Recently, Mike Milke of the Fraser
Institute wrote, warning once again against government interference
in wage levels, particularly against a minimum wage. In the past he
has warned against the temptation to raise taxes on the most
profitable businesses, and the top income-earners.
Higher wages don't just materialize, he
says. They come from a finite (but very large) pool of capital that's
better used to keep the economy growing.
Such warnings are regarded as gospel
pretty well everywhere in the industrialized world. Everywhere but in
the new Alberta.
Meanwhile, the real wage packets of 90
per cent of workers in the U.S. have fallen for 13 years, according
to a Standard and Poor index. Incomes for the 10 per cent have ...
well, you know. I doubt Canada's experience is much different.
Businesses taxes are rock-bottom,
everywhere.
So if Milke has things right, we should
be living in the best of all possible worlds right now. Just like the
misinformed Dr. Pangloss was always saying in Voltaire's Candide.
But you don't need to be an economist
to know it's not true. Rather, there's an argument to be made that
Milke and his many friends have things upside down.
Big profits for big business do not
grow the economy. Rather they grow off the economy. The “economy”
is all of us. And if 90 per cent of us have less and less of it every
year, that can't be good.
Last week, a group of experts wrote a
discussion paper for the International Monetary Fund. The findings of
their exhaustive study were so heretical, they could not be directly
attributed to the IMF. So they were released for discussion purposes
only.
Ok then, let's discuss.
Their basic thesis is a direct
repudiation of that of the Fraser Institute, and all other right-wing
think tanks.
Trickle-down economics does not work,
the report says. When the rich get richer, they mostly just get
richer. They do not invest in ways that benefit the rest of us. Who
knew? We did. Welcome to the real world.
When the income gap between the
powerful and monied minority and the rest of us grows too large, the
economy suffers.
Why are corporations sitting on
mountains of cash, not investing? Because we can't afford to buy more
of their stuff. Essentially, consumers are tapped out, so there's
less new profit to be made building more factories to produce more
stuff.
I remember being part of the provincial
discussion years ago in Alberta about raising the AISH allowance for
the severely handicapped. My argument then — and it's still the
same — is that when you give a poor person a dollar, a rich person
will have that dollar soon enough.
AISH rates were raised — and lo and
behold — landlords raised their rents soon after, making it more
profitable to invest in rental housing for everyone. What AISH
allowance is left after rent is paid (often forwarded to landlords
right off the top) didn't disappear, it's spent.
Business groups worry that raising the
minimum wage will hurt their members' bottom lines and/or hurt
employment.
But when people have more money, what
do they do with it? They spend it, every cent, as fast as it comes
in. The money is taxed in every transaction, and the profits go to
the businesses best able to compete for it.
You say higher wages just don't just
materialize? Sure they do. They materialize into the profits of small
and large businesses, when consumer traffic increases.
That's why I say trickle-down economics
does work. You just need to invert your view the income pyramid. All
the money in the vast base filters into the hands of the rich and
powerful at the apex. Trickle-up economics, if you need to see it
that way.
The rich need to be taxed a fair share,
because the social contract needs to be upheld for a stable society
to be able to produce a strong consumer economy.
Income redistribution has become a
dirty concept in today's politics.
But I say — and international studies
like that in the IMF agree — that where incomes are more equitable,
you have a more stable, happy society. It takes fewer resources to
police and suppress unrest in these places. Upward mobility is more
achievable for the smart and the industrious, because the caste
system that keeps the poor in their place is weaker.
That's why, at a certain point, governments need to intervene. They need to mandate a
minimum wage, so that an honest day's work reflects the honest cost
of living for the day.
They need to redistribute a negotiated
portion of the top wealth into the vast and complex infrastructure of
society that makes it possible for wealth to be accrued.
That's what our new Alberta government
seems to be attempting.
Milke and all the right-wing think
tankers that speak for the powerful just need to reverse their
charts.
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