The economic foundation of racism

Is racism an ugly fact of life or is it a symptom of a much larger problem?  I suspect it is mostly the latter in which  case it is a serious problem with lots of potential for inflicting injustice on people who really do not deserve it.

A discussion of racism should start with some basic principles.

* We do not have to like everyone and it is okay to disagree with others.  We do not have to associate with people we dislike.

* Some people enjoy hurting others.  If you want to really hurt another person say something negative about them that is true.

* Physical violence is wrong.

* Verbal and psychological violence is wrong.  It is disgusting and immoral but it should not be considered criminal  because it involves values, morals and some very fine lines.  It may be that a part of growing up is to learn how to cope with negatives and some people may have to do more learning than others.

* Some members of minority groups are obnoxious and we do not have to like or associate with them.

* We sometimes fear the unknown and strangers.

* Minority groups can be racist against majority groups

There is some anecdotal evidence that racism and negativity based on being a part of a group is increasing.  The question is whether or not this is itself a problem.  This writer thinks it is mostly a symptom of a deeper and larger problem of a shortage of energy and mineral resources.  There are lots of these resources left on the surface of our planet but we have “cherry picked” the most easily accessible and those that are left require a lot of time and energy to extract.  The result is that our economy has started into a serious decline.  Lots of people sense that the decline is happening but do not have a clue as to why.

This is where racism comes in.  When things go poorly, we need scapegoats so that we do not have to ourselves take responsibility – in this case for using up the resource base.  Actually we have a double scapegoat scenario developing.  Some people are blaming foreigners for our problems while others are blaming these evil racists among us for the problems.  This writer blames everyone.

Whoever is to blame, we are facing a very difficult situation around the world.  Normal people are aware of this – Brexit, Trump, the Italians – even if people do not understand the negative forces at work.  Some people have a propensity to hate but to treat the rest as criminal is itself an injustice.

The native Peoples in our part of the world have and Indian prayer – that they not criticize another person until they have walked a mile in that persons moccasins.  Most of the people who are considered racist deserve the benefit of that prayer and the rest of us have a need for some clear understanding without which the problem will not be solved and we will all experience a lot of suffering.

My ebook Funny Money: Adapting to a Down Economy discusses this problem and outlines some policies which might ease the suffering.  You can  get a free copy from the link at the top of this weblog.

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Incomes keeping up with cost of living

“Can someone explain to me why it’s so hard for companies to increase wages in Vancouver?”

This question was asked recently on the Reddit Vancouver forum.  I suspect it is a question which could be asked in many cities across North America and around the world. The question was asked because for many people the cost of housing and the cost of living in general has been rising faster than incomes.

A number of reasons were given in the discussion – maximizing profits for shareholders, a cultural shift towards laziness, in some fields there is a conspiracy to drive down wages by saturating the field with desperate new grads willing to work for peanuts, foreign buyers are driving up the cost of housing, and supply and demand.

Having studied economics this blogger prefers the last one, supply and demand for bodies, but also believes it is a symptom of a much larger problem.

For the most part wages are, with some exceptions,  determined by supply and demand. When unemployment rates were low, workers were able to demand and receive a living wage.  As there have been more and more unemployed people we are seeing more people not keeping up with the cost of living.  Some employers have learned they can do well by paying higher than going wages.  But this works because they can attract the best workers and probably would not work for all firms.

The exceptions to the law of supply and demand are those occupations which are protected from competition by government legislation such as licensing requirements.  Very often licensing is said to be required to protect standards of service to the public.  Doctors must be licensed to ensure we get quality medical care but the licenses also restrict competition and keep doctors incomes high.  Teachers are paid well because they have licenses and strong unions in a legal monopoly.  People are required to send their children to school and mostly the schools are operated by the state.  Government employees also have strong unions and employers that have a monopoly.

The moral of the story is that if you want to have the wages to support a good standard of living, choose an occupation that is legally protected from competition.

Most of us are aware the economy is going through a difficult time but believe it will return to continuous growth.  This blogger is an exception.  Our economy is in trouble because we have used up the most easily accessible energy and mineral resources.  There are lots left but the energy and effort required to extract them make them mostly useless.  If this theory is correct, then we are probably faced with a long period of economic stagnation during which the standards of living of a lot of people will go down.

The answer to the question is that it is hard for companies to increase wages in part because wages are determined by supply and demand and in part because the economy is started into a period of decline during which it will be hard for companies to even stay in business.

