Continued rant about capitalism and our imaginary democracy

But what can we do? Well, I may be pinned as an idealist, a socialist (as if that's an insult), a communist or worst for believing what I believe. But I firmly think there are several areas we need to change.


    1. Fair trading - The idea of fair trading is an interesting one to me, looks very appealing, but also feels a bit idealistic. If there was any way to introduce fair trading practices in the world, at least some of the issues raised on my last post would be considered. Fair trading would attempt to provide fair jobs in developing countries. Instead of having people working at almost slave conditions, we would trade with countries like India, China and Bangladesh in a way that may ensure the growth of a middle class, which is the only real driver of prosperity as seen in history. Sounds great, doesn't it? But I did say it also feels a bit idealistic. One of the problems with this idea, is that it would clearly cut down profits. If the main drive for outsourcing cheap labor to these countries is profit, fair trading would diminish the interest in the idea. I believe that this is the main reason the only time you see "fair traded" labels involves food and other exotic commodities. By that I mean, you can't produce coffee as easily in Canada, so we need to export it from the tropics, no other options there so the big players can afford to push for fair trading. With sweatshops, you don't get that. If all of a sudden local business owners in Bangladesh decided that their working conditions isn't good enough, hence they push for fair trade, Wal-Mart and Fresh Co will just go ahead and shop around other desperate countries to provide the same service for cheap.

    2. Rational protectionism - One other way to prevent some of the problems outlined in my last post is to introduce tariffs to products imported from countries like Bangladesh. I don't think a blanket protectionist policy is a good idea, but I do believe that using tariffs to regulate prices of goods that are coming from developing countries and are made from inhumane conditions can help. A capitalist economy has profit at the bottom line, not global or social prosperity. So they don't care if 300 people have to die in Southeast Asia in order to be able to make large profits. What they do care about is profit, and if these profits are getting chopped at the border because of tariffs, that will change their practices. Maybe implement conditional tariffs that try to enforce accountability, so for instance if a falling building would make it so that from now on, Fresh Co will have to pay significant tariffs to our government because of their negligence in choosing appropriate manufacturers. I hope this point isn't mistaken by people, and make them think I don't believe in globalization and free trade, I do, I just think it needs to be done responsibly. I also think accountability isn't a real factor in the free market, so this is one way to add accountability to the picture.

    3. Tax things we don't like - Another way the government can help this situation is by taxing things we don't want, and giving benefits to things we do want. In this situation, one approach would be to give more tax benefits to businesses that hire locally, and contribute fairly to the local economy. This would obviously impact commodity prices, but I just see it as a necessary evil. Nothing in this world is free, so when we pay so little for things, we have to wonder how this is possible. Efficiency is one possible explanation, but another very real explanation involves the fact that people cut corners. Corners that sometimes should not be cut. For instance, in Canada recently, it has made the news that big banking conglomerates have been firing local workers in order to hire, cheaper, temporary replacements from abroad. They use our government programs in order to increase profits while putting Canadians out of work. Again, this is where taxing or giving benefits comes in, our government is rewarding corporations for bad behaviour. To me this is even more of a problem when you start to talk about the whole "trickle down economic policies", which clearly, and I mean, CLEARLY, is complete rubbish. Businesses want to make profit, they don't give a crap about how they treat employees, or how the overall economy is doing. They just want to make money.

