NO INCOME EQUALS A POOR OUTCOME

 

NO INCOME EQUALS A POOR OUTCOME

An ominous K-shaped economy has emerged.

In the mid-60s a seismic shift occurred in the way governments went about setting budgets goals and how programs were developed and administered.  Balanced budgets became a thing of the past and my father’s sage advice was ignored by all, “If you make a nickel you can’t spend a dime.”  Borrowing.  Credit.  Buy now and pay later.  The government’s parlay to justify this largess in spending; we’re aggressively investing in the future and the expected return on investment will pay off the debt.  And one of the pat phrases used to convey to the public that those elected knew what they were doing: Build it and they will come.  Ask for specifics (what are you building and why and how much will it generate in income?) and the answers turn rather vague and thin.  It is biting us in the ass because all that growth and progress has come at a huge cost.

Borrow and borrow some more.

Horrendous deficits and debt accumulation is now an annual reality for nearly all levels of governments.  And the attitude; if you can’t cover the cost of goods and services, just borrow more.  We’ve even invented some nifty lines to justify the total absence of balanced budgets; deficit financing.  Spread it out across the board—meaning every citizen and that includes all men, women and children—and it doesn’t seem all that bad when you put it that way! Not at first glance anyway.  As the years go by that mole hill of debt has steadily grown into a mountain.  The staggering amount we now owe as citizens is indeed mountainous!  You see, the debt accumulated doesn’t belong to some undefined and mysterious entity.  No.  It’s you and me who are on the hook and all our fellow countrymen.  As long as we’re able to pay the interest to the financial entities holding all that spurious debt, they’re okay with that.  Kind of like paying the minimum on a credit card, which basically means that your debts balloon and balloon.  Interest payments in the billions of dollars are flowing steadily into the pockets of financial institutions, investment groups and wealthy individuals, while simultaneously the average person is turning into the working poor, struggling and seeing progress and lifestyle improvements melting away like the proverbial snow under a hot sun.

Why did we go this route?

Most of my life I have lived in Oxford County, Ontario.  When this area was first settled by pioneers more than century ago there was no such things as an income tax.  People were just starting out, clearing the land and setting the stage for future development, trade and industries.  Schools for instance were paid for by the local population.  There was very little government or oversight because basically livelihoods were carved out of the soil.  Mostly farmers.  Livestock and growing their own crops to sustain themselves and the excess, if any, was sold to slowly grow their farms and the communities they belonged to.  It was also rare for anyone to reach the ripe old age of 60 and child mortality rates were high.  But something happens when prosperity comes knocking on doors.  All of a sudden societies expand rapidly as all that sudden wealth comes with additional needs and demands.  Growth and progress are killers if not restrained and that is something humans suck at.  All those extra people meant that we needed to grow economies rapidly because basically all economies are based on incomes.

Income stupid.  Everything is based on income!

No income, no taxation.  And as governments expand their services to accommodate the increase in human numbers and demands, it can only come from more income.  All income hails from the private sector, from private sector jobs and from the profits their industries (everything that earns capital) generate.  Governments are a cost factor.  All jobs supported by government funding are a cost factor.  And everybody who depends on government support to stay alive and housed, is a cost factor.

Our numbers are killing us.  Progress is killing us.

We went from 2.5 billion people in 1905, when a global population census was taken, to a record 8.3 today.  In 125 years we have added a whopping 6 billion more people and despite all the growth and progress that made those numbers possible, it hasn’t been able to keep up with needs and demands.  Demands vary from nation to nation, from the poorest to the richest, from the least populated to the most densely populated.  Nations are jumping through hoops to keep up and it is only getting worse.  Robots, automation, AI, working faster and harder, it only makes those with the most wealth richer and most of us poorer.  All that borrowing, all that debt, hasn’t led to greater prosperity for all and the financial potholes are draining the energy from governments and communities because this endless round of borrowing is not sustainable.  Increasingly we are borrowing to provide income, creating a vicious cycle of dependency.  And we haven’t given up on the growth syndrome and we stubbornly cling to this silly economic mantra that growth will eventually pay off.  We’re even importing people and subsidizing childbirths.     

And to top it all off, we’re sucking the life out of the planet to keep up this charade of growth and progress.  Hence the heading of this article and I would love to hear your take on the subject.

A K-shaped economy.

Within financial circles the latest buzz word to describe the economy and where we are headed is a K-shaped economy.  In the letter K one leg goes sharply up and the other one goes down.  The one going up representing the rich getting richer and the other one, going down, the poor, indicating they are getting poorer and poorer.  They are diverging lines going in opposite directions.  A troubling scenario.  The one envisioned and preferred is a circular economy (O).  Within the circle everything is constantly reconstituted and redistributed (let’s stick with labor, income and contributing).  We’re talking an economic model that is relevant, healthy and enduring.

Give me an earful.

Feel free to comment or share.  I purposely kept it short and to the point.  The big picture if you like.  It is the impetus of the subject that matters and not details.  When we delve into specifics, anecdotal evidence, motivation, etcetera, we only stray from the origin.  The essence of life is providing for the essentials generated through our labor.  Even a hunter-gatherer had to get up in the morning to make an effort to stay alive and it doesn’t matter how income is earned, obtained or achieved.  That idle hands things comes to mind and that wonderful phrase associated with it; idle hands are the devil’s workshop.  All of us do so much better when meaningfully employed!  When we actually earn an income!  When we contribute!