economicmultipliers_47

Economic Multipliers (47)  
 
Do you know what these are?
They help CREATE wealth in systems.
Understanding how past examples relate to today’s problems is an economic multiplier for everyone:  Example 1
 
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I took the time to read:  Diffusion of Innovations by Everett Rogers.  I’m sure the book was written for ‘academic’ types (even though it’s quite readable for anyone).  One example (of the many good ones) in the book struck me as VERY relevant to how we think about the world we live in today.  This is a short summary.

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Years ago, a community in Finland had large reindeer herds and if you had to pick the one single thing that made their economy function well, it was those herds.  People (on the whole) weren’t particularly wealthy in comparison to their neighbors but were (on the whole) able to provide for their full livelihood.

And then came snowmobiles.

Initially, only the wealthier individuals in the community bought the vehicles and of course the snowmobiles increased their efficiencies (helping make them wealthier and reducing their need for outside labor … also helping make them wealthier but also reducing the base of jobs available in the community).

People realized they wouldn’t be able to ‘compete’ if they didn’t have their own snowmobile and it wouldn’t surprise me if many ‘creative financing’ options popped out of nowhere to help individuals buy snowmobiles.

The wealthier individuals in the community had what’s called a ‘head start’ AND they most likely had bought their snowmobiles outright:  They had no monthly ‘payments’ to make.

While this was all going on, reindeer herds started to decline:  Reindeer need peace and quiet to thrive:  Snowmobiles are not quiet.

When the OK-off individuals who ended up with monthly payments for their snowmobiles started adding up all the gas, insurance and maintenance costs, they couldn’t make ends meet.  Their herds were diminishing, they had a lot of extra ‘cash’ expenses and many ended up ‘selling out’ to the individuals who had the ‘head start.'

At the time the book was written, many of these individuals ended up on the equivalent of welfare with no way to ‘extract themselves.’  A couple of generations later, I’d hope the community adjusted but when people think about how they are going to live and feed their families, they usually can’t think a couple generations out.

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How is this relevant to the economic environment we live in today?

Ask yourself how many things are ‘required’ to function in your community and how much they cost:
  • to buy and
  • to use, maintain and replace.

Ask yourself if there is housing that allows young people to build their bases of wealth.  It seems to me that it would be ‘handy’ for communities to build ‘dorms’ that:
  • kids could live in until they were 25,
  • cost about $100 a month,
  • were on a public transportation line,
  • had ‘live-in’ (in apartments) ‘parents’ for every floor (two or three story units NOT requiring elevators would seem optimal)
  • required kids to maintain the properties AND learn everything they needed to know about maintaining the equipment and buildings
  • had slots for one or two handicapped individuals who got paid for organizing ‘work’ and training kids on maintenance (there wouldn’t be an age limit for these slots) AND
  • had a rotational system for grocery shopping, cooking, etc.
But know that I would ONLY consider something like this to be ‘handy’ to communities IF the facility had strict rules regarding drinking, drugs and even smoking and it was easy to ‘bump’ kids out if they diminished the quality of life for the young people who really were trying to increase their bases of wealth and get ‘solidly grounded.'

Ask yourself if it would be possible to have an OK life if a two income family with two kids made approximately $3.00 more per hour than the minimum wage (Could they afford daycare? … Many countries in the world prioritized on daycare when they realized that women have many talents and societies are best served when those talents are put to their best use.  And, unfortunately, some women should not be left at home with children because it wouldn’t be in their children’s best interests (and ultimately society’s)).

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As I write this, I can say that I walk and bike to many places that other people drive to.  I also can say that (on the whole) a car is a necessity to function properly in this community because of the population density (how spread out people are) relative to service and store locations.

A car is like a snowmobile:  It can come with payments and always has insurance, gas, maintenance and replacement costs.  The question is:  Would the need for it (or some other thing) to supposedly ‘survive economically’ actually make people in your community poorer?  Would the need for it (or some other thing) make it more likely that people would need public assistance?

Energy is a rather large payment for many in this community.  Ironically, the very first people who get energy improvements are homeowners who can afford them (because they identify that those improvements will increase their base of wealth:  higher property values and lower energy costs).  The very first people who tend to buy the most energy efficient cars are wealthier people (at least for the car they’d use on their ‘short trips’).

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The bottom line is:  Without even recognizing it, wealthier people can CREATE the very conditions which require people to NEED assistance.