The Economic Focus

Economics is the primary focus on any government in a stable society. Within that realm, many countries speak on different topics but in general what is the ultimate goal of the government? Make everyone rich? Eliminate poverty? Get everyone two cars? The best focus for a government is on two fronts: with respect to financial decisions it should focus on long-term growth, with respect to social economic decisions it should focus on eliminate poverty.

When we look at different countries in the world, the presence of affluence is not indicative of a well functioning society. In terms of the United Nations Human Index rating, those with the least poverty almost invariably score higher than those who focus heavily on increasing affluence versus targeting poverty. If we look at countries such as USA or South Africa, we see many of the richest in the world living there and yet, in terms of living conditions, some of the worst for the Western world (and in some cases, just worst in the world in general). In contrast, if we look at a country such as Sweden, with extremely low poverty, it scores very high and always ranks near the top for living conditions.

The reasons are typically simple and somewhat utilitarian. Every additional dollar above what is needed for the average comfortable life style adds very little to happiness. However, simply transferring money from the rich to the poor is an abuse of metrics. The problem is not that the rich hold too much money, hoarding it from the poor, it is that the poor were never given any opportunity to earn that money. Furthermore, opportunity is insufficient. Social mobility is an excellent trait for a society but unless the income divide is actually small, it is relatively meaningless.

So, countries and government should focus on tackling poverty. What are things that may be done?

• Income tax versus corporate income tax
• Rethinking welfare

Let's talk taxes. There's actually an extremely large variety of taxes today and in history; income tax, harvest tax, land tax, property tax, wealth tax, inheritance tax, tithes, inflation tax, sales tax, tariffs, export taxes, duties, debt interest. But by far, today in the modern age, in the big picture, the largest two are income taxes and corporate taxes.

Corporations pay tax only on profits. Individuals pay tax on everything.

The idea is to encourage corporations to reinvest the money they earn into creating more jobs, capital and generally investing in the economy rather than taking the profits home. On the other hand, individuals are taxed in a manner historically similar to completely broken systems such as the "peasant land tax" or "salt tax". It does not take into account the cost of living which is an important measure in determining poverty.

So, let's rethink welfare and rethink income taxes. We want people who are poor to move up into the middle class. We want the middle class to live comfortably and invest in our country's future (possibly moving up into the rich category by doing so). We want the rich to competently run corporations in an efficient market manner.

Structuring income tax to take into consideration the cost of living requires a measure for determining cost of living. Canada has the LICO (low income cut off) which indicates when you are poor. It would not be difficult to add another measure for "Oh my God, I don't have food", which sits even lower than the LICO. Now we convert income tax into a "individual profit tax" so that if you are having trouble earning enough to put food on the table, the government doesn't come to make your life even harder.

• Below the strict panic line, you should receive government money.
• Below the LICO line, you should not pay taxes.
• Above the LICO, you should pay graduated income taxes.
• We provide a variety of tax-free investment opportunities to encourage long-term growth (RRSP, RESP, TFSA etc)

We entirely eliminate provincial welfare systems and replace them with the negative income tax rates in this model. All of the administrative costs of welfare is to be turned over to tax auditing, which one hopes would not cost substantially different under this model.

If one is worried of welfare abuse then think of this; when you are using a spam filter for your email account, would you want it to eliminate all your spam but also blow away several of your good important emails per day or would you rather it let through a little bit of spam and allow all your important emails through to you? The answer is of course the latter (unless you wish to be facetious). I would rather ten poor people be given the chance at a better life than blocking a single welfare abuser from cheating the system.

So what about the other part of the government responsibility on long-term growth? I believe the key is for government to focus on being globally competitive. Ideology is exceptionally damaging to the Canadian economy and the best example is telecommunications. Mobile devices and internet prices are one of the highest in the Western world, with the lowest bandwidth caps and the slowest speeds. This is due entirely to private monopolies owning the market.

Forget neoliberal, supply-side or Chicago school of economics. Do what is best for the country! It is worth little to note that your ideology brings you to call something efficient when it lacks in comparison to the world. We could build our internet infrastructure through private monopolies and allow these companies to act without regulation, gouging customers and hampering the development of our digital economy, all in the name of free market, but at the end of the day, countries such as Japan or Finland forge ahead while we are left in the dust. What comfort is to cling to artificial principles when you live in relative poverty?

• Natural monopolies such as energy and infrastructure (including internet) should be socialised. In the case of infrastructure, this can be rented at slightly above cost to private corporations to provide service. For instance, the government laid fibre optic lines which they can then rent out to private ISPs at near cost who then resell to consumers in a highly competitive environment with nearly no bar to entry (afterall, an entrepreneur merely needs to fork out a small amount of capital to serve a small set of customers)
• Essential services need to be socialised. Healthcare, basic mail, licensing, regulatory bodies, inspections and so on, should be run by the government to reduce costs and corruption.
• Luxuries should be market run. In elastic demand environments, the government should not waste administrative overhead in trying to manage prices.
• Research and development. Universities product new technologies, corporations typically produce slight enhancements. The government should focus grants primarily to universities in order to encourage the growth of new industries and markets, which give our country a distinct time advantage versus others.

Growth and opportunity, that is the mandate of any government.