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How Western Economies Could Double GDP Growth in Two Steps

by John Brian Shannon

Empowering the bottom-two economic quintiles via a Guaranteed Basic Income and a 21st century minimum wage will allow low-income people to become ‘part of the solution’ instead of ‘part of the problem’ in Western economies.

We Have a Problem in the West

The top-three economic quintiles are doing just fine thank you very much, and any one of those top-three quintiles contribute more to society… than the bottom-two quintiles combined!

That includes the CO2 emission contributions of any one of the top-three quintiles by the way. And it includes the high level of government spending required for the enhanced infrastructure and security considered de rigueur for those who live near the top of the economic pyramid.

If you don’t believe that the top-three economic quintiles cost the government more, just take a drive around some of the ‘tony’ neighbourhoods in your city. Look at the streets (nice, broad thoroughfares and sidestreets that are always well paved, etc.) look at the decorative streetlights, the curbing, the sidewalks. Also don’t miss the world-class schools and recreational facilities. And of course, visit an international airport to see how many of the travelers boarding planes to sunny locales hail from the top-three economic quintiles. That would be most of the travellers in the airport.

While the top-three economic quintiles are driving their Land Rovers and taking exotic vacations and sending their kids to university (and yes, they do work hard for their money — nobody is saying any different) the bottom-two quintiles can’t.

While the top quintiles cost society much, they also contribute much. And why shouldn’t they contribute much? They’re the prime beneficiaries of that society.

At the end of it all we may conclude that (apart from their astonishing CO2 footprint and the astronomical security costs to ensure almost total security in their neighbourhoods) the top-three quintiles aren’t the problem when we’re talking about the economy.

Through no fault of their own the problem lies with the bottom-two economic quintiles and we can thank (some) economists and (some) politicians for this miserable state of affairs.


Shall We Toss the Bottom-Two Economic Quintiles into the Ocean?

Or should we allow them to become ‘part of the solution’ on the path to dramatically increasing national GDP growth?

If we did toss them in the ocean, just for argument’s sake; Who will pour your latte at your favorite coffee joint? For that matter, who will pick up your trash, man the gas station counter, feed the ducks in the city park, or cut your lawns and clean your swimming pool?

Wouldn’t you rather be earning your $100 per hour or whatever you earn, instead of spending your free time sweeping the sidewalks and changing burned-out streetlamps? Wouldn’t you rather be racing your personal watercraft with friends at your lakefront cottage? You work hard, you play hard. Great!

Now let the other people contribute too.


Maybe Those Bottom-Two Economic Quintile Types Aren’t So Bad!

As it stands now however, the bottom-two quintiles are a drag on the economy. There’s no hiding that fact.

Some are homeless and may engage in property crimes or other offenses. Others may find themselves often unemployed or in a permanent state of underemployment as 34% of all manufacturing jobs have left Western nations for Asia since 1975. (Not the fault of the bottom-two economic quintiles by the way)

And still others just can’t find their niche, nor do they have the education, nor the financial clout to engage in the type of business where they could succeed in personal terms, but also contribute to the overall economy.

They want to contribute(!!!) to their country but can’t find a way forward. And they’re not up for moving to Asia to reclaim their former manufacturing job. Nor should we expect them to.


Changing a Negative Into a Positive!

Many people have experienced the kind of drag induced by leaving your car’s emergency brake in the ‘on’ position as you travel down the highway. As soon as you realized your mistake and moved the e-brake to the ‘off’ position the car appeared to have 100 more horsepower.

But of course it didn’t. The motor had the same horsepower it always had, it’s just that by accidentally leaving the e-brake ‘on’ it took extra power to move the car.

So it is with the economy and the bottom-two quintiles.

Prior to all those manufacturing jobs leaving for Asia, the bottom-two economic quintiles contributed much to the economy. We used to call them ‘the middle class’ or ‘blue collar workers’ or ‘the rank and file’ and other descriptors.

But there just aren’t the jobs to employ them now. So many people (millions) have exhausted their unemployment insurance benefits and have given up looking for a job, any job, that they’re no longer listed as officially ‘unemployed’. The corporate world, and governments too, appreciate that those are rarely reported stats. It makes them look bad and feel bad, but they don’t know why, or how, this has happened. In any case, it’s better for them that it’s rarely reported.

