Social Policy in Ontario

Canada earned a gold medal this week for staging a successful Olympics and Germany earned bronze for engineering a temporary reprieve for Greece, the eurozone’s basket case.

However, champagne corks are not popping in Berlin. After all, the Greeks were simply able to borrow another ?5-billion to continue to live beyond their means.

Same applies in North America: The U.S. deficit this year will be bigger in dollar amount than Canada’s economy and the Tory budget confirmed more will be spent just because more can be spent.

So the world is in a mess because nobody knows how to solve the Solution of 2009 — which was for governments to spend lots, ring up deficits, stimulate, rescue, bail out and freeze taxes. Some say capitalism must be replaced and the capitalists say statism or government intervention is to blame.

George Soros, billionaire hedge fund philanthropist, has lived under both systems and has written a gem of a book called The Soros Lectures offering some ideas to help rebuild a sustainable world economy. He also expanded on these ideas at the World Economic Forum recently in Davos, which I attended.

His thesis is that the world is at the same point in history as it was after the Second World War — the system is in ruins and must be rebuilt from scratch. He is a strong proponent of forging a Bretton Woods II, or a new currency/financial architecture to replace the current laissez-faire version that went bust.

“Two forms of economic organization — state capitalism and international capitalism — are in competition with each other and neither is attractive,” he writes. “International capitalism is inherently unstable because it lacks adequate regulation. It is also highly unjust favouring the haves over the have-nots. State capitalism will lead to conflicts.”

By state capitalism, Soros is talking about the Russian, Chinese or Venezuelan models, where governments are players/combatants not referees.

Somewhere between the two lies a better capitalism, along with rules that impose moral behaviour.

Instead, for 20 years, the world’s financial economy has run chaotically, without controls, on behalf of financiers making obscene bonuses, leveraged-buyout artists, manipulators arbitraging jurisdictions and speculators creating bubbles and volatility. They brought the world economy to the brink and were bailed out by the people they hurt.

Soros blames the myth of Milton Friedman’s deregulatory “market fundamentalism.”

“Markets are amoral, which is why they are efficient and the decline in public morality was fostered by the rise of market fundamentalism,” he writes. The myth became that “people pursuing their self-interest are indirectly also serving the public interest. It gives self-interest and the profit motive a moral imprimatur that allows them to replace virtues like honesty, integrity and concern for others.”

dfrancis@nationalpost.com

< http://www.nationalpost.com/opinion/columnists/story.html?id=3f306c01-c266-4f0e-8282-2da4a7f86075 >