Power of individuals and the universal basic income

Proposals for a universal basic income are bringing out lots of arguments which show a lack of understanding of the UBI and the nature of money. Here is an example in an article from  The Independent.

The author of the article claims a UBI will open the door for increased government control over people’s lives. This blogger figures the opposite will be the case and an income scheme will be a tremendous transfer of power to individuals.

The first and most important thing to say about a UBI is that it needs to be a part of a radical overhaul of the way in which we exchange goods and services and the way in which we create money.  Probably the current economic crisis is the result of our having used up the most easily accessible of energy and mineral resources.  There are lots of these left but they require lots of energy to extract.  The fractional reserve way of creating money also has lots of problems and needs to be reformed.

There are lots of people who want to tell others how to live and those of us who value Independence will always have to be vigilant and assertive.  This is separate from the UBI and will be an issue regardless.

Money represents purchasing power and giving it to people empowers them in that they can make purchasing decisions according to their values. This is different from food stamps in that stamps are for specified products and can hardly be the equivalent of money. A UBI will be a tremendous transfer of power to individuals and one would expect a lot of people to object to this.  Some of those who object will likely be the bankers whose power derives from creating fractional reserve money.

Another UBI issue is dependency.  Some people including the author of the reference article fear it will make us more dependent upon the state. I beg to differ because we should think of the UBI as an inheritance.  We can have it because we have such large agricultural surplus which is based on hundreds of years of agricultural and technological development.  We should all have a right to a share of the agricultural surplus.

The universal basic income will lead to a revolutionary change in the way we exchange goods and services.  Many of the issues are discussed in my book Funny Money: Adapting to Down Economy.  I encourage  you to have a look at it.  Details at the top of this blog.

Hiding from the economic crisis

Why are interest rates so low?  It’s a question which has apparently been occupying a couple of North America’s top economists but this blogger sees the discussion as a screen hiding some very important economic issues.such as the root cause of the economic crisis and values which will guide us in trying to  find a solution.

On the surface the answer is simple.  Interest rates are the price of money and are determined by supply and demand.  They are low  because that is where the two balance.  They appear low because we are used to high returns on our investments and are reluctant to give them up.  There is no reason why interest rates could not be zero and maybe they should be.

To understand the root cause of the economic crisis we need to go into a macro economics classroom and watch the lecturer draw his basic diagram on the blackboard.  It is in the shape of an”x” with one side representing the financial side of the economy and the other the real or physical side.   This is important.  As we measure the physical part of the economy in financial terms it is easy to forget the distinction and analyze economic problems only in financial terms.  We need to ask what is happening to the physical side of the economy because it could be that is where the problem is.

This blogger figures the problem is with the resource base.  There are lots of energy and mineral resources left on this planet but we have exploited the most easily accessible.   Those that are left take a lot of time and energy to extract and this is causing a lot of economic problems.  It could even force us into negative growth.  This is a much more serious problem than why interest rates are low.  It is also an extremely difficult problem because it challenges some deeply held beliefs and values.  It’s a lot easier to talk about why interest rates are low.

Some ideas about how to fix the economy are included in the essay “LETS go to market: Dealing with the economic crisis” on this weblog.  A major feature of that essay is a proposal to change the way in which we create  money.

The emotions surrounding money make it a such a difficult subject that few people understand the economics of money and banking. This is unfortunate as money is so essential to how we exchange goods and services.  I encourage you to take a look at the essay.

While I prefer to see low interest rates as a symptom rather than the problem here are  some observations.

Money should be considered a tool to facilitate exchange rather than as a commodity with a value of its own As the quantity of goods and services we want to exchange varies up and down  so does the amount of money supply we need,  If there is too much money there will be inflation and if there is too little money there will be deflation.   Some people believe there should be mild inflation but this reduces the value of savings and should be  considered theft.

Quantitative easing has been an attempt to stimulate economic activity by increasing the money supply.  It has resulted in a rising stock market but has done little for the real economy.  That has to be a sign of a serious problem which has not been identified.

The way in which we create money, known as fractional reserve banking, is a heavy-duty problem because it is based on loans on which interest must be paid.  If all debts had to be repaid at one time there would not be enough money in the economy.  It is a Ponzi scheme on a grand scale and it is no wonder we experience frequent financial crisis.  For more on this topic see these previous posts on this weblog.

I believe we are facing a serious economic problem in that it is not clear there can  be a return to economic growth.  Dealing with this will require some major changes in our way of life.  It is disappointing that two of our most well-known economists are protecting us from having to deal with this with a frivolous argument. It’s as if they are playing in the turkey poo on animal farm and producing gobbledygook.

