Last night I was listening to the radio, and twice I heard reports that "British Columbia's economy may be overheating."
What? Overwhating? What the hell does that mean?
Here, for the confused, is a handy translation. It means too many people have jobs, and big business would like it if there were more unemployed people around.
See, unemployment rates are now the lowest in BC since 1981 (coincidentally, the year before a massive recession that, among other macroeconomic effects, put both my parents out of work for two years). When there are low unemployment rates, competition for JOBS is changed to competition for WORKERS. This, as we all know from reading our Adam Smith, leads to higher wages. It's the simplest supply-demand example in the world.
Now, again according to Mr. Smith, this situation can't last forever, for two reasons. First, there will be a point at which employers can't afford to raise their wages any more, because they would lose all their profits. Second, more workers will come to an area of high wages and high employment, thus increasing the labour supply and reducing wages (or at least keeping them stable).
So why is it a problem that the economy is getting overheated? Isn't this a good thing? Business is still making money, and workers are better off.
Well, business doesn't think like you and I do. They have to answer to their shareholders, a notoriously fickle and lemmingesque group of entities, which expect a certain level of return. Or, if they have no shareholders, their personal calculation of profit most likely includes a new boat or cabin they want to buy. If their profits fall bellow this pre-set mark, someone is unhappy. And shit rolls down hill. So the economy doesn't have to actually crash for employers to start rolling their crap down on the heads of wage workers. It's just passed some magic, invisible but unmoveable line that none of us down on the bottom rung will ever see.
On a more abstract level, employers don't like periods of protracted wage growth. Workers can get the feeling that maybe they're entitled, not only to a living wage, but to good treatment. In this kind of environment, with high demand, workers can drop their tools and leave if their boss calls them a moron. Hey, there's another job right across the street. And when the business cycle whiplashes back, as it inevitably will, workers may still feel like getting respect. They may even form a union to try and protect their gains. Can't have that.
To be fair, there are some real constraints, especially in the construction industry. Many contractors sign agreements to get the work done at a certain cost, and have to overspend to finish the work even if, say, the price of steel or the wages of a specialist pipefitter double after they sign the deal. But these problems are temporary and don't affect too many people in the economy as a whole. Unemployment does.
So, if employers start calling on the goverment to hike interest rates, thereby throwing cold water on the economy's face, what they are really asking for is higher unemployment. Which is the government's problem, and costs business nothing. It does cost everyone else, however, in the form of higher crime rates, child poverty, drug use and the sheer psychic frustration felt by many thousands of useful people with nothing useful to do. Oh, and we have to pay higher taxes or see more services dumped to pay for the longer dole lines.
Adam Smith suggested, at the end of the first book of The Wealth of Nations, that goverments should always take a long, hard look at any suggestion brought to them by capitalists. Because, as he astutely realized, when things are good for capitalists, they are actually bad for almost everyone else.
The economy cannot keep moving at the pace it is. The Asian currency purchasers and the housing boom have pushed it far beyond where it should be. And we should make preparations - individually and as a society - for the inevitable morning after the drunken binge. But for business, the prime beneficiary of this boom, to start talking about "overheating" is hypocrisy of the highest order. If they make any move to restrict or reduce wages, or to increase unemployment, we should each of us find the nearest guy in an expensive suit and give him a swift kick in the balls.
It's only fair, that's what they're trying to do to us.