Much like the Bush administration which is floundering as the economic crisis intensifies, the Harper government seems to have no idea what is going on.
Not only is the United States and the world as a whole undergoing the worst stock market crash since the Great Depression, the so-called “read economy” is about to be hit by a potent mix of falling purchasing, declining prices, business bankruptcies on a vast scale, and the loss of jobs at a pace we haven’t seen in our lifetimes.
Meanwhile, on both sides of the border, policy makers are dithering as the very real threat of the collapse of the Big Three automakers grows greater every day. When Lehman Brothers expired what seems like a millennium ago, we were reassured that Ben Bernanke, the Chairman of the U.S. Federal Reserve Board , was a student of the Great Depression and knew what to do.
Think of those grainy news reels from 1929 and the early 1930s. We used to feel smug about them. How dumb those policy makers were not to understand that you had to pump sufficient liquidity back into the system to keep the economy from collapsing? (We were taught that in Economics 101---oh, I forgot, when I took Economics 101 Keynesianism was still in vogue. Now in Economics 101, students learn the idiocies of Friedmanism and its successor doctrines, a perfect brew for cooking up a depression.)
If the Big Three, or any one of them, go into bankruptcy protection, the storm that will follow will be enormously more intense than what we have experienced so far. It will be felt in every community in Ontario and Quebec. The auto parts, steel, rubber, glass, and other feeder sectors, along with the service sectors in the dozens of communities tied to the auto sector will be devastated. From there it will spread to every community in the country, including those that nowhere near an auto plant.
In the U.S., the Bush administration, in its last chaotic hours, is just hoping the bad movie will go away. In Ottawa, Stephen Harper and Jim Flaherty (whose first instinct was to sell the CN Tower) are praying that Canada’s oil patch will save them (haven’t they noticed that the U.S. economic crash has already hit Fort McMurray between the eyes.) They want to play the old game of competitive deflation in which Canada lowers labour costs and government spending in the expectation that we can still export enough to the U.S. to keep our economy humming.
The Harperites don’t realize that this downturn is not like the others. It is, at bottom, the outcome of the shrinking role of the United States in the global economy. This time the U.S. market is not going to save us. The Americans are awash in red ink that is spreading in all directions----governmental, corporate and personal.
Canada needs its own large scale and coordinated governmental strategy for staving off collapse. Time is of the essence.
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6 comments:
Socialism, anyone?
In the Canadian context, I find it odd that the CCF, which pledged not to rest until it has eradicated capitalism from Canada, has morphed into the NDP that now seems intent on helping to save capitalism.
Perhaps I'm just reading it wrong...
Interesting post. Just a minor clarification, I believe it is Ben Bernake , the head of the fed. reserve who is the expert who has studied and written about the "1929 Great Depression ", not Hank Paulson who is a Wall Street insider and former executive of one of the large investment banks.
Thanks. Your quite right. It is Bernanke. I've changed the post accordingly.
A sobering critique of the Harper government's alienation from the problem. They seem disconnected emotionally and philosophically coming up with bandaid solutions to a deep cut problem. But what's the point in propping up the automakers? They make too many, fuel in-efficient cars that exploit resources and pollute the air? If we grant them any money now, they'll be back in six months asking for more!
It's time to wake up and smell the coffee: capitalism is coming to an end.
LeonT
There is so much misinformation out there, right now. Enough for anyone on which to hand their prejudices.
I was in Montreal this w/e. No recession there. Grey Cup w/e notwithstanding.
Most of us still have jobs. Maybe not as many as the statistical wizards that rule us say (e.g., discouraged workers), but not the bloody end of the world I see predicted on TV and in headlines.
Consumer confidence is a biggie, but come on. We're more savy than 75 years ago. If the price of consumer goods, homes, money, etc. falls low enough, we will buy.
It's up to governments to soften the blow.
Prof. Jim:
At least Harper is making the right noises, saying he favours deficit financing. Whether he can go beyond paying lip service to Keynes is another matter. The Conservatives seem caught between doing what makes sense -- deficit financing, something most nations, including the Americans are planning -- and their ideology, which is Friedmanism. That means selling public assets and the like. Look for some of this and some of that from Harper and company.
By the way, at the election debates, which seem an eon away, Jack Layton opposed deficit financing. That puts him to the right of Harper.
And by the way, shouldn't that be the "real economy," not the "read economy?"
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