    4. Criminalize lobbying - This brings me to my last point. We do not live in a democratic country here in Canada or the USA. We just call it a democracy, but the truth is that when money is involved, the popular opinion isn't a factor. There are two things that move our countries towards changes. These two are money and power. The government and corporations have a complete monopoly of these two commodities, if you will. Corporations make huge loads of money, that they then turn around and pay for lobbying that furthers their agendas. Lobbying is essentially the exchange of dollars for political power. This is where politicians take corporate money, to not only fund their propaganda during election, but also this is the money that moves politics. Money that prevents stricter gun laws in the USA, when 90% of the population supports the motion. It really doesn't matter what people want, if politicians can just sell bits of their influence to corporations, so that they can fund their next election. Elections nowadays are a joke. It's basically a bunch of corporate puppets paying absurd amounts of money to tell us what we want to hear so that we vote for them next time. I mean, just look at the Conservatives in Canada, spending tax payer dollars on advertising to convince us that the Harper government is environmentally conscientious. While at the same time they are developing and destroying the Tar Sans, they are closing down research facilities in Ontario focused on environmental issues and global warming and they are trying to move us away from freedom of research by muzzling Canadian environmental research. So it really pisses me off to see my money being spent to convince me of a complete lie. So people, wake up! While we are all still comfortably employed, living a relatively comfortable life in Canada, our nation is moving in a very terrifying direction. The direction of a plutocratic nation, away from the democracy we like to say we have.

Waco explosion, Bangladesh factory collapse and the free market

In the wake of two recent tragedies, I think we should all revisit this idealized notion of Free Market. First there was the West Fertilizer Company explosion in Waco, Texas on April 17th. This was a very destructive explosion that has killed at least 15 people, injured 160 and damaged over 150 buildings within its blast radius. Horrible tragedy really. A study conducted after the blast, indicated that this plant was last inspected by Occupational Safety and Health Administration over 28 years ago. In this inspection almost three decades ago, the agency found several serious violations including improper storage and handling of anhydrous ammonia, and improper respiratory protection for workers. Although, this did lead to a $30 penalty for the company, which I'm sure would normally have tremendous impact on any multi million dollar operation, and of course lead to the appropriate changes.

I think it's important to remember, we're talking about Texas here. The Rick Perry state, where conservatism and capitalism are as important as the bible. This is  a perfect representation of what I think is wrong with republicans in the USA, and conservatives in my country up north. Conservatives and libertarians love to preach about the tremendous benefits of their version of a "free market". They love to say that Adam Smith's capitalism, much like Christianity, is overseen by the invisible hand. That supply and demand are the most relevant regulatory forces we need. I have a lot of problems with these notions.

While there may be measurable benefits from unregulated capitalist policies - and I'm not advocating that there is - there is a much more problematic hidden caveat. Conservatives claim that this so called "free market" is what will pull the world out of a global recession, they forget that lack of regulation is what put us in the recession in the first place. On top of that lack of regulation, is the bottom line need for profit, which is what led the factory in Waco to be holding over 100 times the allowed amount of ammonia, which arguably was a cause for such a violent explosion.

Alright, let me continue with another event from this week. I'm talking about the collapse of the garment factory in Bangladesh. This has killed over 300 people so far, causing a tremendous amount of pain to thousands of family members and friends. For those that don't follow the news, this week, on the 24th, an 8-story commercial building collapsed in Dhaka, the capital of Bangladesh. This was a building that housed several clothing factories that produce garments for exportation to industrialized nations such as the USA and Canada.

Basically this is a building that would not be allowed to be used in the industrialized world. It was dilapidated, just falling apart. There were major cracks on the walls, and clear signs of a safety problem, which even led the factory to briefly shut off the day before the event. Well, it would cost a very large amount of money to fix, or rebuild structures such as these around developing nations. It would cost a lot of money that they are unwilling to spend because that would mean they can't produce sub par t-shirts for a few cents. People! this is the direct result of several major flaws of what we call today capitalism.


    1. Capitalism is a profit driven idea  based on competition for markets. In no way I think there is a problem in this foundation, the problem with our modern view of capitalism is the importance of the bottom line, profit. Yes, of course profit should be the goal of a business, however, this should not come with lives on the price tag. Wal-Mart for instance reported a net income of 15.4 Billion dollars in 2011 with a 24.7% gross profit margin. These numbers alone are simply astounding, and I firmly believe that success stories like this are inspirational. However, when these types of profits rely on absolutely unacceptable conditions for the people behind the scenes, my view of it is certainly changes. When this 24% profit margin only exists because as consumers we accept that people in the third world are allowed to literally die to produce my cheap sweater, that I'll use gardening so I don't get my nice clothes dirty, there is a problem. I'm not at all free of guilt as consumer, but I think eventually we need to look at how to fix this problem.

