Have you ever noticed
...what we know about the economy?
Around the crest of the millennium, I worked as an editor (feel free to laugh heartily, based on my typos and grammar!) for the Department of Statistics (or ‘Stats’ to the cool kids). I worked in the publishing department, where we turned terabytes of charts and data about the whole economy into human-sized brochures, a fledgling online presence, and other publications—documenting findings from surveys, the Census, and statistical work done by statistics nerds.
One of the regular features of a typical month was a ‘lock down’. It wasn’t the fun kind of baking-sourdough-and-bikerides-and-getting-to-know-your-kids-better lock downs, like the first Covid lockdown.
It wasn’t even the everyone-sullenly-hides-away-in-their-room-with-a-screen-and-no-one-talks-to-each-other kind, like every subsequent Covid lockdown.
No, the lock downs at Stats were to prevent us from interacting with people outside our floor, during times when we were preparing embargoed press releases for things like Balance of (Trade) Payments, GDP, and the Consumer Price Index. The reason being, trading on this information, before it was publicly available, could be very profitable if you knew what you were doing (I didn’t, which is why I’m writing a newsletter about equity, rather than lobbying for expanded fossil fuel drilling rights or whatever!).
It didn’t really occur to me at the time, but has since, that we know a lot about the economy. We know about average wages and we measure productivity; we know how many tonnes of sheep meat we export; and what trading partners we have for milk-solids. We know what percentage of us are working, retired, in prison, overseas, or need assistance. And we know how much assistance is needed, because we know how many emergency grants are given out, and how many charitable organisations run foodbanks, and how much rent and power price increases cost us in supplements and government allowances.
But, there are two really integral things we don’t seem to know much about. We don’t know much about actual wealth, and we don’t know much about profits.
The wealth one is tricky. So we’re told. Because asset values go up and down, and wealth gets scattered all over the place. But, let’s be honest, if we wanted to know how wealthy someone was, we could find out. After all, as I’ve pointed out several times, there are whole industries dedicated to this stuff: Auditors and insurers and financial advisors and accountants and unpaid-fucking-interns working on magazine ‘rich lists’.
Now, you might say “Sure, maybe it can be done. But, it’s a lot of work”. And, to that, I want to point out that this is exactly the sort of thing AI was built for!
And then you’d say “Sure, ok, but should it be done?”. And, to that, I’d invite you to read my last few newsletters!
At this point, pretending we can’t measure wealth is the same energy as pretending it would be a ‘mistake’ to solve inequality.
Which brings me to profit. This thing about this one is people already have the information but just don’t really share it widely. Sure, if you’re a public company, you pop some numbers in your annual report. But those things are designed to attract shareholders. It is literally your job as a CEO to make your company's performance look good in the annual report; no less than it is your job as a CEO to report accurate numbers.
I’m not saying people are lying in these things. But those numbers don’t record excess. They’re certainly not including the detail about how Vice Presidents spend three times as much flying their 45-minute commuter trips in Business Class, under the paragraph where they point out how “our 2% headcount reduction facilitated a return to profitability in the third quarter.”
The tax department of course has profitability numbers. But our publishing floor at Stats never saw that detail. We captured survey data from selected businesses, but if you’re a private company the only place you need to legally be transparent about your profits is on your tax return.
Now, I’m not saying I completely begrudge that. It’s true that it is not really my business [sic] if the local greengrocer is making a killer profit… Until he’s the ONLY greengrocer. We agree it’s ok for people to keep their incomes and their profits private because we imagine the market is working as promised. Indeed, if there are multiple competitors able to access a market, and they’re not colluding on pricing for their customers or suppliers, then ‘healthy competition’ is very likely to keep prices and profits reasonable.
But, if you represent 80% of the world’s shipping vessels or whatever; or you and your other bank-CEO buddies go golfing weekly and talk about credit card fees, then we should have the right to ask questions about your profits.
