Trust Me, I’m an Economist

I’m not an economist. And neither are the politicians who keep referring to ‘the economy‘ as some kind of divine justification for all their political machinations.

Mitt Romney says President Obama’s remarks that “the private sector is doing fine” prove how out of touch the President is with the American people. This from the man reportedly worth $250 million. He complained that, thanks to the President’s domestic economic policy, too many Americans are either out of work or are forced to take part time work for unsatisfactory wages.  Says the man who loves to regale supporters with anecdotes of his father shutting factory doors and laying off workers. He complained that President Obama fails to acknowledge the impact that subsidized healthcare has had on the American economy, particularly on small businesses. Well, how’s this for a logical economic impact of a social safety net in areas like healthcare: when people are less fearful about having to pay out-of-pocket for unforeseen medical disasters, they’re more likely to spend money now on consumer goods, rather than save it for a rainy day.  Which is what most of the “job creators” (wealthy investors, banks, large multinational corporations) are doing.

It seems like “the economy” is nothing more than a catchphrase to support just about any policy/criticism any politician puts forward on any issue whatsoever. Ensuring that the most vulnerable people in America are able to receive healthcare? What about the advantage businesses get from offering health insurance benefits in place of inflation-adjusted wages to desperate workers? Clearly healthcare is purely an economic issue, not one of compassion. In Canada, the Federal Government is in the midst of forcing through legislation that would drastically change environmental (including redefining the definition of a fish), national security, and old-age pension regulations, because they are all related to the economy. In fact, according to Finance Minister Jim Flaherty and Tory House Leader Peter Van Loan, simply to raise opposition to anything included in this ‘budget bill’ is to oppose the creation of jobs specifically and the economy of Canada in general.

All right, well if stewarding the country’s economy at any cost is the name of the game, what about working together with organizations such as the IMF (hardly a left-wing organization if one looks at its track-record) to prevent the worst from happening to Europe’s economy as a result of insolvency in Greece and Spain (and others)? Well no, say Bank of Canada Governor Mark Carney and Flaherty, that would be a poor use of taxpayer money. It would harm our economy. Because what we learned from the credit default swap disaster a few years ago is that economies of different countries around the world are completely isolated: if something goes wrong in Europe, we’ll all be okay, as long as we don’t overextend ourselves by trying to help.  Oh, wait…

Apparently, the economy is ephemeral and mercurial: it can require supporting several apparently irreconcilable beliefs and courses of action at the same time.  ‘The economy’ as referred to by so many politicians, is a very bizarre place, and bares little relation to what we see and do in the real world on a day-to-day basis.  When Mitt Romney refers to the 8.1% of Americans who count as being unemployed, and the very many more who are seriously under-employed, as evidence that the private sector of the American economy is struggling, he is in fact brushing over one of the tenets of neoclassical economics that has served his family so well: net benefit. Romney is worth more than 2000 times more than the average family, according to a report released the Federal Reserve Board on Monday June 12. According to the report, average net worth of American families decreased almost 40% between 2007 and 2010. But economic growth, another catchphrase that has become ubiquitous among the world’s politicians and business leaders, is driven by increasing revenues of large corporations, not necessarily by ensuring full employment: after all, families only lost an average of $50,000 per year. Fortune 500 company ExxonMobil earned more than $40 billion in profits in 2011. Which group do you think is driving US economic policy?