Jonathan Brun

On COVID-19, Crisis, and Basic Income

Cassandra – National Museums Northern Ireland

When the Coronavirus broke out last year in China, it seemed so far away. My wife and I had plans to move to Shanghai in April for two months and I would work from our offices there. We optimistically hoped that China would get the disease under control in January and February and it would all be back to normal in April. Today, in China, business and life are returning to normal and there is a good chance that on April 1st, 2020 it will be business as usual with the streets of Shanghai filled with people moving at a frenetic high and the delicious aromas of street food in the air.

While China is getting back up and running, the rest of the world is in lock-down and chaos. This turn of events is both surprising and highly predictable. It is surprising and disappointing that despite warnings we did not prepare better. The way I look at it, “Western Society” had 100 years to prepare for this Pandemic. Just over 100 years ago, the Spanish flu swept through the world in 1918-1920 and killed millions and taught us valuable lessons. Since then we have developed reams of people trained in advanced risk planning, risk assessment, economists, epidemiologists, and a variety of other professions. We built international organizations such as the WHO. We had numerous recent warnings and practice sessions for a pandemic with SARS, MERS and EBOLA. Despite all this knowledge and experience, western governments have failed miserably in their job to protect their people and their economies. The difference in the actions of China and other countries is often attributed their centralized government with strong powers and a population that is used to following orders. This line of argument was recently highlighted in the NY Times and other publications. While there is an element of truth, it is a gross oversimplification and it is an abdication of our responsibility to maintain organizations, systems and plans for a potential pandemic. If there is one conclusion I can draw from the COVID chaos so far, it is that knowledge is not enough. Governments must actively plan, practice and coordinate their various institutions and governments to ensure they can act swiftly when a new virus emerges. I would suspect that most Western countries felt they were prepared for a pandemic, but our overconfidence has led us down the path we are now on.

While the ineptitude of the west is unpleasant, it is even more remarkable that we are surprised by this crisis. Frankly, I am frustrated in my own failure to see this coming and to sell off my stock portfolio! In our globalized and connected world it should have been clear that a virus that infected tens of thousands of people in China would eventually seep out of the country and contaminate the world. We knew that the virus was fairly contagious, certainly more so than SARS, and yet we kept plodding along as if China was hermetically sealed. Some countries limited flights to China, but we all know that it only takes one person to contaminate a very, very large population. There are certainly mountains of academic papers on humanity’s collective failure to see large events coming when they are perfectly clear in hindsight. Sure, hindsight might be 20/20, but with our experts and highly educated populations, why were more people not ringing massive alarm bells in January 2020? Anyways, moving along…

Perception of the Economy & Money

There will certainly be some positive outcomes from this crisis. First and foremost, people are starting to understand how the economy is in fact just a bunch of people transferring money to each other for services. One person’s expenses is another person’s income. Wow! Holy Moly! Who knew?

Night Of Disaster Painting
Graham Coton

If we shut down one part of the economy the rest comes to a really abrupt halt, all the way down the line. It’s almost as if we are on a moving train with interconnected parts! One surprise, to some at least, is how tightly wound the economy is. A month without revenue – for people or businesses – is often more than they can handle. There is very little buffer in our society which still has a majority of people living paycheck to paycheck and many businesses in a similar situation. Hopefully this crisis will teach us the importance of planning for the future, helping the less fortunate and building businesses, institutions, people and family that can withstand longer periods of rationing. Beyond preparation and coordination, I am optimistic that this crisis will change our perception of money and what the government can do when it wants to.

To try and prevent or mitigate the current train crash, certain governments, such as Canada and the United States, are implementing a form of basic income for those hit by this crisis. Starting in April Canada will offer $2,000 per month to all residents who lost their job or were affected by the crisis. The Canadian government, after a successful petition by UBI Works (with which I am involved), consolidated a variety of programs into a central program that will start April 6th, and begin distributing $2,000 checks by April 16th. This basic income will be critical to stabilizing the economy and keeping people going. While $2,000 is not enough to live on for some, it is a good start. This relatively unconditional monetary issuance will set a new standard for what is possible and I am optimistic that it will break our traditional perception of what government can do. The Globe and Mail outlines how the program is in fact a significant departure from traditional employment insurance programs. Perhaps this emergency program will be the breach in the dam of complex government programs.

