The Global Crisis: The End of an Age of Reaction

Ask not for whom the bell tolls. It tolls the din of imploding financial institutions, crashing stocks, choked credit markets, and government bailouts. It tolls the end of an age of reaction. What is to come may be better, it may be worse. It will be different.

What has ended is the Anglo-American era of globalization, with its ever vaster financial markets, de-regulation, and the out-sourcing of production to the cheapest available pools of labour. At the helm were the members of a ruling class nourished on bonuses, mergers and acquisitions, who never spared a thought for the people whose lives they were blithely reordering, often destroying.

The pillars of the system that has crumbled were constructed from the early 1970s on when the earlier system of Bretton Woods and Keynesianism collapsed as a consequence of the Vietnam War, the oil price shocks of 1973-74, stagflation and the fiscal crisis of the state. The new, meaner, footloose capitalism that took shape was centred in finance capital, with national economies, manufacturing, trade unions, and the relatively well paid working classes of the advanced countries consigned to the dustbin.

Monetarism and supply-side tax cuts for the rich---trickle down economics---replaced Keynesianism. With the election of Margaret Thatcher in the U.K. in 1979 and Ronald Reagan in the U.S. in 1980, the political tone of the era, with its hallmark myths and axioms, was set. What followed were successive waves of deregulation that did away with the rules governing financial institutions, minimizing the distinctions among deposit banking, investment banking and insurance. New investment instruments----all manner of derivatives and futures options---were legitimated to allow the lending of ever larger amounts of capital, backed by ever smaller reserves of real assets. A pyramid was being constructed. It was a self-propelling, self-consuming pyre that could only survive through the continuous addition of new debt, its essential fuel.

With the United States, and America’s offshore island, the United Kingdom, at the centre of the global system, the debt took many forms, personal indebtedness, the indebtedness of America to the rest of the world, and the rising indebtedness of the United States government. As it turned out, it was the bursting of the housing bubble that took down the system.

That housing prices in many countries were inflated due to the expectation of further increases had been evident to observers for some time. The housing bubble was further inflated by so-called “sub-prime” lending on a massive scale to high risk borrowers. The red ink from the sub prime sector spewed unredeemable debt out to each of the other sectors drowning them one by one.

The old lesson, learned nearly three centuries ago, with the South Sea Bubble, is that bubbles are bound to burst, that all the hype that attends their expansion is blown away in the cataclysmic instant when it all flies apart.

The era that has ended prized finance, wealth, showy consumption, the acquisition of grand houses, to be renovated from top to bottom, private schools for the children of the privileged, and safaris to see the Big Cats of Africa. Workers, craftsmen, teachers, farmers and nurses were not much valued. The affections of the era were erratic, transitory and rootless.

A central axiom of the age was that the heavy hand of government should be lifted to allow business to have its way. Regulation was negative as were taxes. The tax-man was an evil doer, an oppressor of upstanding citizens.

A central myth of the age was that a borderless world was in the making. This was true enough for capital, but for labour, refugees, and the wretchedly impoverished, it was a hard world, in which migrations to better places grew ever more perilous. Globalized economic production drove the poor off the land and into gigantic cities, notable for dreadful housing, sewage and infrastructure. One milestone in this miserable era was that toward its end more than half of humanity had come to dwell in cities.

In Europe and Canada, where public enterprise had been widespread across a range of industries and services, it was an age of privatization. Thatcher's Britain set the pace with the privatization of British Rail, British Telecom, city transit systems and the country's water utilities. In Canada, Petro Canada was privatized by both Conservatives and Liberals. Over the past five years, the company that tax payers built made a profit of 9.2 billion dollars. All Canadians should have reaped that reward. Instead private investors did. Some old Tories such as Harold Macmillan, objected to all this as the “selling of the family silver” but he was out of fashion. The tax payers were the losers. The winners were financiers, and in many cases, the top executives of formerly public companies who had prepared the way for privatization and had been rewarded with huge salaries.

Particularly in the United States and the United Kingdom, but also in Canada, the whole idea of economic planning was disparaged as a fossilized relic from the bygone days of the mixed economy. The short term was what mattered. The long term could take care of itself. A major consequence of this mentality was the deterioration of public infrastructure. Highways, roads, bridges, rail systems, schools, universities, and hospitals were allowed to decline into ever greater states of dilapidation. An emblem of the public squalor of the age was the London Underground, the grand old lady of the world's rail subway systems. Journeys on the London Tube customarily began with passengers hearing the announcement of a long list of the lines or sections of lines that were, or soon would be, out of operation, or undergoing repairs.

The private opulence of the few was thought too important for it to be scaled back to provide resources to address the public squalor endured by the many. Catastrophes punctuated this reality. In 2005, when Hurricane Katrina ravaged New Orleans, not only were the levees a shambles, there was no plan to ensure that the poor, mostly black, residents who didn't own cars, could escape from the city. In 2007, thirteen people died when a highway bridge collapsed in Minnesota.

During the age of reaction, the hegemonic myth had it that the market, conceived as a natural, impersonal actor, set the monetary rewards for work according to the true worth of those doing the work. A top banker, who earned many millions of dollars a year in salary, bonuses and stock options was worth that money because he could command it in the marketplace. Any interference with this magisterial process, through higher taxes or by regulating the amount of income an individual could earn, would inexorably result in a loss of productivity that would damage the performance, not only of the bank for which he worked, but by extension, would retard the forward thrust of the economy and, therefore, the general well-being. This preposterous postulate, equivalent to the Ptolemaic theory that the sun revolves around the earth, turned cause and effect inside out. It was a time when the dominant myth held that the real work was done in the office towers of financiers and corporate law firms, rather than in factories, fields, schools, laboratories, hospitals and on construction sites.

