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The Silver Bullet for the Economy

by John Brian Shannon | January 28, 2016

How balancing the economy can give us the best work/life balance.
Or is it the other way around?

U.S. work, life, balance

By legislating that every worker in the has the right to a job for a minimum of 6 months every year, we could solve inequality, poverty, and most social ills.

For those of us fortunate to be born in a Western nation, life is mostly about balance, and for our elected leaders it’s about how to achieve balance in the wider economy, and about the kinds of policies we’ll need for the future.

Thus far, our political and economic model has evolved. But let’s never forget that it wasn’t designed, it evolved. Big difference. (It might be the best Model T Ford ever built, but it’s still a Model T, if you catch my meaning)

And that’s exactly the conversation that we need to have

Here in North America, it requires only 1% of the workers (and presumably 1% of the total available investment pool) to produce enough food to feed everyone on the continent. Yet, we see major food distribution problems and it’s getting worse.

With regards to agricultural output and distribution, our North American model is the best devised but it’s far from perfect. And that is my point, instead of waging trillion dollar wars we should have continued to improve our economic model, especially in regards to the food distribution aspect.

I don’t think that we should be giving food away for free (except in emergency situations) but there are far too many Food Banks in operation for such an affluent society, and there is constant demand for more of them.

Q: And why do we have this particular symptom that I’ve singled-out for discussion?

A: There are far too many idle hands, and it’s because their jobs picked up and went to Asia — a process that began in 1973.

We could put an end to many social ills by employing every worker for a minimum of 6 months per year

By legislating mandatory job-sharing, every worker would be guaranteed a job appropriate to their particular skillset for a minimum of 25 weeks of full time employment, annually.

That means every worker has a full time job for a minimum of 6 months of every year and is then eligible to receive automatic unemployment insurance benefits during their (short) layoff period.

Mandatory job-sharing eliminates the need for ‘Welfare’

We know that long-term unemployed individuals eventually turn to welfare in order to be able to eat, have shelter, etc. once their unemployment insurance payments run out.

We also know that long-term unemployment eventually turns into substance abuse, crime, homelessness, and other social ills.

More crime = bigger policing budgets = bigger insurance claims/higher insurance rates = more citizens injured or terrorized by crime, etc… all of that are the symptoms of high and long-term unemployment, progression to welfare, and changes in the thinking of the individuals in such circumstances, including long term depression, withdrawing from society, anger, resentment, and more.

But with mandatory job-sharing the yearly unemployment rate would be 0% — that is, over the course of the year, every worker will have worked a minimum of 6 months. However, at any given point throughout the year the nominal unemployment rate would settle at 2.5%-3.0%.

With a job (and full unemployment benefits during layoff) long-term unemployment would become a thing of the past.

Keeping workers in a state of long-term unemployment brings on an OCEAN of troubles

Job-sharing is the answer.

By legislating that every healthy worker has a job for a minimum of 25 weeks annually, we could solve the worst inequality, poverty, other social ills, and dramatically and positively lower crime rates, insurance rates, policing and court costs, and enjoy a safer, more egalitarian society.

It’s so simple.

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International Trade Agreements: Win-Win or Lose-Lose?

by John Brian Shannon | June 11, 2015

The secrecy surrounding these agreements is a complete non-starter for me.

The obsessive secrecy is enough to tell me everything about this being a corporatist agenda on the one hand — and a latter-day containment policy concerning China (or any country that crosses the U.S.A.) on the other.

It really muddles the difference between trade and governance as many commentators have said.

Elizabeth Warren, as usual, has it right; “If transparency would make it harder to sell the final product to the public, it raises serious questions about the desirability of what is being negotiated.” — Elizabeth Warren (paraphrased by Professor Dani Rodrik)

Yet, having said all of that, I’m strongly in favour of international trade agreements!

TTIP protest in London, UK

TTIP protesters in London, UK (Aug 2014)

What NAFTA could’ve been, vs. what it became

To this day I’m a strong proponent of NAFTA — but NAFTA had the potential to be so much more.

Instead, some of the more mediocre minds took over what was a grand overriding vision of peace, order, and good governance for all of North America — and one of the vehicles to help make that happen was the original NAFTA agreement, which was to be followed up by additional agreements, e.g. NAFTA II and NAFTA III.

But because it was handled so badly, the public mood turned against NAFTA and all talk of later NAFTA agreements were dropped like a stone

To state it a different way; The corporatist agenda greedily precluded the long term interests of North America.

And what did we get in exchange from corporations for opening up the North American market thereby allowing corporations to make additional billions per year?

They took their NAFTA windfall profits they had earned in North America to Asia, and 2/3rds of North American manufacturing jobs went to Asia, as well.

Thanks for that.

But it’s not the fault of corporations. They’re in business to make money for their shareholders — which increasingly, means the 1 percent.

To one person, the actions of these corporations might seem profoundly ungrateful to North America — while to another person, these corporations acted in their best interests.

