Economic Issues
Economic issues affect our current and future financial well-being, and in turn our health and enjoyment of life. Although, as individuals, we can make many choices that will affect our personal finances, the policies of our governments and world events can improve, limit or eliminate many of our options. For the most part, we have very little direct control over world events, and we are often at their mercy. On the other hand, we can modify the policies of our governments to help bring about the changes in our corner of the world that will help to insulate us from world events, to give us some better economic options and to protect our finances.
We each have our own ideas about what it means to be wealthy. Ask any two people and they will most likely have different ideas about what they need to feel wealthy. Many of us might believe that someone would need to have a net worth of millions or billions of dollars to be considered wealthy. On the other hand, many of us instead believe that true wealth is really a matter of having the right combination of good friends, good health, and the ability to live in harmony with nature. In fact, if two people possessed the same things, one might feel wealthy and the one might feel poor.
No matter what each of us believes about what it means to be wealthy, it still boils down to having enough of the right resources to enrich our lives. In general, we become wealthier by getting or controlling more of the things that we prize. In the case of money, this is usually about increasing our net worth. We may do this by earning money from work, investments, inheritance or any combination of these or other methods. In order to stay wealthy, we need to continue earning enough to offset our expenses. In addition, it helps us to spend wisely and not to waste what we have earned.
When an individual becomes wealthier, it does not always follow that our world becomes wealthier. The things that we do to accumulate wealth fall alone a spectrum with respect to how it affects the world’s overall total amount of wealth. From best case to worst case, our actions go from creating wealth, to redistributing wealth, to destroying wealth.
For the world to become wealthier, our actions need to create wealth. We create wealth by doing productive work. For instance, we might produce something, or manage or invest in the productive work of others. In a best-case scenario, our actions would not only make us wealthier, but would also help make other people wealthier without making anyone poorer.
When we inherit or win a prize, we are usually talking about the redistribution of wealth. In these cases, we would become wealthier, but no new wealth would have been created. For the most part these are wealth neutral activities, but they can help someone to create or to destroy wealth. An inheritance might be used to invest in a business that creates wealth. A contest that awards a prize might also raise awareness of some product, service, cause or issue. On the other hand, the recipient of this money may stop working and therefore stop creating new wealth.
Usually, if not always, criminal activity leads to the destruction of wealth. One clear example would be burning down a building to collect the insurance money. Not only could there be transfers of wealth from the insurance company to the building’s owner and from the policy holders to the insurance company, but there would be a waste of the resources needed to put out the fire and the building would have been destroyed. Even when the redistribution of wealth through robbery, shoplifting or many other types of crimes does not directly destroy any goods or property, there is a destruction of wealth. Not only do these crimes waste the time and resources of our police, courts and prisons, but the criminals could have been doing productive work instead of committing crimes.
In addition, there are many things that can destroy wealth that are considered legal. These things can be as simple as wasting our food or breaking something that we own, to complex business acquisitions or buyouts that are only used to avoid taxes or to sell off assets to make a quick profit. There are also many things that we are required to do that do not directly or even indirectly contribute to the creation of wealth. These include such things as overly complex tax codes, redundant or ineffective regulations, and poorly designed communities and infrastructure.
Our political and business leaders often talk about economic growth as the road to economic prosperity. The key measure currently used for this economic growth is our GDP (Gross Domestic Product). This is the amount of Goods and Services being produced. A rising GDP means that the value of goods and services being produced each year is rising.
Since many people believe that a rising GDP translates into more jobs and a rising standard of living for everyone, it is considered by many to be the key indicator of a healthy economy. Unfortunately, there are a few big problems with using GDP as an indicator of economic prosperity.
For our GDP to grow, we must produce more each year. Currently, the biggest contributor to our GDP is consumer spending. Changes in consumer spending can therefore have a big impact on GDP. In addition, increases in consumer spending translate into increases in sales tax revenue and corporate profits. These are the reasons why a lot of attention is paid to consumer spending when our political and business leaders talk about economic growth.
There really are only two ways to increase consumer spending. People, on average, would need to start spending more or there would need to be an increase in the number of people who are doing the spending. If we take a close look at these ways of increasing consumer spending, we can see problems with both.
In the first case, there is a limit to the amount of goods and services a given individual can use. Once someone has consumed all the things he or she needs or wants, trying to consume anything more would only be a waste. In addition, it does not make much sense to go into debt to buy things that we do not need.
In the second case, there is also a limit as to how many people our world can support. If we keep increasing our population, our limited resources will need to be divided among more people and each one of us will need to pay more for less. In fact, we are already depleting many of our resources, paying more for many of our basic needs and ending up with less, even when our GDP is rising.
