Toward a better economy

This entry was posted by Friday, 30 June, 2017
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TOWARD BETTER JOBS AND A FAIRER ECONOMY

Opponents of minimum wage increases, such as the small Canadian business owner quoted in the news article referenced below, have a point: although our economy needs adjustment, band-aid fixes are not the answer.  In the long run, such measures tend to be ineffective; and in the short run they can be hurtful – even to the people they are intended to help.  It’s time we looked at these things as matters of fundamental economic fairness, and did something sensible and enduring to fix them.

Fortunately, the updates our economy needs are not drastic, and need not be disruptive.  Tools are already in place that will allow us to tweak the economy in ways that can bring us to a more sustainable model, while respecting free market traditions –  and without causing great pain to either employers or employees.  Properly applied, they will please everyone who is not set on abusing the system.

We simply need to recall the legitimate purposes of the tools and put them to proper use.

MINIMUM WAGE INCREASES: an example of wasted effort

Minimum wage increases are at best temporary fixes, intended to benefit a few members of society for short periods of time.  They are rooted in the notion that constant growth is a necessary and desirable part of a free-market economy.  The problem with such thinking is that continuous growth is only possible so long as there exist ample (read “inexhaustible”) sources of labor and raw materials.  By now, at this point in history, we have come very close to filling the world up with people and with developments, and have depleted resources to the point that extracting them causes considerably more harm than good.  And for the sake of efficiency, we are doing so with the help of machines that needlessly put people out of jobs.

We can’t keep doing that.  We are putting more and more people out work, and using up more and more of the planet with low-grade, disposable buildings and products.

At this point, sustainability and the humanizing value of work are more important than bottom-line efficiency.  We have to start teaching ourselves to be satisfied with lower, sustainable rates of growth, and with slower, enduring, human-powered developments.

In other words, we need to start teaching ourselves to share a bit: to cultivate contentment.

As the gentleman in the article points out, minimum wage increases frequently hurt the people they are meant to help.  They often force small employers, for example, into a choice between laying people off or going out of business.  Their only sure, long term product is inflation.

THERE ARE BETTER WAYS

There are better ways of bringing the economy up to date.  The single easiest and most effective way to promote change is through revision of the income tax code.  Others include revisiting the purposes and principles of corporate liability, and of course the best and most enduring of all means is education, from early childhood on.

Let’s look at some realities and the tax code first.

BASIC ECONOMIC REALITIES – our background for better solutions

If we step back and take a broader look at today’s world and the players in our economy, we can begin to see how tweaking laws and taxes can provide lasting solutions that will help make our day-to-day lives fairer, and more sustainable, without compromising our basic free market principles, which have great potential for good.  Nor do we need to make government any bigger.

We can encourage better jobs for almost everyone, without hurting anyone.

First, a few premises.  Pope Francis, the United Nations, and most of the rest of the responsible world have recognized that:

  • So far as development goes, the world is nearly full.  We no longer need (indeed, can no longer afford) unbridled development solely for the sake of individual profit.  We need careful, considered development in some places, and better care and upkeep in most others: we don’t (generally) need more freeways or automobiles; we need to make better use of the things we have.  We need to stop paving farmland and forests, and building homes, offices, shopping centers, and factories with the idea that they’re going to be fully depreciated in a few years and then replaced.
  • We have to stop looking at everything we use, including people, as disposable.  As a society, we have more things, and particularly more disposable consumer things, than we need, or are good for us – we are killing the planet with them.  We have created a consumer culture that is poisonous to us and to our planet, and therefore to our children and future generations.
  • People need access to work, and particularly to fulfilling and rewarding work.  Work is both a basic requirement and a privilege of life as a human being.  Most of us want to work, and to do meaningful things with our lives.  To the extent that we obtain good jobs, work enables us to improve ourselves, to build our self-respect and to create and improve things – to make the world a better and more beautiful place.

    In democracies, workers are entitled to economies that maximize the availability of such jobs.

  • On balance, private property rights are the basis of the best economic system we’ve come up with: capitalism.  Although capitalism can in some lights be seen as rooted in greed, it may well be the best we can do, given the fears and limitations God has built into us: most of us need incentives to work.

    But note, please:  by capitalism, I do not mean shirts-off, no-holds-barred, take-whatever-you-can-grab-and-to-hell-with-everybody-else-capitalism; but forms of capitalism that reward effort and initiative in fair and appropriate measure, bearing in mind that those things should be rewarded.

  • It’s also widely acknowledged that, at this point, turning large companies into giant companies solely for the sake of increased profits for their surviving owners and executives is harmful to most of us, and benefits only a very few of us – namely, the surviving owners and executives. The bulk of us, including executives from the non-surviving merger partners and large numbers of low-, medium-, and high-level managers, not to mention many workers whose jobs become redundant – end up being “downsized.  “

    For a while, increased efficiencies brought by larger-scale operations can bring lower costs.  Ultimately, however, big-for-the-sake-of-big stifles competition and drives wages and salaries down, and prices up.

Our economy produces enough that, in properly-balanced conditions, the great bulk of us could have better jobs, and earn more money, through the encouragement of more, smaller companies, rather than fewer, large ones.  The only ones who might “lose” in such conditions are those who are taking advantage of an outdated economic framework.

