The Parallel Parliament

by Glen Pearson

Tag: economies

Round Economies, Square Nations

squarepegCall it economic determinism, if you like – or even economic inevitability.  Either way, Canadians feel as if they are mere passengers on some kind of runaway financial train.  To make us even more anxious is this sense that we’re just like other nations whose financial future seems to be caught up in some kind of maelstrom, making it impossible to tackle significant issues like unemployment or climate change.

All that being said, it is important to remember that Canada and its highly innovative communities never developed quite like any other nation. From the very beginning we were ancillary dreams for someone else’s design – British, French, American.  But our early founders knew that if we wanted to set our own independent path we would have to overcome a set of challenges that would simply overpower us unless we developed a federation that pulled its diverse communities together through government intervention.  For that to happen, a special kind of social contract had to be designed that would offset the overwhelming forces of designing empires.  If we permitted those larger economic magnates to run free we would always be chasing the whirlwind, much as we are doing now.

Those demanding ever greater austerity, the miniaturization of government, increased privatization and the relentless lowering of taxes, overlook the reality that Canada’s historic genius and influence has been its ability to craft its economic outlook to this social compact.

We succeeded in this country against great odds.  A relatively small population hugging its southern border in the midst of a massive land would seemingly be an impossible construct to manage.  And yet we prevailed – not merely through government investments or a robust free market, but by both.  The corporate minded instinctively understood that such a vast landmass, with its untold riches in natural resources, would require infrastructure to move goods to markets.  The national rail system assisted them in seeing what was possible, as numerous spur lines transported ores, labourers, and grains to the main line then on to markets in eastern and western Canada.  Yet the world grew intrigued by this country’s products and so a series of ports, airports (including northern and remote airstrips), ferry systems, and even the remarkable St. Lawrence Seaway were constructed – all with major government investment.  And to move those products, governments invested in research and development that designed the automobiles, ships, locomotives and even components of aircraft.

While the free market and businesses reaped huge dividends from such national infrastructure, they in no way were inclined to come across with all the funds.  To benefit most sectors (not all) of the country, businesses paid their share through corporate taxes as the years progressed and that accommodation created an economy that was not only progressive, lucrative and versatile, but which served as a “gluing agent” that assisted in Canadians discovering each other.

Those days are long past, replaced by a reigning orthodoxy that says our economic troubles and unemployment are due to this country’s inability to get in-sync with the global economic forces.  We accepted it for a time, but we are now aware that, following two decades of that kind of reasoning, we are worse off than at any other time in recent memory.  How can we possibly accept that the answer to our economic woes is just an increased amount of the same?  We would be fools to accept that providing global access to our natural commodities is a replacement for a stable, balanced economy.  We are not the world’s warehouse, but instead a land of rich history, cooperation and mixed economy that didn’t search for social good through a prosperous business sector but the other way around.

This penchant for a universal economic model is actually one of the great deterrents to essential capitalism, starving small and medium-sized business of the attention and investments required to provide for more employment.  A one-size-fits-all model is no more conducive to capitalism than it is to social equilibrium.  Our history shares no resemblance at all to the current economic norm, yet we proceed apace as though there is only one path forward.

Canadians need to come to terms with the counsel of Aldous Huxley: “Facts do not cease to exist because they are ignored.”  Canada’s history is hardly some romantic artifact of the International Monetary Fund, World Bank, World Economic Forum, or even the G8 or G20; it’s clear, accounted, and revealed – warts and all. Its overall success is a matter of public and international record.  The fact that our star has fallen in recent years shouldn’t blind us to the reality that ours is a fate shared by other developed nations – the economic model that doesn’t work here doesn’t work in these regions either.

Monolithic economic structures, packaged in hermetically sealed portions of globalization, are hardly suitable to the human condition, anymore than they are to nations attempting to make room for their citizens.  New ways must be discovered to access the trillions of dollars that flow through our communities and country and yet never seem to land long enough to produce jobs or a sustainable future.  John Lennon used to say “living is easy with eyes closed.”  Actually the opposite is rapidly becoming the reality, not only in Canada, but around the world.

Greasing the Skids

Earth-Oil-FaucetInnately, everyone comprehends that the days of cheap oil are over and that supplies have passed their prime.  Yet a large contingent of governments, instead of implementing sustainable policies to slowly maneuver their economies in accordance with that reality, continue to pursue growth in ways that refuse to take the decline of oil into account.

In the 1980s, China used up a modest two million barrels of oil each day; currently that consumption stands at nine million – every day.  That seemed okay in an era where oil seemed boundless and all industrialized nations had geared up their national economies to reap the dividends.  No more.  With the end of cheap oil comes the era of shrinking economies and hard choices.

According to the International Energy Agency in its 2010 report, 80% of all oil fields operating today won’t be producing in another 25 years.  Yes, new fields are always being discovered, but they are the expensive kind and inevitably lead to the rise of oil pricing and an outright attack on sensitive environmental regions around the world.

This is important because almost all Western nations have geared their concepts of economic growth and productivity on the availability of oil for everything from production to transport.  We were warned about the danger of this years ago from major reports by the United Nations and energy and environmental think tanks to rather cheeky predictions of Canadian author Jeffrey Rubin.  They were ignored, and now each country’s finances is in a bind.

As oil prices rise, so will the price of everything else, and the cost of running national economies will be forbidding.  Those economies, like Canada’s, will stall because, despite all the warnings, governments never really prepared for the days when they would have to do more with less.  And since they’ve been caught in these difficult times, they are attempting to peddle the message that we’ll be okay if we just keep going. This is understandable, but what is damning is that our governments never established the economic infrastructure that could assist us in transitioning to an era of sustainable development and growth.

