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"Backpack ready" economics "Backpack ready" economics
by Joseph Gatt
2020-11-21 11:52:36
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Pre-COVID, the economy around the world centered on this principle: borrow first, pay later.

In a “borrow first, pay later” economy, the assumption is that sources of income are “stable” or “likely.”

The banker's mentality was as follows: John Doe and Jane Roe can not remain their entire lives without income. So we will loan money to John Doe and Jane Roe for college, for housing, for transportation and for business investments, and, whatever income sources they will be getting, we will get a piece of that cake.

econ01_400The problem with this economic model is that John Doe and Jane Roe were looking for 100% safe sources of income, and jobs at companies or organizations that “could not collapse.”

First consequence: no one wanted to work for small businesses, because they could lose their job at any point.

Second consequence: many governments around the world, pressured by the banking system, established overly bureaucratic healthcare, unemployment benefits, and retirement pensions systems...

That is, rather than having your health insurance, unemployment insurance and retirement pension tied to your own name, it was tied to your employer. If you quit or get fired, you have to run around from office to office to be able to keep your health insurance, get your unemployment benefits, and try to keep your retirement pension.

So, if I were to change things, this is the way I would conceive the economy.

First, rather than use a “borrow first, pay later” system, I would use a system that I like to call the “backpack ready at any moment” system.

In the “backpack ready system” you don't borrow money for education, transportation, housing and business. Because that would mean that you would have to get a “stable” job, and would “force” the system to adopt debilitating labor policies that create a co-dependence between employers and employees.

In the backpack ready system, you don't “get a degree so you can get a job.” And you don't “get a job so you can pay back your loans.”

In the backpack ready system, you “study so you can learn several trades” and you “get a job so you can afford to move around, a nice place that you rent, and of course some learning and some leisure.”

In the backpack ready system, your employer does not take care of your unemployment insurance, health insurance and retirement pension.

In the backpack ready system, unemployment insurance, healthcare and retirement are private pension systems are completely private organizations with only one person making the payments: you, and no one else. Not your employer, not anyone else.

Of course you could negotiate your contract with your employer and ask for parts of your paycheck to contain funds for healthcare, unemployment insurance and retirement pension. But you get those perks in cash, and you're the one making the payments to the funds.

Should healthcare, unemployment or retirement pension schemes be private organizations or government organizations? I'd say they should be private organizations. But I'd say the law should not allow them to invest the money or inject the funds in big business. They should live almost exclusively out of payment long-term interest rates. And people should read the contract carefully before signing it.

In the backpack ready system, the economy is built on the assumption that you should learn several useful trades, and then get one or several jobs, and your backpack is always ready to move around other jobs or other locations. You don't buy a house assuming you are going to keep your job your entire life at that very location. You rent a house assuming you could get fired at any moment, or, even better, a huge opportunity could come knocking at any moment.

In the backpack ready system, you get a first job, multiply contacts, and then work for several organizations, or for one organization that values your work.

In the backpack ready system, you don't invest in businesses where the assumption is you are going to be around for many, many years. You invest small sums in a business, watch it grow, with the assumption that you could stop the whole thing any moment. Either completely change the business model, or change trades, sell the business or get a job.

In the backpack ready system, because employers don't have to depend on you because taking your name out of retirement pension schemes and health insurance is too much work. And you don't have to depend on your employers to repay your loans.

Finally, in the backpack ready system, you really need to make money. So you really have to learn useful skills. And you really have to network your way around and advertise your skills.

I hear people telling me: if we use this system, people are not going to make their health insurance payments, their unemployment insurance payments and their retirement pension payments. People need a “nanny” to make those payments for them.

My answer to this is, in any liberal and capitalist economy, health insurance, unemployment and retirement pension services are going to advertise, and are going to tell people that they would be stupid not to enroll.

But, if you refuse to enroll, that's your problem. We don't prevent people from gambling away their life savings, so why should we prevent people from opting-out of insurance schemes?

I also hear people say: if we allow pensions systems to be completely private, they are going to use predatory tactics, such as denying insurance to those who have pre-existing conditions like diabetes, blood pressure or mental health issues.

My answer to that is there's something called “the social contract.” If people with pre-existing conditions get organized, think about a viable, profitable, durable private insurance system that would provide insurance needs specifically for those with pre-existing conditions, I'm sure we'll come up for something for 25-30% of the world population in that category.

I also hear people say “if people don't have job security, they won't be able to find a job, they won't be able to plan for the future.”

Here's a semi-fictional story. Laugh all you want.

Yossi is 24 and Jane is 28 and they have been dating for 2 and a half years. Yossi wants to work as a freelance English teacher because there are many schools and there's a huge supply of jobs. Yossi made his calculations: he can make 6,000 dollars a month before taxes teaching English at three different schools, and an additional 1,000 dollars a month tutoring on Sundays. Yossi could make an additional 1,000 dollars a month writing for the local papers.

Jane keeps moaning and crying that Yossi's plans are “not viable” and “too risky” and “not stable.” Yossi tells Jane that he doesn't intend to spend his entire life doing that. Yossi wants to get married, rent a cheap place, and move around wherever job opportunities are best, all that while saving a ton of money and working as much as he can. Yossi wants to leave the future to the future, and the future will tell whether he should invest in a small business, move to a different city or country, or perhaps try his luck in a different career like translation, interpretation or perhaps journalism or punditry.

Jane wants something different. She wants to mortgage an apartment in “the big city” because “that's where rich people live.” Otherwise “people are going to gossip about us.” Jane also wants Yossi to get a job at “the big company” because “the big company” gives full job security and provides retirement pension benefits and health insurance.

Yossi tells Jane that he does not intend to spend his entire life in “the big city” and that if “the big city” becomes infested by drugs or that the plague hits, he wants to move to “the smaller city” or “the different country.” Yossi does not want to be a slave at “the big company” because “the big company” could fail at any point, so Yossi would rather get a job at “several small companies” to multiply income sources.

Jane tells Yossi that “people will make fun of us if you work at several small companies because people don't do that.”

Yossi's problem is the following: Jane is right, because there are no private health insurance companies and retirement pension companies that cater to “freelancers” or “people who work several high-income part-time jobs.”

Jane is right because “the big company” will provide health insurance and retirement pensions, and “the big company” also provides the wife and the kids’ health insurance. If Yossi works several jobs, and that they get pregnant, Yossi's children won't have insurance.

This system penalizes both Yossi and small companies. Small companies can't use Yossi's “talent” and Yossi can't do what he loves and has to settle for a full-time job slaving around at a company 60 to 70 hours a week, answering to a boss who very much dislikes Yossi. Yossi would have loved working for several small companies who like him and like having him around, and they could part ways for any reason.

In the end, Yossi and Jane split up. The birth rate deflates to 1 child per couple on average. Big business keeps hiring people who daydream of working for small business but who are stuck working there, and hate working there.

Did I mention that Yossi had zero debt? If Yossi had debt, that would have made the plans even more complicated.

So much more I could say, but I'll save other stories for another day.


    
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