No economic system has lifted as many people out of poverty or fed as many hungry mouths as capitalism. Yet — to borrow from Hamlet — something’s rotten in the economy when a handful of companies witness unprecedented gains amid the worst downturn in nearly a century. The good news? Crises can force us to confront bitter truths, explore dramatic new paradigms and galvanize change. Today’s Daily Dose brings you 10 bold economic ideas that could fundamentally transform how societies build and view prosperity, plus bonus ideas from history. You almost certainly won’t agree with all of them. But no change comes without a little provocation.
Charu Sudan Kasturi, Senior Editor
1. Slow Growth
For decades, economies have sought faster GDP growth as their central performance metric. Now a growing number of experts, including Oxford’s Kate Raworth of “doughnut economics” fame, argue that slower economic growth and even stagnation are signs of success. Rapid economic growth is aggravating climate change, they point out, while economic stagnation indicates that an economy is working at its full potential. And you’ll never guess where the concept is catching on: in an increasing number of towns and cities in China, a country where, in 2020, the coronavirus exposed the limitations of rapid urbanization and high-speed life.
What if both capitalism and Marxism are enemies of economic equality? What if the answer isn’t universal basic income? As the world grapples with the question of how to bridge deep income inequality, some experts say the answer might lie in an unlikely place: Alaska. The state’s Permanent Fund, which is neither government-owned nor private, guarantees all Alaskan residents an equal annual dividend from revenue earned through oil extraction in the state. Experts argue that by applying that principle to economic exploitation of all common resources — minerals, the oceans, the skies — we might have a more equal world.
Sweden has the world’s highest number of unicorns (privately owned billion-dollar companies) per capita after Silicon Valley. Tunisia is Africa’s startup hub less than a decade after the tumult of the Arab Spring. They both have national policies under which employees can take leaves, receiving their wages for up to a year while their jobs remain secure, to pursue entrepreneurial dreams. The idea? Societies must share the risks of innovation they’ll eventually benefit from. For evidence that it works, look no farther than Canada, where the extension of maternity leave from 30 weeks to 52 weeks has led to a 39 percent spike in entrepreneurship among women.
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Imagine you start with $100 and a coin. With each toss of the coin, your wealth grows 50 percent if it lands on heads and shrinks 40 percent when it’s tails. Since there’s a 50 percent chance of each flip being heads, economics tells you this is a great deal. But in reality you’re guaranteed to lose money if the coin falls on heads and tails an equal number of times. (Try it with an equal number of heads and tails!) That’s the kind of flawed math that’s at the core of economics, argues top British physicist Ole Peters, as he leads a growing movement to challenge the basic principles behind 300 years of economic theory. He’s finding support from luminaries in the finance world such as Nassim Nicholas Taleb and Michael Mauboussin.
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Tourism is unlikely to return to pre-pandemic levels anytime soon. And remote-working company policies appear poised to stay in place for a while, if not permanently. Marry those two trends, and you have an unlikely recipe for revenue for tiny, tourism-dependent countries. The African island nation of Mauritius and the Caribbean paradises of Antigua, Barbados and Bermuda have all launched one-year digital nomad visas in the past few months — offering tax incentives to those who come, but also levying an upfront charge ranging from a few hundred dollars to a few thousand. Meanwhile, popular resorts, like Vakkaru in the Maldives, have launched packages specifically for long-term remote-working travelers.
Is working from home a luxury? Deutsche Bank researchers are proposing that, once the pandemic passes, countries institute a “privilege tax” on those who choose to work from home when they have the option of returning to an office. The argument is that you’re saving on transportation and on dining out — and the tax could generate $49 billion to help poor people. However, critics point out that work-from-home has forced employees — especially those living in small apartments — to spend money on making their bedrooms suitable for Zoom meetings, not to mention a surge in their Wi-Fi costs.
3. Beyond Bernie
French economist Thomas Piketty has an eyebrow-raising idea of his own — and this one’s definitely more proletarian. Piketty, who gained global acclaim with his 2013 best-seller Capital in the Twenty-First Century, is proposing a 90 percent inheritance tax on all those whose wealth exceeds $1 billion. His pitch goes beyond anything even Sen. Bernie Sanders has proposed.