Yet, there is no need to leave two-fifths of the population in a permanent state of poverty and thereby not able to move ahead with their lives — let alone contribute to GDP.

A two-track plan could accomplish a number of good things for the overall economy.


Allowing the Bottom-Two Economic Quintiles to Become Part of the Solution, Instead of Part of the Problem

Working people always contribute more to the economy than non-working people. But what’s the use of getting a job if you can’t afford the monthly bus fare to get back and forth to work? It’s a very common thing nowadays.

Make your choice now; Eat for the month, or use your grocery money for subway fare. Pay the electricity bill, or buy a monthly bus pass to get back and forth to work. Buy some decent clothes for a job interview, got the job! now you can’t afford the bus fare to get you back and forth. Ugh!

These are the very real concerns of the McJobs era. It’s even multi-generational. Older workers may work as low-paid greeters at WalMart, while younger, low-paid workers at fast-food restaurants experience similar life choices.

Two-fifths of the working age population are a drag on the economy — but only because of poorly thought-out policies and on account of the race for corporate profits which were (and are still) improved by outsourcing jobs to developing nations. Bad!

Therefore, because the situation is so tragic ANY solution is better than allowing the status quo to continue!

Two Ways to Solve Gross Inequality and Increase GDP:

  1. Legislate a standardized $15/hr wage right across the country. In this way, people who would rather work will be able to afford to eat for the month AND pay their electricity bill AND have enough money for bus fare to travel back and forth to a job. Perhaps Mom and Pop can front them the money to buy some decent ‘job interview appropriate’ clothing and help in other ways such as babysitting young children, etc. However, we can’t expect Mom and Pop to pay for all of those things, as their time and resources are limited too.
  2. A guaranteed basic income (GBI) of $1088/month per adult (a generally recognized amount, accepted by researchers and governments)
    In some cases, this would effectively ‘top-up’ the monthly income of welfare recipients and Old Age Security recipients to $1088/month from all sources. It would likewise replace all other low-income schemes, grants, etc. So much duplication of services exist that entire government departments could be down-sized (by attrition) thereby saving some government departments up to 5% in their annual budgets. Especially police and court budgets. And the multi-billion dollar SNAP programme and Food Banks could be eventually discontinued, for example.

With 21st century policies in place, the bottom-two quintiles could then afford(!) to look for a job, afford(!) to move to a different jurisdiction to accept a job offer, afford(!) to return to vocational school or attend night school to brush-up on job-skills, or afford(!) to move to a safer neighbourhood where they aren’t afraid to take the bus to a night shift job they’ve been offered.

As soon as they report on their annual tax return that they’re earning any amount over the poverty line, then their GBI payments would be discontinued. Success!


“Paying good wages is not charity at all — it is the best kind of business.” — Henry Ford

And, in case you’re wondering what kind of chips Henry has in this game? Henry single-handedly created the middle class in America. Yes, it’s true!

Henry Ford created the Middle Class and the modern economy by simply paying workers $5 an hour, twice as much as the national average at the time. People flocked to get a job at his factory. Other companies followed suit realizing that great, qualified employees were lining up at Ford’s doors. This unprecedented gamble by Ford paid off and America was on its way to becoming an economic giant. Henry Ford was behind the success of the American Middle class, and he did not do it by lowering wages.

In fact, he is quoted as saying:

“Low wages are the most costly any employer can pay. It is like using low-grade material — the waste makes it very expensive in the end. There is no economy in cheap labor or cheap material. The hardest thing I ever had to do was to reduce wages.” — Henry Ford

Excerpt from Raising the Minimum Wage: The Birth of the American Middle Class by The Daily Kos


If policymakers want the present situation to continue to deteriorate; Just keep on doing what you’ve been doing, and you’ll keep on getting what you’ve been getting

But if we want the bottom-two quintiles to contribute to the economy like they did in past decades, policymakers must set payscales at rates that are relevant to 21st century cost of living standards (they’re not now!) and they must institute a GBI that replaces all low-income schemes and empowers people to either; move to a job, retrain for a job, afford transportation to and from a new job, and in the meantime, maintain their home / electricity connection / phone connection / internet connection / job interview and other employment-related clothing needs / childcare / normal caloric intake / buy medicine, and afford other necessities in our modern world until they get back to work.