Don’t get me wrong, sometimes questions do get asked. But for the past 40 years or so, they’ve been pretty weak-sauce.
Let me put it this way, it’s not uncommon for political parties to get several days of media and opinion if they propose a tax cut that will deliver an extra $500 a year to the average worker. Last year, the major banks in our country earned ~$1400 in after-tax profit for every man, woman and child in our country.
We know about this because public companies do need to include the version of it that makes them look ‘their best’ in their annual report remember. What’s curious though is how we appear to value this kind of “success” highly enough that we’re not collectively all throwing up in our mouths at the mere thought of this absolutely rip-off.
We’d prefer, what? That $500 of our earnings are kept out of a fund that builds roads and schools and hospitals, rather than $1400 of our earnings are kept from padding the wallets of overseas shareholders?
This is just weird on its face, right?
What I think is going on is the actual nature of wealth and profitability are being obscured by compelling ideas like “job creation” and “GDP”. Even when the profitability is public and obscene (like those banks), and clearly distorts any principles of free ‘supply and demand’, our eyes focus right past it.
And that’s before we even get into profits we don’t care to know about: What is the profit from the nightclub owner who is bitching on talkback radio about the minimum wages she has to pay her staff? What about the profit of the school stationary shop owner who is bitching about how 7% inflation means he needs to raise his prices by 20%?
If I’m on an unemployment benefit and have a kid, you know exactly how much I earn. When I complain that I can’t afford my rent, you know the framework I’m complaining from.
If I’m that same person’s landlord, and I’m saying my costs have gone up, I can be lying through my teeth and you’d have no idea. When was the last time you heard of a professional landlord reducing the rent because their house is “getting older” and their “mortgage is getting smaller”?
Now you might point out that private companies have a right to charge whatever the market will sustain, and to make whatever profit the market will sustain. In fact, you might point out that this is good—it is capitalism working as it should, incentivising the best companies and, in doing so, building clear rationale to innovate and be ever more productive.
And, actually, I agree with you. Except, as we discovered in the last newsletter, even an ideal, perfectly-neural, economy doesn’t behave in neutral ways. Even if we could eliminate any initial tax or regulation or market-power advantage that an operator might take, we would still be stuck in a system that perpetuates inequity via simple momentum.
So what is the solution here?
Honestly, I can’t serve you up a “one weird-trick” fix here. We justifiably like the idea of freedom to buy what we want. We justifiably like the idea of a clear and equal way to measure merit and innovation and effort with some kind of ‘reward token’.
But we have increasingly insurmountable problems—climate, war, corruption, migration, pandemics, and so on—each buffeted by ignorance and inaction. And, frankly, we don’t have the luxury of time or reliable technical solutions for all of them right now.
Right now, the people in power have no incentive to increase taxes on the rich, or increase spending on the poor, because the sources of these inequalities are not visible to the people who, democratically, designate that power to them.
What has always been true of problems like this is, as they say, “sunlight is a good disinfectant”1. Profitable companies and wealthy people are a thing, but we now live in a world where that thing is a symptom of a transparency problem, no longer a symptom of human growth and potential. In almost all developed countries, we’re well past the point of lifting increasing numbers of people out of poverty. In many countries, the trend appears to be effectively backing away from that goal. That always happens when power is wielded by a small minority; people who exclusively benefit from the rest of us not really being able to clearly see what they are doing.
I’m not saying things like democracy and free markets and opportunity no longer exist. They are just not the crystal-clear, sharp-edged forms that they should be in a forward-moving society. We view them through a haze of unreasonable optimism and manufactured consent.
I don’t want you to read that last paragraph as hopelessness. It is not. My point is those good things exist but we are collectively making them more difficult to see. I can’t leave you hanging on that note though. So, for whatever my opinion is worth, I think there are two reasonable ways of fixing these problems:
Shine the light—give the people an honest view of what wealth is and how it grows and influences and corrupts. There are millions of ways that you might do this practically, but it all involves standard stuff: Education, changes to political donations and lobbying rules, less private funding of media, breaking up the huge ‘cradle-to-grave’ tech companies that dominate every aspect of our lives etc.
