Rethinking Economic Growth
We live in a world – especially in the western world – where it is just given that economic growth is a sacrosanct necessity in order to ensure continued prosperity. If a company is not growing each quarter, investors look elsewhere to invest their money. If businesses are not continually adding new products and bells and whistles to current products, consumers lose interest and look elsewhere to spend their money.
Governments require economic growth to ensure they can collect sufficient tax revenues to fund their governance responsibilities. Children are schooled to increase their chances of landing the highest paying job possible. When push becomes shove economically, governments look to reduce if not eliminate funding for the arts in our community and in our schools. Inventions and innovations that increase corporate revenues are celebrated and subsidized by governments (overly or subtly and cleverly) without sufficient attention paid to the deleterious impacts on the majority of the populace.
Technology Advances (for whom?)
Sure, Artificial Intelligence will offer us capabilities and benefits previously unavailable and often previously unimageable, but the risks and impending dissolution of millions of jobs, lost income, lost homes, lost dignity, and suffering that will accompany such transformative technologies require attention. AI has the potential to be destructive, invasive, manipulative and perhaps worst of all, inhumane.
Promises are offered of how many new jobs will be created; in fact, proponents of AI already point out how many jobs there are that cannot be filled. Why? Because our current economy has been built on a mindset and a skill base that no longer are relevant to the new economy. One would think that governments would transform public education to address the new world order, but they don’t. More often, governments cut back on education, focus on curriculum that reflects the ruling party’s ideology (e.g. promulgating curriculum that ignores science but serves the erroneous and often self-serving positions of those in power who are people of wealth).
While AI is a force that will not be turned back, it can be managed, but who will actually do that when the current addiction to a growth economy is everyone’s mantra?
When self-driving vehicles become the norm, what will the truck drivers, cab drivers, and delivery drivers do? They will not take on the high-tech jobs; they will have no jobs other than perhaps the low paying jobs left for them to compete for. To give you a sense of the scale of this problem, in the United States, the number one job in 40 states is truck driver.
Now, some of you might think, who is this Mark Holmgren guy to criticize AI’s lack of merit. Truth is the voices are many and include esteemed thinkers and doers like Stephen Hawking, Elon Musk, and Bill Gates who, despite the positive possibilities of AI, see Artificial Intelligence as our greatest existential threat. Here is what Elon Musk said at a MIT symposium in October 2014. Read more here.
The Workforce as a Commodity
Businesses focus on reducing costs in order to maximize profits. Workers are seen as commodities, cost centres to control and shrink. Benefits are deemed to be an unnecessary investment in the lives of the workforce, which has given rise to rationale for what folks like me call, indecent work. Work without benefits of any kind, no health care, no sick leave, no RSP benefits, not to mention poverty inducing wages.
Their value has increasingly become tied to how little they can be paid in order to grow the economy for the minority of folks who benefit from devaluing the average worker. No one says this outright. Rather unfounded, and often clearly disproven, economic theories and models are held up as shining lights that will help the rest of us lead strong economic lives. Trickle down economics is one such theory, which has consistently been disproven over and over, but it still is used as rationale for reducing oil royalties like Getty did years ago, and for reducing corporate taxes federally and provincially while not doing the equivalent for the average worker.
Economic Growth as Advertising
The case for economic growth is more akin to advertising than a justifiable case for prosperity for society as a whole. Mergers are promoted as being good for consumers when in many or most cases they benefit people with wealth far more than the general population. Mergers occur not to improve the lives of consumers; they are purposed to fuel profits.
Case in point: years ago when Canada Trust merged with TD Bank, I received a glossy publication about how I, as a Canada Trust customer, would benefit from this merger. Better service, a more stable banking environment, and on. It included photographs of smiling, healthy-looking people, but in the end it was all dishonest fluff. Banking hours were reduced, fees were increased, loans were harder to get. There was not one benefit to me and other Canada Trust customers, only lost benefits. Ask yourself, as a consumer, what mergers (i.e. how has bigger and bigger business) saved you money, increased your standard of living?
