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6 Myths About What Makes A Strong Economy

It is clear that people around the world are angry and disillusioned with the global economy. Growing inequality has left much of humanity struggling to make ends meet while the richest one per cent continues to profit. This rampant inequality is a sure sign our economic model is broken.

Photo by Oxfam America

Recently we revealed that eight billionaires -- all of them men -- own as much wealth as the bottom half of humanity.

It is clear that people around the world are angry and disillusioned with the global economy. Growing inequality has left much of humanity struggling to make ends meet while the richest one per cent continues to profit. This rampant inequality is a sure sign our economic model is broken.

So what exactly has gone wrong? Our economy is built on six false assumptions that continue to be sold to us as truths.

#1 Our profit-driven capital growth model is gender-neutral

The World Economic Forum predicts that it would take 170 years to close the gender pay gap at current levels of progress. Women are subsidizing the economy with free and cheap labour while facing violence and exploitation. It is predominantly women who are working for poverty wages in export processing and special economic zones. They are the ones fueling GDP growth but can't access the benefits.

Women are also responsible for countless hours of unpaid work in the home -- the cooking, cleaning, childcare and eldercare that enables our economy to function. All combined, this unpaid care work is actually worth trillions of dollars -- but it never actually gets accounted for. Every day, women face the challenge of balancing unpaid care work with the need to earn a living. To build a human economy, we need to invest in services like health care, childcare and eldercare, and make economic decisions that take into account the needs and challenges women face.

We need to take deliberate action to ensure that growth fairly benefits women.

#2 The market is always right and the role of government in the economy should be minimized

The firm belief in the power of markets, combined with a negative view of government intervention, is fundamental to neoliberal economics. While the market is an incredibly powerful engine for growth, it does not lead to inclusive growth if left unchecked. And a runaway market certainly won't ensure shared prosperity and a sustainable future.

Public ownership and market regulation is necessary to ensure everyone can access essential services such as healthcare and education. Governments can and should intervene in the economy to protect citizens from shocks, such as the financial crisis of 2008, and to prevent private monopoly control of services that the poorest rely on, like transportation or water.

#2 Corporations must maximize profits and returns for shareholders at all costs

Shareholder-driven profit-maximization is seen as the gold standard for economic growth. But this means that businesses look for ways to pay ever-less tax and squeeze workers out of a fair pay to maximize profits. This has resulted in massive conglomerates and extreme profit margins that disproportionately boost the incomes of already rich shareholders, while shortchanging workers, farmers, consumers, and the planet. While investors are satisfied, society hurts.

But it doesn't have to be this way. Business can thrive with adequate returns, as opposed to maximum profits on the backs of the poor and the planet. This model already exists. Some corporations have already chosen to prioritize a social mission over profit maximization, or to share ownership with community stakeholders, including workers. They have chosen to give workers and farmers a fair deal and are willing to cover the cost of more sustainable resource use.

#4 Extreme individual wealth is not the problem -- it's a sign of success

Contrary to public belief, research shows that many of those at the top do not owe their fortunes to hard work. Fifty percent of those on the Forbes billionaires list owe their wealth to inheritance or a high level of cronyism.

The inequality gap is also extremely relevant to economic growth. Countries that are more equal do economically better, for longer. Having more billionaires actually slows down a country's growth. The super-rich too often use their wealth to gain political advantages -- tilting a country's policies in favour of the few over the many. Less inequality helps create more democracy -- and vice versa.

#5 GDP growth should be the overriding goal of policy making

GDP is hailed as the measure for how a nation, and its leaders, are performing. But GDP doesn't tell us how citizens are faring. While Zambia's GDP rose and it transitioned from a low to middle income country, the number of people living in poverty in the country actually increased. Tracking GDP doesn't tell us who actually profits from growth. GDP also doesn't account for women's unpaid care work, which is subsidizing the global economy at an estimated value of $10 trillion USD a year.

#6 The planet provides endless resources for the economy

Our economic growth relies on natural resources or on natural systems to process waste. These environmental inputs and outputs are not accounted for and therefore ignored. A focus on short-term returns has blinded us to the negative long-term consequences of our economic model.

Our planet can no longer keep up with this rate of depletion, and the consequences fall disproportionately to the poor. The richest 10 per cent of humanity is responsible for half of all total emissions leading to climate change, yet it is the poorest communities that face the most severe consequences. Women in rural communities are particularly affected as they often depend on agriculture for a living.

People's well-being and the survival of the planet require a different kind of economy -- an economy that does not stand on the shaky ground of these six myths.

In a human economy, national governments are accountable to the 99 per cent. They intervene when needed and cooperate with other governments to fix global problems such as tax dodging, climate change and environmental harm. In a human economy, businesses seek to increase prosperity for all, and ensure that women's work is fairly paid and equally valued. Technology is steered to the benefit of everyone and to create an environmentally sustainable future. And governments measure what actually matters: people's wellbeing, not just GDP.

We think a more human economy is possible. We have a blueprint for it.

If you want to know more, join us on February 9th to explore how Canada can take the first steps to building a more human economy with its next federal budget.

Diana Sarosi is a Women's Rights Policy and Advocacy Specialist at Oxfam Canada

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