Economic Literacy

It was during the ’08 economic meltdown. I was listening to that bastion of financial rectitude, the CBC, presenting a phone-in show soliciting suggestions to solve the unfolding crisis. Solutions ranged from arguably plausible to off-the-wall insane. An example of the latter was a university (!) student’s suggestion that the “government just write everyone a cheque for $1M”.

At first, I thought this might be some clever satire unfolding but, alas, it was not; this guy was totally earnest that “the government” had “all the money in the world” and should dish some of it out to help “everyone in need”. He didn’t specify what his major was; I’m just going to hope it wasn’t economics. But I doubt ignorance of financial fundamentals is solely the province of sociology and women’s studies majors. Evidence of real financial ignorance abounds everywhere, including at the very highest levels of government, places where, at least theoretically, financial sophistication would be an essential job requirement.

I’m really not surprised, though. Our system of education places little importance in drawing any parallel whatsoever between the consequences of profligate management of a household’s finances and that of an entire country’s. Economic myths are easily sold to an economically illiterate electorate: “Green” jobs (expensive and economically destructive); “stimulus” spending (ad infinitum) to purchase prosperity (impossible); and a brand new “theory”: Radical increases in wages (in a difficult economic period) to “boost the purchasing power of workers”.

The latter (hair) brainstorm is apparently predicated on the myth that Henry Ford doubled the wages of his assembly line employees so they could all afford to purchase the cars they were producing. Nothing could be further from the truth. Henry Ford could not only well afford to raise these wages as he did due to the amazing efficiencies inherent in his assembly line innovation, he had to do so to stem the tide of 370% annual worker turnover in has plants. The firm has reaped the p.r. benefits of a contrived reason for the raise ever since.

For most of us, it would be a wise investment to obtain and study a basic economics textbook before buying the next snake oil salesman politican’s prescriptions for a better life through bigger deficits, accumulating debt or voodoo economics.

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