An Alternative Conception Of The Pandemic Economy
Long ago, I had a dream. In this dream, I was still in America, but we had a very different economy. I dreamed that most Americans had a year of expenses saved up. I dreamed that Americans didn’t rely upon Social Security. They relied upon their own savings to retire at 30 or 40. They didn’t rely upon private insurance for health care. In my dreams, Americans exerted the political will to have medicare for all.
If the vast majority of Americans had a year of expenses saved up, we wouldn’t need Congress to write checks for us during the lockdown. We could just wait it out until the pandemic passed, and we’d be OK. The only people who would really suffer a pandemic would be the investor class, but they have enough money that they’ll never be homeless, so no one would really suffer much at all. If Americans had a year of expenses saved up, very little government intervention would be required at all to keep the economy moving during a pandemic because the people would be their own banks.
How could we get to that place? You know, a place called “America” where the people have enough money to take care of themselves? We start with education. We start by teaching our kids how to keep their expenses low so that they could save their money. We teach our kids not to get credit cards. We teach our kids the value of compound interest and good investments. We teach our kids that a dollar saved is a dollar earned. We show our kids that when money accumulates, it attracts more money.
Where do we find such an example? We could start with Mr. Money Mustache. Here is a fine young man who figured out how to save enough money to retire at 30. He saved about 60% of his income and found a way to live off of his savings starting at 30. He has shown us that it is possible to retire at 30 with economic discipline. He didn’t stop working, though. His savings gave him the room he needed to start his own ventures. His savings game him the room he needed to fail at the business so that he could become good at business.
In this country, we have this myth about entrepreneurs. We have been led to believe that most entrepreneurs started on their own and built a successful business by the sweat of their brow. That might have been true in the past, but our economy isn’t structured that way. We really don't have much room to fail in this economy.
Rob Kyosaki, the author of the book “Rich Dad, Poor Dad”, says that only 1 in 10 businesses will succeed. In order for an entrepreneur to succeed, he might have to fail quite a few times before he finds success. Failures cost money. So the people who do start businesses start with very low expenses so that they can afford to start the business and fail. They often have the support of their spouse or partner who goes to work while they start their business. They sometimes have family support to start their business, too. Most entrepreneurs these days, have financial support from someone else so they can start a business and fail until they get it right.
We are often led to believe that the wages we are paid as employees are fair. But if we look at public policy, we see that it’s largely one-sided in favor of business. We see that wages have stagnated for 40 years while executive compensation goes up, up and up. Guess what kind of people promote that kind of public policy. One of them is sitting in the White House right now.
Most people don’t have access to wage data. We don’t have access to compensation consultants who can help us bargain for what our skills are worth. Big businesses have access to reams of wage data, they know what the prevailing wage is. Businesses are in a much better bargaining position than the average wage slave.
What would happen if most people had a year of expenses saved up? Then most people would be choosy about the jobs they work. They would be in a position to demand better wages or walk. When an entire workforce has money saved up, enough to last a year without work, then the labor market becomes a seller’s market. The seller gets to set the price in a seller’s market. With money saved up, workers can do the research they need to find the job they want at the price they want. They could start their own business at their option.
Now imagine what kind of a discussion we might be having in Congress if say, 90% of Americans had a year of expenses saved up and the other 10% not that far behind. The debate wouldn’t be about cutting checks for the people. The discussion would be about directing enough resources to deal with the virus. With money saved up, the people would not panic, because they would have had had the time and resources to research the policy decisions leading up to the outbreak. The people would be able to take the time to engage in the policy discussion. With a year of expenses saved up, the people would not be begging for help from their millionaire Congress.