The Real Economy Learns

There are a couple of things you can say about the Great Depression of the 1930s. The first is that it was particularly brutal on average citizens, and the poor especially. The second is that it effectively baptized an entire generation of Canadians into a kind of social cohesion never experienced previously.The last point is something we really haven’t witnessed in Canada since that time. We’ve been through numerous recessions since, including this Great Recession we are experiencing at present, but it’s almost like we never learned anything from those experiences. With the Great Depression almost all Canadians shared the ravages of poor economic management, but they came out of it with a remarkable degree of social cohesion – something that provided us the political will to make needed reforms. Enduring a lengthy world war also aided in that progress. Legislation emanating from those reforms is largely what created and sustained the great middle class. In reality, it made that growing class vastly more secure, prosperous and remarkably productive. How? Not by giving citizens money, but rather by taking tax revenues and investing in those things that propelled average Canadians ever upward in wealth and jobs. The funds were used to bring improvements to the nation’s infrastructure, schools, public universities, research and development, and a remarkable foreign policy apparatus.But there was more. Soon came the establishment and protection of labour unions, pensions, disability benefits and unemployment insurance. How did the country’s coffers react to that? Remarkably, it turns out. Canadians took those developments as a kind of investment in them and propelled this country into the most productive era it had ever achieved.Sadly, as we attempt to come out of this Great Recession, no such great economic order has been introduced. Corporations took the largest bailouts in the history of the world and proceeded as if nothing had changed. The public bailed them out to the tune of trillions of dollars in the advanced countries, but corporate leaders then pressed for even lower corporate taxes, expanded free trade, and a wide open door towards globalization. In other words, they took all that money and asked for more breaks. Now that the stimulus money and the bailouts have passed, it seems we are heading down the same path as we were prior to the recent financial fallout. We didn't learn.So what will happen? Here’s a pretty sure bet. Middle class incomes will continue to flatten. Increased wealth will accrue upwards to those that least need it. The job picture will remain perilously fragile. Food bank numbers will escalate, as they have now been doing for over a year. Infrastructure will continue to erode, limiting the public’s ability to gather and build. Inequality, as it has been doing for the last few years will continue to widen. With lowered economic prospects, the middle class won’t buy enough products to keep the economy growing. This list could go on, and it is troubling.Only two things can come of this. The first is what we are seeing now: large-scale revolts against Wall Street, financials centres, and now wealthy individuals. Will these protests die out as some say? Perhaps, but things will never settle back to normal. Agitation is in the air, fuelled by poor job prospects, helpless governments, an arrogant corporatism, and hapless citizens. The second thing is real reform.We are now witnessing the emerging antithesis of the famed Tea Party movement, only this time it is people angry at the lack of public accountability, rather than promoting private enrichment. The right wing's continued call to dismantle governments and programs is always accompanied by its hope in the financial markets. Let free enterprise do its work, they maintain, and things will even out. Well, they aren’t, they won't, and people have had enough. The right wingers know something we have forgotten: big government has always been the ally of the little guy, the struggling family, the poor student aiming to get a degree, the cancer victim looking for treatment, the immigrant looking for work, and the small businesswoman looking for a level playing field against the big guys.But we are now catching on to something as well. Downsizing governments has almost always benefitted the wealthy and emboldened the private sector monopolies. At some point our politicians are going to start defending the public space once more, but not until a citizen movement even greater than the Wall Street protestors makes its move. Ironically, they will gather in public parks, in schools, libraries, and city streets – the only places open to them because the wealthy ones left those venues long ago for their gated communities and secure office edifices.Take a look at this bar chart. It is no accident that our most difficult times financially have occurred after the right wing ideologues have had their chance at power. Sure, these are American figures. Reagan and Bush Jr. opened the floodgates for attacking government. In Canada, “Tory times are tough times” and our present prime minister now has the pruning shears in his hand with a majority government to pave the way. Past leaders like Trudeau and Mulroney also drove us into debt, but at least supported public institutions that defined us as a people. The present administration? Well, not so much.What smart economy keeps repeating the same financial missteps over and over? What intelligent financial oversight makes no plans for a new era of jobs or environmental sustainability? What shrewd management would cut the very sinews required to get the public moving and working again? The real economy doesn’t do that, but learns from past missteps and innovates and invests until that majority of citizens are again better off. What we have now isn’t real but a recipe for more decline.