How can you get a job nowadays if you can’t afford an internet connection? Do you know? (I don’t know. Can that still be done in the year 2017? Probably not)

The time for navel-gazing is over. It’s time to get brave and release the brakes from the economy and allow the bottom-two quintiles to again contribute to the economy by passing legislation that’s designed to make people part of the solution, instead of part of the problem!



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The Synergy of the Virtuous Economy

by John Brian Shannon | June 17, 2016

An economy that constantly grows and improves because it has enough virtuous circles (and cycles) is by design, a ‘good economy’.

It’s what every economy wants to be when it grows-up.

However, there are no generally accepted metrics to measure what constitutes a ‘good economy’ — but a definition by Edmund S. Phelps in his recent Project Syndicate essay is a definition that one can appreciate.

It is worth noting that the UN Happiness Index could be a way to grade the successful march towards a ‘good’ or ‘virtuous’ economy, as nations that rank highly on the UN Index also tend to have high productivity, high per capita income, low unemployment, a high degree of personal rights and freedoms, low crime rates (and related to that stat) generally high levels of education, and in other ways their citizens live fulfilling lives in a stable environment.

It’s easy to ‘work it back’ from the end-user point-of-view.

Another way to grade the march toward a ‘virtuous’ economy would be the Social Progress Imperative’s SPI Index.

If nations are ranking highly on SPI heuristics, it’s obvious that everything needed to support those high grades are *already in place* and working. Ergo, a high-scoring SPI nation is one with a ‘good’ or ‘virtuous’ economy.

Social Progress Index 2015

Social Progress Index 2015

Perhaps nations (and economists!) should put more emphasis on UN Happiness Index and SPI heuristics and less emphasis on GDP growth.

After all, You Can’t Feed a Family with GDP

The 1%’ers will always rate their country highly on the UN Happiness Index and on the SPI Index, as their incomes and security are guaranteed and their income growth meets or exceeds GDP growth. What matters in this case, is what 99% of the population thinks.

In developed countries, GDP growth has largely plateaued, and even in the United States of America the largest economy on the planet and the country with the strongest military, GDP growth is anemic at 2% annually.

There just isn’t room to grow the U.S. (and other) developed economies more than 2% per year under the existing paradigm.

“If you keep on doing what you’ve been doing, you’re going to keep on getting what you’ve been getting.” — Jackie B. Cooper

Einstein said something similar — “The definition of insanity is doing the same thing over and over again, but expecting different results.”

Therefore, to try to get more growth out of the U.S. economy by ‘doubling-down’ on everything that we’re already doing, does nothing except prove the truth of such quotes.

But what the U.S. hasn’t tried (enough) is to use heuristical analyses to plot a policy path towards high UN Happiness Index and high SPI scores. By doing so, I posit that the U.S. could unlock another 2% of GDP growth annually.

If that’s true for the U.S. economy, it works double for China’s economy.

Did anyone else notice the productivity increases in China during, and for a short time after, the Beijing Olympics?

Yes, a mini economic boom occurred as a result of hosting the Olympics — just as it does in any country that hosts the Olympics. But productivity isn’t known to spike upwards when a country hosts the Olympics.

I guess after not seeing the sky for decades due to a permanent and thick blanket of industrial smog, Beijing residents finally got to see the sky — due to some very foresighted Chinese air pollution abatement policies that were implemented for the duration of the Olympics.

“Look everyone, The Sky!”

Smog in China. Image by scmp

Constant smog is a normal state of affairs for residents of China’s major cities — except during the 2008 Olympics when special air quality policies went into effect (in Beijing only)

An improved quality of life picture for Beijing residents worked to improve overall productivity, improving the bottom line for Chinese companies.

Certain other perks were added — including never-before-seen-in-China freedoms to travel and to miss time from work in order to travel to the Olympics.

That’s what I call a virtuous circle!

