Monday, July 21, 2008
Where Do We Go from Here?
In 1976, Milton Friedman received the Nobel Prize for Economics. In 1979, Margaret Thatcher was elected Prime Minister of Britain. And in 1980, Ronald Reagan was elected President of the United States. Thus began what Canadian political economist James Laxer has called, "the Age of Reaction." It has been a time, he writes, when "political ideas, cultural assumptions, the role of government, relations between the employed and their employees, and between the wealthy and the rest of the population have assumed a new shape."
In the United States in 2007, writes Laxer, "the relative income gap between the rich and the poor [was] wider than at anytime since 1928 (the eve of the Great Depression.) The lives of ordinary people have grown more uncertain. During the past quarter century, most people have been on an economic treadmill, precariously trying to make ends meet and to ward off the danger of crippling indebtedness."
And in a recent article entitled, "A Nation in Debt," -- in The American Interest -- Barbara Defoe Whitehead chronicles how, in this same period, "the institutions that encourage thrift have moved uptown, catering to upper income Americans with an ever expanding array of tax advantaged opportunities to invest and build wealth. The potential "small saver" has been left behind as prey to new highly profitable financial institutions: sub prime credit card issuers and mortgage brokers, rent to own merchants, payday lenders, auto title lenders, tax refund lenders, private student loan companies, franchise tax preparers, check cashing outlets and the state lottery. Once existing on society's margins, these institutions now constitute a large and aggressively expanding anti-thrift sector that is dragging hundreds of thousands of American consumers into profligacy and over indebtedness."
And the contagion is spreading to Europe and Canada -- as any recently cashiered auto worker (one out of seven jobs in Ontario is related to automobile production) can verify. The government of Stephen Harper has bet its and the country's future on Friedmanesque economic theory; and, like the Bush administration to the South, it has squandered the surpluses which it inherited.
Indeed, as Douglas Peters, the former chief economist at the Toronto Dominon Bank, wrote in The Toronto Star last week, "it appears that this was exactly what both the U.S. and Canadian conservative governments intended. The purpose of the tax cuts was to make it more difficult for governments to raise spending and introduce new programs." The people who bore a visceral hatred of government set out to make sure it would fail. Now the bill for this folly has come due. World markets -- which these folks raised to iconic status -- are teetering; and the future of the planet hangs in the balance -- as we fight wars in the Middle East, the largest repository of the stuff which is a major cause of our economic and planetary woes.
We are at a precarious moment. But, as Al Gore also reminded us last week, there is a common thread which runs through the multifaceted problems we face, "which is deeply ironic in its simplicity: our dangerous over reliance on carbon based fuels is at the core of all three of these challenges -- the economic, environmental and national security crises. We're borrowing money from China," said Gore, "to buy oil from the Persian Gulf to burn it in ways that destroy the planet."
Gore suggested that the way out of our morass is to rebuild our electricity grid and take advantage of renewable energy sources -- wind, solar and geothermal. It would be an expensive project. But oil at just under $150 a barrel is expensive; and it kills jobs, not to mention the lives which have been lost in the sands of the Gulf. Gore believes that we can do this in ten years -- the same critical path which President Kennedy set to put a man on the moon. It would mean abandoning Friedman's economic model; and it would mean taxing carbon, or as Gore put it, "we should tax what we burn, not what we earn."
That, coincidentally, is the policy on which Stephane Dion has staked his and his party's future. There will be an election in the United States in November. There will be an election in Canada shortly thereafter. During the Age of Reaction, Laxer writes, "in the developed countries . . . democracy has been in decline, increasingly replaced by a plutocracy in which money dictates political outcomes." No one should be foolish enough to believe that money can, or should, be banned from politics. But, if the Obama campaign has proved anything, it is that small donors have a voice. The question is, can the non-plutocrats once again grasp the levers of power? And do they care enough to fix the mess Mr. Friedman, Mrs. Thatcher, Mr. Reagan -- and their hundreds of thousands of acolytes -- have left us?