Economic crossroads or burning bridge?


Stephen Harper got a boost from John Williamson, a recent guest op-ed columnist in our local paper. Williamson (a student at the London School of Economics) encouraged us to support the Harper Conservatives in pursuing their economic mission in these troubling times.

But the trouble is, these troubling times were caused by exactly the kind of conservative policies that both Harper and Williamson are espousing. Over the past 25 years, successive “small c” conservative Canadian governments—from Mulroney’s US-branch-plant-Conservatives to Chrétien-Martin’s economically-conservative-globalist Liberals to Harper’s reskinned neo-conservative-Thatcherism—have put Canadian public assets on the global auction block. Meanwhile, “to remain globally competitive” successive recent governments have adjusted policy to suit the goals of international big business, reduced corporate taxes, eroded the power of trade unions and indexed our economy even more tightly to the US.

Of course, the net effect of globalization has been the creation of an international free-market, in which large international corporations can transfer operations, finances and resources to the most favourable locations—without interference from international regulation, because there simply isn’t any. There’s a real beauty in this if you’re the CEO of a big corporation. You can have your people buy resources wherever they’re the cheapest and ship them to where the labour is the least expensive (and where the labour regulations are the loosest) and then ship the end products to wherever the consumers are the wealthiest.

The economic theory of all this as stated by Thatcher, Reagan, Milton Friedman and a whole lot of others is basically, “a rising tide lifts all boats”. And to an extent that’s true. Increased international trade has enabled the creation of a whole new manufacturing economy in China, and a new white collar service economy in India, to name two prominent success stories. However, the inequity between the “have” countries (or regions) and the “have-nots” is growing exponentially. Put another way, the rich are getting richer and the poor poorer. This is true domestically as well. The top .5% of our population has become dramatically wealthier than the bottom 50%.

As I said, this massive transfer of wealth—essentially from the working middle class to the most privileged class in the West—has been made possible by the new global economy and the lack of international regulation. And the system works extremely well if all the international players play nicely. However, that’s not exactly the way of the world.

We can see it on the nightly news. When Russia cuts off the supply of its natural gas to the Ukraine in the middle of winter, home furnaces shut off across Europe. When the Israelis invade Gaza the price of gasoline goes up 12¢ a gallon in a matter of days. It’s no big surprise.

What did seem to come as a surprise was the recent financial meltdown. But not really. Since the last recession in the early 1990s, Alan Greenspan and his US Federal Reserve kept tinkering with interest rates to keep the American economy ticking—by keeping American consumers spending. And they did. They bought everything China-India-Japan-Mexico-Indonesia-etc. could make. When they ran out of cash, they maxed out their credit cards. When the bills piled up, they flipped their houses, and spent the equity buying more cool stuff. With home values rising, the boom was on. Mortgages and home equity loans became easier to get. Money flowed like water, and to keep it flowing, the Fed kept lowering interest rates. It was a boom. So, hello, what did the free-marketers think was going to happen? Pul-ease.

Now governments around the world are rushing in to bail out the global economy, by some estimates to the tune of $500 trillion. So what happened to the self-regulating, free-market capitalism that would be our bridge to a new golden age? Well, as we see, the bridge is going up in flames.

What’s been missing in international governance over the past 25 years is a separation between commerce and state—much like the very necessary separation of church and state some 300 years ago. Government, at its best, offers protection for its people. That includes protection from predation of all kinds. That includes everything from military invasion to economic exploitation. One of the founding principals of modern government has been the redistribution of wealth, in order to allow those of us who are not as fortunate at birth to have a least the opportunity of achieving a comfortable life.

In this scenario—the new burning bridge scenario—I can’t see any advantage to supporting Stephen Harper over Michael Ignatieff. In fact, a case could be made for the opposite. Ignatieff, who was the director of the Carr Center for Human Rights Policy at the John F. Kennedy School of Government at Harvard University, may have a much better sense of how our government might protect the future of ordinary Canadians within the globalized economy. Harper, on the other hand, with his roots in the Alberta oil economy and his affinity to big business capitalism may be yesterday’s man tactically reinventing his image today—while struggling with tomorrow’s problems. And, case in point, after two terms as prime minister he doesn’t have much to show for it.

Closer to home we have the same burning issues—these culled from the same editorial page in the Courier last week. In an editorial Town Manager Hendrik Slegtenhorst advised residents to expect a period of belt-tightening. As if it were breaking news, he cited our aging population, out-migration of youth, the decaying downtown core, and a shortage of municipal taxes due to the small footprint of the town relative to its large service area. Again, what he’s actually seeing are the smoldering bridges that have been burning in St. Stephen for more than four decades. What, one would ask, were our previous municipal governments thinking?

No, we’re not at an economic crossroads. This fork was chosen long ago, when St. Stephen’s manufacturing sector disappeared into the emerging global economy a half century ago—and when Canada left Pierre Trudeau’s nationalist era.

If we concede that the economic bridge is indeed burning, what is needed now are governments less connected to the whims of global corporations, and more in tune with creating a new approach to regional, national and international economic and environmental regulations.


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