Now that the once revered supermen of the age have flown the economy into the side of a mountain, the wreckage lies all around us. The myths of the supermen have been exposed as the lies of con men who enriched themselves at the expense of humanity. The price that will now be paid by people the world over for the rule of the financiers will be stupendous. One thing people everywhere have gained, though, is freedom from the power of the lies that they were told. And that freedom can be the basis for a new beginning.

And the Big Loser is----Stephen Harper

Yes, Stephane Dion is through as leader of the Liberal Party. He’ll be the first Liberal leader since Edward Blake never to become prime minister. The Grits will now have to decide, in a new leadership contest, whether to tack vaguely to the progressive side with Bob Rae or Michael Ignatieff, or to move to a pro business, pro American integration stance with Frank McKenna or John Manley.

And Jack Layton is not about to move into Stornoway as leader of the opposition. His strategy during three election campaigns has been to take the NDP to the centre---remember how quickly he rejected the nationalization of the oil industry during the French leaders’ debate---to reposition his party as one of the two major contenders for power. It didn’t happen. Now the party will have to rethink its role in Canadian politics. It might even decide to return to socialism in a world in which bankers have flown the economy into the side of a mountain.

Gutsy Elizabeth May injected candour and courage into a campaign that was noteworthy for its lack of either. But the Greens have been shut out of parliament again.

Gilles Duceppe played defence brilliantly. He stopped Harper in Quebec, but his party still remains without a clear long-term mission. During elections, the BQ is neither clearly sovereignist, nor clearly committed to fighting for a well-defined agenda inside Canada.

The big loser, however, is Stephen Harper. He gambled everything to win a majority and he lost. Had he won his majority, he would have taken the country through a wrenching two years with a harsh right-wing agenda, including program cuts, privatization of the CBC, a larger role for faith based initiatives, and increased military spending. Then he would have used the last two years of his mandate to cozy up to Canadians and to claim victory in pulling the nation through the economic crisis.

That’s not on now. Harper is going to wear the economic crisis. And when the nation goes to the polls in about two more years, his record will be one of economic failure, tax cuts for corporations, and the collapse of the manufacturing sector. Next time out, he will go down to defeat---the R.B. Bennett of his day---either to a revived Liberal Party or to a progressive electoral coalition including the Liberals, the NDP and the Greens that is committed to a new economic agenda for Canada and to the implementation of proportional representation.

Forget about a merger of all three parties, that’s not on. But that’s fodder for future posts.

French Debate: Stephen Harper does the Rope-a-Dope

(Written for rabble.ca's election coverage.)

Stephen Harper played defence for two hours during last night’s French language debate. Appearing tranquillized himself, he tried to lull viewers into a zen state in which they would not think that cuts to the arts, locking up 14 year olds for long sentences, and dismantling gun control were all that bad.

Gilles Duceppe got off the best lines of the encounter when he charged that under Harper there would be more guns in circulation and more fourteen year olds behind bars in prisons he called universities for crime. Stephane Dion was likable and confident easily exceeding the low expectations that had been set for him. Held back by her relatively poor French, Elizabeth May did manage some effective shots at Harper. Expect more from her tonight in English.

Jack Layton spoke well, but his constant references to the day when he will be prime minister were a little cringe provoking. On the war, he was clear---the NDP is the only party, he said, that favours withdrawing Canadian troops from Afghanistan now. On petroleum, he was vague and disappointing. A viewer from Caraquet, New Brunswick asked whether the time had come to nationalize the petroleum industry. Layton said no, the NDP does not wish to nationalize the industry. Rather, he said, the party wanted action. Pushed from the left in the late 1960s and early 1970s, the NDP favoured the creation of a publicly owned petroleum company. The party took credit for the establishment of Petro-Canada by the Trudeau government. Now the NDP doesn’t give the idea of public ownership in the petroleum sector a glance. It’s a sign of how far the party has moved away from the left. (In case anyone retorts that public ownership is out of favour these days, let me point out that the proportion of global petroleum held by state owned companies is on the rise and now exceeds eighty per cent.)

I expect Harper’s handlers to take him off valium and put him on caffeine for tonight’s encounter.

Handicapping the Debates

(Written for rabble.ca's election coverage.)

Fingers-crossed, here’s how things might go in the French leaders’ debate tonight and the English debate tomorrow night.

The plagiarizer arrives ready to play it cool, determined to close the deal with Canadians as the leader who can steer the economy through rough seas.

Jack Layton, who has made himself the heart and soul of the opposition to Harper, and who is running the best of his three campaigns, nails him on the economy. He’s got to make the case that putting the country in the hands of extreme free-enterprisers whose highest loyalty is to Big Oil would be a perilous choice for Canadians. Layton now commands trust and he can use that to his advantage as the one leader who cares about what happens to working people in tough times.

Gilles Duceppe, often overlooked in English Canada, uses Harper’s cuts to arts funding, his savage criminal justice proposals and his alliance with the gun lobby to make the case that the Bloc continues to have a role to play in Quebec as the essential defender of Quebecois values and identity. Tonight’s his big night.

I have high hopes for Elizabeth May, who can think on her feet and who is much less of a poseur than the other leaders. If anyone can show that Harper is naked on the environment and that he is simply reciting a script----likely written in Achnacarry Castle near Loch Lochy in Scotland where everyone knows the neo-cons have their secret headquarters---it is her.

Stephane Dion could end up charging off in all directions, furiously lashing the NDP for its old fashioned socialism in which monopoly money is the coin of the realm, and then striking out at Harper for his secret right wing agenda. If he is wise, he’ll make the strategic decision to limit his attack to Harper, and use his time to make three or four points that people can remember. Don’t bet the farm on this.