Six Principles for Economic Resilience

Stewardship is the answer.

Note: This is Part 3 of 3. See Part 1 here.

Photo by Stockcake.

Resilience is what we get when we steward key underlying shared resources. Since we want economic resilience, we need to steward the economy. To be clear, stewardship is not, as some economists suggest, about getting good results in the short term or maintaining the status quo for a little longer. That is optimization, a different beast as I pointed out that Brian Klaas pointed out.

Instead, we apply universal principles and let the specific implementations vary with context — see Part 1. In Part 2, I dove deep into the regenerative agriculture example because a) I love it, and b) regen ag is about as close as I can imagine to a silver bullet for the socio-econo-cultural mess we currently find ourselves in domestically and abroad.

In this post, I propose some economic stewardship principles.

Stewarding Our Economy

This country will not be a good place for any of us to live in if it is not a reasonably good place for all of us to live in. ~Theodore Roosevelt

I have asserted in this blog across several posts that socio-economic equity is foundational to economic health. I argue that equity can be considered a resource in need of stewardship. Equity — specifically in healthcare, childhood education, and wealth endowments — engenders security. It empowers people to emerge from survival mode. Once rid of the short-sighted zero-sum thinking endemic to survival, people can think instead about investments in themselves, their children, and our shared environment.

Investments are at the heart of medium-term economic growth. In many economic discussions, labor and physical capital are the default vehicles for investment, but human capital (training and education) and natural capital are no less vital. Which recalls the regenerative agriculture example in Part 2.

Economic resilience is understood by economists to be worthy of study. But the literature is a bit short on actionable conclusions. Part of the problem is that resilience is hard to quantify for any system. In macroeconomics, it’s even harder because our definition for economic success is not clearly nailed down and agreed upon. We have average and aggregate metrics like GDP, inflation, and unemployment, but average isn’t typical and aggregate isn’t everybody. So we miss some stuff.

And besides, the point of an economy is to support a diversity of lives and lifestyles; the point is for people to peacefully live the lives they choose. For most of us, I believe, the life we choose includes adding value to the lives of others and being appreciated (or paid) for it. Which is economics. The thing we call “the economy” is both an aggregation of and a platform for the indelibly human practice of specialize-and-trade. All this makes it hard to measure true economic health.

But “hard to measure” does not mean “OK to ignore.” If we can agree a healthy economy underlies a nation’s widespread peaceful satisfaction among citizens, then surely we can agree our economy warrants thoughtful stewardship.

Here’s my first stab at six economic stewardship principles. Message me with improvements.

1) Respect Labor

It is not about winning. It’s not about losing. It’s about showing up and being seen. ~Brené Brown

I am…less interested in the weight and convolutions of Einstein's brain than in the near certainty that people of equal talent have lived and died in cotton fields and sweatshops. ~Stephen Jay Gould

As mentioned, I believe that fundamentally, people want to add value and be appreciated for it. Sure, we usually have to pay each other to work on days we would rather not work. But there is value in work beyond the immediate accomplishments we ostensibly pay for — namely, connection and self-worth. In one example of the ripple effect of a decent paycheck, evidence indicates that higher minimum wages reduce violent crime.

So…ensure living wages; be union-friendly. Angry, frustrated workers are bad for the economy even for those of us who (think we) only care about GDP growth. And since it takes repeated demonstrations of respect to convince people we are not a threat, it makes sense to consider the act of respecting labor to be an investment that pays off in the medium- to long-term. In other words, stewardship.

2) Disconnect Healthcare and Education from Wealth

There can be no keener revelation of a society’s soul than the way in which it treats its children. ~Nelson Mandela

Within “all men are created equal” lies the sub-principle that all people… are, if given appropriate educational resources, capable of learning, exercising sound judgment, and acting on said judgment… ~Ada Palmer

In case it needs pointing out, childhood education and healthcare are investments in — stewardship of — future adult citizens’ contributions to future GDP growth. Not to mention the current mental health of their parents, many of whom are the workers we should avoid making angry and frustrated.

Instead, in the U.S., childhood education is tied to local property taxes. Which means the more money parents have, the better their kids’ educations. Most wealthy countries do not do this because a good elementary education for everyone’s children is a shared benefit.

