Editor’s note: We asked Thomas Michael Power, Chairman of the University of Montana’s Economics Department, to comment on a new reportby BC’s Urban Futures arguing that the province’s primary economic engine is its natural resource exports. Power disagrees—and argues that true economic development has little to do with exports and everything to do with creating a web of local economic relationships.
Two and a half centuries ago, early economists in France postulated that all wealth springs from the earth: farming, timber harvest, mining, and fishing were the sole sources of value, value that then circulated throughout the rest of the economy. It was not a coincidence that the ruling landed gentry who controlled the dominant resource, agricultural land, supported this theory. In England, at about the same time, a different theory dominated: All wealth results from exports that bring in the outside income that circulates through the economy. It was not a coincidence that the rising commercial trading class strongly supported that theory.
Economics as we know it, starting with Adam Smith, developed as a critical attack on such self-serving narrow conceptions of the “origins of the wealth of nations.” But two and a half centuries later we still have self-interested parties flogging these theories rather than treating them as long discredited and abandoned historical curiosities. The Urban Futures, Inc. consulting group’s “Regions and Resources: The Foundations of British Columbia’s Economic Base” (article here; pdf of executive summary here); is the latest example.
The report argues that the BC economy continues to be almost exclusively dependent on natural resource industries operating in the rural areas of British Columbia. The greater-Vancouver metropolitan economy is simply an avaricious parasite living off the wealth generated by the hardworking folks in the hinter land.
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This view of the BC economy is not based on analysis or data but on a simple assumption: All income and consumption and, therefore, well-being in BC is totally dependent on the income generated by BC exports to the rest of the world. There is no other source of economic activity and well-being except the income injected into BC by those exports.
This is clearly a false assumption. If it were true, no economic activity would be taking place on our entire planet since we have yet to enter into trade relationships with other worlds. In the economic history of our planet, we have never made a commercial transaction with extraterrestrials. According to this study, then, there must be no economic activity taking place on Earth. Yet, despite the planet’s failure to commercially export anything, the world’s economy has been expanding at a brisk pace for decades, even centuries.
Let me make a blunt economic assertion: The function of exports is not to “bring money into the economy” to support internal economic activity. Exports have only one function: to pay for the importation of goods and services that we do not produce ourselves. The more self-sufficient our economy is, the less we need exports.
Exports involve combining our work-effort with our savings and the local gifts of nature to produce valuable goods and services that we then send away for other folks to enjoy. How could that improve our well-being? In return we get colorful pieces of paper printed in other countries which are called “money” or, if we are really old-fashioned, a soft yellow metal called gold that we then put in an underground vault somewhere.
How could either of those improve our well-being? There is only one way: We use those foreign-printed colorful pieces of paper or that soft yellow metal to buy from other countries what we cannot easily produce ourselves. Those imports do improve our well-being since they give us access to something that we otherwise would have to go without or produce at a higher cost. So it is the imports, not the exports, that improve our well-being. The exports are a way of paying for the imports.
This is the reverse of the two and a half century old mercantilist theory that Urban Futures Inc. is trying to sell us. We only need exports to cover the cost of our imports and we only need imports to the extent we cannot produce certain things ourselves. Most of our economic activity does not fall into either category.
Where would we get the money that currently circulates within our economy if it were not for exports? The same place we get it now: The government and the banking system would simply create it! Money is, after all, simply colorful pieces of paper, jingling coins, or accounting entries at a bank. Money is a medium of exchange that facilitates internal economic exchange so that we do not have to do all of our trade in barter terms. It is possible to have a totally self-sufficient economy with an elaborately sophisticated economy with extensive specialization and division of labor all facilitated by an internal money supply. The US economy for a good part of its history fit that description, with little more than about 5 percent of its total economic activity associated with international trade. That did not hobble American economic growth.
True economic development does not involve more and more extensive dependence on exports. True economic development consists of weaving a local web of increasingly sophisticated economic interdependencies that create more and more niches for economic actors to deploy their skills and resources in satisfying an increasing range of their fellow citizens’ needs and desires. That increasingly sophisticated web of local economic relationships creates economic opportunity while capturing and holding more and more of the money that circulates within the local economy. This is not a new theory. It was basis of Adam Smith’s Wealth of Nations: The increasing specialization and division of labor.
That, of course, is what the greater-Vancouver economy is all about. It is also that type of diversification that has brought relative prosperity and stability to much of southern BC as the natural resource industries have provided a continuously shrinking fraction of total jobs.
Less than 10 percent of total BC employment is in the natural resource sectors. Is an economic assumption that tells us that 90 percent the Province’s jobs and 85 percent of its production are irrelevant a reasonable way to approach public economic policy? Does an economic assumption that urges the Province’s rural areas to focus exclusively on natural resource extraction with its accompanying dependency, instability and environmental disruption lay out a safe path for sustainable rural development? I think not!