More democracy, stemming from more understanding and transparency, is the most equitable way of solving these problems. This is the path that everyone (rich people included!) should want us to take, because, if we are clearly shown how ultra-wealth works and we still choose to keep it, then we all know we’ve weighed-up, and prepared ourselves for, the consequences.
Redistribute—wealth tax, capital gains tax, financial transaction tax… however you do it, this one involves taking money from people who don’t need it all, and giving it to people who do. No judgements. People are different, and some are lazy and useless, but we need to not care? The main value we need to uphold is that we don’t need billionaires or centi-millionaires to “do humanity better”.
Honestly, this is the easiest by a long shot, if all you’re dealing with is practical considerations. Just tax rich-people-stuff more, and distribute the money across public goods and vulnerable people more. You don’t need to educate anyone or change any other laws. The only major sticking point on this is the ‘perception’ one: The thing I’m trying really hard to explain in this series.
I don’t quite want to leave it there though either. Because there are two other, worse, paths to an enlightened and just society with wealth. One represents a crapshoot, and one represents a disaster. However, both are still worth thinking about because, right now, the good options are still proving a hard sell:
Revolution—let’s be fair, this one is always in the mix. I think detached ultra-rich libertarians honestly believe their worse-case future is a gated bolthole in the South Island of Aotearoa-NZ, with a private military and a ready supply of young (white, male) blood transfusions; Or a space colony on Mars with a big telescope to watch the remnants of an unlivable-Earth collapse from afar…
They are so hilariously wrong. Eventually, if nothing else is done, a tipping point will come and, at that point, they will be outnumbered roughly 300,000:1.
…That is A Medium-Sized-City:12.
Hollywood has soothed us into the idea that the rich will just starve us or trick us or manipulate us into dystopia. Only, once people find themselves having to eat the family pet to survive, my prediction is The 99.9% will not go quietly into that dark, neon-lit future.
Science fiction—look, I work in the tech industry so I can believe and get behind all sorts of magic. But I also know, the guys funding the R&D labs now don’t really give a shit about ‘problems’; they want to sell ‘solutions’. The financialisation of, well, everything has made it far more personally expedient to rework and dismantle some existing thing than to concentrate on public (read: unprofitable) goods.
I would dearly love a carbon-sucking-poverty-eliminating-anti-populism machine. But that’s even less commercially coherent than Elon Musk’s purchase of Twitter.
By all means, prove me wrong with those last two, ultra-rich. I acknowledge these sound both far-off and pretty pessimistic. We are not there yet, but we all know how problems can compound quickly. And, on that note, I think it’s about time we talked about capitalism… stay tuned.
-T
That metaphor is probably most famously quoted as “sunlight is the best disinfectant” but, you know, it’s worth pruning it back a little, because we should leave ourselves some levels of justice beyond just “making some horrid thing more visible”.
Here’s a fun thought experiment if you’re still dubious. There’s this thing called ‘Dunbar’s number’ which basically estimates around 200 people is the practical ‘limit’ for a functioning human social group. You can kind-of extrapolate from that idea that you probably interact with up to 200 people regularly (work/school/clubs/family/friends etc). So, think about the people you know. Is there just one person in there who you are certain would turn into an insane psychopath (serving whatever definition of ‘good’ or ‘evil’ you like) were the world completely go to custard? Like Mad Max-style or whatever. Just one person? I expect you do have someone in mind… so, statistically-not-sound, but it’s pretty safe to assume that roughly 1/200 people would be both crazy and capable enough to go Full-Literally-Eat-the-Rich-Revolt if things got really bad… Even if only those people go after the ultra-rich, that ratio is still 1500:1. Honestly, those odds are bad for people on the wrong side of any revolution.