It’s the Stupid Economy

Standard

In the late 1800s, income inequality had reached an all time high in most of the western world. What followed was fifty years of war and revolution. Did the first cause the second? It’s not certain but the evidence certainly points in that direction. The accumulation of wealth and power in the hands of the few was so great that America’s first populist President championed legislation to break up the largest corporations, notably in the oil industry but also in the beef and railroad industries. Perhaps that’s one reason the USA avoided many of the internal disruptions faced by many other countries in the 20th Century. In any case, for many countries, violence became the great leveler.

Income inequality began to fall in western nations from World War I until the 1980s when it began to rise again, slowly in much of Europe, more rapidly in the English-speaking countries and the developing world. While the USA has returned to economic divisions similar to what existed in Teddy Roosevelt’s time, countries in Latin America and parts of Africa and southeast Asia have even greater income disparities.

While at the extremes, inequality is almost unimaginable. The hundred richest people in the world have more wealth than the poorest billion. An “eat the rich” ideology now runs rampant among certain segments of the population. Personally, I suspect they’re not that tasty.

But income inequality runs deeper than that. If you are in the top 20% of the population, you have seen your wealth and income increase steadily if modestly over the last 40 years. You may not feel like Rockefeller and you may be worried about your kids’ future, but for the most part you feel secure and happy. As it turns out, money does buy happiness up to a point and beyond that point it mostly seems to buy you detachment from the real world.

For the rest of the population, things are not so rosy. Incomes have stagnated or even fell in real terms and the perceived gap between you and those ahead of you in the economic race has become magnified. And, once, we get to the bottom 20%, poverty levels have risen as incomes fall.

None of this should be surprising. The market system is specifically designed to produce winners and losers and its primary goal is the accumulation of wealth. While apologists for capitalism claim that a rising tide lifts all boats, most of them don’t seem to understand that a lot of people don’t own boats and many who do, have leaky dinghies always on the verge of capsizing and sinking.

And what does all this income inequality mean for us? Bad news for the most part. A definitive study of 23 countries suggested that increased income inequality leads to higher incarceration rates. That may seem unsurprising but it may also lead to higher rates of family breakdown, worse medical outcomes, shorter life spans, higher child mortality rates, greater social disruption and breakdown of governance systems. I suspect, since it apparently leads to more consumption, it also leads to greater environmental degradation including climate change. Just anecdotally, a single large yacht of the type owned by the super rich produces more greenhouse gases than 400 average-sized African villages. And the drive to accumulate wealth and then keep it almost certainly takes you directly through oil fields and rain forests.

It also explains the growing dislocation of most voters in western democracies. Faced with abundant evidence that the economy is failing them in both real and relative terms, they begin to distrust the politicians who lead their state—even when such distrust is clearly misplaced. The rise of populism on the left and right as well as the constant churn of single term governments comes from that distrust. Eventually, when no party seems able to solve their problems RIGHT NOW, they turn their back on democracy altogether. Which suits authoritarians (who ultimately prove to be supportive of the rich) just fine. Are there alternatives? I think so but that will have to wait because…

That’s ten minutes from Hayden Trenholm.

Photo by Raden Prasetya on Unsplash

The Art of the Con

Standard

Is any one really surprised that Donald Trump conned a journalist into including him on the Forbes 400 list of the nation’s wealthiest people? There were always nagging questions about how much money Trump really had—the bankruptcies, the unpaid contractors, and so on—and, as it turns out his companies and personal wealth were hemorrhaging money at the time. You might think you could tell the difference between someone with several billion dollars and someone with several hundred million (no one said he was broke) and the ability to generate debt, but you can’t. Even the most conspicuous consumers can’t spend it fast enough when you are in that league.

But why would he bother? Super rich or mega rich is still beyond most people’s dreams of avarice. But to a con man, reality is the real dream and appearance is everything. Appearing rich has always been more important to Trump than actually being rich. Which explains the gold (or at least gold-plated) tub fixtures and the obsession with having the biggest this or the largest that. You can draw your own conclusions about that.

