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What to do next is the policy question every government must face. In Canada, like elsewhere, more of the same — a.k.a. nothing at all — is a popular answer. Radical change is seldom a preferred course of action. And yet, for over 30 years, neoliberal radical change is what has been on the world agenda. We are now grappling with the unhappy results. The bleak outlook for the future is unlikely to improve unless a new and equally radical policy orientation is chosen.
The starting point for a new approach is to recognize meeting human needs has to replace business profitability as the organizing principle for policy. The economy is about people working together to meet each other’s needs. These needs for shelter, food, water, clean air, income, recreation and employment can be addressed directly and democratically through governments at all levels, co-operatives, non-governmental agencies and community organizations; not just indirectly through price signals given to firms. Working out new international agreements is a condition of creating a more promising future.
Class compromise, a big bargain struck between business and labour, characterized the first 30 years of the post-war period. Business went along with the provision of public goods, such as health care and education, and accepted modest re-distribution from rich to poor through the welfare state, on condition that labour leave investment decisions to business leaders.
After the 1982 recession, business marshalled resources, and fuelled partisan political attacks on policy gains won by labour and community groups. In Canada, Conservative and Liberal governments bent on privatization, free trade, de-regulation, deficit reduction, and the pursuit of anti-inflation not employment creation, ruled with little evident difference between them. This policy direction, first heralded by Thatcher in the U.K., Reagan in the U.S., and Mulroney in Canada, was initiated by largely American corporations, and was embraced by the OECD, IMF and World Bank.
The three-fold crisis created by the neoliberal turn in policy is the reason Canadian progressives, and their friends elsewhere, want to turn the clock back to the pre-1980s period, and think things through again. Environmental destruction, rising social inequalities, and a dreary economic outlook (especially for youth, the indebted and the unemployed) loom large over the future. Continued reliance on the economic and political regime created by corporations — in the name of so-called market forces — and imposed by the neoliberal state guarantees things will only get worse.
The three-fold crisis is the result of making governments subservient to business profitability, and using state power to assist the most powerful economic actors. Trying to protect the planet from further environmental degradation, alleviate inequalities, and create jobs for all those seeking paid work, requires a new relationship between business and government, one based on democratic values, where business is subservient to the community. This entails a new agenda: focusing on changing one issue in isolation from the others will not work.
As the G20 meets in Mexico, a new policy consensus is not about to emerge. Worse, austerity, and the accompanying insanity of government cutbacks which serve to reduce economic activity, and therefore government revenues, are presented as sound choices for sovereign borrowers such as Greece, Spain and Italy.
The not-so-hidden agenda is to bail out European banks, which are holding sovereign debt in the form of bonds, now discounted in value. Because bond prices fall when the cost of borrowing rises, bank solvency is the real worry. The discounted bonds represent banks assets that have plunged in value. But the banks still have liabilities (in the form of loans with the European Central Bank or ECB) with the sovereign debt pledged as collateral.
As the value of the sovereign bonds slips, banks become technically insolvent.
In the absence of a lender-of-last-resort — the ECB is not mandated to lend to governments, an error that needs to be remedied — the IMF has asked for pledges from major countries to backstop European efforts to contain the financial crisis.
In an election year, with a vulnerable president, the U.S. does not want to play along. The Harper Government, every eager to parrot discredited neoliberal lines, has taken to lecturing European leaders about what to do. In Mexico, the European Commission President let loose with a stiff rebuke to Harper. Being singled out for condemnation represents an unfamiliar precedent in the history of Canadian summit diplomacy.
In Canada, using its infamous party talking points, Conservative MPs are pretending Harper is protecting taxpayers’ money, when in fact, the opposite is closer to the truth. Canada is not being asked to contribute tax dollars, simply lend its borrowing capacity to a world effort to strengthen sovereign bonds against speculative attack. The threat of such united action should be enough to ensure that the attack does not materialize.
The fragility of the world financial system requires new thinking and new approaches. The Harper government refuses to acknowledge the links between the European crisis and the wider problems of a world characterized by giant financial flows across borders. The government assumes the policy question — what to do next — need not be asked, because Harper has the answer: more of the same. Presumably, he expects a new result.
Duncan Cameron is the president of rabble.ca and writes a weekly column on politics and current affairs.