I have been active in the basic income movement for nearly seven years and in that time I have seen a variety of advocacy approaches. My take has always been that basic income is much more revolutionary than people realize. It is not simply a transfer of money, it is a transfer of power. By issuing a basic income to all citizens, you are reducing the influence of the rich and eroding their money and power. The consequence is a more even playing field where a larger swath of society have a fair shot in life. However, because basic income takes something away from powerful people it was always going to be hard to implement. My thinking back then and today is that the only way to institute a basic income was during a period of economic crisis. During a time of social and economic upheaval, government and the people could make this radical change without giving the opposition the time to organize a fight. Naomi Klein has written a lot about disaster capitalism where governments privatize industry during times of upheaval. I do think that disaster politics can go in the other direction to, progressive ideas can become mainstream when a crisis takes place. Milton Friedman wrote, “Only a crisis—actual or perceived—produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes the politically inevitable.” The key is to take the temporary and conditional cash transfer Trudeau has created and turn it into an actual permanent and universal basic income. The $2,000 transfer is a key step towards an actual universal and unconditional transfer of wealth to all members of society.

Now that the program is in place UBI Works is pushing for this basic income to become universal and permanent. A real basic income would allow the economy and society to be far better prepared for the next crisis. A basic income would create the buffer that society needs in a time of crisis. It would set a foundation under the feet of everyone and allow us to withstand the future storms that are bound to hit us.

Published on March 30, 2020

On having a child

It is tremendously easy to have a baby. Of course, the hard part is to raise the child and be there for them throughout their life – regardless of the child’s personality, capacity’s and fortune. This past August, I had my first child, Samuel, who has been a true blessing. As I write this, he is trying to learn to crawl on his nearby play-mat.

As with other life events such as love, death of a close family member, bankruptcy, success or health issues – is hard to understand what something means without experiencing it first hand. Unsurprisingly, it is hard to convey what having a child and more importantly, having a human depend entirely on you, feels like until you actually hold one in your hands and stare into the depths of their eyes.

At my age of 36 many friends now have children and I have had the opportunity to spend time with older friends who already have grown or semi-grown children. They all explained the various benefits and challenges of raising a child and in all honesty this helped prepare for my own child. However, when my friends had children over the past few years, I would offer my congratulations and a gift, but the congratulations was not nearly as wholehearted as it is today. When I received congratulations from family and friends upon the news of the birth, I could hear a much higher level of enthusiasm in their voice. Once you have a child, you understand the true blessing that it is and you feel a much deeper sense of joy when someone else has their own child.

I have always felt that there are no shortcuts in life and we cannot reinvent the wheel. To life a full, happy life you need certain key ingredients; a meaningful purpose, a strong partner and ideally, children to take care of. Only through these things can you really experience the full spectrum of the human condition. Of course, some people cannot or choose not to have children and this is not meant as a criticism of their choice. Yet, without reproduction our species would disappear and without child rearing, our children would not survive. Like music, food, friendship, love and hate – there is undoubtedly an innate powerful desire to have and raise children hard coded into the depths of our genetic code.

My wife and I have been blessed with a healthy and easy baby. He sleeps well, eats well and barely cries. We are also in the most fortunate of situations with the presence of many family members who are more than eager to babysit and help. Colleagues and friends who do not have such a strong support system or who have difficult babies face a much, much greater challenge than us. It is therefore absolutely critical that our society continues to support families and especially those with more difficult situations. I am very proud that Québec offers subsidized daycare services for only 10$ a day as well as one year maternity leave, 5 weeks fatherly leave, and our Canadian government offers the world’s most generous child support program – the Canada Child Benefit Program, which offers up to $7,500 dollars per year per child based on your income. These programs make a world of difference and are critical to levelling the playing field for all children; giving them a fairer shot at success. Having a child may be easy, but raising a productive member of society is a huge challenge and this support system is critical to our society’s future.

Children are their own people. While they may look up to their parents until their teenage years, they are eventually on this planet to do their own thing. Too many parents project their own values, goals, and failed ambitions on their children. My modest hope is to empower our child to pursue success and happiness in this challenging world. There are no shortage of parenting articles or books, but my approach is to first say thank you to my wife, who inevitably does more than me, and then to offer a steady hand while our son faces the exciting milestones of life. I look forward to the journey ahead and I hope to encourage others to embark on the same rewarding adventure.

Published on January 6, 2020

Capitalism and a market-based economy are not the same thing

Capitalism and a free market economy are not the same thing. While this may seem evident to many, there seems to be a general confusion that leads to all sorts of challenging discussions. If you aim to change or improve a system, it is first critical to properly understand it. To understand a complex system such as a modern economy you should probably start with some of the core organizing principles. How do we allocate resources among citizens? How free are citizens? How much control does a central authority have? etc. It is clear that we cannot address all of this in a blog post, but I wanted to point out one critical issue that keeps coming up in discussions – capitalism is a method of distributing resources in a society. In contrast, a market based system of exchange of goods and services is a mechanism to force organizations to improve their performance and the value they deliver. While there are strong linkages between the two concepts, they are not the same thing.