    2. Businesses like Wal-Mart not only exploit the third world for profit, but they also do it by removing jobs that used to be local. They move manufacturing outside of our respective countries to places like Bangladesh. Now, that alone isn't a big deal, the problem is that fair paying jobs here in Canada and the USA are being destroyed to produce poverty sustaining jobs in the third world. So we mess up our own economy, to allow developing countries to exploit their population by giving them the absolute bare minimum.

    3. So who wins here? The big players! Massive profit margins definitely benefit the billionaires running these businesses. In terms of economic growth, our economies have been growing in the last few decades, but this growth has mainly been in the top 1%. The billionaires are getting better at making profit, and this is in part done through cutting fair paying jobs to give out unreasonably bad paying jobs in the third world.

Well, some may say, well that's just the dark side of capitalism, there isn't anything we can do. That's where I disagree. What needs to happen is regulation, and accountability. Right now in North America, there are tax benefits involved with importing goods from developing countries. The way the government sells us these benefits is almost as if they are convincing us they are doing good in the world. Of course allowing easier trade with Bangladesh will help their economy grow, where is the harm in that? The harm is in the fact that while this sounds good in theory, the reality is that across the ocean big corporations abuse the fact that there are desperate people out there in order to give them horrible working conditions for their profit. There is no oversight of these conditions by the big corporations for obvious reasons. The lack of oversight by Canada and the US is partly because of the important of economic influence (lobbying), and the lack of oversight by third world authorities is an attempt to maintain their country as a viable source of almost slave labor which does help their economies to some extent.

This is where I would like to challenge all my conservative and libertarian friends to tell me how this Ayn Rand capitalism is good for anyone besides the top dogs?

Stranger danger - a look into protectionism

Protectionism is often a point where I tend to disagree with a lot of people. I think the rise of developing nations into more significant roles in the world economy makes this topic come up more often. The BRIC countries (Brazil, Russia, India and China) have been growing and developing a new role in our globalized economy. This makes a lot of sense, when you consider the fact that globalization helps spread wealth around. Wealth that decades ago would have stayed in one region for much longer, all of a sudden can go between continents in the matter of seconds. Outsourcing manufacturing jobs is not new at all, however, we see more and more outsourcing of other services to different nations and the spread of money and knowledge just allows innovation to occur more often in new places. When you put all this into context, it makes sense. If you consider that there is a finite amount of wealth in the world (which isn't necessarily true but the analogy helps my point) and all of a sudden a lot of the wealth that use to be generated and spent in North America and Europe is being diverted to emerging economies.

Well, isn't that a good thing? Don't we want to spread the wealth? More often than not, I feel that the answer is yes but no. Yes, it's good to give the opportunity for other nations to develop, and more innovation to occur. That's good. We want struggling nations to be able to lift people from poverty and maybe even develop a middle class. These are all great things, I agree. However, I also feel that we need to look at what the side effects of these things are. For instance, think about why this money started to flow to developing areas. This happened mainly because companies realized that in order to stay competitive; they needed to lower costs, and one way to achieve that, is to outsource work to places with cheaper labor, cheaper land and maybe cheaper taxes. The bottom line is that jobs that use to be done within developed countries, moved abroad. Considering people can keep having cheap products, people that are employed in NA and Europe are happy.

