Now that the pendulum is swinging back …
Andrew Jackson closes his lengthy and excellent post on the fallout of the US financial crisis with this paragraph (which I repeat here only because Andrew’s post was so comprehensive):
We are at a moment when progressives will have to move from critique to prescription. As Naomi Klein argued in the Shock Doctrine, neo liberalism took advantage of past crises by having a set of coherent prescriptions ready to hand to advance to policy-makers. We are just beginning to define a new global agenda to replace the neo liberal prescription which has led into the current crisis.
And in a recent National Post article, Canadian historian Michael Bliss goes even further and thinks the policy mix will be strongly progressive:
As in the 1930s the consequence of this awesome failure of free enterprise is going to be a massive rejection of faith in the capacity and competence of the private sector. It turns out that only the public sector, i.e. taxpayers and their representatives, has the resources to pay the piper and keep the system going. So now government is going to call the tune. Ordinary people in the United States are blazingly resentful at the apparent privileging of the rich and powerful, both individuals and corporations, and that resentment will increasingly steer public policy. In the next few years there will be massive new regulation of business, massive new taxation of wealth and sustained vilification of the values that have driven Wall Street and Bay Street. If you want a bizarre straw in the wind, check out the vicious Capital One credit card company TV advertisements that portray bankers as greedy vermin, pests to be exterminated.
Here in sleepy Canada, we seem to be particularly prone to beliefs that we are somehow insulated from all this trouble. No housing bubble here, we tell ourselves, no seriously imperilled banks, no trade problems with the U.S. because of our energy resources, no problems with our manufacturers that can’t be solved by more subsidies and bailouts. But what if the real problem is that we are deluded, misled by our culture of fawning business journalism, fawning business schools (what might be called the Florida effect) and profoundly faulty securities regulation? We think we will only suffer a ripple-effect from the crashes on Wall Street and other financial centres. One of the lessons of the 1930s was that for resource-based economies ripples have a way of morphing into tidal waves.
We Canadians can thank our lucky stars, however, that in the years when our financial “leadership” was squandering billions of investors’ money in stupid risk-taking, our much-vilified politicians have actually put our public finances in order. The government of Canada is in far better shape to help us get through hard times than the U.S. administration, which has become imperilled by years of mindless, reckless deficits and unsustainable imperial overstretch. Even here in the Great White North, though, we should realize that an age has ended, and that we are headed toward a fundamental rethinking of our public-private balance.
The quiet times of easy affluence are over. The next few years will be characterized by turbulence, deficits, new taxes, populist demands for more regulation and a surge of neo-egalitarianism and resentment of conspicuous wealth. Generally we will see an immense backlash against the greed is good school of economics and conservatism.
Many business spokesmen will find these developments extremely discomfiting, and will try to warn against the dangers of heavy-handedness, stifling controls and abuses of public and regulatory power. Sadly, as happened in the 1930s, no one will believe them. If they had credibility we would not have a liquidity crisis. The fact is that the members of the financial community do not trust one another’s judgment or capacity to understand the world they live in, which goes to the heart of the matter.
So, here’s the question: what’s your ten-point plan? Keep it short and sweet, and we’ll compare notes and see what common themes emerge. I’m still mulling over mine. Over to you.