Recession Redux: Time for an Economic Overhaul

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Published On Sun Aug 14 2011.    By Stephen Bede Scharper, Christianity

“Make a billion, lose a billion.”

This was the wry comment of a boyhood friend, a Wall Street hedge fund manager, shortly after the 2008 financial collapse. I thought he was joking.

Yet after learning that the top 25 hedge fund managers in the U.S. last year enjoyed an average take home pay of $880 million (U.S.), I realized it was no joke. (And their 15 per cent tax rate loophole continues.)

As markets bounce like superballs in light of the United States’ loss of its triple-A credit rating in the eyes of Standard and Poor’s, and speculation grows that France, the second-largest economy in the Euro-zone, may suffer a similar credit rating downgrade as their banks deal with the financial firestorms of Greece, Ireland, Portugal, Italy and Spain, fears of a second global financial meltdown have whipsawed the financial world.

To quote former Yankees catcher Yogi Berra, it seems like “déjà vu all over again” in the global economic scene.

Yet this current financial debacle is happening after trillions of dollars of government bailouts were handed to banks and corporations.

But a funny thing happened on the way to a massive corporate welfare moment. Instead of reinvesting in jobs, manufacturing, and new enterprises in the nations that saved their pork bellies from the financial frying pan, many of the largest and most profitable U.S. corporations are sitting atop nearly $2 trillion in cash, refusing to invest in the economic life of the people who threw them a lifeline.

As the Globe and Mail’s Greg Keenan reports, General Motors, a recipient of $5.8 billion (U.S.) in U.S. and Canadian government bailouts, while recently adding 2,000 jobs to North America, is most interested in preserving its “fortress balance sheets.” This means that, while it plans to increase vehicle production capacity by 45 per cent over the next four years, those jobs and new plants will be located, not in Oshawa or Detroit, but in Brazil, Russia, India and China. As for a rationale, GM noted that Canada and the United States are “high-cost manufacturing countries.”

Since the ascendancy of Margaret Thatcher in Britain and the election of Ronald Reagan in 1980, we have been subjected to the “surround-sound” theme music of a new global economy. We were immersed in the worldview that free-trade in North America and Europe would spur economic growth, decrease unemployment, lower the price of goods and services, and lead to a prosperous future for all.

The overarching idea was if you simply removed the fetters of big government, gave tax breaks to the wealthiest sectors of society, and allowed market forces to gallop freely across the land, we would become “competitive in the global marketplace.” The ensuing economic activity would “raise all boats.” Tragically, such measures have served chiefly to “raise all yachts,” as the growing gap between rich and poor in North America and Europe demonstrates.

As McGill economist Thomas Naylor notes in his new book, Crass Struggle: Greed, Glitz, and Gluttony in a Wanna-Have World, governments have increasingly become “a creature of the corporate sector.”

“The social contract,” Naylor argues, “is being rewritten.” It’s now a compact between “government and corporate barons.”

Economics, after all, is a social science, not a form of alchemy. As celebrated environmentalist David Suzuki observes in the recent, compelling documentary, Force of Nature, we often refer to “the market” as some arcane, mysterious behemoth, which has to be appeased and stimulated by financial “wizards” who use the pecuniary equivalents of the reading of tea leaves, incense burning and virgin sacrifice to assuage its mercurial moods.

As a social construction, our economy can and must be radically altered. It is clear that the neo-liberal paradigm, with its tax breaks and financial bailouts for the most affluent, is failing not only our societies, but our ecosystems as well. As the chaos of climate change reveals, from rising sea levels, coral reef depletion, massive droughts, and the creation of millions of climate refugees, our current economic system does not simply need fine-tuning, it needs a serious and sustained overhaul.

“Competitive in the global marketplace?” It’s time to be compassionate, socially just, and ecologically responsible in the “global village.”

It is, after all, no joking matter.

Stephen Bede Scharper, a Senior Fellow at Massey College, teaches environmental studies at the University of Toronto. His column appears monthly.

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This entry was posted on Monday, August 15th, 2011 at 11:58 pm and is filed under Debates. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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