But what is the appeal of a liar, a cheat and a phony—because there is no question that the man remains appealing to a significant portion of the American public? On a side note, the second favorite American President in Africa is Donald Trump. Maybe 70 years of being ruled by Big Men authoritarians who spent fortunes on appearances while their people starved has something to do with that. The devil you know and all that…

They say you can’t con an honest person. The con works because the one being taken is a little bit greedy, a little bit shady, a little bit criminal. I don’t suppose that America is any more dishonest than most countries but combine a modicum of corruption with the intense stigma of being poor, it might explain a lot about what’s going on in the USA (and Canada) these days. When most chronically indebted or outright impoverished Americans think of themselves as “disappointed millionaires” and are sure that, even after a lifetime of contrary experiences, that tax cuts for the rich will someday apply to them, you have to wonder if they too have slipped from reality into a dream-like state.

Capitalism is about everyone pursuing their own best interests. That’s how markets are supposed to work—maximizing utility through personal choice. But when the evidence shows that white Americans are willing to sacrifice their own health to ensure that black Americans can’t get decent medical care, you have to start to wonder if there is a single scrap of truth in any mainstream economic theory.

If capitalism is a giant con—as most of my left-wing friends would readily agree—what is the alternative? Collectivism sounds good in theory but in practice it hasn’t always worked out for those who value even a minimum of personal liberty. And the egalitarianism of Marxist-Leninist theory has almost always led to the empowerment (and enrichment) of the elite in the vanguard of the revolution. Human perfectibility is as much of a con under communism as it ever was under any religious system that believed in saints and holy men.

So what are poor flawed humans to do? I remember being told by a Swede that the reason they have chosen democratic market-based socialism so often is not because they believe in the goodness of their fellowman but because they don’t trust anyone at all. Democratic socialism is less about making people better than about keeping the worst of us out of power. Something to ponder.

And that’s ten minutes from Hayden Trenholm

 

Corporate Citizens

Standard

What is the proper level of corporate taxation? According to those on the left, a lot higher than they currently are, while those on the right can’t imagine they could ever be low enough. They can’t both be right, can they? Of course not, but it is possible they could both be wrong.

In order to understand the debate, one first has to consider what a corporation is and why it exists. In the early 19th century, the industrial revolution almost came to a shuddering halt because most rich people were not entrepreneurs (they still aren’t but that’s another issue). The idea of capitalism is that you risk your money in hopes of a large return in the future. Rich people liked the idea of large returns; risk, not so much. Especially when that risk meant not just potential loss of money, but, if things went badly wrong (say, if a bridge collapsed or a well got poisoned) with a business venture, the risk of personal responsibility and, even, jail time. Why chance it when you can buy a nice country estate?

The idea of the corporation was an old one, arising out of the model of business partnerships. But, still, a dozen backers might lower the financial risk to any one of them but not necessarily the criminal risk. Limited liability only could take you so far. But suppose we were to treat the corporation as “an artificial person,” that is as an entity separate from the people who own it, the criminal and civil risk now falls on it rather than its owners (as long as they acted in good faith and didn’t actually direct the company managers to break the law). Whew—the capitalist class collectively sighed and the rest is history.

In fact, it is so embedded in history, corporations are allowed to mess in elections as if they were people (at least in the USA) and boards are able to claim no knowledge of the wrong doing (say, illegal bribes in Libya) of their employees. But, of course, corporations can’t go to jail or be executed—though they can be fined or forced into bankruptcy. And, the managers who broke the law can be imprisoned and, of course, fired and excoriated by the board and stockholders.

Even the left have completely bought into this pleasant fiction of the personhood of corporations, forgetting that every single corporation in the world is owned by somebody. Now, I’m not saying we should throw rich people in jail every time a corporation goes astray (though I’m not averse to the idea) but I do think, for the purposes of taxation, we shouldn’t let them hide behind the protective walls of corporate tax laws.

Because here’s the thing: in almost every jurisdiction, corporate and business taxes are effectively lower than personal income taxes (even if they are similar on paper). I’m not just talking about the tax rates of the rich—most middle-class people pay taxes at or above that charged to corporations.

