Wednesday, February 04, 2015

The Sins Of The Fathers

For Neo-Liberals, a deficit is more than a negative number. It is a moral failure -- a sin. That conviction drives Stephen Harper's economic policy. And that conviction, Scott Clark and Peter DeVries write, is a perversion of economics. Until recently, Canadian governments have understood that fixation on deficits is detrimental to the nation:

By that reasoning, most governments in Canada since Confederation were unethical — because they ran deficits. They borrowed to finance the transcontinental railways which built our country, the St. Lawrence Seaway which connected our western provinces to global markets. In fact, the only post-Second World War governments which didn’t fall into that category were the administrations of Jean Chretien and Paul Martin.

Harper’s own government appears to be a late convert to [Joe] Oliver’s peculiar brand of fiscal ‘ethics’. After inheriting a surplus of $14 billion, it quickly turned it into a deficit by cutting two points off the GST. The Conservative government, for all its fiscal ethics, has run a deficit since 2008-09 — saddling future generations of Canadians with an additional debt load of more than $150 billion.

Like Puritans focused on the sins of others, neo-liberals see themselves as missionaries, whose job it is to convert the world. In Canada, they have converted the three major political parties:

The New Democrats’ top policy priority is a national childcare program — not a bad idea, actually, but not an economic growth strategy. They’re also allergic to any talk of deficits and debt financing; they’d to raise corporate taxes — not a good idea, actually. They have made a number of small tax announcements to support innovation and small business, but they hardly constitute an economic growth strategy.

The Liberals, meanwhile, have made increased infrastructure spending their top priority. But they too have an aversion to deficits and debt financing. In a well-written article in the National Post last week, Liberal Finance critic Scott Bryson set out the arguments for a national infrastructure program. The words “deficit” and “debt financing” do not appear anywhere in the article. Instead, the Liberals are looking at “innovative” ways to get private and public pension funds to undertake infrastructure investments. Whether any of these would be up to the challenge remains an open question.

And, until the false morality of Neo-Liberalism is overthrown, the future is austere. Our children will be right to be furious with us:

What Harper and Oliver can’t get into their heads is that burdening future generations with crumbling infrastructure — and the attendant costs — is unethical. But it can be ignored, because most of us, including Harper and Oliver, will not be around to accept the responsibility.

Until Neo-Liberalism is vanquished, the sins of the fathers will be visited upon their children.


Hugh said...

I disagree with what this article is saying. Canada's debt is already massive. Govt can't keep going deeper in debt indefinitely.

The idea that economic growth will take care of debt and deficits is false, IMO.

Interest rates are being kept low, in part due to high debt levels. This is a big reason behind the unsustainable real estate bubble.

What's going on looks like a giant ponzi fueled by debt.

Owen Gray said...

If the debt is consumer debt, it is a Ponzi scheme, Hugh. That's what caused the housing bubble in the United States and which could still sink us.

But Clark and Devries distinguish between consumer debt and invested debt. Invested debt can spur economic growth. Consumer debt is a dark hole.

Neo-Liberals would have you believe that the only kind of debt is consumer debt.

mogs moglio said...

What Peter DeVries fails to acknowledge is Pierre Elliott Trudeau's abandonment of Canada's government getting loans from The Bank of Canada and instead turned over to loans from foreign and domestic banksters the lending power. What did that do to Canada's economy? Put us in eternal debt slavery.

We built Canada with loans from the Bank of Canada and were fine we did not need private or foreign banksters now we are in a hole so deep we can't get out.

Each of us all Canadians rich or poor or even homeless and children babies and parents and grandparents owe over $20,000.00.

How does that make sense? We owe it to banksters that already are some of the richest entities on the planet.

We are collectively stupid to allow this to go on.

Hugh said...

Ok, but I don't think pursuing economic growth is a good idea. There are limited resources, water, fisheries etc. We need economic shrinkage in order to survive within the limits of the earth.

Governments and central banks want GDP growth because that's one strategy they plan to use to deal with all the debt.

Owen Gray said...

Like the two kinds of debt, Hugh, there are two kinds of economic growth -- unrestrained economic growth and sustainable economic growth.

The challenge is to create an economy which makes wise choices about employment and resources.

Our present masters seem incapable of making those kinds of distinctions.

Owen Gray said...

The Neo-Liberals have preached for fifty years that government should be out of the money markets, Mogs.

Once government put its fate into the hands of private banks, its fate was sealed.

Hugh said...

I'm also curious about that idea of borrowing from BoC.

I think Canada stopped doing that around 1973?

Which was when Canada's debt started going up.

Owen Gray said...

That's an interesting topic for research, Hugh. Something to look into.

Anonymous said...

Canada's resources are pretty much foreign owned and so are the jobs. Foreigners send their wages home, that money isn't even spent in Canada. 71% of the oil patch is foreign owned and that money leaves Canada too. In what way does this benefit Canadians and this country?

Some countries have realized, without the middle class growth stagnates. Your everyday Canadians are left with no money to support business and many retail businesses have been shut down and/or have been pulled out of Canada.

Owen Gray said...

As far as the Harperites are concerned, Anon, the economy is not supposed to benefit ordinary Canadians.

Toby said...

This might help. Check the graph.

Owen Gray said...

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations."

Thanks for the link, Toby.