Imagine if that could be made permanent. It’s an example of how improved lives for workers can positively affect productivity and the bottom line.

By employing end-user heuristical data, developing nations could double their GDP growth annually.

For the rest of us; Now that the standard economic tools to increase growth have largely ‘topped-out’ in developed nations, it’s now time to look at improving the lives of citizens by using heuristical analyses — to increase the happiness of citizens, which will increase productivity, improving the bottom line, leading to higher GDP growth.

The proof that this works well is easily found by investigating the Norwegian, Danish, Swiss, Swedish, Liechtenstein, and UAE economies.

Ultimately, the question is a regional one; How can we improve the lives of workers and their families so that productivity can be enhanced, and thereby improve annual GDP growth?

Some nations have asked, and the results have been astonishing.

Soon, people will be saying things like; “The synergy of the ‘Good Economy’ is that the pursuit of happiness by individuals is directly related to the pursuit of worker productivity by corporations, which is directly related to the bottom line and GDP growth.”

And when those words are commonly spoken by both the masses and the elites, for the first time in history, our civilization will be firing on all cylinders — courtesy of the ‘Good Economy’.

NAFTA, TPP, or Tariff Me?

by John Brian Shannon | April 15, 2016

A long time ago when there were unicorns, there was a justifiable need for international trade agreements in order to spur trade, increase movement of capital flows and to promote movement of labour — but mainly to gain access to potentially larger markets in both developed and developing nations.

International trade agreements like NAFTA and even today’s TPP are throwbacks to a day when we didn’t have all of that. Many global economies then were practically closed markets, with few exceptions.

It’s almost the opposite these days — globalization has certainly prevailed — and it’s the rare country that isn’t buying or selling wares from around the world on a daily basis.

North Korea is a closed market, so is Japan (although it is a huge exporter) and only a handful of other nations could be considered ‘closed markets’ in any substantive sense.

In your home country you can probably buy a car, a music player, clothing, food, and almost anything else — and it likely wasn’t built, created, or grown, in your country.

Globalization has succeeded wildly and we now live in a globalized world.

How’s it working?

For the people in developed nations it has meant 25-years of inexpensive goods on store shelves — goods that were either built, created, or grown, in developing nations, which has been a real bonus for developed world consumers — and it has also benefited workers in the developing world.

Unfortunately, it also led to many high-paying jobs being sent overseas, resulting in higher unemployment and worse social ills than that in some developed nations.

Liberalized international trade has become all that it could be

Which is fine. It’s served it’s purpose and we now have open markets around the world with levelization of trade, capital, knowledge, labour, and general market equilibrium — if not market symbiosis.

But there isn’t much more room for globalization to grow. Other than tidying-up some intellectual and property rights regulations we’ve arrived at our free trade destination. We’re already living in the globalized economy.

Where do we go from here?

There are a number of things that can strengthen our domestic economies without turning back the clock to the (almost) closed economics of the 1960’s.

Ten Ways to Make Our Country Better and Stronger – While Helping Citizens to Succeed and Live Happier Lives

The Ten Ways: Increasing Intellectual Property Rights, Increasing Government Revenue Streams, Preventing Obscene Government Debt, and Enhanced Government Services Designed to Move the Bottom Economic Quintiles Towards Middle Income Status

