There is no way of getting around the topic in today's society; we are in a recession - but this is no depression. While there have been comparisons made of the current state to that of the "dirty thirties," there are a few key differences that set this recession apart from that of the 1930's, instead placing it into the heart of the 1980's financial collapse. First, socially we are in a different place. We have a social welfare system, that while not perfect, does create opportunities to prevent complete poverty (at least in theory). Second, our current economic system has been developed to prevent such major economic crashes like that of the thirties. National banks have been established and federal supervision has been created, to prevent the excessive credit lending that helped produce the Great Depression.
Another, and probably one of the most important differences, is the shift from an agricultural to industrial society. During the thirties, Western Canada had faced a major series of agricultural nightmares which placed many farmers into a position of economic turmoil. While the Auto Industry is mirroring this, our reliance on fashionable automobiles is not as great as our reliance on wheat and food sources. Instead, as the '80s proved, vehicles are only nice to drive to get food and not produce it. Furthermore, our understanding of the economy has a solid following (both within private institutions and our own government), and we are not in a period where Social Credit could win an election.
It is very well understood in our current decade that spending to a deficit is not going to place the nation into a state of financial ruin. Keynesianism is a solid model and has been used for decades and helped weather the financial collapse under Pierre Trudeau in the 1980s. Keynesianism (most simply put) is the economic model which states: spending in time of economic hardship is necessary for the development of an economy, and the continuous development of a society. Furthermore, a government must spend to prevent the complete collapse of the society. The model also describes: in times of economic prosperity the government must save - in short "buckle up" its belt. The goal being to save for hard times and to pay off debt that could have accumulated in a previous recession. This model has been used with success but has also faced criticism over the need to spend into deficit.
It must be noted that the depression had no such theory accepted by the federal or provincial governments. Instead the common action was to wait and see what would happen. We are very much past the "don't ask and we won't tell mentality" that was dominant of the early half of the twentieth century. We are also past the socialism scar that prevented many need based families from looking for or receiving help. We are in a period of time were political groups such as the NDP are present to provoke action for the "little guy." This is a period in time were social initiatives are well ingrained and accepted into the fabric of society. However there is still much work the needs to be done before we can say "hello prosperity."
The current budget put forward by the Conservative government, while appearing to have this model in mind, is arguably the opposite. While the goal of the budget is declared to increase spending and provide relief for lower income families, the overall help it stands to provide is limited to those who do not need it. To further complicated the issue, this new budget puts at risk many provinces who would stand to lose substantial income due to being locked into a single system (currently certain provinces are given the choice of what budget they would follow, allowing a greater amount of economic freedom, and the ability to retain profits from such economy boosters as off shore oil drilling) - a system that could potentially devastate the financial situation of these provinces. Newfoundland and Labrador along with Quebec would be at the top of this list.
It must also be noted that the budget helps those who are in the higher income brackets to a greater degree then those at the lower end. The budget proposes to increase the starting minimum salary of each taxable bracket. The lower tax brackets may only see a $1000 dollar increase, while those making a more substantial amount of taxable income would see an increase approximately 4 times that amount. While the intention seems to be in good faith, this budget appears to be a last ditch effort to hold onto power and prevent a no confidence vote from taking place in the House of Commons.
Had the conservative government taken a more social Keynesian model, much like President Obama, then Canada would have stood to leave this recession faster than previously predicted. The protectionism model proposed by Obama stands to either propel the United States out of the problem or throw it farther into the fire. Now protectionism in the past has proved to be a dangerous and ineffective model, however this was done at a different time and under a different economic global society. Also the United States being one of the economic powers can, potentially, survive without the help of other nations. Canada on the other hand has no such ability and still must heavily rely on the financial gains provided within the trading markets. Nevertheless, today this may prove to be the spark the United States needs to turn the proverbial clock backwards. However for Canada, while economists predict an end to this "chaos" come 2010, economic models need to be developed to help those in need. Without a working class, the elite will have nothing to make their profits from. Helping the affluent cope is of no use if there are no riches at the end of the dark tunnel. Hopefully this budget proves to help, and the Liberals keep their word on accountability, otherwise this recession could last longer and hurt more then need be.
- Z.R. Nissen
Posts
No comments:
Post a Comment