Therefore, basing our economic growth and prosperity on increases in consumer spending is not the best way to do it. When economic times are bad, people need to be able to cut back on their spending without having to worry about it making our economy worse. Even in good economic times, it is often better for people to save and to invest in the future instead of spending everything they earn.
The real key to economic prosperity lies in creating an economic environment where people and communities can build wealth, and everyone can balance how much they are willing to work with how much they want to spend. A growing economy would be one where productivity was increasing so that people had the option to work fewer hours, to earn more and/or to buy more. Therefore, economic growth should be based on productivity, and economic prosperity should be based on our standard of living.
Today, the world’s population has grown and continues to grow so large that we are using up our natural resources at a faster and faster rate, and leaving each of us, on average, with less and less. Almost a billion people do not have enough clean water or food. Even more people live without adequate housing, clothing and medical care.
For most of the world’s poor, given the state of the world economy, there is little opportunity for them to better their lives. For the rest of us, we need to work even harder each day to enjoy the same lifestyles we had the day before. Without changes to our economic system and a reduction in our overpopulation we will need to greatly improve our productivity to stand any chance in the future of enjoying the same things we have today.
In some parts of the world, there is rapid economic growth. Some people in these countries are seeing rapid improvements in their way of life. This trend may be good for them, but it is increasing our pollution problems and is bringing us all closer to the day when we deplete many of our natural resources. The only bright spot is that the birth rate is lower in more developed countries, and this could eventually help with our overpopulation problem.
The bottom line is that there are not enough natural resources in the world for the nearly 8 billion people we had in 2021, let alone the billions on their way. Our limited supply of resources just cannot provide all these people with a comfortable lifestyle, let alone, allow them to live as well as the average citizen of the United States of America lives today. Based on some analysis that was done, if everyone lived as well as we do in the United States, then the world could only support a human population of about 1.5 billion.
Even in the wealthiest nations and in the best of economic times, there are still people who are unemployed, who live in poverty and who are homeless. Some people may have given up any hope of living a better life, but most people are willing and able to work hard and to do what it takes to improve their lives. Unfortunately, we are all at the mercy of our current financial conditions and our inequitable and unsustainable economic system.
For many of us, a pink slip and a few bad breaks could drain our finances and start us down the road towards bankruptcy, poverty and even homelessness. During a recession, this just becomes even more likely. Given the growing world population and the depletion of our natural resources, failure to fix our economic system could lead to a level of poverty, starvation and war the likes of which no one has ever seen before.
We need to modify our economic system so that all of us and all our descendants will have the possibility of a good life. Along with being sustainable, our new economic system must also be resistant to numerous types of financial problems. There will always be natural disasters that will destroy some of what we have built, but good planning can mitigate their impact and allow us to recover faster. Our governments must take the responsibility to balance business and personal activities to safeguard and to improve the economic viability and wealth of our communities.
We also want to give everyone the opportunity to have a job and to earn a living. As part of this, we must keep the cost of living low enough so that even the lowest paid workers can earn enough to live on. Everyone should be able to earn enough to buy food and clothing, to rent or to buy a nice clean place to live, to splurge a little, and to have enough left over to save for a rainy day and for retirement. With all our advancements, people should not still have to worry so much about their basic survival. We should have reached a point in time where we are free to explore all that life, our world, and our universe has to offer.
Our new economic system must also protect our environment. All life, including all the plants and the animals that we share this world with, should be allowed the opportunity to live the best lives possible. Of course, if there are people who will not help the plants and the animals out of respect for them, then maybe they will at least do it for their own sake and the sake of their decedents. If we destroy our environment and its inhabitants, then we will reduce our supply of clean air and water, our recreational choices, the biological sources for our medical research, and the places of natural beauty and wonder that we should be able to enjoy.
For real economic improvement, we must reduce our overpopulation and wisely use our natural resources. We must reduce urban sprawl, protect our environment and use more renewable energy sources. Not only will this mean more per person, but more for the plants and animals with whom we share this planet.
In addition, we must alter our thinking in terms of wealth and work. We do not need to spread our wealth. We must think in terms of spreading our work.
Labor is a renewable resource, and productive work can create wealth. When people are unemployed, their labor is wasted and the rest of us must work harder to support those who are not working. When our communities have the right balance of local businesses and the right balance of business and labor laws, we can have virtually full employment, we can make our economies resistant to world economic downturns, and we can give ourselves and all our fellow citizens the chance to prosper.
In the following subsections, I will try to expand on what I believe has gone wrong with our economy and how we can fix things.
Economic Systems -
Creating a new Economic System that strengthens our economy.
|