Until we passed Obama’s Affordable Care Act (ACA), healthcare in the U.S. was tied to employment, which is tied to income and education, and therefore wealth. The Center for American Progress says “Obamacare” has worked mostly as intended. But it is still under fire — it’s going to take some more work to keep it and ideally to strengthen it.

Also, let’s pay teachers well enough to compete with their other employment options (see “Respect Labor” above). A natural experiment in Wisconsin studied by an economist at Duke University demonstrated that performance pay for teachers resulted in a larger supply of teachers (so more competition among them) and better standardized test results for students.

3) Minimize Financial Extremes

The Americans are, of all modern peoples, those who have pushed equality and inequality furthest among men. ~Alexis de Tocqueville (1805-1859)

We may have democracy, or we may have wealth in the hands of a few, but we cannot have both. ~Louis Brandeis

Don’t ignore the poor when they’re down. And, on the other end of the wealth spectrum, don’t create royalty by allowing lazy inheritance of massive wealth. Both are bad for longer-term economic success as measured by standard metrics.

The poor are blocked from contributing at their full potential, which is bad for everybody. Meanwhile, another dollar of wealth for the wealthy has much less subjective value than another dollar of wealth for the middle class. So if our goal is to maximize value among our citizens — not to mention our motivation to work — it seems reasonable to ask all our children to start at roughly the same financial starting line and build their own wealth as ability and luck would have it.

I subscribe to the notion that “pre-distribution” (policies meant to prevent inequity as distinct from inequality) is preferable to redistribution (policies to level effective incomes after households have engaged in labor and consumption). Not everybody agrees, but those arguing for the advantages of pre-distribution tend to use more holistic and practical arguments. John Rawls, a giant of political philosophy, was an early proponent, although the “predistribution” term had not yet been coined. Examples of pre-distributive policy include minimum wage and collective bargaining laws (see “Respect Labor”). Also anti-trust and intellectual property laws (see “Referee Democracy-Capitalism Interactions” below).

As Brené Brown says, “Most of us are one paycheck, one divorce, one drug-addicted kid, one mental-health diagnosis, one serious illness, one sexual assault, one drinking binge, one night of unprotected sex, or one affair away from being [the people] we don’t trust, the ones we pity, the ones we don’t let our children play with, the ones bad things happen to, the ones we don’t want living next door.” So social safety nets (yes, redistribution) still make sense under certain circumstances — SSI, EITC, unemployment benefits, SNAP, Medicare, etc.

Affordable housing has garnered increasing attention in recent years — for good reasons, including mental health, elementary education outcomes, and financial stability. This is a complex issue and may warrant a combination of pre- and redistribution policies.

As for managing the upper end of the wealth spectrum, progressive income taxes are important. Firm caps and taxes on estate inheritance would help with the “starting line” mentioned above.

4) Referee Democracy-Capitalism Interactions

No man chooses evil because it is evil; he only mistakes it for happiness, the good he seeks. ~Mary Wollstonecraft

The idea that we can enjoy the benefits of society while owing nothing in return is literally infantile. Only children owe nothing. ~Sebastian Junger

As I have argued, capitalism is deeply human. Meanwhile, the natures of compound interest and power accumulation ensure that the rich get richer and more powerful. Unless we keep the interactions between power and money in check, we will, through negligence alone, enable the corrosion and eventual collapse of democracy. At this point, does anyone still think that’s just a theory? We have not yet risen above the socio-political blunders of history. Still making the same blunders…

Keep money out of politics — seems obvious. So overturn Citizens United v. Federal Election Commission for starters.

The U.S.’s electoral college has probably run its course — its original purpose was to give voters in slave states (male “owners” of other people, to put a finer point on it) more influence than free-state voters.

If something can corrupt you, you’re corrupted already. ~Bob Marley

All judges should have term limits for goodness sake. The argument that lifetime appointments insulate them from politics is obvious nonsense. A corrupt or biased judge appointed for a lifetime isn’t less corrupt or biased than one with a term limit!

Anti-trust laws should be vigorously enforced.

5) Fund Compassion

Pity arises when we are sorry for someone. Compassion is when we understand and help wisely. ~Gautama Buddha

In compassion lies the world’s true strength. ~Gautama Buddha

Nothing can make injustice just but mercy. ~Robert Frost

I have previously argued that compassion is good for the economy. In a nutshell:

• Compassion is a cornerstone of effective leadership. Regardless of the mission — battle or business — we must practice mutual support. And mutual support without compassion is a tall order at best.

