I feel like the title of this post could be a misguided and unfortunate name a of a tea lovers book. One my wife might buy on holiday from a little loose-leaf tea store, as a memory of her trip. And then a year later, one of my vising friends is browsing the shelf and it catches his eye and questions it, with my wife not understanding the connotation.
What connotation?
Anyways....
After dropping my daughter to her dance class, I went into a local café to ride the hour out and rather than the normal coffee I would get and since I am on one morning cup a day now, I took a cup of ginger tea instead. It cost €3.90 for a cup of hot water and a teabag, which while very normal these days, I feel is exorbitant for what it is. I get that they have a premises and pay staff and they definitely aren't raking in the money, but it is around 20x for what it could be bought in a supermarket for a box of teabags. But, everything has gone up in price, with no value returned.
In Finland, the average loss of purchasing power over the last three years has been two months salary. To make it easy, that means if a person earns 12,000 a year, they can now only buy 10,000 worth of goods and services. This is a massive change in buying power in such a short time, and many people are struggling. Which is why next time I drop my daughter to dance practice, I will sit in the library instead. Cafés can be reserved for more value-adding times, like when I am with family or friends.
This shouldn't be happening, should it?
If we are looking to improve quality of life, we shouldn't be scaling back the things we enjoy, we should be building the foundation so that we can enjoy more of these things. Within reason. But, this is not how the economy works, because that profit-seeking activity will always lead to a reduction in average possibility, because there is a massive increase in wealth at the top end of the distribution. That increase has to come from somewhere.
Yesterday I was reading an article from Australia where the BlackRock CEO, Larry Fink, was saying that Australia should have 30-year, fixed-rate home loans, rather than variable. This would mean that they would have a set amount to pay on their mortgage and be far less susceptible to interest rate fluctuations, which leaves more free capital to invest into the capital markets. This is what happens in the US, where the majority are on fixed-rate mortgages, which plays a big part in why Americans invest more into the capital markets.
“One of the greatest foundations of the United States is that more Americans invest in equities than any place in the world. Why? They have more confidence, they’re more hopeful. But another foundation is they don’t have to worry about the ups and downs of their mortgage payments.”
There are some merits to this, but there is also a lot of risk, as while it is true that it would eventuate in more money going into the capital markets, it also leads to overborrowing, risky lending and well, Global Financial Crises. Yet, Larry Fink doesn't have to worry about any of this.
Sometimes the definitions write themselves.
And by the way, 20% compounded annual growth rate across thirty years is incredible.
What I find interesting is that it is very easy for the average person (like myself) to look at some kind of proposition that promises to increase the amount of money in my pocket soe that I can do more of what I enjoy, like going to a café, and agree with it. Especially when in financial hardship of some kind. It is a greed mechanism, but also a security mechanism too, but it is going to usually lead to a problem, because again it is going to equate "amount of money" to wellbeing, even if the amount of money I get is going to be at a much lower rate than the amount of money that those at the top get. This difference is the wealth gap, and rather than making people's lives better, it is making people's lives worse, because relatively, the majority are falling behind the minority.
Governments do this all the time to us with indicators like GDP and GNP, which are good at seeing how much money a country generates, but are terrible at indicating how much wellbeing has developed. This "wealth = wellbeing" equation works to some degree at the individual level because a wealthy person can afford more opportunity, but it doesn't work at the country level, because average wealth doesn't speak to the distribution of that wealth, or the purchasing power of the individuals involved. Currently, the capital markets are hitting highs, while purchasing power of real people are hitting relative lows.
We have a strange conflict as a society, because if we want to ensure our own wellbeing now and in the future, we should be looking to maximise our financial health, because that is what allows us to buy what we need (and want) for ourselves and families. Yet, to do this successfully, we would likely have to be part of a system that ultimately is going to lead to the average wellbeing of everyone else declining. What we should realise is that while the economy can work for us at a localised level, at a global level it is going to harm us.
Yet we don't think too much about this.
For instance, when we go into a sport store and find a pair of shoes we want that are on sale, we are happy. Yet, we choose not to think about the supply chain that enabled that same pair of shoes to be created, manufactured, shipped, and sold to us at a discount, and still make a profit. Did anyone get harmed along the way?
Top 5 sports brands by sales:
Major investor Nike:
Vanguard 9.0%
Blackrock 7.3%
Major investor Adidas:
Vanguard 2.82%
Vanguard Star Funds 1.28%
Vanguard Tax Managed Funds 0.78%
Major investor PUMA:
Blackrock 5.5%
Major investor Lululemon:
Vanguard Fiduciary Trust Co. 11.24%
BlackRock 6.26%
Major investor Under Armour:
Vanguard 7.9%
Blackrock 7.0%
Profit-seeking doesn't care about wellbeing, it cares about generating wealth for investors. There are lots of caveats and complications, but simply put, over the space of time, the capital markets will be a driver of wealth gaps, because those who can invest will make more than those who can't. But, having more people invest under the current system isn't the answer either, because that is going to drive up the wealth gap further, as the new money pushes wealth into the old.
Financial health seems to be a trade-off of general wellbeing, but I think that it shouldn't be this way. If we were to have a healthy economy, I think it would look to have wealth generation incentives aligned with human health outcomes for physical, mental and emotional wellbeing. This still requires a huge amount of different industries to accomplish good results, but it would likely lead to a wider distribution of wealth, and a change in focus of what industries get the majority of the investment. If people had a higher level of wellbeing, the social and geopolitical structure would shift dramatically also.
For the better?
Who knows, but the current system is definitely not improving the global environment.
Ultimately though, I am an idealist on these matters, but a realist in my estimation of change for the better actually happening. Most individuals will of course look to secure themselves first and that is going to maintain the status quo, increasing the wealth and outcome gaps even further. I don't blame them of course, because everyone wants to have better outcomes for themselves and their families, so will obviously support initiatives that promise to offer them - even if they lead to worse outcomes overall.
What I do believe I know however, is that relying on government and industries that are driven by the singular algorithm of monetary growth, is going to lead humans into a worsening situation at all levels that matter to humanity. The economy might boom, but our lives bust. Tet, all we seem to be able to do, is watch on with a cup of tea in hand.
While getting tea-bagged by the profiteers.
Taraz
[ Gen1: Hive ]
