(Sorry if duplicate)
This appears to be an incomplete picture at best. Let's examine:
> It's time to introduce "workfare for capital"
> By Jim Stanford
>
> Frank Stronach, former CEO of Magna International, once explained why
> companies weren't investing more in the production of goods and
> services.
One reason during one time period doesn't provide proof of causation
("why"). There are many reasons why the above has occurred historically
and is occurring today.
> "Why would you pour a foundation, buy machines, or hire employees," he
> asked, "if you can make as much money buying Canadian government bonds?"
>
> The figures bear him out. The average return on equity for Canadian
> business from 1990 to 1998 was 5.7%, while the average return on
> long-term Canadian bonds during the same period was 8.2%.
The rates weren't constant in each case during the 8 years. Business
decisions have been made with shorter and shorter horizons this decade,
so 8 yr averages aren't very helpful. Interest rates varied
significantly during the decade, and there could have been times when
business prospects were low and capital did find alternate placement in
government debt instruments. However, few businessmen would buy a 10
yr(or longer) bond when they might need to liquidate the position within
a year or so if business prospects improved; so the rate on 1 year
treasury bills would be a more reasonable comparison.
> Conservatives have long deplored the alleged harm that "easy public
> money" has on the work incentive of poor Canadians. In response,
> provincial politicians have cut welfare rates and the federal government
> has cut unemployment insurance benefits. And they try to justify these
> punitive cutbacks by claiming they help to break the poor's "cycle of
> dependency."
Maybe so.
> But the recipients of the biggest public welfare handouts are being left
> alone. They are the financial investors who received $77 billion in
> interest payments from Canadian taxpayers last year on their holdings of
> government bonds.
Why is interest payment a "handout"? The borrowings were made by the
representatives of the "taxpayers" (most working age, voting Canadians).
Spending money that you don't have (in the current monetary/fiscal
system)involves the voluntary payment of interest. If one doesn't want
to 'handout' interest, one doesn't borrow.
> That's almost four times as much as the total cost of
> the welfare programs of all 10 provinces, and over six times the total
> UI benefits paid out last year.
Maybe so.
> Our politicians conveniently ignore the impact of all this "easy public
> money"
This is a sour grapes rant against all people who were able & willing to
spend less than they earned (or inheritanced from other earners). If the
money went into bank deposits or money market funds, would Stanford
still claim the interest was "easy public money"?
There is no difference in the macroeconomic picture since government
expenditures cycle through the economy similiarly to private
expenditures.
> on the work incentive of investors, who obviously have lost the
> will to earn an honest living.
All economic success therefore becomes dishonest once one decides to
cease working for money? Philanthropists are dishonest, all retirees are
dishonest if they have any savings. Get the logic?
> Knowing they can rake in so much money
> simply from holding pieces of paper, they have no need to undertake
> useful and productive work. Why should they bother financing the
> production of goods and services of real value when they can live as
> well, or better, just by clipping coupons from government bonds?
"real value"?This assumes that growing economic throughput is always an
unquestioned plus for humans. I suggest that GDP is not always the best
indicator of quality of life.
See the GPI (Genuine Progress Indicator) at Redefining Progress:
http://www.rprogress.org
The belief that the pieces of paper(government bonds) represent no
additional GDP is of course totally false, as the capital invested was
cycled through the economy as I already explained.
> These unfortunate investors are clearly locked into a cycle of
> dependency. All they can think of is what they will buy when they get
> their next government cheques. Will it be expensive booze? A gambling
> spree in Vegas? A cruise on a luxury liner? Another Mercedes-Benz?
Ad hominem insults reflect on the one using them. Presuming to know the
motivations, intentions, and future actions of others is hubris. The
author is the unfortunate one locked in his own mental apartheid.
> What these lazy investors need is a healthy dose of tough love. Their
> welfare rates--the interest on their risk-free government bonds--should
> be slashed by a percentage that at least matches the deep cuts in social
> assistance.
The reduced deficits (now currently a surplus) in the Canadian national
budget have resulted in declining interest rates. Less borrowing could
force rates even lower.
> And, if they still won't go out and get real jobs, they
> should be made to enroll in a "workfare for capital" program. In return
> for their welfare income, they would have to invest some of it in
> community development projects. Like low-cost housing, for example.
Why not ask your government to use the proceeds from the bond sales to
fund these? Is "be made to" & "would have to" the preferred sort of
societal mechanisms you wish used on a minority of your fellow citizens?
Look out, they may be used on you!
> Such a worfare program for unproductive investors
I think the typo is freudian; really means 'warfare' :-)
> could be patterned on
> the pronouncements of Ontario Premier Mike Harris in his 1995 election
> platform. The Common Sense Revolution was the definitive statement on
> the benefits of workfare. We reprint it below, with appropriate
> editorial changes indicated in bold-face:
>
> "We want to open up new opportunities and restore hope for investors by
> breaking the cycle of dependency...We should prepare financial welfare
> recipients to return to the real economy by requiring all able-bodied
> capital...either to work, or to be reinvested in the community in return
> for their benefits...Although the amount of money involved may not be
> large, the possibility of community work opens the door for financial
> welfare recipients to learn new skills, work towards full-time
> employment, and increase their self-esteem."
I'm a strong advocate for community reinvestment, employee stock
ownership, customer stock ownership (incl mutual insurance companies),
cooperatives, community housing & land trusts, community supported
agriculture, etc. These are not necessarily at odds with all government
borrowing. Municipalities and states in the US borrow to support low
income mortgage pools, hospitals, bridges, schools, water, sewage
treatment, etc.
If Stanford qualifies as an economist, I'll seriously think about
hanging up a shingle & re-joining his 'real economy' as a competing
consultant in the field.
Steve Kurtz
Ottawa
> -----
>
> (CAW economist Jim Stanford is a visiting fellow with the CCPA.)
>
> Taken from The CCPA Monitor, June 1999.