If you liked this post your are invited to comment, press the like button and/or click  one of the share buttons. If you disagree you are invited to say why in a comment.  While I like the idea of sharing this platform, my personality is such that I don’t reply to many comments.

The unemployed scapegoats

Apparently a lot of people are blaming themselves for their own unemployment.  This is sad because there is a high probability that our committment to the work ethic will make it difficult or impossible to cope humanely with the economic crisis.

I believe economics is largely about relationships and for relationships to be satisfactory they require a  more or less equal two-way exchange including compassion and understanding.  Too often the victims of the economic crisis are being blamed for their misfortune which is neither understanding nor compassionate.  For them to blame themselves must be psychologically devastating.

Our economic problems are a result of our having consumed the most easily accessible energy and mineral resources and are aggravated by a financial system that has a built-in collapse mechanism.  Those of us who have lived through and enjoyed the recent golden age of prosperity should collectively  take responsibility for the crisis even  though we would not be human if we had not used the resources. To blame any one group for what we have all done is to make them into scapegoats.

Our economic problems could be a lot worse than we would like to think and could lead to a population reduction up to 80 per cent.  That is what the native North Americans experienced when the Europeans arrived.  Of course we are exempt from that kind of disaster but there are so many things threatening our civilization and our way of life that we might be wise to think about how we can cope with a serious disaster so as to minimize human suffering.

One approach may be to look at anthropology and history.  How have other cultures organized themselves and how have they organized the exchange of goods and services.  This has allowed me to see that there are other ways of doing things.  Sometimes those other ways are very appealing.

Our culture places too much emphasis on jobs and employment.  Not only do jobs provide us with food, clothing, shelter and entertainment, they also provide us with self-identity.  If one does not have a job one is a nobody and deserves to be look down upon.  The proper place for such people is that famous burning garbage dump in Jerusalem known as hell.

The reality is that full employment is not a realistic expectation.  The huge agricultural surplus we currently produce makes it unnecessary and our having used up the most easily accessible resources makes it impossible. We need to reorganize our economy so that all people can have the opportunity for a standard of living similar to most other people regardless of what they do with their time.  This means we need to look at some sort of universal income scheme.  Before we can have an income scheme we have to get over our committment to the work ethic.

To some extent we all have to take responsibility for how we live our lives within limitations.  Sometimes we must live in circumstances that are beyond our control.

This blogger feels quite pessimistic about the economic future but has to recognize that people have been pessimistic about the future for millenia.  On the other hand, there have been times during the millenia when pessimism has been justified.  Please don’t blame the economic crisis on those people who are suffering from it.

 

If you liked this post your are invited to comment, press the like button and/or click  one of the share buttons. If you disagree you are invited to say why in a comment.  While I like the idea of sharing this platform, my personality is such that I don’t reply to many comments.

 

 

What will be left for our grandchildren?

Should we feel sorry for our grandchildren who will have to repay the massive debts we have been building up?  Probably not but we should feel sorry for our grandchildren who will have to survive on mineral and energy resources which are difficult to extract.

Debts can suffer fatalities from three causes: bankruptcy, inflation or government haircuts.  Considering current economic conditions  there is some possibility the current debt load will be written off before our grandchildren even understand the word.  If and when this happens there will be considerable  economic turmoil.

I believe economies should be analysed first and mostly in physical terms rather than money terms.  This way we can see some underlying trends and problems which can easily be hidden behind financial terms.

Currently we are probably dealing with problems in both sides of the economy.  We have used up the most easily accessible energy and mineral resources and the marginal cost of accessing what is left is going up.  At the same time the fraction reserve way of creating money in which interest is charged on the money supply is a Ponzi scheme which frequently breaks down.  Financial crises have long been a  feature of our economy.

If one analyses the economy only in phyiscal terms we are not living beyond our means as we produce everything we consume.  In this respect there can be no borrowing from the future.  What we are doing is using resources which won’t be available to our grandchildren at a reasonable cost.

A major financial collapse will have a devastating effect on our exchange of goods and services.  It is quite likely our grandchildren will have to pick up the pieces from a financial collapse.  What is more certain is that they will have to cope with our having used up the most easily accessibe energy and mineral resources.  There will be lots left for them but these resources will require a lot of energy to extract.  That will be enough of a burden to impose upon them.

 

If you liked this post your are invited to comment, press the like button and/or click  one of the share buttons. If you disagree you are invited to say why in a comment.  While I like the idea of sharing this platform, my personality is such that I don’t reply to many comments.

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