Captain Economy. I can picture the good Captain standing aboard the HMS Economy trumpeting the phrase “A rising tide lifts all boats!”
If I had a dollar for every time I’d heard that phrase in Saskatoon, I could probably buy my own boat – and I’d call her Dignity (Deacon Blue, anyone?).
The phrase – commonly attributed to John F. Kennedy – suggests that improving the economy benefits all people. Sounds great; economic growth is a wonderful thing. But does it really lift everyone? All ships?
That the poorest of the poor benefit from growth has become mainstream economic canon. This is, in large part, thanks to an influential report by two former World Bank economists (Dollar & Kraay) who claimed the income of the poor rises “one-for-one” with overall growth.
That’s quite the statement – and it went on to influence countless policy decisions across all levels of government. We seem to have concluded that there is an absolute relationship between economic growth and poverty reduction.
Fast forward to November 2021: economists Vandemoortele & Delamonica published research challenging Dollar & Kraay. They called the conclusion that the average income of the poor increases by the same proportion as overall income “erroneous and misleading.”
In their view, the statistical analysis “did not warrant” such a sweeping conclusion. To prove it, they applied Dollar & Kraay’s statistical methodology to a random set of numbers and got the exact same result. Ouch. That’s not a good thing when you’re trying to prove a certain correlation between numbers.
Alas, was Captain Economy even a captain?! Me thinks perhaps not!
V&D’s critique of the rising tide philosophy has been supported by others. Gene
Sperling commented “the rising tide will lift some boats, but others will run aground.” Similarly, Ed Miliband said “they used to say a rising tide lifted all boats. Now the rising tide just seems
to lift the yachts.”
What does this mean for Saskatoon? Well, I am not saying economic growth and poverty reduction can be easily summed up or solved by one theory or the other (flashback to Mr. Kay telling me “Economics isn’t as easy as you think, Alex”).
I do, however, think this new research should prompt us to at the very least question our paradigm that “growth is good for all”. It’s good, that’s for sure. But is it benefiting the poorest in our community? Saskatchewan’s various booms over the last 100 years have lifted many, but it’s clear from the poverty pockets across the province, and particularly in Indigenous communities, that the tide didn’t rise all boats. For our economy to truly each its full potential, it needs to create opportunity for everyone.
So, how do we encourage economic growth that benefits all? Well, in Saskatoon, I would say by making progress on economic reconciliation and building a more inclusive economy. That’s how all ships will truly rise.
In the coming months SREDA will be launching two programs to further support economic reconciliation and a more inclusive economy. If you’d like to get on board, please let me know – we need more Captains.
That’s what’s on my mind, let me know your thoughts?
p.s. Deacon Blue, Dignity in case you missed the reference