4. Crypto Tax Havens
Raising taxes — on workers or the wealthy — isn’t the only way to make money. Lowering them to attract an industry others are skeptical about can work just as well. Just ask the governments of Malta, the Marshall Islands, Gibraltar and Bermuda, countries that are emerging as the world’s next big tax havens — specifically for cryptocurrencies. They’re opening their economies to proactively woo cryptocurrency investors, offering them protections at a time regulators in almost all major economies view them with suspicion. Many of these small nations are also launching their own cryptocurrencies.
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Don’t follow the money, let the money follow you. Instead of concentrating on GDP growth alone, if countries are measured on the basis of citizens’ life expectancy, income equality and overall sense of well-being, Costa Rica (pictured) tops the list. And since 2011, New Zealand computes its Living Standards Framework based on the rule of law, the state of the environment, mental health, income, housing and more — using that data to drive budget allocations. If it weren’t working, the world’s wealthiest wouldn’t view New Zealand as the perfect bolt-hole for when catastrophe strikes, and the country, along with Costa Rica, wouldn’t have been among the most successful in battling COVID-19. As for Bhutan, which coined the term Gross National Happiness? Its GDP per capita is 60 percent higher than neighboring giant India.
2. The Next Sharing Economy
But what if money isn’t the central factor at all? The gig economy has so far placed profit at the heart of its businesses, whether it’s Uber and Lyft for rides or Airbnb for home rentals. As more and more consumers look for a deeper meaning in what they do — including supporting Black-owned enterprises — an alternative, values-based economic model is gaining steam. It prioritizes social needs over private profit. Take a look at Boroondara, an affluent, elderly city with Australia’s highest proportion of single-occupancy homes — right next to pricey Melbourne. Now, under a new city-supported project, young and old are sharing a roof and food in Boroondara. Rent is secondary. The key idea? Helping the elderly overcome loneliness, and the young find affordable housing.
history’s unlikely teachers
The Chinese Communist Party likes to talk up the country’s economic successes over the past four decades as evidence that Beijing’s version of socialism is superior to both traditional Marxism and capitalism. But what exactly is the modern Chinese economic model? It’s actually borrowed from a country that might seem like China’s polar opposite but is more similar than you might imagine: the low tax, capitalist haven of Singapore. In 1978, China’s soon-to-be leader Deng Xiaoping visited the island nation that had by then built itself into a stunning economic success story. And Deng’s template would become the Singapore model — that a country could use capitalist economics to build wealth, without granting real freedom of press, speech or political orientation, as one party has ruled since its independence.
Fostering creativity by incentivizing small businesses is a modern capitalist concept, right? Wrong. The idea dates back to ancient Indian economic theory. In the epic Mahabharata, Bhishma, the patriarch and mentor of the ruling clan, tells the eldest prince that “a king should tax his kingdom like a honeybee gathering honey from the flowering plants.” In other words, tax in a way that an entrepreneur has enough means to keep growing — just like a bee collects honey while also facilitating pollination. The concepts of interest rates and of keeping the revenue deficit to a minimum were outlined by the third-century B.C. master of economics and statecraft Kautilya (his closest Western parallel is Machiavelli).
3. Modern Barter
The Stone Age system of exchanging goods without involving money is back, in many cases a direct outcome of U.S. sanctions against Iran, Russia, Venezuela and other countries and businesses that deal with them. India has traded rice for oil from Iran and Venezuela; the European Union electronic gadgets for crude from Iran; and Indonesia palm oil for fighter jets from Russia. The idea is to avoid formal banking channels that are vulnerable to U.S. sanctions. And it’s not just countries: Bartering has taken off during the pandemic as some goods have become scarce. What would you trade for a roll of toilet paper?
To stop inflation and currency devaluation, third-century Roman emperor Diocletian imposed fixed prices on most goods. So people began hoarding commodities. Diocletian’s response? A law against hoarding. So businesses started shutting down. The emperor introduced yet another law, penalizing businesses that shut down. The punishment under each of these laws? Death. Though we do wonder if Diocletian was actually trying to kill off the Roman economy.