So instead of racing to the bottom to try to attract corporations to move from one province or one country to another, maybe we should reduce the corporate tax rate to zero—and assign their profits (and losses) to the people that own them. This would require much simpler tax laws and closer auditing to ensure creative accounting didn’t make profits magically disappear and maybe stricter penalties for tax evasion (both for the evaders and the accountants who help them).

And here’s the thing, it should also make markets more efficient as risk and reward became more transparent and people make choices in their own best interests, instead of going along for the corporate ride.

And that’s ten minutes

The Great Divide

Standard

Years ago, Hugh McClellan coined the phrase “The Two Solitudes” to describe the lack or perceived lack of communication between English and French Canada. A long history of separate political and social evolution made it seem to many that the divide might never be bridged. Times change and people and societies change with them and though independence was a real draw for many Quebecois, that tide has receded somewhat. Both Canada and Quebec are better places for the rich exchange of culture and of political ideas between the former separate camps. Tensions continue to exist – after all we spent twenty years building them to their peak in 1995—but still the idea of the two solitudes no longer has the same resonance that it once did.

Except new divisions have arisen in our country. “The Great Divide” is not, as the name suggests, a division that cleaves between east and west but rather a much different partition, that between urban and rural.

Little communication or understanding exists anymore between urbanites and their country cousins. Not only in Canada but throughout much of the world, the values, economies, cultures and politics of many countries have split along urban/rural lines.

Cities tend to embrace more progressive ideas (and parties) while rural areas fight to preserve traditional and conservative values. You can see this in places as diverse as PEI and Alberta. In the former, the Greens swept the urban centres while the Conservatives held sway in the more rural villages and counties. Even normally right-wing Calgary elected three NDP members in the face of the Conservative wave and they were close in several other ridings. UCP majorities were much thinner there, too, compared to the overwhelming support they gained in the countryside.

One can look south of the border where, even in dead red states, patches of blue blossom wherever population densities rise. In England it was the urban centres like London that voted to stay in Europe while rural regions largely voted to leave.

There are a lot of reasons why such hard divisions have arisen and seem to be solidifying. Urban areas are more diverse – people who don’t fit in their rural or small-town communities gravitate to the cities where they can find others who share their views and values or, at least, they can submerge into the greater anonymity that urban life provides. Cities tend to be net generators of economic activity and wealth and are better able to adapt as new industries rise and older ones fail—problems that one industry towns or single commodity rural areas have a harder time doing. Immigrants are naturally attracted to areas of greater economic opportunity and it often takes government subsidies and supports for them to consider more remote parts of any country. Cities also tend to host the major universities, museums and arts centres, as well as being the locus of government.

Yet, there are dire consequences for democracy if these divisions persist and expand, especially since most countries continue to grant rural areas more representation and therefore power (Nebraska, for example, has the same number of Senators as California and, in Canada, the courts have agreed that a 25% variation—more in sparsely populated districts—in seat size is reasonable, giving rural areas five seats when urban populations of the same size only get four). Yet the urban-rural conversation seems almost never to be pursued except by accident.

Maybe it’s time we found a way to change that.

And that’s ten minutes.

The Kindness of… Rich People

Standard

Twice, I’ve stood outside Notre Dame Cathedral without going inside, daunted by the long line-ups and the admission fee. After all, I’m an atheist who has already visited his share of impressive churches. This one was a youngster compared to some I’ve been to in Italy and Spain. Still, I now wish I had gone inside so I could see the not-quite-original interior. The present-day church was largely refurbished in the mid-19th Century largely at the urging of Victor Hugo – art intimidating life, as it were. And, I expect, despite the outcry of some folks, the church will be refurbished again. And that’s a good thing–the preservation of human history and art everywhere is part of what makes us human. I hope I live long enough to see it (they think it will take 10-15 years).

People have been shocked and surprised to see how quickly a billion dollars was raised from donations for the project—a lot of it coming from 2 French billionaires. It was quickly pointed out that there were lots of problems in France already, poverty and illness and so on, that a billion dollars could be used to fix. In Canada, the favorite has been the lack of clean water on First Nations. It reminds me of the similar outcry against spending money on the space program. But where would social media be without globe-circling satellites?

I get it. We see all these social issues and think something should be done (well, something other than supporting progressive politicians and paying our fair share of taxes) and, well, those guys have a lot of money, so shouldn’t they do it?

