Four steps to a better economic future

Emerging conditions mean we’re likely to face a large global recession in the next two to three years. Part of the reason is the significant and substantial growth of government, corporate and personal debt, and the massive growth of unfunded pension liabilities in the public and private sectors.

Debt is everywhere and is sustained by the bond market, which only has so much capacity to buy debt against promises of future money (which the central banks will simply print through a ledger transaction).

Global debts from all sources sit at $249 trillion and, by 2050, unfunded liabilities will be $400 trillion.

This is all made worse by the reliance of a great many governments – several U.S. states, the U.S. federal government, several non-Euro European countries – on trickle-down economics. That’s the idea that cutting taxes on corporations and wealthy people stimulates the economy and creates jobs.

There’s no credible evidence to support this idea, yet it continues to be practised.

U.S. President Donald Trump’s tax cuts have had no positive impact on economic activity (and his trade wars have made the economy vulnerable to recession). But those tax cuts did lead to a massive transfer of wealth from public good to the very wealthy, while most citizens paid more tax, not less.

At the same time, economies are transitioning from wealth based on human capital to wealth driven by intangibles; from wealth growing through manufactured goods to wealth growing through intangibles and debt (e.g. Tesla, Uber); and to economies where inequality is growing.

While many countries seek to balance budgets, almost none are and most can’t. Even Germany – held up as a model economy in Europe – has a debt-to-gross-domestic-product ratio of 60 per cent. Others are much worse – China (65 per cent), United Kingdom (86 per cent), France (96 per cent), U.S. (107 per cent), Italy (131 per cent) and Japan (236 per cent) – and are all in serious trouble.

Nonetheless, the policies and practices that got us into this mess continue to drive behaviour. And the mess is getting messier.

This is not a preferred future. A preferred economic future seems to have four components:

· economic strategy focused not on the growth of material corporate wealth, but on personal, family and community well-being;

· economic strategy aimed at greater equality, not less – a description of most Scandinavian economies and Iceland, for example;

· a strategy that supports lifelong learning and lifelong health over corporate profit;

· a strategy that embraces sustainable development in all of its aspects.

What’s needed is a pathway to this future, which will involve a reset of the capitalist frame in which GDP growth at any cost is generally seen as preferable to human development.

One country – New Zealand – wants to see a different pathway for the future. Contrary to most national spending plans, the goal of its coming 2020 appropriations is not to boost gross domestic product or ensure economic growth, but to increase the happiness of the country’s citizens.

In the next fiscal year, all of New Zealand’s non-core spending must be oriented toward five well-being goals: improving mental health, reducing child poverty, supporting indigenous people, transitioning to a low-emissions economy and thriving in a digital age.

And to measure success, the government will track nontraditional indicators such as perceived environmental quality and sense of belonging.

New Zealand is a small country – less than five million people – but it’s working towards a preferred future based on equity, well-being and sound environmental management.

Many other countries are simply continuing to pursue a preferred future from the 1960s that stopped being preferred by most of their citizens in the late 1990s. Canada seems to be one of them. It’s not managing a transition from an old economy to a new economy – from an economy based on get rich quick to one based on equity, effective climate change management and valuing community.

Maybe Canada should follow New Zealand to the future many Canadians already say they prefer.