I’ve been reading and thinking a great deal about how CoVID-19, AI, Climate Change and such will change the way we act as a species (for a positive future).
Unless you like being shut-in, without work, access to basic services and the economy crumbling around you, my guess is you believe that overall this crisis has shown us we simply weren’t prepared and the system suffered multiple failures. That brings us to some big, fundamental questions. Follow my logic here, and feel free to give me your comments. This is not a proposal, more a stream of consciousness or philosophical approach.
What do you think we should expect of our nation, our governments and our economy in respect to both everyday life and an appropriate response to such a future crisis?
In a perfect world we’d have all the technology and resources to manage a crisis like this coronavirus global event, so that no one was at risk of food anxiety or losing the roof over their head. If that sounds like socialism to you, let’s make one more assumption — what if it wouldn’t cost you personally anything other than your usual taxes, etc. Can we agree in principle that would be positive? So what would that in reality take?
First and foremost, we’d need a level of prosperity that would accommodate a ubiquitous allocation of basic resources. And yet the US’ economy is the single most successful and prosperous economy in history and the US still can’t achieve anything near this? Why?
It all comes back to equitable allocation of resources, mostly wealth and monetary resources, but it is true of resources in general. When we have to look at resource allocation, we end up looking primarily at economic levers and government policy/structure.
Capitalism and markets today are heavily incentivized to put resources into making returns, and shareholder profits. If resource allocation is suggested that goes into goals that are not commercially oriented, the market is generally not a fan (absent extreme social pressure). Hence, we have markets that allow fossil fuel companies that continuously pollute the planet and obfuscate scientific research on climate damage over decades, because markets are not advantaged by holding the feet of fossil fuel companies to the fire. As long as they’re making money for shareholders and not overtly unethical or destructive, the market will put its preference on market returns.
The other determining factor in resource allocation is overall government efficiency, government policy and structure. There are strong arguments for reducing government to force efficiency gains, however, there is also the problem that the less effective government is, the more you need to rely on free markets, which again are not incentivized to fix big problems that don’t make returns. This leads to resource allocation being largely based on available capital and short-term returns — which reduces distribution effectiveness. The greater the reliance on free markets, the more likely wealth distribution will be unequal.
Thus, in highly capitalist systems, the lower government efficiency (or smaller size of government in more efficient systems), the more that rich companies and rich individuals have greater access to resources than poorer individuals. For example, if you reduce government spending on infrastructure and basic services like healthcare or education, the more that the best education, healthcare and infrastructure will be dependent on how much personal wealth you have.
The more you have, the more you make
Individuals with greater access to resources might argue that poorer individuals just need to work harder to get ahead, otherwise it isn’t fair on those that contribute more into society. In a system with equitable resource distribution this a reasonable assumption, but in a system where wealth is unequally distributed the ability to mobilize socially in respect to wealth or status is greatly reduced — until the point where no matter how hard you work, the likelihood of moving from poor to wealthy is closer to zero. To get ahead you need an economy like China’s today where hard work mobilizes, or like the US’ historical post WWII economy. The great American Dream was based on the principle that anyone that works hard could actually get ahead, but today that isn’t possible in the same way as it was in the 60s or 70s.
This is why the US economy post WWII is considered historically so super successful — it wasn’t the size of government (The New Deal, Infrastructure spending was at the highest level historically). It was down to a robust middle class, broadly participating/consuming and an economy that was growing super fast because resources were broadly employed on :
a. macro economic growth,
b. national economic advantage (competition/innovation), but
c. not specifically on market growth.
The US market post WWII did indeed grow, but it was a function of the broad health of the economy, and not a free market rewarding efficient resource allocation for corporate growth. Not the other way around where the economy is dependent on a healthy market as the key indicator of growth. This is also why trickle-down economics historically don’t work. Resource allocation is biased toward the market and wealthy, not broad economic activity.
Today, we have a market near historical records, but overall we have increased political polarization, atrocious resource allocation, long-term functional employment issues, along with rapidly accelerating inequality.
Even before the covid crisis economic inequality in nations like US, UK, Australia and others were at decades long record levels (as measured by the Gini co-efficient). In economies like the US and Hong Kong today, this means even average wage earners can’t afford adequate housing and services. What we know from history is that this level of inequality is highly likely to generate social change — either through revolution or proactive reallocation of resources.
The other thing that is common with the greatest periods of progress for humanity is how united people are in their focus, and intent. Technologically the greatest periods of growth were during war time, or massive scale projects that had strong majority support — like the emerging space race in the US.
The most prosperous economies have also invested heavily in the future. Strong education for children, investment in infrastructure or competitiveness that will create long-term economic growth and investment in activities that improve the lot of more and more people (so that political pressure is reduced). When we reduce R&D, Infrastructure and Education investment in an economy, and over time that economy slows.
As a species then, our best use of resources, our best efforts should be put into furthering the prosperity of humanity as a whole on a long-term basis, not for just a small segment of society based on market cycles. Especially if crisis’ like covid-19 are likely in the medium term.
This means we logically should seek to automate economies as much as possible, invest in longer-term time horizon infrastructure, development and technology, and seek much more equitable resource distribution in order to generate broad prosperity and resilience.
As an aside, it’s likely in these scenarios that a flat tax rate would be more reasonable. If someone acquires more resources they pay more, but no more on a pure percentage basis.
But at the heart of it we need to agree on two basic principles:
1. As Aristotle concluded, the purpose and intent of humanity should be for the broad prosperity of the species, one that would protect us from crisis like coronavirus, or enable optimal global responses to mitigate emerging risks (like coronavirus and climate change);
2. and we need to invest in economies with bell curve wealth distribution and strong middle class growth, not economies that produce advantages to just a small minority of individuals
Sound like socialism? Or is this simply the most logical, most optimal resource allocation and intent for humanity as a species, as a whole?
Let me give you a scenario that reinforces the logic of this approach.
Imagine in 20 years or so that the first humans are settling on Mars, the first city on Mars is growing, and humanity is expanding out through the universe. What sort of economy would be optimal for these martian settlers?
The entire economy would be focused on sustainable prosperity because for both martian settlers and the governments and corporations of earth supporting Mars colonization, this would be the best case. In an economy where sustainable prosperity is the common goal, generating profits in the economy would be secondary to ensuring every colonist had air to breath, water to drink and food to eat. Once those goals were met, the objective would be to mine raw materials, and produce goods or services that could be consumed locally and back on earth to grow the martian economy, but the basic needs of individuals would always be a priority.
Why isn’t the earth like that today? Why do we rely on dwindling resources, over farm oceans, etc instead of developing a sustainable ecosystem?
It’s because we don’t work cooperatively as a species. We’re focused on individual and national benefits over the whole. However, that ultimately is not a strategy that will work, because as we get closer to the earth’s carrying capacity to support us, that will result in a mass extinction. Sustainability is the only long-term viable goal, and that only works if we have a unified intent to progress the entire species, and not just our tribe or our family.
Let me know your thoughts….