It depends who you work for, I guess…

If you’re a person who works for 1 percent of the population, then this result is acceptable to you. If you’re a person who works for the 99 percent, then this is a wicked bit of business indeed.

Occupy Wall Street protests and other anti-corporate sentiments didn’t materialize out of thin air.

The Occupy movement happened because 99 percent of the population suddenly realized that both the corporations and government were ‘against’ the little guy — you know, the people who actually pay the bills and fight in wars — not the cabal of the 1 percent and their government acolytes

If we pass TTIP and TPP in a shroud of secrecy to further satisfy the corporatist agenda the #OWS protests will seem a minor historical disruption by comparison. (Just a friendly warning from someone who believes in trade agreements)

Some look for advantages between signatories of trade agreements

Which completely misses the point.

In the NAFTA example, many people were spending endless hours trying to decide if the NAFTA agreement benefited Canada? Did it benefit the U.S. more? Or perhaps Mexico was the main beneficiary?

NAFTA was about lowering barriers to improve the free flow of trade between the North American partners with the goal of making North American products and services more competitive in all respects — against other trading blocs or nations. Not against each other.

THAT is what NAFTA was about. Which many people missed originally, or have since forgotten.

It’s too bad that the subsequent windfall profits ended up strengthening the Asian economy instead of the North American economy where all of those profits had been earned

So; Are those corporations ‘traitors’ to North Americans — or are those corporations ‘heroes’ to their shareholders?

The answer is glaringly obvious.

If you’re a one percenter (or a government acolyte of the 1%) then these corporations were ‘doing their duty to shareholders’ under legal boundaries set by government policymakers and financial regulators, even though the optics look incredibly bad for both corporations and government policymakers.

If you’re a ninety-nine percenter you probably view these corporations as ‘traitors’ to North America — even though these corporations followed the letter of the law. Everything else is just spin for you.

A summary of NAFTA?

1. It could’ve been so much more.

2. The corporations made additional billions (maybe even trillions) due to NAFTA, and in that respect it scores a clear win for corporations — but they have lost much of the support and good will of ‘We the People’ in the process.

3. The additional revenue made by corporations due to the NAFTA agreement are now in China not doing a damn thing for the North American economy where those windfall NAFTA profits were earned, making NAFTA the third-largest transfer of wealth in modern history.

(a: The largest wealth transfer in modern history was from the Old world to the New world, b: the second-largest wealth transfer in modern history was from the West to the oil rich Kingdoms, since 1932)

4. NAFTA was a major instrument in the creation of the 1 percent and the societal problems that have since flowed from rising inequality.

Unprecedented in modern history, the 1 percent own more wealth than 1/2 of the world’s population and by 2030 the 1 percent will own 3/4 of the world’s total wealth.

Leaving only 1/4 of the world’s wealth for the 99 percent to exist on, going forward…

Can you say… inequality? Or how about… protest marches? This time with billions of protesters.

As productivity has only little room for improvement in the developed world, the only other factor to allow the present economic paradigm to continue is falling incomes for the 99 percent

If you don’t recognize that as a looming societal apocalypse, you’re not an economist.

If you are an economist, I apologize in advance for your nightmares.

It looks like it’s up to citizens to stop policies that are clearly skewed to benefit the 1 percent and are increasingly detrimental to the 99 percent.

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Why is Profit Bad for the Canadian Economy?

by John Brian Shannon | Mar 31, 2015

It matters where all that profit is going. Or does it?

You decide. But the great sucking sound you hear is Canada’s money going into Canadian bank accounts to gather dust, or it’s off to Asia to be invested there for higher but riskier returns. Either way, such money is completely unproductive to the Canadian economy.

Stock market index graph

Money seeks higher returns wherever those may be found. These days, profits earned in Canada are simply ‘Canadian dollars waiting to leave the economy’ on their way to be invested in Asia, or ‘parked’ in Canadian bank accounts doing nothing productive for the Canadian economy.

In the case where that money is invested in Asia, that money has permanently been removed from the Canadian economy. If it was just a few million dollars per month it wouldn’t be a problem, but it has been occurring for decades on the order of billions of dollars per month.

And that is unsustainable economics and it is why we are now into permanent slow growth, inequality, and falling living standards for 99% of Canadians.

Side issue: Some $24 billion leaves Canada each year via personal remittances to family members overseas, and that is a tiny number compared to the corporate billions that leave Canada annually.

Read: Sending home $24 billion a year from Canada. Who gains, who loses?

Profit, Profit, Where Art Thou?

An astonishing percentage of-the-remaining-in-Canada-money-supply is concentrating in the hands of fewer and fewer people (which used to be known to economists as the top 20% for most of Canada’s history) but nowadays, the top 1% have accrued more wealth than the bottom 99% all together. And it’s getting worse every year.

You can’t run an economy like that

Some educated people (and some junior economists) thought that our historic growth rate statistic was responsible for our successful economy — when in fact it was the ‘velocity of money’ that allowed Western economies to become so successful. But few recognized it at the time, and worse, that still holds true today!

