William A Gardner
4
September
2016
Economics
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The Disease of Affluence
Isafjordur, a small fishing village tucked away in a small fjord at 66 degrees north in the Westfjords of Iceland, seems like a step back in time. The water is calm as we tender from the cruise ship to the harbour. Here with the aroma of sea and fish lingering between high bare hills the ancient Norse influence is strong. We step into a tiny cubbyhole room off Hafnarstraeti to watch a short movie 'Waiting for the Storm', a local production showing the townspeople preparing for a major winter blow. In the video the blizzard whipped down from the Greenland ice sheets and across the Denmark strait bringing high winds and snow. Activity outside ground to an icy halt. Unconcerned, the Icelanders adjusted and went about their business with little concern. The story reflects their society. They are an independent and tough people, practical and realistic. In Reykjavik the City Walk guide had shown great pride in her robust Viking heritage. It is their nature, you see, to be prepared. Difficulty is expected. A potential crisis in this isolated town is just another challenge. After the 2008 financial crisis when most western countries were using public money to bail out their financial institutions, Iceland refused to follow their example despite serious problems at their banks.
Later over coffee at the town bakery, Gamla Bakariid, I wondered if we in our southern cities are we as well prepared for any coming social and economic storms?
It has been said that no civilization has ever survived one particular disease, the disease of affluence. Once this state of affluence is established a dangerous attitude takes hold in much of the population and especially the elite progressives. Ideology is embraced. The reality of human nature, nature itself, and basic economics is ignored. It appears that the golden future has arrived.
Societal structures form a buffer between the actions and consequences of life. Yet we are deceived. The social safety net blinds us to underlying structural problems. Fissures slowly become visible below the surface. When you peer under a few rocks there appears a growing malaise due to a characteristic widening differential between the wealthy and the poor, and between those who wield power and those who see themselves as powerless. As these fissures increase we see a growing concern among leaders to control an increasingly fractious public. It is a path well worn in history. The yellow vests are a symptom, as is President Trump, as is Brexit, as is the election of screaming socialists to legislatures.
A primary root of this challenge is the nature of growth: the desire to get bigger, to have more. It is firmly fixed in our subconscious from a young age. What child doesn't want to grow bigger? It is certainly embedded in our economy. A strong economy depends on growth. No growth means a stagnant economy and malaise. Thus leaders promote growth irrespective of other problems this may create.
Centuries ago growth was limited by what could be extracted from the natural world with primitive tools and weapons. No longer. The energy available today combined with human ingenuity has created a world where unlimited growth seems possible. The strictures of the natural world have been thrown off and we stand like Prometheus, the created taking the role of creator. Is there anything we cannot do? Ahh, but deception lurks in the economy, human nature, and the nature of bureaucracies.
As one analyst suggested, society has divided between the protected and the unprotected. The protected are those who through good choices and good fortune find themselves safe within the economic power structures of society. The unprotected are those who, for whatever reason, find themselves increasingly on the sidelines of the economic cornucopia. Unfortunately the latter cohort is growing as a percentage of the population. Governments, desperate for money to pay off the entitled and satisfy public demands, fiddle with the economic statistics and search for ways to keep the economy growing because they perceive growth as the only way to prevent social disorder and protect their jobs and pensions. The search for money is endless. The bureaucracy finds creative new ways to apply new fees and increase taxes. They can't yet tax the air you breath in but they have found a way to tax the air you breath out. Leaders encourage the immigration of people to increase the population and thus the GDP. A flat GDP with no population growth is cause for fear. They appear unaware that they are laying the foundation for the the next, and more serious, challenge.
With deference to the French tax collector for Louis XIV, Monsieur Colbert, the hissing is becoming louder. In Calgary the charge for garbage pickup just increased by 22% from last year. It is poverty for the unprotected through a thousand small cuts. Yet the pervasive belief in affluence, like the big lottery winner who ultimately finds himself not just broke but in debt, keeps governments spending. Read about Modern Monetary Theory (MMT) if you are in doubt. It is human nature and the nature of economies. Affluence is like a drug, and the drug of choice is growth. The solution is to make things better, not bigger.
Places like Iceland will be fine I'm sure, but our large and wealthy western democratic societies may not.
