and money do not enable flourishing, what good are they?

I also favour Basic Income (see www.ubiworks.ca). A Canadian senator** Advocates take their case for a guaranteed basic income to the Senate | CBC News is preparing a bill to bring this into being. If everyone had a certain reliable income so that they could purchase needed shelter, food, and other things (the inflation caveat still applies), they could not only take care of themselves – perhaps without other government allowances (which bear an administrative cost) --but also purchase things and keep the "economy" going. Even if some could not "participate in the economy" by working for more money, they would still drive the economy by making purchases. There have been experiments in this country https://www.cbc.ca/news/canada/hamilton/basic-income-research-1.7014989 which illustrate this.

I'm not going to advocate either of these, because I recognize their limitations and I am not an economist. I am appealing for actual economists to recognize that we need something better so that people will not go hungry and unsheltered because of the way the economy works. Please put on your thinking caps and come up with it.

*Money, the True Story of a Made-up Thing, Jacob Goldstein; The Deficit Myth: Modern Monetary Theory and the Birth of the People's Economy, Stephanie Kelton; Basic Income for Canadians: From the COVID19 Emergency to Financial Security for All, Evelyn L. Forget; Values: Building a Better World for All, Mark Carney; A Brief History of Equality, Thomas Pikkety; Reclaiming Populism: How Economic Fairness Can Win Back Disenchanted Voters, Eric Protzer; Trade Wars are class wars: How Rising Inequality Distorts the Global Economy and Threatens International Peace, Matthew C. Klein; The day the world stops shopping: How Ending Consumerism Saves the Environment and Ourselves, JB MacKinnon.