Don’t believe one optimistic word from any public figure about the economy or humanity in general. They are all part of the problem. Its like a game of Monopoly. In America, the richest 1% now hold 1/2 OF ALL UNITED STATES WEALTH. Unlike ‘lesser’ estimates, this includes all stocks, bonds, cash, and material assets held by America’s richest 1%. Even that filthy pig Oprah acknowledged that it was at about 50% in 2006. Naturally, she put her own ‘humanitarian’ spin on it. Calling attention to her own ‘good will’. WHAT A DISGUSTING HYPOCRITE SLOB. THE RICHEST 1% HAVE LITERALLY MADE WORLD PROSPERITY ABSOLUTELY IMPOSSIBLE. Don’t fall for any of their ‘humanitarian’ CRAP. ITS A SHAM. THESE PEOPLE ARE CAUSING THE SAME PROBLEMS THEY PRETEND TO CARE ABOUT. Ask any professor of economics. Money does not grow on trees. The government can’t just print up more on a whim. At any given time, there is a relative limit to the wealth within ANY economy of ANY size. So when too much wealth accumulates at the top, the middle class slip further into debt and the lower class further into poverty. A similar rule applies worldwide. The world’s richest 1% now own over 40% of ALL WORLD WEALTH. This is EVEN AFTER you account for all of this ‘good will’ ‘humanitarian’ BS from celebrities and executives. ITS A SHAM. As they get richer and richer, less wealth is left circulating beneath them. This is the single greatest underlying cause for the current US recession. The middle class can no longer afford to sustain their share of the economy….. Their wealth has been gradually transfered to the richest 1%. One way or another, we suffer because of their incredible greed. We are talking about TRILLIONS of dollars. Transfered FROM US TO THEM. Over a period of about 27 years. Thats Reaganomics for you. The wealth does not ‘trickle down’ as we were told it would. It just accumulates at the top. Shrinking the middle class and expanding the lower class. Causing a domino effect of socio-economic problems. But the rich will never stop. They will never settle for a reasonable share of ANYTHING. They will do whatever it takes to get even richer. Leaving even less of the pie for the other 99% of us to share. At the same time, they throw back a few tax deductible crumbs and call themselves ‘humanitarians’. Cashing in on the PR and getting even richer the following year. IT CAN’T WORK THIS WAY. Their bogus efforts to make the world a better place can not possibly succeed. Any ‘humanitarian’ progress made in one area will be lost in another. EVERY SINGLE TIME. IT ABSOLUTELY CAN NOT WORK THIS WAY. This is going to end just like a game of Monopoly. The current US recession will drag on for years and lead into the worst US depression of all time. The richest 1% will live like royalty while the rest of us fight over jobs, food, and gasoline. Crime, poverty, and suicide will skyrocket. So don’t fall for all of this PR CRAP from Hollywood, Pro Sports, and Wall Street PIGS. ITS A SHAM. Remember: They are filthy rich EVEN AFTER their tax deductible contributions. Greedy pigs. Now, we are headed for the worst economic and cultural crisis of all time. SEND A “THANK YOU” NOTE TO YOUR FAVORITE MILLIONAIRE. ITS THEIR FAULT. I’m not discounting other factors like China, sub-prime, or gas prices. But all of those factors combined still pale in comparison to that HUGE transfer of wealth to the rich. Anyway, those other factors are all related and further aggrivated because of GREED. If it weren’t for the OBSCENE distribution of wealth within our country, there never would have been such a market for sub-prime to begin with. Which by the way, was another trick whipped up by greedy bankers and executives. IT MAKES THEM RICHER. The credit industry has been ENDORSED by people like Oprah, Ellen, Dr Phil, and many other celebrities. IT MAKES THEM RICHER. Now, there are commercial ties between nearly every industry and every public figure. IT MAKES THEM RICHER. So don’t fall for their ‘good will’ BS. ITS A LIE. If you fall for it, then you’re a fool.. If you see any real difference between the moral character of a celebrity, politician, attorney, or executive, then you’re a fool. WAKE UP PEOPLE. THEIR GOAL IS TO WIN THE GAME. The 1% club will always say or do whatever it takes to get as rich as possible. Without the slightest regard for anything or anyone but themselves. Reaganomics. Their idea. Loans from China.. Their idea. NAFTA. Their idea. Outsourcing. Their idea. Sub-prime. Their idea. The commercial lobbyist. Their idea. The multi-million dollar lawsuit.. Their idea. $200 cell phone bills. Their idea. $200 basketball shoes. Their idea. $30 late fees. Their idea. $30 NSF fees. Their idea. $20 DVDs. Their idea. Subliminal advertising. Their idea. Brainwash plots on