Despite all the hub-bub about how strong our economy is,
“Growth has delivered its benefits, at best, unequally. A fifth of the world’s population earns just 2% of global income. Inequality is higher in the OECD nations than it was 20 years ago. And while the rich got richer, middle-class incomes in Western countries were stagnant in real terms long before the recession. Far from raising the living standard for those who most needed it, growth let much of the world’s population down. Wealth trickled up to the lucky few.”
That perspective is from a major think piece and study, “Prosperity without growth? The transition to a sustainable economy” authored by Professor Tim Jackson, Economics Commissioner with the Sustainable Development Commission. It’s a long piece, but worth reading (click here).
In Edmonton, 25% of the workforce earns less than the living wage. Often these are workers who have to take on two to three low paying jobs to survive. Too often such jobs are engineered to avoid paying benefits of any kind. In some, if not many cases, part time workers are expected to keep their entire week free so that their employer can has all the options it wants to schedule them. Walmart is a prime example of enslaving its part-time workforce to its business needs. So, a 20 hour per week worker making $15 per hour loses the opportunity to take on other work. In the business world, we call that “opportunity loss,” something to be avoided — avoided by business even if it means creating such loss for its workers. It’s a nefarious double standard but miraculously one that people living pay check to pay check (close to 50% of Canadians by the way) still seem to believe in and vote for.
Who is Most Responsible for Climate Change?
Everybody should be more environmentally responsible. We should recycle, reduce our personal use of water, drive less and on, but these good acts won’t on their own save the planet.
The biggest polluters are large corporations. According to a recent article by The Guardian, “100 companies have been the source of more than 70% of the world’s greenhouse gas emissions since 1988” – mostly fossil fuel companies like ExxonMobil, Shell, BP and Chevron, but I bet you a gas mask of your choosing that our large Canadian fossil fuel companies are big contributors to pollution as well.
To be fair, it’s not just corporations who pollute. This USA focused article categorizes these polluters as 41 public investor-owned companies; 16 private investor-owned companies; 36 state owned companies; and 7 state producers. (See this unnerving study, Carbon Majors Report 2017, published by the Climate Accountability Institute in 2017).
Carbon taxes are one way to stem the tide of environmental tragedy, but these tax seems to upset people and some governments significantly more, than the dire straits we are in as a society and as a world. While I share concerns that governments won’t use these tax dollars to invest in green energy, voters could compel them to do otherwise, but we don’t and we are good at drumming up all of the compelling reasons to focus only on now, not the future coming.
We need to become less automobile-centric while transitioning to public transportation and the use of electric vehicles. We need to deploy and scale up technology innovations being foster by green companies like DYNAcert, Questor Technologies, and Xebec, but let’s keep in mind that these are interim interventions in a world that is still transfixed by fossil fuels.
If we wish to reduce carbon emissions and the contamination of land perpetuated by vehicles and the industry that supports fossil fuel driven transportation, we need radical shifts in government policy. Municipally, we need policies and bylaws that counter the continued emphasis of residents on parking spots as a key component of development. Bike lanes used by a small minority of residents that currently add to vehicular congestion on the streets are insufficient alternatives to our automobile centric demands unless accompanied by a litany of other changes.
Data as a Tool of Confirmation Bias
All of us are guilty of confirmation bias, but our collective tendency to pursue data that fits our opinions and ideology is a self-centered, polarizing habit. Data appears to be valid to the majority of folks only when it can be used to confirm ideology. If jobs are the number one priority, governments will create policy and programs and advertising to support that. Some will even tell us how the elimination of a carbon tax will create jobs while giving short shrift if any shrift at all to climate change.
Wealth and Income
If you believe that a growth economy is good for all of us and fundamental to prosperity, why is it that the only cohort of the population that is seeing substantive growth to their income an wealth are the top 1% of the population, who by the way already have high incomes and considerable wealth?
With all of the cost cutting that is going on, how come the cost of housing and food and clothing keep escalating far greater than the income and wealth growth of 99% of the population?
