A $3 Trillion Lesson

In a period of 14 years, we have been confronted by two severe economic downturns – the Great Recession of 2007 and the COVID shutdown of the last two years.  How the former was handled has something to teach the latter.

It’s no secret that the $3 trillion invested by governments in 2008 to save the global financial system bungled.  Granted, financial gurus in both government and private sector had their backs to the wall and had to act quickly. Still, the route they adopted left the financial industry in a similar situation to the one that prompted the disaster in the first place.  Such massive incentives seemed to work for those in the financial industry, but little came of it for the billions of people who live in the real economy.

What the $3 accomplished was to bail out banks and other lending institutions.  No real jobs were produced, no roads or bridges were built, and peoples’ financial status remained as insecure as ever.  The reality that governments had greatly assisted the lending groups that had caused the crisis in the first place was bad enough.  Worse, however, was that citizens, small and medium-sized businesses, and public institutions were worse off once the debacle subsided.

Accurate figures on how much governments worldwide have spent helping their nations get through the pandemic are understandably hard to come by. Most project that the stimulus spending so far is over ten times the amount of the 2007-8 bailout.  But governments spent a vast amount of funds on average citizens as COVID progressed in wage subsidies, healthcare benefits, business investments and subsidies to cities, where most of the global population now reside.  Such interventions were commendable, to a greater or lesser degree. Still, the question must be asked: is there enough infrastructure for communities, education, meaningful employment, affordable housing, anti-poverty efforts and climate change remediation?  In other words, are there investments being made that affect the long-term benefits of populations and not merely quick fixes to stave off the pandemic?  If not, then the mistakes of the Great Recessions will be repeated, with the financial sector making the most significant gains.

Providing Canadians and businesses with cash to keep them afloat is necessary, but it isn’t enough.  Government investment in infrastructure to enhance more sustainable economic growth is essential if we are to move ahead into a better recovery.  There must be financial stimulus that benefits everyone.

There have to be changes for the new economy to work.  Those same businesses asking the government for help in this crisis can’t demand that the government leave them alone.  There is much work to do.  Long-term business growth will depend more on collaboration than competition if success is to be found.  That means working better with staff, customers and the communities in which they function.

And what of the large corporations that also received government support?  It’s time they altered their approach from short-term gains to long-term growth.  That will also take collaboration – working with governments to provide infrastructure for workers and sustainable technologies.

Those millions of citizens who quickly discovered the benefits of having stable and financially responsible policies will have their sacrifices to make if the future is to work.  There is the need to come together in the communities where they live and forge new lives of collective living together.  The days of independence, isolation, and concentrating solely on one’s circumstances must be rendered to the past if we are to succeed.

As someone presciently noted a year ago, as the pandemic was in full swing:  

“There’s no point in talking about getting back normal when it was expected that got us into this predicament.”

We must avoid the temptation to fall back into the 2007-8 mindset, or the results will be the same, only worse.  There is now a new world to build – new enterprises, new buying patterns, new investments in infrastructure, and a new “can do” attitude – if our future emerges as something different from our past.