No.

The last thing any one should want is to live on the largess of the rich. Noblesse oblige was the basis of feudalism not of modern democracies. If the rich are going to pay for things, it should not because they are feeling generous to the poor little serfs beneath them but because we live in a system that reduces rather than exacerbates income inequality.

Because the root of the problem is not that billionaires exist but rather that, in late stage capitalism, where monopolies and oligopolies are the rule not the exception, our economy is designed to concentrate wealth and manufacture poverty. Even if you took a billion or a hundred billion or a trillion away from the mega-rich and gave it to the poor (the latter figure would give them each a thousand dollars), it wouldn’t change that system. The cash, sooner or later, would wind up in the same place.

And right now, it seems there is no alternative. (And don’t point to China or Russia either—whatever they call their system it is still a variation of the capitalist means of production). If we really want to make things better for the masses of humanity, we need fundamental changes in how we operate.

There are hints of what a post capitalist society might look like – you can occasionally find them in the talks of futurists or, even, in science fiction. It won’t be anything like the past, that much I’m sure of. With the end of regular employment caused mostly by automation (another thing people decry but seem powerless to stop), we will need a radical reordering both of social priorities and reward systems as well as the redistribution of wealth through guaranteed basic incomes and carefully designed tax regimes that get at international money transfers and hidden wealth stored in crypto-currencies. We will also likely need more free trade and more open borders, rather than less, so that the wealth of the world—there is no shortage of that—can be monitored and shared more equally.

Meanwhile, the people who would benefit the most fall for the old con, that the rich are somehow better than us and should care for their weaker cousins. And we vote for populists who distract us with fear of the other while their masters laugh all the way to the bank. Or the cathedral.

And that’s ten minutes.

Burn, Baby, Burn

Standard

Currently a war is being waged in Canada over something that should be a unifying proposal. The Canadian public, who overwhelmingly believe that climate change is one of the major issues facing the country, must be confused. Almost everyone agrees it is happening and most of those also accept that human activity is a major factor in causing it. Scientific studies show that is so and, moreover, that there are specific things we can and must do about it.

Now before you link me to the phony web-sites denying all this or trot out your long-debunked theories about WHAT IS REALLY GOING ON, let me tell you I’m not interested – that ship is sailed. You have been relegated to the trash heaps of voodoo history, along with anti-vaxxers, flat-earthers and Holocaust deniers. I can’t waste my precious time debunking that which, on the face of it, has no merit.

Besides, I want to get back to that which should unite us. The Carbon Tax, hereafter referred to as TCT.

Oh, I can already hear the gnashing of teeth—on both the left and the right. What’s that you say? You thought TCT was nothing but a leftist plot to destroy business and fund their crazy progressive programs. Well, not quite. A fair number on the left prefer a cap and trade system or a regulatory regime that gets at the real culprits of climate change, that is, large corporations, while protecting the innocent victim, ordinary folks like you and me. TCT is not sufficiently punitive to industry and governments, especially non-left ones, can’t be trusted not to keep the cash rather than use it to help taxpayers (which oddly is what those on the right say, too). What’s more, industry will simply pass the tax on to consumers. Bad all around.

Certainly, cap and trade worked pretty well for getting rid of sulfur (and hence acid rain) and regulation took care (mostly) of ozone-killing chlorofluorocarbons, which is why I, too, used to think they were the way to go for carbon emissions. Then I realized that not only was the chemistry different, the distribution of emitters was different, too. Everybody produces carbon emissions and, when the law of large numbers kicks in. individual emitters are collectively very significant; everyone must be engaged in reducing carbon. And the simplest way to do that is to put a tax on carbon. Of course, that reeks of market economics, also anathema to those on the left. Phooey, I say; I’m proud to use the tools of the enemy to advance good causes. Policy shouldn’t be designed to punish bad behavior but to change it. And people respond to price.

Which is why many real conservatives (and most of industry, including the oil industry) support a carbon tax. It is simple, requires little government intervention or bureaucracy, can be designed to be more-or less revenue neutral (put simply the government gives back in tax credits or rebates, all –or in my preferred scenario, most—of the revenue it collects) and creates a level playing field where individual choice moves the market from carbon-heavy to carbon-light alternatives.

