RETHINKING THE ROLE OF ECONOMIES AND CONSUMPTION

The Home Office Tax

Recently, some analysts from the Deutsche Bank suggested that a tax for people working from home should be introduced. Their reasoning behind this proposal is that people altered their spending habits when working from home. In fact, Eurostat, the European Union's Directorate-General for statistical information, recently published a report that shows that European households' savings rate drastically increased over 20% in 2020. Unfortunately, as of right now, there is little data on other parts of the world, except for North America, where the data is congruent with Eurostat's findings. Nonetheless, it is likely that there are similar saving rates elsewhere, either. The reason for this increase is the raging Corona pandemic that led many states to limit social activities and even enforced comprehensive curfews. Accordingly, people in all parts of the world stayed mostly at home over the last months and, where possible, worked from there as well. With little consumption options left, citizens reduced their spending and increased their saving rate. However, the analysts from Germany's biggest bank do not seem to like this development, since they believe this harms the economy. In their eyes, it appears, citizens are merely consumers - a technical factor in a profitable equation. This raises questions about the purpose of economies and citizens' role as economic actors.

Elitist Views On Economic Conduct

The proposal from the analysts displays a deep misconception on economies. Although not all economists would have favourable views on the proposal, it is not too far-fetched to assume that there is, indeed, a larger group of people who would support such a tax. What we can derive from it is that economies are seen as an end in itself that needs to be upheld by means of consumption as one of the primary factors in that construct. Within the boundaries of such a view, the citizen's role is reduced to the role of a consuming actor and in its capacity of a worker, the citizen is reduced to a production factor. However, because we would not expect the economy to be existent solely for the sake of being existent, the goal has to be its monetary aspect. This is an important part to the understanding of the core notion of this proposal. It follows that this view defends that economies are constructs that are exclusively aimed at generating wealth and that the individual parts of it interact in a way that enables them to upkeep this. From this we can ask the following question: "If economies are, from such a perspective, aimed at generating wealth, would a tax on people who consume less, in order to save more, not be counterproductive, as it directly reduces wealth, as well as the amount of monetary means to further generate wealth individually?". Of course, the answer is "yes". If one believes that economies' sole purpose is to generate wealth, then introducing a tax that is aimed at replacing parts of unnecessary consumption is simply not in line with the thought. Therefore, we need to go beyond this statement and ask whether those analysts believe that economies are set out to make elites wealthier and with such a tax they want to mitigate future risk that might hit the demand-side of economies, as it did in the Corona-Pandemic. This question finally brings us to the core premise of the proposal and, therefore, to the underlying notions that led to the development of such a policy proposal. It can be said that there are people that believe that economies are exclusively structured around the idea that its functioning enables elites to maintain and increase their wealth. Among those people, it can be reasonably assumed, are those analysts that proposed this home office tax.

But is this really the purpose of economic conduct and, more importantly, should it be the purpose of economic conduct? Certainly, there is little ambiguity that, currently, most economic systems are built in a way that allows for the disproportionate growth of wealth in relation to the monetary means available. In other words, the more money you have, the easier it is for you to earn more money - with every earned unit of currency, the acquisition of the next unit becomes cheaper. The reason for this lays in the functioning of the financial markets that has reached such a level of sophistication that through the logic of lending money flows naturally to the positions where its utility is the highest. Based on this fundamental mechanism, the absolute amount of monetary means at one's disposal increases the amount of opportunities and, hence, the chances success of generating further money. Further, the quantity of monetary means also defines the options of increasing wealth. Opening businesses, investing in all its forms and lending are only a few of those options. In each and every form, however, the increase of money is directly or indirectly tied to the behaviour of a mass of consumers. For example, acquiring real estate as an investment is only possible, if there is a consumer that will pay a monthly rent. Returns on investments in a stock company will, in the end, be directly dependent on whether the company can sell its product or service and generate profit by doing so. So, it can be stated that economic systems are dependent on consumers and that the success of wealth-generating practises in the financial markets is positively correlated with the overall consumption level.

What Is And What Should Be

In light of the above, it makes sense that elitist circles would favour a home office tax to partially make up for reduced consumption. They profit exponentially from popular consumption - either as business owners, investors or lenders. Further, the structure of the monetary system and the surrounding legal frameworks enable them to aggressively pursue such practises. However, just because something allows for a certain course of action, it does not follow that this course of action is also desirable. In other words, the economic system is consumption-oriented, but should it be? The answer is a clear "no". It is time to rethink the role of the economy within our society. The markets are flooded with unnecessary and overpriced products and services. Even worse, marketing has become one of the cornerstones of economic conduct. In many cases, marketing is not more than the application of strategies to push people to consume more. While we think that we are consuming to satisfy our own personal needs, in reality, our consumption is mainly serving corporate interests. The global pandemic has shown that we can save much more money than we initially thought and by saving or investing this money, instead of spending it, the citizen increases her chances to become a more active participant on the winning-side of the economic game. It would be wrong to infer from the above that corporate interests would entail that the ordinary citizens' monthly surplus should be kept as low as possible, in order for them to be unable to change the power balance of this money game. However, it cannot be denied that elitists would certainly prefer a high consumption-to-saving ratio. Finally, it can be said that the proposed tax shows that economies are extremely demand-dependent, which puts the citizens in a powerful position.

As we have explored the structural weaknesses of contemporary economic systems, we should now turn to the normative ideal of an economy. Undeniably, the human race is wandering aimlessly around, in ridiculous attempts to make sense of the world and its position within it (click here for a deeper discussion of this thought). Similarly, our economies show this aimlessness in its functioning for the sake of serving elitist interest. However, we should rather rethink the role of the economy not as a road, but as a vehicle. The highest good, and therefore sole main purpose of our species, is the exploration and generation of knowledge. This endless endeavour should be the guiding principle of basically everything we are doing in our lives - including politics and economics. Consequently, we cannot just view the economy as a construct that helps individuals to live an easy life. This view is toxic, absolute and unsustainable. Viewing the economy as a tool that helps us to achieve scientific advancements faster and better, is a far more useful approach. While there are many companies out there that are concerned with science and innovation, the amount of them is way below of what would be healthy for proper societal progress. Additionally, most of these companies work on the development of quantifiable products and services, as they generate money. Hardly any company is developing technologies, thoughts, processes and other things just for the sake of curiosity. Because they cannot monetise it, they do not even have the money to start developing such things. Mostly, they are dependent on external funding, which they only get from investors that have own interest in the development of non-monetisable inventions. Especially the realm of qualitative sciences is experiencing difficult times - when was the last time social or political inventions changed the way we live? Since 1945, the United Nations' structure remained the same, administrative inventions are slowly implemented and philosophy has become a breadless endeavour to many.

Final Thoughts

All of this has to do with the centrality of profit-maximisation in current economies. If we want to evolve as a species, however, we need to use the powerful concept of economics and view it in a different light. Rather than emphasising consumption (most of it being unnecessary anyways), economies should be set out to reward the innovators that create value for our societal progress. Citizens, powerful as they are, should start questioning their daily financial choices and redirect their focus on more value-adding products and services. Next time you want to buy designer clothes, you should think twice and evaluate how much added-value you would get by investing this amount of money into books, which help you to develop a new skill.