When discussing politics, the common refrain is that capitalism and our current form of democracy are the best systems we have and we should be content to keep plodding along. I will put aside the democracy issue for now, as that merits another post. There is a common social acceptance that capitalism was the driving force behind the insane economic growth of the last 300 years. From the industrial revolution to the latest AI startup, we tend to chalk up progress to the existence of capitalism. However, I would argue that we have a strong tendency to conflate capitalism and a market based economy. It is not simply a chicken and egg question (though it partially is). What came first, capital or innovation? Capital over the past millennia was generally stable and then exploded in the industrial revolution. What changed? We still had kings, aristocracy, the church and other organizing forces. Innovation allowed organizations to offer greater value in the form of cheaper goods – kicking off competition, which is a self reinforcing flywheel that has kept accelerating ever since.

Capitalism

Capitalism is commonly defined as “an economic and political system in which a country’s trade and industry are controlled by private owners for profit, rather than by the state.” This definition seems fairly clear, but I would argue that it conflates ownership with trade. Capital is a representation of the accumulation of something of value. You can have political capital, you can have social capital, you can have a variety of capital. It is not necessarily monetary, but it is something of value.

Capitalism is a form of social organization that is based on people and institutions with capital making decisions. You could contrast this to Socialism, where it is a society that collectively makes decisions or with Aristocracy where it is the king that makes decisions based on divine right. Some would say that we cannot simplify capital to be a generalized concept of counting “value” as that would be too simplistic and too vague, but let me continue on this tangent. A critical error in the definition above is to limit capitalism to the ownership by private interests. Many countries have state run companies, meaning they are owned by the state. The current Chinese political and economic system is often referred to as state run capitalism because the Chinese government is so active in the economy via the companies it owns and controls. So, capitalism should be better defined as a system where those who own the capital make the decisions – be they state, private or other.

Money

Despite using money on a daily basis, many of us and I did not know that money really is. In most school textbooks, we are taught that money is a tool for exchange – it allows me to buy something from you without trading directly in what I have (chickens for example). However, this concept of the origin of money is utterly false and lacks any substantial anthropological evidence. To learn more, simply consult David Graeber’s essay on debt.

So, what is Money? Money is a quantification of value. Money is a representation of assets (value) and debt. In fact, money was invented by the ancient Sumerian temples who were trying to quantify their assets – cows, grain, wine,… and track who owned what to whom. Money, ultimately, is a score-keeping system. It is, an accounting mechanism. Anyone who has run a business or done complex tax returns will know that the “score-keeping system” we use for managing money is far more complex than a simple point system.

In contrast to scoring goals in a game, money is not created in the same way. Money is issued (today at least) by a central bank. In reality money is not issued so much as created by the issuance of credit. The central bank issues credit, not money. When you hold a $20 bill in your hand, it is a note of credit from the government to you. You do not actually have $20, you have credit and in counterpart the central bank has a debt. However, if we start to look at all of money as an accounting system – which it is – then we can begin to realize that the game is rigged.

There used to be a social movement called the Social Credit (notice the use of “Credit” in the name). Without going into detail, this movement identified how the current accounting system used by businesses and by owners of capital was rigged against wage workers. In short, the way we account costs and revenues is not reflective of the actual costs of production and it is unsurprisingly skewed towards the owners of capital. To take a simple concrete example we can look at the depreciation of equipment. The depreciation rates that businesses can apply to their equipment is usually in excess of the actual depreciation of the equipment. That is, you can reduce the value of the equipment in your accounting of profits and losses faster than the value of the machine objectively decreases. You may depreciate the value of a computer in two years, but it actually has a useful life of five years. By doing this, you capture that difference (3 years) and you can use that hidden value to drive more business and therefore profit from it. Social credit is far more complex than this and I encourage everyone to look into it. But the long and short of it is that money is a representation of assets and credit and that the math we use for accounting is rigged against workers and for the owners of capital.

Free Market Economy

A free market economy is defined as “The free market is an economic system based on supply and demand with little or no government control.” Another way of stating this would be to say that a free market is a competitive market where different actors – private or public – can freely compete for resources and customers. When the aristocratic system fell apart during the industrial revolution (and after), it was largely because the industrialists competed and beat the aristocrats in creating greater value to citizens. They offered work to peasants and produced much more value than the traditional agricultural based system controlled by the aristocrats. My own French family came from an aristocratic family in France that saw their relative wealth evaporate as they stayed centred around agriculture and ownership of land, while new industrialists build factories. Eventually, may family sold their Chateau to the family of are large grocery chain. What has driven the vast majority of the innovation and wealth we see today is not capitalism itself, but rather competition.

