(Nov 11, 2008) -- 'Our challenge is to ensure that a progressive approach of using our common wealth for the common good stirs our collective conscience and becomes the centre of political discourse and policy in this country.'
Financial markets around the world are facing an extraordinary time of turmoil and there's no end in sight. Here at home, Canadians are worried about whether they’ll be able to make their mortgage payments, keep their jobs, and ensure their retirement is secure. They deserve answers.
The three key questions are: How did we get into this mess? How do we get out of this mess? How do we prevent another similar mess in the future?
Most economists agree the crisis started in the trillions (U.S.) of dollars of global money needed to be invested somewhere. Much of it landed in the U.S. housing market. While the money was pouring in, U.S. financial institutions were handing out as many mortgages as possible. When there were no more qualified homebuyers, the institutions simply eliminated their lending standards so anyone could qualify.
The selling of shaky sub-prime loans, and the risk they wouldn’t be paid back, eventually triggered a loss of confidence. Banks stopped lending to each other and to people – even credit-worthy people. The capital dried up. The housing market went bust. Many Americans lost their homes and are hopelessly indebted. Major investment banks, mortgage companies and insurers went bankrupt. All of this triggered panic on Wall Street which led to a major crash on stock markets around the world.
Deregulation vs. the role of government
But why were these institutions allowed to take such irresponsible risks and engage in such reckless lending practices in the first place? Well, regulation has been a dirty word in the U.S. for decades. The Bush administration and previous governments dangerously deregulated the financial sector. The lending institutions were in charge of themselves, free to do whatever they wanted. If that included lending money to people who could never pay it back, so be it, the government wasn’t going to interfere.
Deregulation and a lack of financial oversight is a big factor in this mess. But it’s not the most important one. The root of the current crisis is a broader ideological hostility to the very idea of using the government as a positive force for the common good. We end up with policies like deregulation, privatization, tax cuts for the wealthy and global trade deals that put corporate interests first. But these policies are born out of a rigid conservative ideology that believes there is no constructive or compassionate role for government in our economy or society – it’s an ideology that believes unfettered free markets will set us free.
It’s this rigid conservative ideology that got the world into this financial mess. So how does that ideology propose to get us out of the crisis? It says the government should cough up billions of dollars to bail out investment moguls and their companies. The proponents of unfettered free markets are now begging governments around the world to intervene and rescue them from the consequences of their own greed. Hypocrisy knows no bounds.
Exploiting ordinary taxpayers
Where have these governments been for the last decade when regular folks were saying they needed more investment in good jobs, health care, education, pensions, social services, and a cleaner environment? When it comes to these priorities the response was always the same: “Sorry, we can’t afford those priorities.” The results of that response have been stagnant wages, more private health clinics for the wealthy, weaker pensions, less secure employment, unprecedented income inequality and greater poverty.
In effect, ordinary public taxpayers who worked hard and played by the rules and were exploited in the first place are now being forced to bear the risk and responsibility for the financial mess but get no help with their priorities. It’s a classic case of socialism for the rich and capitalism for the poor.
Of course central banks should stabilize financial markets by supporting the financial industry with liquidity, and they should reduce interest rates to stimulate borrowing. But the government must insist on ownership shares that pay dividends to taxpayers in return for any bailouts; they should place serious limits on excessive CEO compensation; and they should force banks to pass interest rate reductions onto their customers.
But more importantly the government must play an active role in maintaining jobs and incomes for Canadians who are going to be struggling to pay their bills and stay above water. The government must protect the public services Canadians are going to need during an economic downturn. They should strengthen and expand income support programs like Employment Insurance. They should invest in public infrastructure projects, including those aimed at reducing greenhouse gas emissions, in order to create jobs, repair infrastructure and stimulate the economy.
Harper and 'the fundamentals'
In short, we need a government that has a plan to protect and support Canadians, not just financial institutions, in tough economic times. In the wake of the current crisis it is becoming obvious to more and more people that the conservative ideological approach of unfettered free markets has taken us down the wrong path and is no longer viable – it is simply too destabilizing, unfair and insecure.
But it would be a big mistake to assume the era of unregulated free market ideology is gone forever. Actually, in Canada it hasn’t gone anywhere yet. Harper is still caught in the grip of this failed ideology even as the crisis is spinning out of control. He has conveyed no sense of urgency. He has blithely told Canadians the “fundamentals of the economy are sound”. He has no plan for government intervention to help Canadians.
But even as conservative ideologues in other countries use the government to bail out companies, I suspect they’re only begrudgingly allowing their ideology to go dormant temporarily. Once things are back to business as usual in the financial markets, their unfettered free market ideology will come racing back.
The thing is, by bailing out the financial sector, governments are transferring massive private debt into the public purse. These massive public debts will conveniently become the excuse for conservative ideologues to push for more deregulation, privatization, cuts to public spending, and tax cuts for the wealthy – all the policies that caused the problem in the first place. We’ll lurch from crisis to crisis – and the crises are going to get bigger and bigger.
But we can prevent this scenario from unfolding by articulating an alternative vision, one that is based on the simple and profound belief that the pursuit of the common good enables us to achieve a good greater than any we can ever achieve alone.
This alternative approach believes that self-interest is too mediocre a value or concept to guide a society and civilization. It recognizes that we cannot effectively address economic insecurity, health care, the environment, food safety, and pensions strictly on our own through unfettered free markets.
It emphasizes that our collective security is best realized by all of us working together, through the collective ownership of our governments, to meet the challenges we face. It’s a common sense approach that says we should collectively pool our risks and collectively share the common wealth.
It is this kind of vision and approach that will enable us to better deal with a future crisis and find our way toward a more caring and promising future for ourselves, our families, our communities and our country.
Our challenge going forward is to ensure that this progressive approach of using our common wealth for the common good stirs our collective conscience and becomes the centre of political discourse and policy in this country.
On October 15th, progressive forces, regardless of political affiliation, should get to work on meeting this challenge.