Economic growth requires increased consumer spending, but for some inexplicable reason, those who control how things work think that increased consumer spending will continue as wages and benefits erode and as the future of work for human beings dissipates as automation and robots do things so much more cheaply?
These erosions of income and economic prosperity for the average worker are not recent phenomena. Recent and upcoming technology “advances” are actually a continuation of profits being built on the backs of workers.
The continued and escalating trends with respect to the Income Gap and the Wealth Gap have been happening during the good times and the bad times economically. Boom or recession, those with money keep making money.
If you are serious about trying to get a handle on the wealth gap in Canada, invest a few minutes in this video from the Broadbent Institute.
The video shares what Canadians believe should be an acceptable distribution of wealth, what they actually think wealth distribution actually looks like and then indicates what the reality actually is – far worse than what Canadians think is appropriate and what they think wealth distribution actually is. Consider the following:
- The richest 20% of Canadians own 70% of the wealth;
- The poorest 10% of Canadians own 1% of the wealth; and have more debt than assets.
- Half of Canadians own less than 6% of wealth
- The average corporate CEO earns more than 200 times the wage of the average Canadian worker, one of the worst gaps in any advanced country.
- The top 1% of Canadians own 20% of all wealth (and I would add that the top 0.1% (that’s zero point 1%) are experience annual rates in income and wealth growth astronomically higher than the 1%, not to mention the rest of us). See next bullet.
- 86 families have more wealth and assets that 11,000,000 Canadians.
Consumer Spending and Household Debt
Consumer spending, the key driver of economic growth, has resulted in Canadians taking on more debt and saving less money over the years, as indicated by the chart below:
In the early 1980s household savings hit 20% of income while currently that percentage has dropped to 2%. Concurrently, Canadian household debt has increased at a faster rate. In 1990, Canadian households had 85 cents in debt for every dollar earned. In 2018, it rose to nearly $1.80 in debt for every dollar earned.
I have shared similar data with others who are quick to blame consumers living beyond their means and for buying toys they don’t need, without an iota of consideration expressed as to how lower or flat wages in an economy that has markedly increased costs of living might be a major contributor to this trend.
But even if these voices are entirely correct in blaming consumers for their own mess, isn’t this exactly what a growth economy fosters when it depends on consumers spending to continually escalate? Banks advertise the merits on taking on debt. They promote ways to get credit cards and how helpful they can be to individuals, without a mention of interest charges as exorbitant profit-making business units for shareholders.
Artificial Intelligence is being deployed by Google, Facebook, Amazon and the like cater offerings based on people’s interests and previous consumer spending. Visit some product offerings on Amazon and then sign in to Facebook and discover those products or products like them being advertised on your Facebook stream. Proponents of this kind of advertising promote such marketing as a service to consumers. No one cares what a consumer can afford. Spend more is the mantra, but if your contribution to the growth economy depletes your savings and increases your debt, that’s your fault. Shame on you.
Our economy should work for the majority. This is not to suggest everyone should make the same wage. This is not a socialistic diatribe to be lampooned as the dribble of left wingers. Rather, I suggest an economy that works for the majority is what we should expect in a democracy.
Prosperity is not just about money and it certainly is not supposed to be a societal aspiration available primarily to the few. Prosperity is about flourishing and thriving socially, culturally, as well as economically. It’s about a society that values its people, no matter their age, colour, gender identity, or abilities.
The answers offered by subsidies to the poor or by the latest movement to adopt a Universal Basic Income are actually symptoms of a larger problem. Given our history of designing income security programs that offer financial support at such low levels that ensure the perpetuation of poverty, I have a hard time believing consolidating income security programs into UBI will be built on new and better values.
Stay tuned. I will be writing more about all of this, like it or not!
Other postings on Anticipate!
Livable Income IN a Livable Economy (Part Two: the Impacts of AI)
Why we can’t shop our way to a better economy
The Economy is not Working for the Majority
Ending Precarious Employment – A Game-Changer Strategy
How to End Poverty