The Financial Crisis: You Should Have Known Better

Ian Brown has a wonderful column in today’s Globe which rightfully suggests that maybe, just maybe, people should be a little upset about all the false promises of endless prosperity and perfect social harmony that were made in the leadup to the current economic and financial crisis.  Maybe, just maybe, the “system” must bear some responsibility for this collapse.

But what I found most intriguing about this column is this choice quotation from David Dodge, “Canada’s best (former) civil servant ™” and the man who brought us years of budget surpluses (and deficient funding for health care, education, and social support) — because it speaks volumes about the attitudes of our economic elite who, instead of proposing serious reform, instead advocate for yet more “financial literacy.”   Marie Antoinette would be proud Mr. Dodge.

Ian Brown says: “I got so angry I actually called a few business types to see if my fury was justified. I called Wendy Dobson, a professor at the Rotman School of Business at the University of Toronto, and a former deputy minister of finance in Ottawa; Peter Dey, the former chairman of the Ontario Securities Commission, now an investment banker; David Dodge, the former governor of the Bank of Canada.

They all said the same thing. Yes, there is a need for more oversight of the capital markets, but – well, let me quote Mr. Dodge, the Rooster Cogburn of central bankers, a man with a voice that sounds like five feet of chain being dragged out of a toolbox.

“Anger is understandable,” he said. “When something goes really wrong, the first thing you always do is say, well shit, somebody must have slipped up, it can’t be me.” But, he went on to say, “people are responsible for their own mistakes. And if something seems too good to be true, it is.”

That’s the establishment view, something we’re apparently supposed to grasp from birth.”


  • Dodge Said:

    “people are responsible for their own mistakes. And if something seems too good to be true, it is.”

    Let us translate that:

    “the only thing the public is guilty of is believing in their ruling class.”

    I too hope the lesson is learned.

  • Flailing madly in the seas of tranquility,
    The Canadian economic “elite” surround themselves,
    with presentations of unanswered questions.
    Pushiing backwards on definitions that once were their concrete of deception.

    Hopelessly lost, in a whirlpool of anxiety, sucking down,
    Those that held high these harbingers of economic ideas of spin and deceit,
    With unhappy paycheques and questioning stares,
    Away run the lost leaders hopeful, that new definitions and their levers over history will never repeat such
    secrets of the old.

    Hidden forever will the linkages and attachments to poverty are safely hidden from public sergeants of inspection- who say they have nothing to report on, except the troops misbehaving.


  • “people are responsible for their own mistakes. And if something seems too good to be true, it is.”

    I have no idea why this statement is considered wrong. Sounds like good commentary to me. Is Ian Brown and the writer here suggesting that they are unhappy that the capitalist system is under pressure? That seems to be the thrust. So they join with the bad fund managers and traders in being sorrowful? Cry me a river!

    By the way, David Dodge was never involved in expenditure policy, so how can you say he was deficient in social, etc., policies? That’s just childish and silly.

  • The people in charge believed their own hype, encouraged the public to go whole-hog in investing their savings in the markets and then those in charge directed those savings to “those things that seem to be good to be true.”

    I do not recall Dodge ever saying that market valuations were too good to be true. I can however find quotes where he says markets are in general priced efficiently. Now pushing the tautology of the EMH is childish and stupid.

  • Hi Billy,
    Thanks for the comment. A small elaboration on my point followed by a disagreement.

    Elaboration: my take on Brown’s article is that he’s trying to say there is clearly a place where personal responsibility begins and ends. Sure, a lot of people were perhaps foolishly lured by the promise of effortless riches — and perhaps they deserve to share in some of the blame and pain, but surely we need to also examine structural and institutional forces that encouraged people to make these choices as well — the proliferation of discourse that encourages people to fend for themselves instead of socializing risk, the proliferation of tax breaks that encouraged the same, the endless and subtle threat — more prevalent in the U.S. than here, mercifully, that we may not be able to afford retirement or to send our children to post-secondary school, and the prattle about needing to spread the gospel of financial literacy, as if that did any good for the people — educated and literate (mostly) all — who bought ABCP or Madoff sure in their own knowledge of finance or at least, the rating agency’s. Surely we need to be concerned — and take regulatory and policy action — against investment advisers like the one who put two thirds of my mother’s money in stocks (when she should have been in bullet proof bonds) without consulting with her (or me) but still collects her 2% management fee. It’s in light of these structural and institutional forces that I find Dodge’s comment facile and unhelpful (I’m assuming here, for the moment, that he was accurately quoted — but I’m willing to believe he wasn’t).

    Disagreement: On Dodge’s involvement in social policy, I stand by my comment. Not only was Dodge DM of Health Canada for a while (in the late 1990s), he was the Finance Minister who helped bring in the austerity budgets of the 1990s which slashed health and education transfers to the provinces (and EI provisions which are now coming back to haunt us) in the name of fiscal rectitude.

    Read any account of that time — Paul Martin’s recent book stands out in my mind just because it is mind-bogglingly self-aggrandizing — and you’ll quickly come to the conclusion that Dodge — and Don Drummond by the way — played a key role in these cutbacks and hence in the shape of social policy for the ensuing decade plus.

    You’ll also learn that through and as a result of these budgets, Finance resumed its pre-eminent place in the bureaucratic hierarchy, a fact reflected in the increasing tendency to use the tax system to deliver social policy (CCTB, WITB, UCCB are just three of the big names here but you can come up with your own list of tax credits). Hence, finance — and therefore its DM — play a pivotal role in delivering social policy (and a host of other policies but that’s getting off topic). If you don’t believe me, read anything by Donald Savoie or consult any of the burgeoning policy literature that focuses on this growing tendency — which really took off in the Dodge years — to use the tax code to deliver policy.

    Or simply reflect on the fact that the budget — written, coordinated, and ultimately authored by the Department of Finance — is the single most important policy document to come out of Ottawa in any given calendar year.

  • That kind of personal responsibility maxim cuts both ways.

    In my view, the people who took our money and flushed it down the toilet while promising us the moon made a mistake for which they are responsible. Their belief that they could fleece us forever and treat us like mushrooms was, it may be hoped, too good to be true. It would be really good if they at some point were made to realize that when you fuck over the population at large, you have just fucked with the wrong people and that is a mistake.
    If in the end they get everything they have taken from them, pelted with rotten rutabagas and tossed in gaol, they may initially be angry. Someone screwed up, they may think, and it can’t be them. But in the end hopefully they will realize that

    “people are responsible for their own mistakes. And if something seems too good to be true, it is.”

  • “people are responsible for their own mistakes. And if something seems too good to be true, it is.”

    In that case, Citibank and Bank of America should be in bankruptcy and their executives should be in jail for fraud.

    It cuts both ways, but mostly it cuts against the banksters.

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