I had an interesting thought as I was watching the CBC National news the other night. The reporter was sitting with a group of people involved in the present labour situation: a restaurant owner, a Human Resources executive, a young working person, etc. They went through the litany of elements that made up the perfect storm threatening our economy right now: retiring employees, expensive housing, inflation, possible recession, etcetera. We hear it every time we turn on the news or pick up a newspaper. This little group was a microcosm representing all of Canada.
Each told his or her tale of woe, and then they stopped, all agreeing that there was no solution. When the obvious solution was staring them in the face. There was only one person in the group who had the ability to make a choice that could solve the problem, but he conveniently stopped before he got there. And when we apply the observations of this microcosm to Canada as a whole, the omission becomes even more obvious.
What Do We Need?
Well, as near as I can figure out, once upon a time some free-market economist made up a magic number: three. This genius decided that for our economy to work, it had to expand by three percent every year. If it didn’t, the sky would fall. Three percent isn’t a fact. It’s a target, and who says it’s a good one in this day and age?
But ever since, all the pundits and politicians have made three percent their objective. If the economy grows faster, the Bank of Canada raises interest rates to cool it down. But what if it grows slower? Businesses lay off workers or use the statistics as an excuse to keep wages down.
This system is all based on the necessity for the business owners to make increasing profits. when business is good, those at the top make more money, and a little of it trickles down to everyone else. When business is bad, those at the bottom suffer.
Back to our interview and the solution staring in our faces. The restauranteur owns three restaurants. He can’t get enough employees to run them. The solution? He closes one restaurant. He has enough staff to run two. Sure, that sounds drastic, but he is the only one in the whole chain that has any options. All the other problems are out of our hands.
On the Other Hand
The idea does not apply to many smaller businesses, who would find cutting back of little use. This disparity only showed up because the restauranteur was at the level where he had more than one place of business. The farther up the chain you go, the more it applies.
Taking the Long View
Entrepreneurs know the economy runs in cycles. At the moment, they try to expand as quickly as possible to take advantage of the up cycle. If they set up their businesses with both halves of the cycle in mind they wouldn’t make as much money in the short run, but the economy would benefit. Expanding our view to the whole country, if all the upper-level businesses and investors voluntarily cut back their expectations by a couple of percent, the inflationary spiral would level off on its own.
But they don’t. They all look to somebody else to solve the problem, because they have a right to their three percent growth, no matter what’s going on in the world.
The Bottom Line
Our economic system is set up with the purpose of allowing business owners to make three percent more every year. Most of the problems are caused by trying to force this situation. Perhaps if those at the top quit trying for such large share we could get out of the boom-and-bust rollercoaster we are on.