It was ‘money velocity’ that made our Western economies grow and the ‘growth rate’ was and still is, an arcane statistic.

Money Velocity is Everything to the Economy

Money velocity is a ratio of nominal GDP to a measure of the money supply (M1 or M2). It can be thought of as the rate of turnover in the money supply–that is, the number of times one dollar is used to purchase final goods and services included in GDP.” — The St. Louis Fed

We need to stop increasing the money supply (stimulus) which, due to our presently unbalanced economy, now has the net effect of concentrating even more money into the hands of the top 1% and leaving about the same amount of money for the bottom 99% to fight over.

If all that excess liquidity piling up in bank accounts or invested offshore was put back into the economy, there would be no poverty, GDP would skyrocket, Debt-to-GDP would fall off a cliff, and personal wealth would increase among average Canadians.

It’s unethical to now steal the money from the 1% — as Canadians gave it to them willingly and they took it lawfully.

But there must be some mechanism to get the huge sums of money (the money that hasn’t already left for Asia) back into the Canadian economy and doing something productive with it, instead of just sitting there waiting to be transferred to Asia.

Tax The Rich, Until There Are No Poor?

As the Beatles said; “Tax the rich, until there are no poor.” Although that would be a hard sell for today’s governments.

But as it is now, the rich pay little in taxes except when making purchases. But how many Bentley purchases does it take to keep an economy going vs. how many Bentley’s does each rich person purchase per year?

Which is why money that isn’t productive should be taxed heavily — while money that is reinvested in Canada shouldn’t be taxed at all

This effectively turns the 1% people into part of the solution as they will seek to lower their taxes — rather than be taxed when removing their money from our economy to invest it outside of Canada.

Income tax Change-up

Also, we need a 0.00% income tax rate for those who earn under $25,000/yr, a flat income tax of 17% for those who earn $25,001–$99,999 annually, and a 25% flat tax for those who earn over $100,000 per annum.

Under that scenario if you don’t want to pay the 25% tax on the portion of your annual income that exceeds the $100,000 boundary — simply reinvest it within Canada — and pay 0.00% tax on it. Yay!

If that results in hundreds of thousands more jobs (it would) and a dramatic lowering of inequality (it would) and gets the economy booming (it would) the government will just have to compensate for (possible) lower total tax revenues. And not with export tariffs, or sky-high fees for government services!

More than half of tax revenue is used to ‘service’ government debt. In this case, ‘servicing the debt’ means paying interest on it forever, and ever, and ever, with no pay down of the principal.

Let’s get rid of Canada’s debt

We do that by passing a law to make it illegal for the federal government to run deficits. And we create another law that requires a 5% reduction in Canada’s public debt every year. Ergo, we have no debt in 20 years. And no deficits all the way.

When billions of Canadian dollars per month are no longer leaving the country it becomes exponentially easier to eliminate deficits, pay down the debt, and reduce inequality between citizens.

High government debt unbalanced the economy — which led to the creation of the 1% and inequality — and ‘money velocity’ (the real economic driver) is on life-support

Heavily taxing those individuals that sit on billions of dollars of unproductive money — yet giving them a way to pay zero tax on their over $100,000/yr earnings is one solution to an unbalanced economic equation, one that is getting more unbalanced with each passing year.

As for companies taking their profits out of Canada, until now it should’ve been considered unethical corporate behavior (at the very least) when everything they are was created and supported by Canada (sometimes by tax favours or millions in outright corporate welfare) and from the blood, sweat, and tears of workers here.

But, there will always be people willing to take their money out of Canada to invest it overseas. Great! It will cost them. Because every dollar that leaves Canada would be instantly taxed at 25% before it leaves the country. (This wouldn’t apply to normal cross-border shopping activities, or transactions under $10,000)

Companies that want to take money out of our economy to invest it globally, should be welcome to do so. And that 25% tax must be paid before the money can legally leave Canada. The government will love you.

Corporations to pay the same tax rates as citizens

For corporations removing up to $25,000/yr from the Canadian economy, 0.00% tax is payable on it. If they remove between $25,001-$99,999 annually from the Canadian economy, they pay 17% tax on those ‘withdrawals’ from our economy, and if they remove any amount more than $100,000 from the Canadian economy, they must pay 25% tax on it before it is allowed to leave the country.

And if a company removes $200,000 (for example) from the Canadian economy to invest it outside of Canada — they are paying 25% instant tax on that money — unless they want to lower the tax rate it to 0.00% by showing proof they have invested an identical amount (in this case, $200,000) in the same tax year, somewhere within Canada.

This way, both individuals and companies would play by similar tax rules and have the same tax opportunities.

Over decades of time, such a plan that is based on increasing the money velocity, tax fairness and transparency, and instant taxation on significant amounts of money leaving the country would result in the disappearance of the top economic quintile and the disappearance of the bottom quintile.

A more balanced Canadian economy would result and inequality would be found only in history books.

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