What now?

Maybe it is because I am at that stage of life often termed (politely) as being of “advanced years”, I tend to look at what is going on around me with a different outlook.

There seems to be a great deal of “hot air” being expended on what to do about the economy, as if the “Economy” was the beginning and end of life. I know that I have mentioned this before in other posts but it is necessary for all to acknowledge that the “Economy” is not some esoteric, alien “thing” somewhere out there. The economy IS the people - the citizens of this Country create the Economy with their labour.  

Money is not self-emergent, it doesn’t arise by itself.

Without PEOPLE there would be no money and no economy. There is an old Roger Whittaker song– one called “From the people to the people”, and the lyrics certainly apply today:

“You take it from the people, you give it to the people. 

Its people who reap and people who sow.

You work with the people or you gotta go.”

These words express very well my philosophy. It is PEOPLE who are of paramount importance. Not MONEY. Not the ECONOMY.  Not the BUDGET. It is people – without people there would be no money and therefor no economy, and by default no need for a budget (in surplus or otherwise) or for a treasurer.

So it’s PEOPLE, stupid! People. Look after people!

The problem, in my opinion, is that what is termed the “middle class” is being hollowed out. The divide between the rich and poor is getting wider. The rich are getting richer with the top 1% owning the wealth of the bottom 70%. These are Australian figures but are typical of a world-wide trend. 

The best solution (in my humble opinion) is not to reduce the rate of income tax to the wealthy but to increase it and so provide a better income distribution via a Negative Income Tax- For people who do not earn enough to pay tax (or earn below the minimum wage or some other agreed amount) their income would be supplemented to arrive at the agreed amount or the minimum wage. Everyone, working or not, would be obliged to lodge a tax return and any supplement would be “refunded” via the ATO, similar to the process for a normal tax refund.

More money in the pockets of those with a low-income means they will spend more. This gives rise to what is termed the “multiplier effect”. In Australia this is about 5. This means that for every additional dollar spent the “economy” benefits by 5 dollars. Retail trade in particular would get a boost – more money spent, more employment, more taxation revenue … etc.

To me it’s a no brainer. Increase the “dole” and everyone will benefit. 

Strange economics

I was listening to an old Roger Whittaker song the other day – one called “From the people to the people”, and the ideas and emotions engendered by the lyrics struck home:

“You take it from the people, you give it to the people.

Its people who reap and people who sow.

You work with the people or you gotta go.”

These words express very well my philosophy and what I have been trying to say in these posts, for many years. It is PEOPLE who are of paramount importance. Not MONEY. Not the ECONOMY. It is people – without people there is no money and therefor no economy.

The IMF seem to have come to their senses and have realised that what they promoted after the 2008 financial crisis – domestic financial austerity and repaying the loans provided  from internal resources and so “balancing the budget” – doesn’t work and leads, inevitably, to economic and social crisis. 

Just look at Greece, Portugal, Spain and Italy.

Cut wages and increase taxes and what do you end up with? People with less income and without the ability to purchase anything other than essentials - this is no way to “stimulate the economy” and promote the growth that is so necessary. And certainly no way to balance anything!

Superficially, and very simplistically, a country’s budget and economy may seem the same as an individual’s budget, potential income and wellbeing (their “economy”). But it is not. An individual can do nothing to stimulate his wellbeing if his wage is reduced – it is illegal for an individual to print money. All any individual can do is to try and get another job – very difficult if the general economy is depressed – look at Greece, and not good for their wellbeing.

All that cutting wages does is to, temporarily, boost profits and thus benefit shareholders. But there is an old saying, “you can’t get blood from a stone”. Now I understand this to mean that when something is “dry” no matter how hard you squeeze nothing will come out of it.  Sooner, rather than later “squeezed” individuals “dry up” and the governing authorities (and shareholders) are left with nothing except a society that is poor, desperate, frustrated and angry.

This is not good for anybody’s wellbeing!

The words of the song that opened this post are very appropriate – 7Eleven, McDonalds, Walmart and any other organization (market gardeners?) or government, anywhere, that promotes low wages take careful note!!