• Happy people are better workers — less distracted, more engaged. Happiness relies, in part, on giving and receiving compassion.

• There is strong evidence that Corporate Social Responsibility (CSR) programs lower systemic, credit, and legal risks.

Compassion makes room for redemption. A true justice system, then, should also make room for redemption. The World Justice Project ranks countries’ justice systems based on seven factors: actually catching perpetrators; prosecuting them; correcting their post-prison behavior (as distinct from punish-and-release); doing those things impartially and without corruption; avoiding political interference; and respecting the rights of the accused and convicted. (Denmark gets high marks in all these areas; the U.S. very much does not.)

Politicians in the U.S. are feeding us a load of nonsense about crime. But they do that because it works (for them). The truth is that violent crime is way down since the 1990s. Meanwhile, when it happens, we do not use best practices in dealing with it.

Policing standards. The World Justice Project reckons the U.S. ranks 101st out of 142 countries in terms of criminal system impartiality. Shameful.

Why do we build the wall?
We build the wall to keep us free…
How does the wall keep us free?
The wall keeps out the enemy…
Who do we call the enemy?
The enemy is poverty…
Because we have and they have not!
Because they want what we have got!…
What do we have that they should want?
We have a wall to work upon!
We have work and they have none
And our work is never done…
And the war is never won…
That's why we build the wall
We build the wall to keep us free

~Anaïs Mitchell, “Why We Build the Wall”, as heard in the “Hadestown” play.

Immigration reform. First of all, most serious studies of immigration conclude it is net good for the economy. After all, immigrants got off their butts and went to the considerable trouble of inserting themselves into a foreign culture to participate in a better economy. Participation — which includes consumption, not just work — adds value.

A common counter-argument is that illegal immigration is the problem. Perhaps, but before we get too gung ho on enforcement, we should probably set up a better system and then enforce that one. A substack post by immigration expert David J. Bier of the Cato Institute lays out the actual problems with the U.S. immigration system and it’s not much to do with insufficient “crack-downs.” He lists (paraphrased here) high U.S. demand for labor; easy Internet access to instructions for crossing the U.S.-Mexico border; hapless U.S. laws that incentivize repeated illegal crossings until one “works”; and banning asylum seekers who are already desperate — risking trouble in the U.S. is a much preferable alternative to trouble where they came from.

6) Consider Context

As with all complex systems, context matters. What works best depends on the situation. (That’s why Gabe Brown outlines principles and not instructions for soil stewardship — see Part 2.) Different geographies, geologies, cultures, and demographics dictate different specifics for implementing economic stewardship principles. Current ecological climates, as well as the local climates we can expect in twenty or a hundred years, are factors. Does the climatological/geographical context lend itself to cropland, fishing, or drilling for oil? High density human population or low? Residential or industrial? The physical infrastructure priorities would be different depending on answers to these questions (see Part 1). Institutional priorities might vary. Minimum wages would definitely vary. Education sensibilities could vary. Financial wealth distributions, and therefore the regional definitions of “financial extremes,” would vary. The means by which we discourage corruption and unfair business practices depend on cultural context.

With this in mind, one could argue that, to the degree practical, it does indeed make sense to push policy-making to the states and local governments. But only if our federal government concurrently maintains authority to interpret and enforce the principles (and abide by them, too).

It is About the Economy…

The test of our progress is not whether we add more to the abundance of those who have much, it is whether we provide enough for those who have too little. ~Franklin Delano Roosevelt

It is about the economy. We just need to remember that the economy is much bigger than politics, power, and wealth accumulation. It is a platform for entire populations to build lives on.

Even if helping the poor, outcast, and downtrodden doesn’t float your personal boat, it is good for conventional metrics of economic success to support everybody else in our economy. The economy is a shared resource. We want it to be resilient, so we should steward it.

I defined resilience as a lack of vulnerability to unforeseen disruptions. Admittedly, it is pretty hard to measure that; we can only look back post-disruption and see how we did. But stewardship, from which resilience emerges, is easier to quantify. Many of the shared benefits come later, but even so, it feels good as we do it.