The older I get, the more I doubt the wisdom of chasing rainbows.
In order to receive good wages, workers must be employed by companies making money. A company that is not making money goes out of business and the employees are then looking for work. If shareholders do not earn a return on their investment, they don’t invest. The balance required to pay employees a fair wage and provide a fair return to the investors is what keeps our capitalist economy afloat. No businesses equals no work. Equally, no workers equals no businesses.
Surely the available profit has to be shared down the line of companies too. Company A wants to buy goods from Company B. Company B wants the business, but has wages to pay and shareholders to satisfy. So does Company A, so Company A pushes Company B for a lower price. And so on down the line to the bottom of the supply food change. If wages are too high and the companies can’t make enough money, as we have seen the companies disappear from our shores. I am NOT getting into the debate of what is “enough”, I am more concerned about everyone’s desire to see the numbers grow. Companies want their revenue to grow, their profits to grow. Employees want their wages to grow (yes, I’m no exception). Prices go up, wage increases disappear into increased prices and around and around we go.
Can the numbers keep growing forever with no real change in value? Let us look at a house for example. A house bought in say 1980 for $90,000 was worth $1,500,000 not too many years later. What about that house had actually changed? Nothing. It had no extra bedrooms or bathrooms, it did not miraculously move closer to the city or become a beachfront abode. What justified the $1,410,000 increase in monetary value? Is the resident any happier?
What is so different about the litre of milk I buy today against the litre of milk I bought in 1960? The packaging and the price. The milk is pretty much still, well, milk.
We like our public education, public medicine and pensions. These as we know come out of taxes. We like our roads in good repair. If our government can’t collect enough taxes, they can’t pay for all the things we want them to pay for. We have the age old argument about the national budget being in surplus or deficit. Surplus is mandatory, according to our current government. A surplus is good, of course. Saving for the future is a good thing. Sometimes though, we need to invest in the future and that may require borrowing. Just like we borrow from the bank to buy a house.
When I was younger, I thought the value of my house increasing was a wonderful thing. Now I am older I am starting to wonder. We hear of the housing market being overvalued and an expectation prices will drop – dramatically. We see manufacturing disappearing from our shores because the goods can be manufactured elsewhere much cheaper.
I was chatting to David Spencer on Twitter last night and he made this comment.
Supply and demand, taxes, rich and poor, middle class, various economic theories: yet we all, in the end, can’t take any of the money with us.
I wonder, are we really just chasing rainbows? Do we make it all too complicated? Look at the Global Financial Crisis, or the Great Depression. We buy and sell futures, money can just be printed on demand. I’m just pondering.
What about you?