Forcing people, companies and governments to compete with each other in order to create as much value as possible is the principal source of our wealth. As with any competition, we must have clear rules and that is where rule of law comes in and it remains a primary function of governments to establish and enforce the rules we use to compete. Different rules will lead to different outcomes and it is therefore critical to select the right rules for the right situation. Capitalism is a series of rules about the ownership of capital – despite being an important rule, it is only one rule among many. However, I wish to highlight that it is the competition among actors that drives our wealth – not simply ownership of capital.

Conclusion

The current political and economic elites have successfully conflated the concepts of capitalism (the private ownership of capital) and competition, telling us that their version of Capitalism is the best system for society. The truth is that the rules we are currently using are not fair to workers or the unlucky. The game is rigged, the house will always win. In Thomas Piketty’s seminal book, “Capital in the 21st Century”, he outlines how owners of capital can generate returns on their capital that is superior to the growth in wages of workers without increasing the value they create. The classic example is the owner of an apartment building or land that generates returns greater than inflation. An apartment building does not create much value, and yet an owner of an apartment building can earn more money than workers. In consequence, the capitalist class (the private owners of capital) can grow its wealth faster than the working class and the gap between the two continuously increases until you have social unrest, war, revolution or some other large event that destroys capital and resets the balance. Social Creditists said as much and proposed interesting solutions, but we did not implement them. In short, there is a fundamental problem at the root of the current capitalist system that needs to be addressed for the good of human society.

If we want to generate more value in society, we need to look for ways to increase competition. We need to look for rules that will enable people and organizations to compete to their full potential and not be handicapped by poverty, disease or bad luck. We need to identify rules that will allow small businesses to scale and grow. Rules need to be found and implemented that ensure international commerce is fair and equitable. We need to improve our accounting rules so that the true costs of environmental pollution, labour, resource consumption and other externalities are included in the costs of production and the cost of goods sold.

In short, our accounting system is broken and it needs an overhaul. There are a number of options and the ones I have advocated for include basic income, affordable housing and free education. Capitalism left uncontrolled will eat itself. It is the role of society and government to constantly update the rules of the game to ensure that society is driven to increase the sustainable value it creates for future generations.

Published on December 22, 2019

Why Andrew Yang is the best candidate to beat Donald Trump

Andrew Yang was the first person to announce his run for the Democratic ticket. An entrepreneur of Asian descent, he often starts his stump speeches by asking “What is the opposite of Donald Trump?” and then replied, “An Asian man who loves math!”. Who could disagree with that? The one person who can beat Donald Trump in 2020 is a down to earth, normal person who speaks coherently and truthfully about the challenges facing America and the world.

Yang’s principle policy is a Freedom Dividend – a $1000 monthly cash transfer to all US citizens. Yang is proposing to institute a true basic income in the United States which would establish an economic foundation under the feet of 300 million people. A $1000 a month is not enough to live off of or stop work, but it is certainly enough to return to school, search for better employment, help your family and invest in your future. For the past six years, I have been involved in the basic income movement in Canada and the science and the politics are clear – we need a basic income to offset the precarity of the modern economy and provide more freedom to all citizens.

Yang has already received the endorsement of Elon Musk, our generation’s greatest technical visionary and entrepreneur. The proponents of basic income span the political spectrum from Martin Luther King Jr. to Milton Friedman. Basic income or a freedom dividend is a policy brings together former Trump supporters who are frustrated with their economic precarity and it also attracts left-wing progressives who want economic justice for all. A freedom dividend is a policy deeply is rooted in the American identify of individual independence and autonomy. Basic income was first proposed by Thomas Paine, an American revolutionary. With a $1000 per month, you would be free to make the choices you know will improve your life and of those close to you.

Financial precarity is a huge determinant of our mental health. Living paycheck to paycheck takes a massive toll on our brains and increases our stress. Yang advocates for a massive investment in the mental health of all citizens through a Freedom Dividend, but also through access to marriage counseling and mental health experts. In short, he proposes a return to a more humane society where we set up the tools and systems to allow people to reduce their mental stress and build a better future.

The other Democratic candidates are professional politicians. You can see it in their schedules, in the way they talk and in the way they spin things. Yang is anything but a politician. For better or for worse, he is willing to tell us the truth. He explains that it is too late to stop global warming and we need to think about mitigation, he explains that mental health is in freefall across the US and that the only way to transition to a brighter future is with a massive cash transfer. Like Trump, Yang speaks from his (very different) heart.