  1. We and our trade partners should sign a simple trade agreement to protect intellectual property rights, one that includes universal patent, trademark and copyright protections. The point is to get it done now while it is still relevant. If we wait, there’s no point in bothering with it, as all the secrets (the patents, trademarks and copyrights) will be ‘out of the box’ and in the general marketplace. (The rule must be that we don’t trade with nations that won’t sign and abide by those laws)
  2. We and every country we trade with should pass legislation to allow a simple 5% tariff on every imported and exported good — from supertankers full of oil, to consumer electronics, to clothing, to food, — in short, everything. This simple tariff would replace all other import and export taxes/tariffs/levies and related charges. Billions of dollars of goods are imported and exported every month and the tariff revenue stream can be used by the federal government; To improve productivity by funding R&D, and to improve government services and infrastructure — or used to raise national GDP and quality of life for citizens, by reducing unemployment and to lower taxes on the poor and working poor.
  3. We and our trade partners that don’t already have a national Goods and Services Tax (of 7% for example) on all retail goods, should implement one immediately. This revenue can contribute to the overall economy to improve services and infrastructure, reduce unemployment, and lower taxes on the poor and working poor, and should be shared 50/50 with states or provinces — who after all, would be the parties responsible for collecting it.
  4. We, and every country we trade with should pass legislation making deficits of more than 4% of GDP illegal, at the federal, state, and municipal level. This prevents obscene government spending and prevents the trap of eternal debt servicing costs, once interest rates rise. Which they always do.
  5. Our own country and every country that we trade with should no longer charge income tax on those who earn less than the equivalent of $25,000. per year.
  6. We and our trade partners should pass legislation to the effect that every worker has the right to a minimum of 25 weeks of full-time employment, per year. Yes, it would require a job-sharing programme managed at the state level. Some workers may receive layoff notices in order to accommodate unemployed workers. On the positive side, long-term unemployed people could then contribute to the economy (and to their own personal income!) for a minimum of 25 weeks per year. In countries like Sweden, this is common in industries that can’t keep all of their workers employed, and it is normal for two workers to share the same job for many years (6 months ‘on’ and 6 months ‘off’) so that over the course of a year, every worker in the country will have worked a minimum of 6 months. Which keeps their skills sharp, makes them eligible for automatic unemployment insurance benefits during their layoff, and lowers the welfare rate to near-zero.
  7. Most government unemployment insurance programmes around the world pay 66% of a worker’s salary during periods of unemployment, often after a significant wait and a worker’s claim can be turned down for any number of strange reasons. It’s inhuman. Workers pay into unemployment insurance — it’s not their fault that there are millions more people looking for work than there are jobs available — because their jobs have been sent overseas since globalization began. In some countries, a brilliant solution exists whereby workers can opt to pay into a private unemployment insurance programme, one that can top-up their unemployment insurance payments to 99% of their normal salary for the equivalent of 1 or 2 cents per dollar earned. The employee merely indicates how much extra unemployment insurance coverage he or she wants to purchase, and the deductions are automatically made from their wages and directed to the private unemployment insurance company. The private insurer also begins paying unemployment benefits from the first day of a worker’s lay-off. Workers no longer need subsist on 66% of their normal income while unemployed. (Imagine working in the fast-food industry, living on subsistence wages, then getting laid off due to a slowing economy, and then having to exist on only 66% of your already subsistence-level wage!) NOTE: In Sweden, both the government-run unemployment insurance plan and the private unemployment insurance plan make a respectable profit, every year. That’s how easy it is to do, when it’s done properly.
  8. Every city, town, village or county in the country should have the option to receive a free website from the federal government for as long as certain information is continuously updated by the local jurisdiction. Simply by entering the name of a jurisdiction in Google Search, anyone should be able to find the local time, weather, federal, state, city, village or municipal phone numbers and addresses, emergency services and other essential services (like Hospitals and Veterinary Clinics) and employment information for that city, town, or region. Standardization is key so that workers looking for work, or visitors to a region can quickly navigate to and access important services without a frustrating search (or fruitless search, because not all jurisdictions have their own site or mobile-friendly site — but you don’t know that until you do an hour’s searching and discover that there isn’t one!) Quick access to important phone numbers and addresses can save lives and help to increase productivity.
  9. Streamlined government websites for self-employed people to set-up and begin working in one day with a minimum of confusion, stress and red-tape.
  10. Legislation to require internet service providers to provide basic internet plans of $10. per month with low entry barriers — enough to check emails, find a job, find rental accommodation, and perhaps practice the preferred local language in hopes of finding a job. The internet is an essential service in our era, and those entering the workforce or returning to work after illness, etc. need to be able to start somewhere.

It’s easy to look around the world to see what’s working well in other jurisdictions and write similar legislation.

Legislators in Sweden and Norway don’t have two brains nor any other super powers, that we know of. If they can manage to get these things done, so can we. And if we can’t, we’re not half as great as we imagine ourselves to be.

But we are! Therefore, all we lack is the will to act. So let us act, and help our country to leap forward by one order of magnitude.


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