Focus on Purchasing Power
When the topics of wages and government benefits are discussed, the question always arises as to what is an adequate income for a person to survive, or perhaps thrive. There are also questions about how these programs in themselves might actually drive up the cost of living.
These questions are highly relevant to the platform of the New Physiocrats, as it pertains to the Three Pillars program among other policies.The nominal value of a person’s income is meaningless without the context of purchasing power. In some countries, a very small nominal income can afford one a luxurious life, while in other countries a very large nominal income may be inadequate to pay rent. Rising incomes do not help people if prices are rising faster than these incomes. It will not matter what income the New Physiocratic platform and the Three Pillars provide unless we can ensure that this income has an adequate (and growing) purchasing power. Therefore, these programs only provide meaningful results if they are matched with a concerted effort to drive down the cost of essential goods and services (without promoting waste and misuse). With housing becoming increasingly unaffordable, we see the need for these efforts becoming more critical. Governments have long focused on other economic metrics, but have largely ignored purchasing power; particularly the purchasing power for the most necessary essential goods. Rising GDP growth means little to someone facing soaring housing and food costs.
The merits of reducing the cost of all goods in aggregate are debatable, and reducing prices on different goods and services would benefit different segments of the population. However, reducing the cost of the basic essentials for survival is a certain way to increase the purchasing power of the entire population. At a minimum, these basic essentials include housing, food, water, clothing, electricity, transportation, retail banking, and perhaps communications.
To decrease prices for these essentials, there must be a dramatic increase in domestic supply, competition, and rational use.
The most modern and efficient methods must also be employed to reduce costs. This might require an increase in aid and lending to these sectors, and for the tax system to encourage new entrants into the market. Representatives in these sectors also must have a permanent channel in which to discuss with the government and the public, necessary infrastructure, and strategies to reduce prices. The billions currently spent on subsidized housing, subsidized mortgages, and affordable housing development are wasted, as they don’t address the root of the issue (lack of supply, property kept out of the market, perverse tax incentives, excessive lending for property purchases, etc.).How do you justify (economically) reallocating resources from sectors that the market determines to produce the most wealth, to these other sectors? Economic development often drives up prices for these Basic Essentials, negating the positive effects of growth. Having a system to automatically redistribute resources from high growth areas to the production of basic essentials would maintain purchasing power for everyone. Furthermore, as there is always demand for basic goods, supporting the Static Sectors for Basic Goods provides the economy industries to fall back on when Dynamic Sectors change or flounder.
These reallocations must be made by returning corporate tax revenues back to businesses via Sectoral Banks. This is one of the chief automatic mechanisms through which the Physiocratic goals can be met, without the politicization of picking winners.