If three makes a trend then we in Canada are well on our way into the beginning of a whitewash of the causes of the global economic crisis.
It began last month with Prime Minister Harper and Finance Minister Flapperty. It was followed a couple weeks ago by Peter Brown, founder of Canaccord Financial, Canada’s largest independent brokerage firm. Then this weekend it was Globe and Mail columnist Gwyn Morgan, who is the former head of energy company Encana Corp., current Chairman of SNC Lavalin, and a Director of the Manning Centre for Building “Democracy”. Both Mr. Brown and Mr. Morgan are also Directors of the Fraser Institute.
Mr. Harper, Flapperty (in speeches and public statements), Mr. Brown (in a missive directed at uniting the “free enterprise” coalition in BC and Mr. Morgan (in his Pravda column) have each conjured up sovereign fiscal crises and have seen fit to blame these “crises” on excessive “entitlement” spending. I wrote a point-by-point response to Mr. Brown’s letter a few days ago. What all four men have sought to do is conjure up the bogeyman of “socialist”, “overspending” Europe in an attempt to scare Canadians into supporting the right-wing neo-liberal policies they prefer to continue. Their assertions are self-serving and misleading.
As I wrote in the response to Mr. Brown’s letter, the cause of the global economic crisis was reckless private sector lending, primarily for mortgages, by banks in the US, Europe and Canada (our housing bubble has yet to burst). Sovereign (government) debt increased as a direct result of the bailouts of the financial sector and the stimulus required to prevent a deeper economic downturn and lower tax receipts as a result of crisis. The financial sector cannot escape blame – it was financiers who have pushed for decreasing regulation for years. Seldom a week goes by without another revelation of some massive new fraud or financial crime – the LIBOR collusion, theft from custody accounts, rip-offs of corporate clients and Ponzi schemes.
There are no federal debt crises in Canada, the UK or the US, all of whom can borrow at 0% currently. Countries that control and issue debt in their own currency cannot go bankrupt. The reason some European governments are currently facing high interest rates and “debt crisis” is because the Eurozone has poorly designed mechanisms. The European Central Bank, supported by European leaders, is unable or unwilling to act like a true central bank to its member states, so that individual Euro members are in the position of provinces or US states, who are also currency users, not issuers.
And by the way, there is no big increase in inflation on the way in Canada or the US or the UK, not according to our central banks themselves, nor the private bankers (they would be screaming the sky is falling if that were so) -we have big output gaps, and inflation is not a concern until demand recovers, at which point the central banks can reverse any monetary stimulus). The European bankers being firmly in control and having got and getting more bailouts, wish the ECB to apply austerity for average taxpayers; socialism for the elite and bankers, feudalism for the average citizen. The Euro’s debt crisis is rather artificial.
Let’s also note that while Greece’s government was somewhat irresponsible prior to the crisis (being in the position of a currency issuer it should have acted within that constraint but didnt), the other “irresponsible” Euro countries were not quite that: Italy’s debt was decreasing, Spain was running a budget surplus and had lower debt than Germany. The northern European countries, such as Germany, Sweden, Netherlands are doing fine; yet some of these places have bigger government spending than so-called lazy Club Med states. It’s absurd….Cons have been recently been singing Germany’s praises as a competitive powerhouse, but they fail to note Germany’s public sector is about 25% bigger than Canada’s (and Germans also undertake “socialist”, hippy stuff like solar – a couple weeks ago 50% of Germany was running on solar). Nuance has long not been a strong suit of Cons.
I also take issue with the characterization of social spending as “entitlements”. Odd word, for something that all tax payers contribute to one way or another – through payroll taxes or sales taxes or excise taxes or income taxes. This social spending is earned by workers.
But so it starts, the deflection and revisionist history of crisis. Don’t get fooled by the call of crony capitalism. They will come for your pensions and health care, just as they are doing in Europe. They already came at us with a fake OAS crisis. I want just one Con to show me Canada’s debt crisis. When a borrowers in trouble they can’t borrow at negative real interest rates, can they?