It still doesn't look that bad, after all, they just eliminated unskilled work pretty much. People will just have to get more educated to do other types of jobs. On the other hand a big effect this has in the economy is that companies are making a lot more money, and that money isn't really trickling down to the bottom as politicians like to claim. Richer companies, can afford to be even more competitive, which smothers the little companies (ie. Walmart). This destroys reasonably paying jobs, destroy small companies and innovation from the little guys. A company that doesn't have to work hard to monopolize a market, has less incentive to innovate. On the other hand the developing nation which is now seeing a lot more wealth running around, isn't really used to this, and labor policies don’t always benefit the little guys either. Workers on average are making more there, but the wealth distribution is just becoming more segregating. So the nations that use to provide everyone with a great share of the wealth, now are doing less of that. While nations that always had larger wealth disparities, are just raising the lower class from the dirt while they fill up their pockets with money. 

The reason why North America in the middle of the 20th century was so prosperous was the fact that the economy worked for the people. There were always class differences, and I think there should always be such. But the bottom line was that the financial agenda was to keep the country running smoothly and efficiently, providing a piece of the pie for everyone. Capitalism was controlled and worked well. When Capitalism takes over everything else, and making money is the sole goal of a society, human greed affects how the system works. It begins to alienate the elite from reality, instead giving them the sense that capitalism wants them to make money no matter what. Once this infectious mentality spreads to governments, the real problem emerges. That's when democratic nations become plutocracies, and values go from being about the welfare of the people, to the welfare of this constructed concept of the economy.

That's why I think protectionism isn't all that bad. It's a bit like capitalism, in that it is an idealistic concept, but I think it is important. Going back to the idea that there is a certain amount of wealth available, I think a nation needs to ensure enough of this wealth stays within the borders, and even more importantly, is distributed well. Of course that means people can't have as much "stuff" that's made elsewhere, but ensures a healthy job market and a healthy economy, that is sustainable and fair. Individual governments only have power over their own policies, so they can't ensure that China or India treat their people fairly, however they have the power to try and make their own country as good as it can be. By making sure business practices are done responsibly, and with the people's welfare as a priority.

(I also wrote a little on free trade in the past if you are curious to see that)

Positive sorting or unequal distribution?

Ever since the election 9 days ago I have been considering the conservative majority win. I'm going to leave aside the fact that our democratic system allows for a minority (40%) of people to decide our nation's leader, instead I would like to focus on who this minority has chosen to be Canada's leader for the next 4 years. If it wasn't clear so far, I really did not want the conservatives to be in power.

To start, I think I need to recognize that 60% of voters were supporters of the left as we know the liberals lean somewhat to the left of the political spectrum and the NDP is an even more socialist party. So really I would like to challenge the 40% of voters who did cast a vote to the right on May 2nd. I can't really say anything about why the majority of these folks voted conservative, but I do know a significant portion of them voted on the idea that Harper was good for our economy. People believe he has been doing well handling the recession and his tax cutting tendencies are good for Canada's long term economical growth. Well allow me to explain why Harper's approach does not help the struggling class and in the long term it does not have Canadians in its best interest.

I think any Canadian would agree that what Canada needs during these tough economic periods is a plan that grows the strength and resilience of our economy. Our economy is not just banks and corporations, it is based on people and natural wealth. How we produce and distribute our natural wealth is key to the future strength of Canada's economy. Having said all this let me bring up a very strong period of economic growth. Between 1997 and 2007, Canada saw very healthy economic growth, up until the most recent recession. During this period the top 1% of the population got 1/3 of the gains of this prosperous period. This is not unexpected as we can find that historically prosperous periods often benefit mostly the wealthy, this is somewhat natural and it is usually balanced by a recession that reduces this gap to some extent. However, the last time we've seen this level of growth was in the 60's, back then the top 1% only got 8% of the share, so we're looking at a much more concentrated distribution of resources. Statistics say that in this decade the richest 1% doubled their share of the total income in Canada and the richest 0.1% tripled their share of the national income. Now the bottom third of the population only got 8% of the economic growth of the decade in question. This is very much an uneven distribution of gains, and they present a much deeper problem then the fact that the rich are getting richer a lot faster than the rest of us.