Then why do so many so-called conservatives (Scheer, Kenny, Ford and the other camp followers) oppose it? The simple answer is that Trudeau and the Liberals support it. That pretty much sums it up. It is not principle or fighting for the little guy or, even, ideology that motivates these guys – it is pure partisan politics.

And when the quest for power (which they want so they can cut taxes for the rich and tell the rest of us what we can or cannot do with our hearts, souls and, mostly, our bodies) is the only motive, facts and rational arguments cease to mean a damn thing. Appealing to our most venal instincts (Damn taxes! I like shiny trucks! I don’t want to change! It’s someone else’s fault!), they will say and do anything to gain it.

And when the world burns to the ground, they can always say: I never knew!!! But, of course, they do.

And that’s 10 minutes (or somewhat more – I’m a bit rusty, but I’ll improve)

End Days

Standard

Apparently the world will end this weekend. Again. Every few months or years, fundamentalists predict that they have discovered the date and time of the end of the world or, as it is sometimes called, the rapture. It may be based on numerology as the current one is or on the Mayan calendar. It may be based on mysterious communications from gods or aliens. It is mostly based on wishful thinking. And, so far, it never turns out to be true.

There are lots of ways the world—or at least civilization—could end. Some of them loom on the horizon but, they are hardly preordained. If the world comes to an end, it will likely be caused by human foolishness or human agency. Or an asteroid. Hardly the stuff of heavenly prophecy. I mean, if God wanted to end the world, surely he could come up with something better than throwing rocks at it.

It’s easy enough—and lots of fun—to tease people who suggest that prophecy has predicted the end of times. It’s a little unfair to do so, a bit like kicking a puppy for barking. Sadly, more than a few people are taken in and some lives have been ruined when folks follow the advice of these religious naysayers.

In any case, predicting the end of things has a long and happy tradition well away from the sweaty-faced prophets and weird cults of the world.

Take capitalism. People have been predicting that capitalism will fail and disappear ever since the first person called himself a capitalist—whenever that was. Marx was certain that his scientific materialism showed the days of the capitalist system were numbered. Yet here we are in the second stage of post-modern, post-industrial capitalism, and the world keeps ticking along, mostly using some form of market based economy.

I think it was Faulkner who said the past is never dead; it’s not even the past. Pretty profound for a guy who didn’t know when a sentence should end.

But he was certainly right. Just as William Gibson was correct in saying that the future has already arrived, it just isn’t evenly distributed.

Because no system—once invented—ever really goes away. Don’t believe me? I know people who still play vinyl records, take film photographs, and listen to radio – all of which were predicted to disappear years ago. And did you know you can still send a telegram?

More significantly, slavery, abolished in most of the world more than a century ago, still persists, not just in the dark corners of collapsed states but right here in Canada, the United States and Britain. The slave economy—often operating as an adjunct or as a shadow parallel to the capitalist system—still thrives with an estimated 11 million people caught in its net. And though some people call capitalism ‘wage slavery,’ it is sheer pedantry to suggest the two economic systems are the same.

And what about colonialism? Relegated to the scrapheap of history? Well, there aren’t a lot of western states still elbows deep in the practice, but take a look at what China is doing in Nepal, on the Indian border or in Africa or what the newly expansionist Russian empire is doing in eastern Europe and it’s not so clear.

The belief that we are at the end of an era—or at the dawn of a new one—is deeply embedded in the human psyche and in human culture. Predictions of the apocalypse are scattered throughout history like marbles in a child’s playground. We all—even so-called rationalists—seem to embrace one death cult or another. Yet, the more I see of the world, the more I believe we are all simply muddling through, making deals with entropy to get from one day to the next. Systems are as illusory as the predictions of their end.

So don’t worry, be happy. The end days come for us all—but we don’t have to drag the world down with us.

And that’s a bit more than ten minutes.

And really I should apologize—I’m in the middle of writing a novel of post-collapse recovery. As soon as I get to the hopeful part, I’m sure my blogs will get more cheery. Or not.