Monday, July 09, 2012

They Don't Get It

David Olive wrote last week that there are three things this generation of world leaders doesn't get:

The first point is that this is no run-of-the-mill industrial recession. This is a rare financial recession, whose devastation is acute and widespread in the world.

To listen to Finance Minister Jim Flaherty’s hectoring of Europeans to get their fiscal house in order, or the conviction of British PM David Cameron and German Chancellor Angela Merkel that troubled nations would be best served by adopting their tough-love prescriptions (a view shared by most Republicans in the U.S.), is to conclude that these folks think the current difficulties lend themselves to expedient “solutions” and will soon blow over.

 But it's going to take a decade, Olive wrote, to repair the damage done in the last three decades.

The second thing world leaders don't understand is that the austerity they currently advocate is a false hope:

And so America’s dynamic recovery of 2009-10 has stalled. The aftershocks of the U.S. downturn have pushed Europe into recession. Even China this week slashed its GDP growth estimates for this year to a mere 3 per cent to 4 per cent, after close to a decade of double-digit growth. Japan remains mired in economic stagnation of two decades’ duration.

The latest failure of capitalism sucked demand out of the global economy. All of the world’s biggest economic engines have conked out, for lack of demand. And it’s that paucity of demand – or the spending that creates jobs and tax revenues – that is the immediate cause of unmanageable sovereign debt in Europe. The latter was a non-issue prior to a collapse in demand that drained public treasuries. Those treasuries have been abruptly starved of tax revenue even as requirements for emergency state assistance have soared. 

And last, and most importantly, governments need to invest in the future. The debt they incur now will reap dividends:

Otherwise current generations will suffer the future consequences of deprivation of income, of child support (hungry children have difficulty learning), and of superior formal education (slashing school budgets is a sure route to lack of future competitiveness).

A range of social ills derive from the false economy of balancing the books on the backs of present generations, which are made to forfeit opportunities to flourish in mind and heart. There’s much work to be done in the world – replacing century-old infrastructure, to start – and a rare abundance of idled skilled labour to do it.

We can talk, as the austerity champions do, of long-term gains to be had from the imposition now of brutal economies. But as John Maynard Keynes said, “In the long run, we’re all dead.”

What Olive is advocating is nothing new. It worked during the Great Depression. But today's leaders are not students of history -- and, so, they don't get it.


thwap said...

They believe that we will bail them out as they conduct the expensive policy of driving us into the ground.

They're insane.

Owen Gray said...

Unfortunately, thwap, they've had other people -- the same people who got us into this mess -- tell them that they're bright.

If they'd learned a little humility along the way, they might have chosen another course of action when it became clear that Plan A wasn't working out.

Anonymous said...

"austerity they currently advocate is a false hope"

No Owen its a fraud to protect the rich...

And enslave the masses in endless debt...

Remember Paul Helyer?

Its a game and you me and thwap are the toys. Sigh...

Owen Gray said...

But to thwap's credit, Mogs,
he's working to make sure that Etobicoke Centre does not remain a Conservative riding.

Let's hope that, when the Supreme Court meets tomorrow, they'll allow him to continue his work.

Anonymous said...

Are you kidding?? Harper is appointing two new Conservative judges. What are the odds, one of Harper's judges will hear the appeals?

Same with Elections Canada. Harper has installed one of his boys Yves Corte, in place of Corbett, who resigned from Elections Canada.

Harper is lower than a snake in the grass. He is the master of, dirty tactics, dirty politics and every evil gambit in the book.

What about, American Veterans, coming to work the pipelines. I don't know if they are to fire on Canadians opposing the pipelines, or actually work the pipelines? They have an exclusive deal with Alberta, so they say.

Owen Gray said...

We're about to see, Anon, if Harper has co-opted the judiciary.

At the moment, they are the only source of real opposition to his agenda.

If he's got the Supreme Court in his pocket, we're in deep trouble.

e.a.f. said...

"They don't get it" Yes that's right, they don't need to. They already have what they need so they don't care. Their solutions all involve them keeping what they have & getting more.

All this talk of recession is just about multinationals getting more & having to pay less. Their profits are back to what they were prior to the "recession". It the rest of who haven't recovered.

It is about time the governments let the banks fail. All these bail outs in Europe are for the benefits of the banks. The American "recession" was all about the banks. they should have let them fail, people might still be living in their own homes instead of being thrown out, the houses sitting empty for yrs, & then being torn now. How did that benefit anyone but the banks & their friends.

Owen Gray said...

There was a time when banks were regulated in order to ensure that everyone had a fair shake, e.a.f.

Now that they're to big to fail, they can write their own tickets.