Ch. 10 Economy: What is The Economy?

 Part 2. Economy: The Business of Building a Better World

“An imbalance between rich and poor
is the oldest and most fatal ailment of all republics.”

– Plutarch.

Chapter 10. What Is "The Economy"?

“What a revolting development this is!”

– Chester Riley, The Life of Riley.

What do we mean when we say "economy"? 

It's time to clarify our thinking.

When a politician or someone in the main stream media uses the word "economy", they are usually talking about macro level, nationwide statistics and trends such as unemployment, GDP growth, and the stock market.

However, without context, these numbers don't paint a realistic picture of the true economic health of a country. 

For instance, when we reduce unemployment to a simple percentage, that percentage fails to tell us anything about the quality of jobs, what kind of wages those jobs are paying, or what kind of ownership, benefits and fulfillment workers are getting from those jobs. 

GDP (Gross Domestic Product) is a measure of the value added, nationwide, through the production of goods and services. But that number doesn't tell us much about what our money is being spent on, or the quality of life that these goods and services actually provide for the average citizen. 

When we talk about the economy, many people will initially think of the stock market, but that’s not an accurate representation either. Why? Because the top 10% of the wealthiest, mostly white families own 89% of the stock (Frank, 2021.) 

In America, the top 1% of earners managed to gain more than $6.5 trillion in the form of cushy corporate equities, not to mention mutual funds while the Covid-19 pandemic raged. In contrast, the bottom 90% added $1.2 trillion, according to the latest data from the Federal Reserve (Stiglitz, 2018)

Corporate equities and mutual funds owned by the top 10% hit not just a high, but a record high during the second fiscal quarter. Meanwhile, only 11% of the individually held stocks were owned by the other 90% of Americans. (Stiglitz 2018).

So, we really can’t say that just because the upper percenters are doing well, that the economy is also doing well. The economy needs to work for everyone, not just a handful of shareholders.

In reality, most of these numbers are simply a snapshot of how well rich people are doing on any given day. The stock market and even GDP growth has almost nothing to do with the financial well being of the vast majority of Americans.

Ultimately, "the economy" is just a story. A narrative that is used to paint a picture of something that is complex and ineffable, yet has a real, discernable impact on all of our lives every single day. For the last 50 years, we have allowed this narrative to be driven and dictated by those top percent capitalists and their enablers in Washington and the press... That story has produced undeniable results...

And this, is not the picture of a healthy economy. At least, not for 70% of Americans. 

The economy, such as it is, is not only unequal, it perpetuates inequality (Stiglitz, 2018.) Exactly why this is happening comes down to several factors. Partly, the elites who own most of America’s capital are simply able to save more money than the rest of the country. This means their share has steadily increased over the years.

But the rules for our current economic system have also been written, and then subsequently re-written, again and again for the advantage of the rich, and the disadvantage of the rest of humanity. The US is one of the worst examples of this phenomenon. (Stiglitz, 2018.)

Political scientists have studied and documented how our political system tends to convert economic inequality directly into political inequality. The system becomes a feedback loop unto itself, as greater political inequality also leads to greater economic inequality. The US has done this in the past—for instance, by softening antitrust laws and weakening unions (Stiglitz, 2018).

But the economy isn’t just unequal, it’s also quite fragile. There have been eight major stock market crashes since 1980 alone! The economy as it’s thought of today is a lopsided house of cards that will always fall over given some slight force of circumstances.

As proof of this, you only have to look at what economists refer to as “Friday the Thirteenth” referring to Oct. 13, 1989. That Friday, a stock market crash resulted in a 6.91% drop in the Dow. Prior to this, a leveraged buyout (LBO) deal for UAL, United Airlines' parent company, fell through. As the crash transpired mere minutes after this announcement, it was quickly identified as the cause of the crash (Khan, 2022).

Just one company having difficulty was enough to seemingly bring the entire house of cards down in a heap.

Does the economy really have to be this way?

Of course it doesn't.

However, if we want to change the system to work better for the vast majority of Americans, we have to be willing to take control of our economic narrative. If we want different outcomes, we need a different story.

We start by understanding the current narrative. We must dissect and pick apart the economic story that is already being told. To understand the beliefs, values and behaviors that got us here in the first place. 

Only then can we start to explore new ideas, new beliefs, and new values that will work to evolve a new economic culture that will lead to better results and better economic well-being for the wider populace. 

These next few chapters will help us to understand the ideas and intentions behind the system we now find ourselves in. Starting with our old friend, capitalism.