TV. Their idea… Prozac, Zanex, Vioxx, and Celebrex. Their idea. The MASSIVE campaign to turn every American into a brainwashed, credit card, pharmaceutical, love-sick, couch potatoe, celebrity junkie. Their idea. All of the above shrink the middle class, concentrate the world’s wealth and resources, and wreak havok on society. All of which have been CREATED AND ENDORSED by celebrities, athletes, executives, entrepreneurs, attorneys, and politicians. IT MAKES THEM RICHER. So don’t fall for any of their ‘good will’ ‘humanitarian’ BS. ITS A SHAM. NOTHING BUT TAX DEDUCTIBLE PR CRAP.. In many cases, the ‘charitable’ contribution is almost entirely offset.. Not to mention the opportunity to plug their name, image, product, and ‘good will’ all at once. IT MAKES THEM RICHER. These filthy pigs even have the nerve to throw a fit and spin up a misleading defense with regard to ‘tax revenue’. ITS A SHAM. THEY SCREWED UP THE EQUATION TO BEGIN WITH. ITS THEIR OWN DAMN FAULT. If the middle and lower classes had a greater share of the pie, they could easily cover a greater share of the federal tax revenue. They are held down in many ways because of greed. Wages remain stagnant for millions because the executives, celebrities, athletes, attorneys, and entrepreneurs, are paid millions. They over-sell, over-charge, under-pay, outsource, cut jobs, and benefits to increase their bottom line. As their profits rise, so do the stock values. Which are owned primarily by the richest 5%. As more United States wealth rises to the top, the middle and lower classes inevitably suffer. This reduces the potential tax reveue drawn from those brackets. At the same time, it wreaks havok on middle and lower class communities and increases the need for financial aid.. Not to mention the spike in crime because of it. There is a dominoe effect to consider. So when people forgive the rich for all of the above and then praise them for paying a greater share of the FEDERAL income taxes, its like nails on a chalk board. If these filthy pigs want to be over-paid, then they should be over-taxed as well. Remember: The richest 1% STILL own 1/2 of all United States wealth EVEN AFTER taxes, charity, and PR CRAP. A similar rule applies worldwide. There is nothing anyone can say to justify that. Anyway, there is usually a higher state and local burden on the middle class. They get little or nothing without a local tax increase. Otherwise, the red inks flows like a waterfall. Service cuts and lay-offs follow. Again, because of the OBSCENE distribution of bottom line wealth in this country. I can not accept any theory that our economy would suffer in any way with a more reasonable distribution of wealth. Afterall, it was more reasonable 30 years ago. Before Reaganomics came along. Before GREED became such an epidemic. Before we had an army of over-paid executives, celebrities, athletes, attorneys, investors, entrepreneurs, developers, and sold-out politicians to kiss their asses. As a nation, we were in much better shape. Lower crime rate, more widespread prosperity, stable job market, free and clear assets, lower deficit, ect. Our economy as a whole was much more stable and prosperous for the majority. WITHOUT LOANS FROM CHINA. Now, we have a more obscene distribution of bottom line wealth than ever before. We h
ave a sold-out government, crumbling infrastructure, energy crisis, home forclosure epidemic, 13 figure national deficit, and 12 figure annual shortfall. ALL BECAUSE OF GREED. I really don’t blame the 2nd -5th percentiles. No economy could ever function without some reasonable scale of personal wealth and income. But it can’t be allowed to run wild like a mad dog. GREED KILLS. Bottom line: The richest 1% will soon tank the largest economy in the world. It will be like nothing we’ve ever seen before. and thats just the beginning. Greed will eventually tank every major economy in the world. Causing millions to suffer and die. Oprah, Angelina, Brad, Bono, Drew, and Bill are not part of the solution.. They are part of the problem. THERE IS NO SUCH THING AS A MULTI-MILLIONAIRE HUMANITARIAN. EXTREME WEALTH HAS MADE WORLD PROSPERITY ABSOLUTELY IMPOSSIBLE. WITHOUT WORLD PROSPERITY, THERE WILL NEVER BE WORLD PEACE OR ANYTHING EVEN CLOSE. GREED KILLS. IT WILL BE OUR DOWNFALL. Of course, the rich will throw a fit and call me a madman. Of course, their ignorant fans will do the same. You have to expect that. But I speak the truth. If you don’t believe me, then copy this entry and run it by any professor of economics or socio-economics. Then tell a friend. Call the local radio station. Re-post this entry or put it in your own words. Be one of the first to predict the worst economic and cultural crisis of all time and explain its cause. WE ARE IN BIG TROUBLE.