Average citizens and their governments will be hit everywhere they turn.  Food prices will rise markedly.  Holidays will be curtailed.  Home ownership will become more of a dream than a reality.  We’ll have to get by with less because everything we pinned our hopes upon for prosperity and growth was linked to a commodity that has been in dwindling supply.  Growth might not stall entirely, but the double-digit economic gains of the past are over.

I personally view this as an inevitability that provides significant hope.  If how we have been living has been unsustainable, then the quicker we transition to sustainable economies the better.  If Al Gore was correct in his interview of last week, that, “we’re borrowing money from China to buy oil from the Persian Gulf and Canada to burn it in ways that destroy the future of human civilization, and every bit of that has to change,” then for our children’s sake we’d better get it right this time and refrain from joining our economies to commodities that are finite.

These are not easy days for most of us.  Some make billions of dollars from the extraction, refinement and distribution of oil, but that might as well be another world for most of us.  Yet we have been just as guilty as our leaders of contentedly engaging in past excesses that now leave us with fewer options.

According to author Gwynn Dyer, we either face a financial meltdown or a physical one if governments refuse to deal with our dependence on a commodity that once enriched us but now poses our greatest threat to our economies and our planet.  No political party or financial institution prepared for this moment, and we went along with it because we were having such a good and affluent time.  None of the choices from this point on will be easy, but that’s what transpires when we refused to make the difficult priorities in a timely fashion.  It turns out that the sky isn’t the limit after all – we are.

 

 

Continuum

awww-img-irw_awww_taxes_631px330“An economist,” Laurence Peter says, “is an expert who will know tomorrow why the things he predicted yesterday didn’t happen today.”  He was the famous inventor of the Peter Principle – the belief that once a labourer rises to a position over his head, he will become incompetent.  Many of our modern day economists have been around a while, long enough for us to begin to question the present direction of modern capitalism, our financial markets, and the need for political systems to depend increasingly on economic growth for their validity.

For a long time the belief that each successive generation can be more prosperous than the last has driven much of the policy and financial apparatus in everything from interest rates to social programs.  It was never an exact science – perhaps best displayed whenever frequent recessions dashed our economic prospects with cold water for a time.  Yet we always seemed to bounce back and, over time, became more adroit at both predicting and preventing the worst of recessionary times.  It’s a continuum – perpetual growth – that has infused almost every major institution with the idea that economic expansion is a natural as breathing.

Well, these days we’re panting pretty hard.  For decades, even as global economies grew at dynamic rates, we were slowly coming to the understanding that the future of employment wasn’t a sure thing anymore.  Poverty, and the cost of maintaining it, was becoming a growing concern.  Even in the heyday of the environmental movement (it’s had a few), we were never able to land on firm policies or resolve how to reign in climate change because we were constantly being barraged with economic analyses claiming we couldn’t afford it.  The decline in middle-class purchasing power was largely masked by the flood of cheap products filling the global marketplace, but we are now coming to terms with the reality that consumption depends more on income than the prevalence of cheap items and with unemployment running at all-time highs, the middle class can’t spend like it used to.

Occasionally certain economists, like John Kenneth Galbraith, or more recently Paul Krugman or Robert Reich, have questioned policies structured on the belief of endless growth.  In the main, economists promote minimalist roles for governments.  That’s why we’re seeing the endless rounds of calls for austerity measures on both sides of the Atlantic, and occasionally across the Pacific.  The best way to stimulate economies, the traditional rationale goes, is to decrease public debt, relax regulations, and permit the free market to do what it does best.

Well, what is that exactly – its best effort, I mean?  The economic meltdown from this last recession still leaves a bitter taste in our mouths and the massive financial institutions still remain the easiest targets.  Ironically, trillions of public dollars were used to bail out financial institutions that showed little care for communities or the welfare of citizens.

But it goes deeper than that.  Small and medium-sized businesses are experiencing significant problems getting started or keeping going.  While parents still leave generous legacy gifts to their children, they have also left a public policy wasteland behind that provides decreasing investments in public holdings and institutions.  We have yet to see any credible environmental policies enacted by governments even as global warming attains a tighter grip around our collective throat.  Many companies that are actually leading the way in environmental reform nevertheless call for increasingly limited roles for governments in the climate change challenge. 

Businesses are permitted to acquire massive debts while at the same time calling on governments to tighten their purse strings.  Yet the irony of all this is slowly coming in from the periphery among citizens and their traditional trust in prolonged progress or even the advice of economists is becoming increasingly suspect.

And yet we go on.  In a world where billions of dollars are accumulated in mere hours we can no longer afford university, catastrophic drugs, higher employment, carbon taxes, even a home.  There is no longer a sense of confidence that the usual set of rules imposed on financial systems can generate similar outcomes to those of the past.  We have grown out of work, out of environmental sustainability, out of health, education, welfare, and precariously out of time.  We have grown and grown to the point that we no longer create the kind of jobs that can generously purchase commodities.  We have grown so much in the historic model that we have an abundance of supply that can no longer be purchased on the demand side because they can’t be afforded.  And in that one area where supply is increasingly limited – oil – we have no effective plans of what to do when supplies run out or when fossil fuel emissions alarmingly limit the possibilities for our children.

We have filled our world with growth concepts until we have run out of room to expand.  Economists ask us to hold tight, don’t borrow so much, pay off our debts, limit our public expenditures as a people, and collectively tighten our belts.  Yet they often fail to turn their sights on a corporate world that is draining the very resources we require as a people to tackle our greatest problems.

Worst of all, political parties across the board can’t break with that narrative, and this for one key reason: citizens vote against their own best aspirations.  The continuum drags on, with modern citizens the only ones who can bring about change but who refuse to bring economics back into the peoples’ hands lest it cost too much.

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