Pardon the juvenile title, but I really could not think of a better one after reading about the protests that are currently happening in Toronto over the G20 and in France over a proposal to raise the retirement age. Both protests seem to stem from a fundamental lack of understanding of economics and law. This is a serious failure of education and one that must be addressed lest the next generation starts to seriously believe that anarchy is the way.

Toronto

In the past 24 hours, my hometown of Toronto saw the most destruction in a long time. You can check out the photos, but it ain’t pretty. It started as a normal G20 protest and some 500 people later broke off and started breaking windows, setting fires and attacking the police. I’m not sure what they were protesting (I don’t think they know what they were protesting), but one quote resonated with me: “Corporations have more rights than we do, and that’s disgusting”.

That quote is one of the fundamental misunderstandings about our modern financial and legal system that can be rectified with education. Corporations don’t have more rights than “we” do, corporations have the same rights as we do. This is because in the eyes of the law, corporations are no different from people. They have jobs, they pay taxes, they can commit crimes and be subject to judicial proceedings, they become bankrupt, they have the right to freedom of expression and association, etc. There are some statutory differences between human persons and corporate persons, but those differences are not all that relevant.*

*But those differences are sometimes humourous. For example, corporations cannot married and divorced. At least one individual thinks they should be able to.

Corporations were given the power to be “persons” in order to separate the activities of the companies from the activities of the people that run those companies. Look above where I said that corporations can commit crimes: I mean that literally. It’s not the same as saying that the CEO of a corporation can commit a crime. It means that the juristic entity that is the corporation can commit a crime. It’s punishment can be anything from a monetary fine to the death penalty. Death penalty means a court order that the corporation be wound up and no longer carry on business. A corporation’s liberties may also be limited, for example, a corporation may be forbidden from certain activities (i.e. permits may be denied, certain business units may be ordered sold, etc.). Almost anything that can be done to a human person can be done to a corporation. They are living, breathing entities, the difference being that instead of food, water and air, they require investors, managers and workers. Cut off one of those, and it’s the functional equivalent of cutting off food or water or air to the human body.

There is another important point here that I won’t give too much attention to, but will mention: the people that profit when a corporation succeeds is everyone. If you expect to collect from the Canada Pension Plan or if you have stocks or mutual funds or even if you have a savings account, how much money you make depends on how a corporation does. By protesting against corporations you are literally biting the hand that pays you when you retire.

I can go into the history of how corporations and pension funds came about, but I won’t. The point is that this is something that needs to be taught in schools at the high school level. Given how our society operates, knowing this is every bit important as knowing how our political system operates. Once you are informed, the quote “corporation have more rights than we do” stops making sense. The protesters who say things like that are forced to rethink what they are actually protesting.

Don’t get me wrong: there is nothing wrong with saying that corporations should not be seen as persons. But in order to say that, one would have to know the legal context of our society.

Paris

There is currently a protest going on in France regarding a proposal to raise the retirement age to 62 from 60. Unlike Toronto, the protesters seem to know what they’re protesting. However, that does not mean that their premise is not fallacious. I especially like this quote: “the government should tax high wage-earners and banks instead to ensure there is enough money for pensions”. Toward the end of the article, there is also a suggestion that a higher life expectancy should not lead to more years at work. Let’s address those in turn.

Taxes

There is some appeal in taxing the rich (be they humans or corporations) to fund social programs, including pensions. That is, in fact, what the modern welfare state is built on and there is nothing inherently wrong with that. There is however a misconception that results from a lack of knowledge of economics: it assumes that those being taxed will just eat the loss. This is simply not true. If you increase the tax on banks, guess what the banks are going to do? Hello higher fees and lower interest paid on savings. If you try to legislate that, your country simply won’t have banks because nobody will be willing to take a lower profit. Then where will your pension come from? The fact that people don’t know (or think they can ignore) this reality points to a massive failure in education.

Life Expectancy

The protesters in the article are protesting the fact that a higher life expectancy will lead to a decreased standard of living because people will be forced to work longer. That is exactly true and protesting that is like protesting against the sun setting in the evening. Take a very simple example: assume there is no government and you are the only person on an uninhabited island. You expect to live until 85, you work from 25 to 65, setting aside food and whatever else you need to last you the 20 years that you plan not to work (between 65 and 85). Now, let’s say instead of living until 85, you live until 90. At the end of your 85th year, you have a choice: you can drastically reduce your standard of living or you can go back to work to collect more food and other necessaries of life. You can protest that all you want but your protest will not make your conundrum go away.

The same is true in a complex modern society: you put away money toward retirement and when that money runs out, you’re finished. If you ask the government to take care of you past that, what you’re doing is asking the younger generation (the one that’s still working and paying taxes) to take care of you. This means they have less to spend on themselves, which means that social conditions are deteriorating.

Ff you try to increase taxes on businesses to maintain the standard of living, look above for what will happen. The standard of living will only get worse because you will either get inflation or businesses will leave (resulting in unemployment). The only way to avoid that is to have continuous population growth (the more people are working, the less the drain on the social system to take care of those who are not working). Continuous population growth however has its own problems, the most obvious being environmental degradation.

Solution

Knowledge is always the solution to ignorance. As a result, we should start mandatory teaching programs in introductory law, economics and politics at the high school level. Given modern society, those courses are probably more important than geography and arts and definitely more important than gym which everyone is forced to take in grade 9. Having those courses as electives is not good enough because given the choice, many high school students will take gym over economics and drama over politics. If social ignorance is to be uprooted, everyone must be educated, not just those that feel like it.

I have heard, seen and read the debate among pundits in regard to healthcare reform south of the border. Cutting through the misinformation, spin, rhetoric and outright bullsh*t, there is a somewhat trivial economic explanation to the differing opinions. As usual, some of the easiest explanations are the ones most often overlooked.

This economic perspective is a result of one of the comments I saw on the WiseLaw Blog which talked about the comments of Glenn Beck (who was ranting about a “lottery” that is the Canadian healthcare system). The comment went as follows:

“…I know nothing of Beck but suspect he promotes the “conservative” point of view, which, briefly stated, is that being rich should MEAN something….”

This is serious food for thought. What exactly does it mean to be rich? In obvious language, it implies an ability to consume luxury goods and services available in the market. Conversely, what does it mean to be the opposite of rich (I don’t want to say “poor” because that has a different definition)? It means a general inability to consume luxury goods due to having to spend the majority of income on necessities.

You can see where this is going with regards to healthcare. Framed like this, the question is trivial: is healthcare a necessity or a luxury? Your initial answer will depend on your political preference, but consider the following premises and let’s see where logic takes us:

• People cannot control when they become ill; and
• Spending on luxury goods and services is first to get cut in an economic downturn due to less money being available and thus a greater proportion of income being spent on “necessities”.

What is the logical conclusion if we assume that healthcare is a luxury? If a “rich” person becomes ill during a recession when there is less money to spend on luxuries, money would not be spent on treatment.

Politics notwithstanding, I hope my readers can see why this conclusion is silly. Treatment for an illness cannot wait for an economic upswing nor should people’s health be affected by where we stand in the business cycle.

I can therefore conclude that healthcare is not a luxury, but a necessity. This also means that the anonymous reader of WiseLaw is only partially correct: for “conservatives” being “rich” should mean something, but any conservative with an understanding of economics will understand that being the opposite of rich should not spell lack access to healthcare.

Cross-posted at LawIsCool.ca