We like to think that Canada is a rich country, and it should be. We have lots of land and plenty of resources, we have enough capital to develop and maintain modern industry, we have plenty of schools and we like to think that our people are as well educated as any in the world.
And we have done well, in some ways. We have developed one of the most livable countries and some of the most livable cities in the world. Most Canadians live in reasonable comfort with public medicine, reasonable levels of serious crime and comfortable housing.
But somehow all our advantages don't add up to a stable economy or even a decent living for all Canadians. As a nation we're in debt up to our ears, our average take-home income has been dropping steadily for about 20 years and, even in winter, beggars sleep in the streets of our cities. Official figures released in the spring of 1998 show that about 10% of all Canadians are on welfare.
Thirty years ago about 1,900 Canadians declared personal bankruptcy each year. Now we have about 84,000 bankruptcies a year and the number seems to be increasing.
In May of 1998 Stats Canada announced that from 1990 to 1995 the average income of Canadians fell every year for five years in a row. In those five years all Canadians lost an average of 6% of their real income, families in Toronto lost an average of 10% and the number of Canadian families who live in poverty increased by 32%, to 1.267 million families. This was the first time since the 1930's that we posted five years of consecutive losses.
Social agencies estimate that about 20,000 homeless people live in Toronto. Squatters live in vacant buildings and in parks. Teen-agers clean windshields at intersections to make a living, and sidewalks in downtown Toronto are littered with the glass of cars that have been broken into.
Some people refuse to see the rise in divorce and broken homes as a problem, but it's hard to see any benefit in the skyrocketing rate of teen-age suicides.
In 1951 we averaged about 1.8 suicides per 100,000 in the 15 to 19 year old age group, but in 1995 the official number was over 13. Apologists for the modern age like to pretend that the difference is honesty -- that more suicides are now recognized as suicides -- but that's a cop-out. We know that many suicides were disguised as accidents in the past but we also know that today's numbers represent only a fraction of the real total. The problem is so serious that the University of Toronto now has a chair in Suicide Studies, to study it.
The city of Winnipeg with about 800,000 people had 220 public food banks in the winter of 1996-97. Twenty per-cent of the people who used them had jobs, but did not earn enough money to buy the food they needed.
Official unemployment rates hover about 10% but the official numbers give a false impression because unemployment figures count only people who "participate" in the labor market. Students who can't find jobs after they finish school are never employed, therefore they can never be unemployed. People who run out of unemployment benefits are dropped from the rolls, as though they had somehow become employed.
The official unemployment rate in December of 1995 was 8.2 percent but only 68.1 percent of adult men had jobs. That means nearly 32% did not have jobs. Some of the others were retired, but the real life unemployment rate for adult Canadian men that month was probably 15 or 20%.
In the "great depression" of the 1930's unemployment hit 17.6% in 1932, peaked at 19.3% in 1933 and dropped to 9.1% in 1937. Unemployment of adult men seldom hit the levels we now consider normal, and for all but two years of the depression there was less overall unemployment than we have now.
We have more people working now than we had in the depression but real wages have been dropping for more than 20 years, and are now so low that most members of many families have to work. Back in the 1930's most Canadians owned their own homes, most women did not have to work outside the home and kids did not have to work their way through school.
Among people who work we find a grotesque range of incomes. Some Canadians make little more than 10 per-cent of the national average and others make up to 1000 times as much.
That's dangerous. Society can be stable when everybody is poor or when everybody is rich, but a society in which some people have 100 or 1,000 times as much as others is just waiting for some kind of explosion. In the United States -- the economy on which our is modelled -- about 1% of the households own nearly 40% of the national wealth and the richest 20% own more than 80% of the country.
And the situation is getting worse. In the years from 1989 to 1995 average income for all Canadians dropped more than 5%, to $16,726 a year, but executive salaries increased by an average of 14%. Average disposable income dropped more than 8% from $13,845 in 1989 to $12,633 in 1997.