Yang also proposes concrete action on gun reform, universal health care and a suite of other policies. Just watch his recent breakdown (available on YouTube) during a gun reform event where a woman who lost her 4-year-old to a stray bullet asked Yang what he would do. Yang, a father of two young children, could not keep the tears back and anyone could see he was a genuine father who has had enough of gun violence in the United States. Yang is a real person we can all relate to. The United States has a history of swinging the presidencies between radically different people. From Lincoln to Johnson and Nixon to Carter, America has a dual identity it is constantly vacillating between. Yang is the opposite of Trump in every way. If we want radical change and a return to sanity, Andrew Yang is the best pick for the democratic ticket and the future or our southern neighbour.

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I have no affiliation with the Yang Campaign and I am not a US Citizen. This is a personal opinion and does not reflect the opinion of the organisations I represent.

Published on August 23, 2019

Xi Jiping: The Backlash – Review

Xi Jiping: The Backlash by Rory McGregor is the best (short) overview of the current geopolitical situation between China, the smaller powers (Canada, Singapore, Australia) and the larger powers (Germany, USA). He accurately diagnoses the challenges of smaller powers and China’s internal challenges. It seems Xi has a tight grip on power and the loyalty of the party, along with few rivals. The track China seems to be on is a return to authoritarian rule by party officials, with less respect of the rule of law. The use of trumped up charges to imprison Canadians, the picking and choosing of which imports they allow and other terribly mercantile behaviours does not bode well for China in the long-term.

A China that punishes those who defy it will likely contribute to an isolation and separation of China from many potentially friendly powers. Having spent two years of my life in China and having met many amazing Chinese people, I am concerned the country is headed back towards arbitrary rules that will create uncertainty for individuals, families and businesses. My Canadian friend who is based in Hong Kong, married to a Chinese woman with two children and speaks fluent Mandarin is quite skeptical on the stability of the communist party. Despite Xi’s efforts to avoid the collapse seen in the Soviet Union and the following appropriation of resources by the Oligarchs, it is unclear how China can simultaneously develop a thriving market economy and employ arbitrary rulings to cajole countries, people and businesses into compliance.

I love the Chinese people and the country, but there is a very dark trend emerging in China – whether it is the police state they have built with 24/7 global surveillance, the internment of Xinjiang Muslims, or the international actions they are taking to pressure smaller countries and dump product into foreign markets. The Chinese people are both nationalistic and revolutionary. If you put them into a corner, they fight. Just look at Hong Kong. With the economy still growing at 6% a year, it seems unlikely that the party will lose popular support in the short term. The longer term issues that will undermine the rule of the communist party can be summarized as demographic, liberty and rule of law.

The demographics in China are already negative and getting worse. They have very low birth rates and the working population is already decreasing in absolute and relative size. With less workers and less babies, housing values will decrease and a tremendous amount of the Chinese assets are built on property valuations. This carries from the individual families who feel they are wealthy due to owning apartments to the provincial and city governments who derive taxes from property values. Property value is fundamentally tied to demographics. If your population decreases, property values decrease. It can quickly turn into a chain reaction.

All people want freedom. They want freedom to choose their mates, their careers and their future. If Chine continues to restrict emigration and movement this will frustrate the people. It is unclear how much they will do this. Over 100 million Chinese already leave the mainland on trips and return every year. The question will be centred around the upper middle class Chinese and how they view the future of their own freedom. If they are concerned it will be heavily restricted, you will see an outflow of people and money to other countries and a potential large-scale rescinding of Chinese nationality. This is hard to predict and it remains a major threat to the stability of the party. Without the entrepreneurial middle class, the Chinese economy does not work (nor does any other for that matter).

Similarly, the steps backwards on the rule of law internationally will likely lead to similar issues internally. If China is willing to punish Canadian farmers and Swedish salmon farms because of international politics, it seems clear they will use arbitrary rulings to control their own people. No country can develop in the long-term without a reasonable rule of law. Without it, businesses leave, people leave, morale is killed and people will not invest.

Building an empire is all about faith. It requires the country’s leaders and its people to have faith that they are on a divine mission. They must believe that the future will be better if they are active and invest in the country. Empires collapse because people lose faith. It is fare more fragile than we might imaging. With their actions and their challenges, China is running a real risk of losing the faith of the international community, the business world and its own people. If two of these pillars tumble, China will not be able to achieve its dream of a becoming a regional (maybe global) power and welcoming Taiwan back into its fold. Only time will tell, but I highly recommend this book to understand some of the challenges China currently faces.

Published on August 10, 2019