PLAYERS IN THE ECONOMY

We should also look briefly at the major players in our economy:

  • The people.  We, the people (and our relationship to our Creator), are what this life is all about.  We are the reason that an economy exists, not the other way around.  That may seem like a trite observation, but a review of world trends over the last several decades suggests that some of us may have lost sight of that.  Sometimes it seems that profits for those at the top are what it’s all about, and that people are simply one of many tools for helping them to grow.  That’s backward.  The economy, including the corporations it creates, is intended to serve people.
  • Business. Business provides wonderful things for us – money, our jobs, and the many, many things we need.  This is good, and we should never lose sight of it.  It takes special skills to employ people, to lead them, to think of new jobs and make them profitable.  Business leaders should be both rewarded and respected.  But when we lose sight of what business is for, and what money, jobs, and the things we need are for, we can allow them to be used abusively against us.
  • Government.  Government provides good things for us, too, when it does its job properly.  It is the guardian of our common as well as our individual welfare.  It protects us from each other, and from things outside our control – invaders, criminals, and, sometimes, from over-reaching businesses.  To protect us from invaders and criminals, the government provides the military and the police.  To protect us from over-reaching businesses, the government can and should make laws to frame an appropriate economy.

    It’s important to remember that governments, too, can get out of hand.  They can be too big, too overbearing.  They need to exist, but they need to do so in balance with other economic players.  In a democracy, that’s entirely up to us.

It is critical to bear in mind that in any democracy, it is up to us, the people, to create the government, and to insist that those we elect watch out for us by setting up and fostering a healthy economic framework.  If we fail to pay attention, and guide the government, then it may fall prey to other, more active and aggressive players. It’s up to the government to listen to us, and to respond appropriately, but only if we don’t abdicate control.

TAXATION:  A FUNDAMENTAL TOOL FOR SHAPING THE ECONOMY

One of the most important tools government has for shaping the economy is taxation.

It has long been understood that governments, in their roles as protectors of people, require money.  They need to buy things, and to employ people.  Long ago, they began to raise that money through various forms of taxation.

Of course, there are many ways governments can go about doing that.

It’s fair and important that taxes be collected proportionately from those who benefit from governmental protection, including both individual human beings and businesses.  After all, humans can exist with or without governments, but corporations exist only if and to the extent a government has defined them.

It also makes sense that taxes be collected in ways that are likely to encourage the economy to develop in beneficial ways:  overall tax rates must be set at levels that will adequately fund the government, but rates that are collected from various individual tax payers (both people and businesses) can be varied in ways that will encourage all sorts of social benefits.

For example, graduated tax rates have long been used to help ensure that very poor people are not deprived of living incomes.  In addition, various forms of tax credits, rebates, etc., can be used to make it easier for people to raise children, to buy houses, to access health care, education, etc.

Similarly, it’s possible to set corporate taxes at rates graduated based on size, income, energy consumption, location, etc., in order to benefit to society.

USING THE TAX SYSTEM TO SHAPE THE ECONOMY

Modest changes to the tax code, introduced gradually, can gently lead the economy in desired directions – toward more and better jobs, better and fairer distribution of work, sustainable work and production patterns, and reduced harm to the environment, among others – without displacing businesses or disrupting employment.

For example:

  • Because the great majority of modern economic income is generated by businesses (as opposed to subsistence farming, hunting, etc.), and because modern tax codes tend to be bewilderingly complex, it would seem reasonable to shift the bulk of the tax burden directly to businesses.

    This should not be a radical shift because:

o   The bulk of income taxes are already collected and accounted for by businesses, in accordance with withholding requirements imposed by most jurisdictions.

o   The complexity and overhead associated with tracking of tax withholdings for dozens or thousands of individuals by each business would be eradicated or reduced.

o   Businesses are better equipped to keep up with the complexity of modern tax law than individuals, and to monitor fairness and reasonableness of tax legislation and procedures.

  • It remains important, however, that a significant portion of tax revenue be obtained directly from individuals.  Since, in a democracy, it is individuals (and not businesses) who vote, it is important that individuals retain a very real, concrete comprehension that they, ultimately, are the source of all government revenues (ultimately including even those collected from businesses), so that unreasonable growth in government, for the sake of government, can be prevented.
  • In order to encourage corporations to grow to sizes that make sense based on the products they provide, the services they perform, and the needs of the economy, rather than any simple greed that might drive their owners, graduated corporate tax rates based on company size should be introduced.  For example, while it may require several thousand people to design and build aircraft, only a few hundred might be needed to purchase and distribute groceries through retail stores in a given location.  Setting rates based on size will help ensure that more, smaller companies are competitive, and that therefore more creative and engaging jobs are available, and that prices of companies’ products will ultimately drive their logical size.  Creation or maintenance of more, smaller companies will also encourage technological, product, and creative innovation, more competition, and lower prices.
  • In order to discourage the use of energy at the expense of human labor – particularly skilled human labor – the unnecessary use of energy should be taxed.  Graduated tax rates should be applied to the use of non-renewable energy, and forms of energy that contribute to long-term environmental damage.  This can help ensure that human skill is at least given its due in the market place.

Importantly, all of the above changes should be introduced gradually, over a period of several years.  This will require political resolve, therefore an engaged and educated electorate.

It’s all up to, us, the voters.

COMMENTS WELCOME

I would be grateful to hear from anyone having any thoughtful input to a proposal along these lines.

Matthew@Chapter25.org

http://www.cbc.ca/news/canada/london/pricey-beer-expensive-burgers-and-slow-service-blame-wynne-says-bar-owner-1.4140099

 


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