The Pit
By Peter Ewart
Thursday, June 11, 2009 03:45 AM
By Peter Ewart
Economically speaking, we have fallen into a pit. We may not fallen as deeply as some other countries, at least not yet, but we are still in the depths – make no mistake about it.
This downturn we are in, as myself and others have been saying for several years now, is not the usual kind. There will be stock market rallies, there will be so-called “green shoots,” but these are all within the overall context of this economic “pit.” We will be stuck in it for a long time yet. And, even when we get out, the world will be a dramatically changed place, both economically and politically.
Recently, Barry Eichengreen, and Kevin O’Rourke, prominent American and English economist respectively, provided an update to an earlier article in which they compared the economic figures of the current “downturn” with those of the Great Depression of the 1930s (see notes at bottom).
Using graphs, these economists track the two downturns in regards to “world industrial output”, “world stock markets”, “volume of world trade” and so on. What the graphs show is that the current downturn tracks as bad, or in some countries, worse than the Great Depression. This does not necessarily mean that we are going to end up with a depression of that scale, but it does mean, at the very least, that we are heading into an unusually long and deep trough.
Speaking only of the huge hits that people all over North America and the world have been subjected to in terms of losses to their retirement savings plans, pension funds, stock portfolios, income, discretionary spending, etc., are the figures in these graphs so surprising?
And that is not to mention the ongoing credit, financial and monetary crisis wreaked by the Wall Street financial institutions, a crisis which is, by no means, over. Nor does it take into account the government bailouts and the trillions of dollars of debt heaped upon current and future generations. This is not small potatoes. It is serious stuff.
On a world scale, the economy is also undergoing a kind of seismic shift. The U.S. shows signs of declining in terms of overall economic clout, as well as manufacturing output. How will the U.S. financial and corporate elite deal with this? We are already seeing the implications.
On the one hand, this elite is shifting the burden onto the backs of ordinary Americans through the seizing of tax dollars and pouring these funds into massive bailouts of banks and other elite institutions, as well as cutting back government services for ordinary people, slashing jobs and wages, and so on.
On the other hand, the U.S. elite is going to push its problems as much as possible onto other countries, especially ones like Canada with whom it has close trade relations and trade agreements. We are seeing this in the fraudulent “black liquor” subsidy that is being handed over to U.S. pulp & paper companies and which is causing havoc for Canadian forest companies. Another example is the “buy America” clause of the Obama administration. And the black clouds are forming for more protectionism to come.
In any case, this “downturn” is exposing the serious weaknesses that already exist in the Canadian economy.
One of these weaknesses is our massive dependency on the U.S. market. Even more in the years ahead, this dependency will be dangerous for our economic well-being as well as our sovereignty as a country. We do not have a well-rounded, self-reliant national economy, rather it is skewed and distorted towards one main external market to the South.
Another weakness is the lack of “added value” production in our economy, a problem which sees us exporting massive amounts of relatively unprocessed raw materials, whether these be forest products, oil & gas, minerals, metals and so on, and importing many “finished” goods. This weakness is a legacy of our colonial past, and our dominated present. We are an advanced industrial country. There is no good reason for this situation to continue.
However, we have a calcified political and economic elite that has built its fortunes and careers in selling out the land, labour and resources of the country. This calcified elite is incapable of acting in the national interests of the country, as we attempt to climb out of the pit that we have fallen into and as we navigate the “new world economic order” that is rapidly developing. Its solution is to tie us even closer to the American colossus and to export even more unprocessed raw materials and energy.
Developing a well-rounded national economy, one that has sufficient self-reliance and solidity to stand on its own, is a task for everyone, irrespective of our political views or walk of life. And developing a national economy that has a well-developed manufacturing sector that adds maximum value to our wealth of natural resources is another.
In these circumstances, any change is only going to come from the grass roots, from the workers, professionals, business people, native people and communities that make up the country. Yes, we have fallen into a deep pit. But we can climb out of it. And, if we do that, we will be able to climb the high mountains too.
Peter Ewart is a college instructor and writer based in Prince George, British Columbia. He can be reached at: peter.ewart@shaw.ca
Notes:
(1) Eichengreen, Barry & Kevin O’Rourke. “A Tale of Two Depressions.” VOX website. June 4, 2009. http://www.voxeu.org/index.php?q=node/3421
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Posted by: gus on June 11 2009 8:34 AM
If 10,000 people kept an extra $1000 in the local community for at least one more round trip then thats $10 million more dollars in the community with a multiplier of 1. Thats all that individuals could do though... the rest relies on government policy to actually create the conditions for value added industry to become viable.
As for the economy:
Normally capitalist destruction can be a good thing for renewal and innovation, but most of the last few decades IMO its been driven by finance and not operations.
The disconnect between finance and operations mean a world conjured and created in the minds of casino like slice and dice Wall Street types, and not the real world economic models all the economists were working off of that were based on supply and demand and actual operations as a whole outside of the influence of leveraged capital perversions. More and more we live in a world held up by a bigger and bigger ponzi scheme all designed to protect those that consolidated industry to fit their own power interests (monopoly consolidation, off-shoring, derivative trading creation of fake money, over leveraged buyouts, and bankruptcy takeovers) at the expense of everyone else outside of the financial elite. This recession is about the financial elite reaching the end of their ability to expand in the shadows.
All great empires become great through some form of vent for growth that allows for upward mobility of its citizens and opportunities, and when that growth maxim is reached they generally stagnate. For the early Greek it was new colonies of mini city states established all across the Mediterranean taking the pressure off places like Athens and creating opportunities for the settlers. For the Romans it was conquest by force... in the middle ages the crusades... for the British it was their overseas colonies... and for the Canadians and Americans it was the horizon... most recently it was the dot com and the housing boom.
The Americans IMO have reached the limits of their growth maxim and they will slowly become the new China on Canada's door step locked onto our country by a NAFTA deal sucking our raw resources out of Canada for processing south of the boarder. On the up side for the Americans they will have their manufacturing industry back, but on the down side does Canada really want to be in a lowest-common-denominator trade relationship with a China like country looking more and more like its heading to the heap bin of has beens in the history of empires. America has become a creature of their bankster overlords the last40-years, and not of supply and demand economics... and as such their real economy is nothing but smoke and mirrors of its former shadow... as this becomes apparent it could be ugly and Canada hopefully has a plan for that that minimizes the collateral damage to our nation. Removing ourself now from NAFTA would be my most favored choice... serve the Americans 6-months notice contingent upon the following measures not being immediately introduced to fix their obvious ills... thats what a good friend would do for the best long term win-win at this point in time... they would thank us for it later.