Where do bond rating agencies get the nerve? They loom over economic policy like divine oracles. They tell lenders how safe to feel when making loans and therefore what interest rates to charge governments who borrow from them. In recent decades, as raising revenues through higher taxes became politically toxic, they expanded their influence and arrogance.
Before this week’s Ontario budget, they’d already “downgraded” the province’s “outlook” — though not its rating — from stable to negative. It really does sound like the Delphic oracle: murky but definitely gloomy. They’re part of the economics of ugly forebodings that dominates our era.
Before the June election, columnist John Ivison wrote: “The credit-rating agencies will likely record their verdict on the election within 24 hours of the polls closing and we can expect to see the credit downgrades that would have come already. . . ” The interim Tory leader keened: “It is immoral to give people false hope with a budget … only to have to take away services and programs when the lenders put a gun to your head…” They effectively tell governments how many people to fire and what to sell off to balance their books. Their sole criterion is the math. Human welfare, misery or planetary health never factor in.
Yet these agencies gave us (though not all by themselves) the crash of 2007-8. Many of the funds that bought those absurd “devices” which Warren Buffett said he wouldn’t buy because he can’t understand them — Warren Buffett!– are legally required to secure triple-A ratings for their purchases. The ratings agencies happily complied. Two years later those ratings had slid to junk level and three huge banks were kaput. They were indispensable in creating the housing bubble, bailouts, demands for austerity — plus a living hell for U.S. homeowners and entire European nations.
They reformed mildly and briefly, like the banks, then reverted to their old ways. They underpay and understaff their workforce so as to increase executive pay; their best employees are routinely hired away by banks. You’d think their reputation might’ve taken a hit. Like Cassio, in Shakespeare’s Othello, why aren’t they moaning: “Reputation, reputation, reputation! Oh, I have lost my reputation! I have lost the immortal part of myself, and what remains is bestial.” But they show no sign of self-doubt.
Alas (Cassio might add), they aren’t alone. Reputation is the weirdest thing. How did Peter MacKay salvage his? In 2003, in order to become leader of the Progressive Conservatives, he promised not to merge his party with Stephen Harper’s Canadian Alliance. Then he reneged, just like that. When his girlfriend, Belinda Stronach, deserted to the Liberals, he apparently referred to her in Parliament as a dog. Hansard didn’t record it but it’s indistinctly on tape and others heard it. Now he parades as the protector of female virtue against perverts and johns. I’ve never understood why Brian Mulroney didn’t go into hiding after taking bags of cash from Karlheinz Schreiber. Or the U.S. officials who lied about Iraqi WMDs, resulting in the current chaos there — and go on TV now to explain it’s Barack Obama’s fault. How can they all be so shameless, while innocent kids whose reputations were smeared on the Internet kill themselves from a sense of shame? It’s grotesque and incommensurate. But I digress.
So to whose voice should we attend: Moody’s and the other bond raters or Evo Morales? He’s the president of Bolivia and he presided at a meeting last month of 104 nations that issued a declaration in favour of the economic concept, Vivir Bien — living well. “It means listening to the people, rather than the financial markets,” he explained. “It means placing Nature at the core of life and regarding the human being as just another creature of Nature.”
I know that sounds syrupy and naive compared to what we’re used to. But this week Manitoba experienced flooding that’s become the frightening new normal, menacing farmers’ livelihoods; fires are advancing on Yellowknife; in Oklahoma, earthquakes have increased more than 200-fold in a few years due to fracking. Who’s really naive and who’s economically credible at this juncture?
Or, as Shakespeare also wrote (approximately): “The first thing we do, let’s kill most of the economists and all the bond raters.”
This column was first published in the Toronto Star.
Photo: Adam_T4/flickr
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