Conditions are so bad that even governments worry. The Ontario government has closed schools and hospitals that we can no longer afford to operate, Canada Post no longer delivers mail to the door in many areas and -- even though we know that garbage collection is vital to public health -- cities across Canada have reduced the frequency of their garbage collection. In a desperate attempt to raise money federal and provincial governments began running lotteries more than 15 years ago, and now run full-scale gambling casinos.
And this is not a temporary "adjustment" to world market conditions. It's a change in our status, from one of the leaders of the first world to one of the mass of the third.
We're going down the tube -- but why? What happened to the country that was supposed to lead the world into the 21st century?
Some pundits say that much of our unemployment is caused by "new technology". People have no work, they say, because factories are automated and machines make most of our goods.
Not so. If that were the case we would not need to import manufactured goods from low-wage countries.
Some factories are automated and machines make some goods but we use and consume so much more than our ancestors that there should still be lots of work to go around.
Modern car factories employ many robots, for example, but today's cars are so much more complex than the cars of earlier years that there are probably more man-hours of work in a modern car than in an old-fashioned one. Besides, we have more cars than our parents did and we replace them more often.
A robot explored Mars but it did not replace a human worker. Most of the jobs robots do are new, and they should make no difference to employment in a modern culture.
We have so many material goods in the modern world that the fact that robots make some of them is irrelevant. There is still about as much hand work to be done as there ever was, but it's not Canadians who do it.
The real problem is a series of fallacies in "conventional" economics which distort the mathematical "model" economists and politicians use to represent the world. Any one of these fallacies could do serious harm to an economy or a social system, and together they make a real mess of everything.
If the premises are wrong, any system based on them will be wrong.
That's not a new idea. In his preface to the {General Theory of Economics} economist John Maynard Keynes says ---
"-- if orthodox economics is at fault, the error is to be found not in the superstructure, which has been erected with great care for logical consistency, but in a lock of clearness and generality in the premises."
If there is a fault in the premises some people might expect a professional or at least a trained economist to find it, but they would wait in vain. As Robert A Charpie, then president of Bell and Howell, observed in a speech at a symposium in New York, change seldom comes from within any science, discipline or organization.
Charpie analyzed 108 major technical innovations that appeared in the first 60 years of this century and found that only 20% of them came from the industries they changed. The photo industry did not invent instant photos, the textile industry did not invent synthetic textiles and the machine tool industry did not invent tungsten carbide.
About the time Charpie made that speech several billion-dollar companies were developing and building giant computers, but the home computer that changed the world was developed and manufactured by amateurs. Hollywood did not invent television and the photo industry did not invent digital photography.
I'm not part of the economics establishment but in 40 years as a reporter I've seen politicians and professional economists make fools of themselves time after time. Now it's my turn. If I'm a fool, at least I have a better excuse than they have.
I'm going to deal with the fallacies I see in our economic system one at a time, but please remember as you read about each one that there are many fallacies, and in many cases they reinforce each other so the effect is compounded.
As far as possible I make no value judgments in this book. When I say that this or that action produces this or that effect, I make a statement of fact.
I think that's important because many of the statements I make will disturb a lot of people. The value implications of these statements disturb me too -- that's why I'm writing the book -- but I am writing about causes and effects, not about values.
And I write in plain language, because I believe the credo I call "Rutherford's dictum" named for Baron Ernest Rutherford, the English chemist who discovered and was the first to split the atomic nucleus and who won the Nobel prize for chemistry in 1908.
"If you can't explain what you are doing to the woman who cleans your laboratory", he used to tell his students, 'the chances are that you don't understand it yourselves."
If Rutherford was right I have to assume that some established and famous economists really do not understand economics. I'm sure that many people who read this book will decide that I don't know much, but that's life. All I ask is that you keep an open mind, and that you think through the arguments rather than compare them with established dogma.
on to MARSHALL'S FALLACY
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