In order to really show how this unequal distribution affects everyone negatively, we might as well look at the middle class, since we Canadians like to claim it as our strongest class. The median income is the income where half the population makes more than that and half makes less than that. In 1976 this median was around 46k (adjusting for inflation) and in 2008 it was 48k. So during this entire 30 odd years, the average household has become more educated and in a lot of cases now, both parents need to work. So in this entire period of economic growth, we have not seen much in terms of progress in the middle class. To accompany this trend we have also seen jobless benefits and social insurance get watered down.

Since the beginning of this most recent recession, unlike what is seen historically, measures to get the economy back to it's feet have not affect the top earners. The fact that social assistance for the unemployed has been stripped down, people lose their jobs and grab what they can to stay afloat, including much lower paying jobs and self employment. This causes the % unemployment numbers to deflate despite the reality of the situation, which is people are earning much less than before. Not only this but there has been a lot of downward pressure on wages, pensions and benefits as if the middle class is what caused the recession. This isn't as apparent in Canada, but in the US there have been plenty of high profile debates on these issues, such as the teachers unions in Wisconsin. I don't understand how these kinds of measures are seen by the population as acceptable. I don't understand why more people are not completely outraged by what right leaning politicians see as valid measures to help the economy.

Maybe I'm too harsh on conservatives and republicans, but what do people on the right say about what drives this increase in social gaps? A lot of them like to point out marriage inequality, basically the rich marry the rich, and poor marry the poor and this is a social phenomenon that creates more inequality. This is often called positive sorting, and it is just a nice way to justify a problem they don't like to address. It's a way to avoid the real cause which is that during prosperous periods the rich gets richer and during recessions the poor gets fired. Statistics also show that the average household with children now works 200 hours more a year then they did a decade ago. The biggest increase in working time is at the bottom earners. This makes sense because if your new job doesn't pay enough to keep things afloat, then the parents have to work more. So despite the increased amount of hours worked at the bottom, the increase in wages happened at the top where there were no increase in hours worked during the same period.

What many people see as the strength of the conservative party is their measures to ensure economic success in Canada. What are some of these measures then? Well a very common right winged approach is to lower taxes. This is a great way to be popular among the general canadian, who is dumb enough to think that these lower taxes will help them. Apparently a couple of hundred dollars in their pocket will help them solve their financial troubles. I wonder if someone unemployed sees it that way too. To complicate the matter even further, there are these corporate tax cuts that have been occurring since 2007. Now where is the rationale for those?

The idea behind corporate tax cuts are to give to those who have more and they will give to those who need it. Tories say that cutting corporate taxes increases profit meaning more jobs may be created and not only that but foreign investors become interested in our country as a potential investment opportunity. It sounds good, but the reality is not quite as colorful. It turns out the CEOs of large companies are not as giving as conservatives might expect. The average income in 2009 of the top CEOs was 6.7mil, which makes them worth 155 times the average worker, while before the recession the top CEOs were worth 104 times the average worker. I may be reading too much into these numbers, but something about cutting taxes to the rich doesn't seem to be helping the general population. This trend of social gap increase during good times and decrease during recessions is not the case anymore. The top earners are getting benfits during tough times while the average family is keeping their salary in the best cases. Not only that but government deficit is growing at an alarming rate.

So people need to wake up, Harper's measures are not there to help the middle and the lower class. People voting for Harper need to be aware of this because tax cuts don't help the working class and if that's how they buy your vote, I have to tell you, you've been fooled. I worry for future generations, families are already working close to their full capacity. It is almost a necessity nowadays to have 2 working parents, and this obviously has implications on families, if this situation gets worst, how will it be possible for future generations to survive? How will this working class be able to buy a home, or save money for their children's education or even for their own retirement? This is serious, if we keep going in the direction our right wing politicians want we will see Canada become more and more segregated into rich and poor.