In which contributing editor Mark Bourrie suggests we look to the past to figure our way out of the European (and North American) financial crisis.
The other day, Barack Obama’s White House came out with the admission that, as far as anyone knows for sure, there’s no life on other planets. We’re stuck here with each other, which isn’t such a good thing when we owe each other so much money.
The aliens were our last hope for a bail-out.
Tuesday, word came that the minister of finance, Jim Flaherty, can’t add. That should not be news. In the 2006 election campaign, Flaherty said he’d never run a deficit. In the 2008 campaign, he said we weren’t at risk of a recession. In last spring’s campaign, the Tories promised to balance the books by 2014. Flaherty’s admitting now that he can’t tame the deficit any time soon, no matter how many savings his $90,000-a-day efficiency experts think they can find in this town. Anyone who thinks Flaherty can ever balance the books should mull these two words — “Michael Wilson”.
In the past few weeks, Flaherty and Stephen Harper have mugged to the cameras, chastising the spendthrift Europeans for their wasteful ways. It’s been a big hit with the nodding monkeys in Canada’s financial press, who conveniently ignore the fact that we’re broke, too. The total of federal, provincial, and municipal debt, along with Canada Mortgage and Housing’s mortgage guarantees, plus many obligations like pensions and health care, should be enough to shut their mouths, but you can’t shame the shameless.
Governments go broke and the world survives.
England defaulted on its debt in 1596, and the United Kingdom went broke in 1749, 1822, 1834, 1888-89, and 1932, and would have defaulted again in 1948 if the Americans hadn’t stepped in. France went bust in 1558, 1624, 1648, 1661, 1701, 1715, 1770, 1788, and 1812. Russia stiffed its lenders in 1839, 1885, 1918, 1947, 1957, 1991, and 1998.
Now the world waits breathlessly for Greece to fall. Well, it won’t be the first time. Greece went down in 1826, 1843, 1860, 1893, 1932. As for Italy, it’s managed to pay its debts through the years, mainly by inflating its currency.
Canada’s never gone broke, but some provinces have. Alberta, that sound, conservative tax haven, went mams up in 1935. Newfoundland also went bust during the Great Depression. And Canadian municipal bonds issued in the 1800s to pay for railways stank so badly that no one in the City of London would touch them for years.
People manage to survive these little financial bumps in the road. But when the road’s washed out and the systems of production and wealth distribution are screwed, it’s harder to make a peaceful comeback. The old Marxists used to talk about control of the means of production, but our means are withering away.
Bank of Canada Governor Mark Carney nags Canadian business owners for not re-investing profits into upgrades to our factories. Last month, we lost about 50,000 full-time manufacturing jobs. We don’t talk much about free trade, except to go after the Chinese for low-balling us on price for the crap we buy.
In southern Europe, youth unemployment ranges between 35 and 55 per cent. That’s a very scary deficit figure, one that can’t be written off by the banks or flooded out with inflated currency.
Europe and the rest of the West will need something similar to the post-World War II Marshall Plan to get back on their feet. That reconstruction plan was more than just dumping money into investments. It changed the way Europeans lived, from the fuel they used to the way they wrote contracts.
But we still have to go through the worst of the problem before we get to the solution. And, by the look on the face of the Italian prime minister, we should be there soon.