Tuesday Morning Links

This and that for your Tuesday reading.

- Laurie MacFarlane writes that flows of income and wealth have everything to do with bargaining power and social decision-making, rather than productivity or merit:

(A)ggregate wealth is not simply a reflection of the process of accumulation, as theory tends to imply. It is also a reflection of the boundaries of what can and cannot be alienated, priced, bought and sold, and the power dynamics that underpin them. This is not just a historical matter.

Today some goods and services are provided by private firms on a commodified basis, whereas others are provided socially as a collective good. This can often vary significantly between countries. Where a service is provided by private firms (for example, healthcare in the USA), shareholder claims over profits are reflected in the firm’s value – and these claims can be bought and sold, for example on the stock market. These claims are also recorded as financial wealth in the national accounts.

However, where a service is provided socially as a collective good (such as the NHS in the UK), there are no claims over profits to be owned and traded among investors. Instead, the claims over these sectors are socialised. Profits are foregone in favour of free, universal access. Because these benefits are non-monetary and accrue to everyone, they are not reflected in any asset prices and are not recorded as “wealth” in the national accounts.

A similar effect is observed with pension provision: while private pensions (funded through capital markets) are included as a component of financial wealth in the OECD’s figures, public pensions (funded from general taxation) are excluded. As a result, a country that provides generous universal public pensions will look less wealthy than a country that rely solely on private pensions, all else being equal. The way that we measure national wealth is therefore skewed towards commodification and privatisation, and against socialisation and universal provision.
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All statistics tell a story, but stories can be told from different perspectives. Embedded in the definitions of all economic statistics are value judgements about what is desirable and what is undesirable, which in turn shape the way we think about the economy. At the moment, the way we measure the wealth of nations mainly reflects the fortunes of capitalists and landowners rather than workers and tenants. Britain looks wealthier than Germany on paper, but this does not reflect the lived reality for most people. While it’s important not to overstate the extent to which statistics can influence the real world, this is important for at least three reasons.

Firstly, it illustrates how seemingly objective metrics often have ideological assumptions baked into them. While there is already a well-established literature on alternatives to GDP, many economic metrics are used in economic analysis and policy appraisal without any critical appraisal of their underlying ideological assumptions. This needs to change.

Second, it highlights how paper wealth has in many places become decoupled from productive capacity, and how conflating the two can be highly misleading. This is particularly the case where zero sum rentier activity is widespread, as in the case of Britain. Such discrepancies raise the question of whether the way that we currently measure wealth is really the most sensible.

But most importantly, it illustrates that the distribution of wealth has little to do with contribution or productivity, and everything to do with politics and power. As J.W. Mason states: “It’s bargaining power, it’s politics, all the way down.”

- Meanwhile, Anna Tims offers a reminder that a cashless and financialized society imposes disproportionate costs on the people who aren't catered to by big banks.

- Allison Alberto discusses a new study from the Alberta Federation of Labour showing how a $15 minimum wage will boost the economy as a whole as well as the standard of living of some of the people who need it most. Michael Speers implores the Ford PCs not to reverse planned minimum wage increases in Ontario. And Emily Klatt reports on the Saskatchewan NDP's push to finally follow suit with a living hourly wage for all workers.

- Finally, Michael Spence comments on the balkanization of international trade flows. Neil MacDonald writes that contrary to the Libs' spin, the new NAFTA represents almost total capitulation to the U.S.' bullying - including by limiting Canada's ability to seek out trade agreements with new potential allies. David Moscrop concurs that Canada has both made painful short-term concessions, and increased our future vulnerability to the U.S. And Duncan Cameron outlines the changes for the worse in the Trump NAFTA.