Masthead graphic based on a painting by Gudrun Thriemer.

Sunday, December 14, 2008

Ignatieff, climate change and the debt axiom

Debt is axiomatic. Maybe someone out there is inventing a non-Euclidean economics in which the debt axiom is fundamentally changed (and parallel lines meet or converge), but we can be pretty sure that isn't Michael Ignatieff or Stephen Harper.

Ignatieff is pre-disposed to defend the prevailing orthodoxy; Harper is a reformer who harkens back to the virtues of a bygone era and a simpler, almost non-existent government. Neither man is searching for a new vision because neither concedes that the system is broken. For Ignatieff, environmental policy is an afterthought. For Harper, bankruptcy is a good place to look for bargains. They are both entitled to their views, but neither one should be running the country.

What does it mean to say that debt is axiomatic. It means that debt is a premise of practically everything that our economy is supposed to do. It means that we are apt to take it for granted, that it may, like so many cultural assumptions, be invisible to us. Or, what amounts to much the same thing, we suppose that the way it is is the only way it can be. We are too busy to imagine options. At the end of World War One, with Europe's economies in paralysis, John Maynard Keynes recommended simply cancelling the debt.

It was a time honoured strategy, practised as long ago as the 6th century by Athenian Archon Solon and as recently as 19th century US. But in 1919, the US refused because this time it ws the US government that held a big slug of Europe's debt.

In normal times, a secure paradigm explains the facts and provides a stable basis for making acceptable decisions. In times of deep crisis, remnants of the former regime reappear in the flotsam pretending to reshape bits of debris in the image of their former glory. Public discourse does not confirm, apply or extend the official version. Lonesome reporters long for a plausible simulacrum.

With the National Post still arguing that Ignatieff really defends torture and supports the war in Iraq, we may need to remember that Harper and Ignatieff, socialists, and the Bloc are just the most immediate of our concerns--and options.

Or they were until yesterday when the US Senate refused to bailout or otherwise nationalize or support the auto industry. What is most urgent varies from day to day, but the number of stories able to elbow their way onto center stage is declining. The disappearance of songbirds will have to wait. For the nonce, the elephant in the room has decided to stomp on the unions.

The Canadian media wants a story that is every bit as exciting as Obama's election. Never mind that both Harper and Ignatieff are academics. Never mind they share a kind of fascination with deductive systems--where no birds sing. Never mind they both like to believe they are the smartest guy in the room.

It would be a great showdown for Prom Night, but we've had enough student council politics for one season. Let's not call political leaders up on phony charges. The facts are bad enough. At the moment we are still getting used to the disappearance of commercial fisheries. In his essay, "If torture works..." Ignatieff says "I end up supporting an absolute and unconditional ban on both torture and those forms of coercive interrogation that involve stress and duress." (Prospect April 2006) It can't be any clearer than that. How his ideals play out in reality is separate question as Conservatives are learning about Harper. Andrew Coyne calls the threat to appoint 18 new Senators "another broken promise."

In 2007, Ignatieff admitted that he had got Iraq wrong. To be sure we require a leader with skills that go beyond admitting when you're wrong. But Harper hasn't even got that far. He hasn't admitted anything about Iraq. He is playing the absurd fall sitting of parliament as if it were exactly what he planned, and has yet to back down from his denial of the the Canadian economy's nosedive.

Outside the twisted logic of the National Post's Editorial Board, which, in a flight of verbal derring-do, has introduced the word "tergiversation" into the pubic debate to describe Ignatieff's apostasy, a good many columnists have shown disturbing signs of wanting to embrace a new Messiah, a White Knight. Hardly anyone on the so-called Left can get beyond Ignatieff's resume and his gorgeous suits.

And that's the problem with dualism. Heads someone else wins, tails the rest of us lose. Would you rather have a fake saviour in a nice suit or a cold race to the bottom? Who should rule the world if not the US?

Therein lies the real strength, not only of the Liberal-NDP-(Bloc) coalition, but the idea of coalition generally, the idea of an ad hoc none-of-the-above party. We all have our biases. But reality is a social construction.

The NDP and Liberals have attempted to limit the Bloc's power by seeking its support only on confidence motions. No commitment on other types of motions. No seat at the Cabinet table. No say in appointments to the Senate, the CRTC, etc.

I have heard people say that the Bloc should be party to the coalition and that the coalition should run as a coalition in the next election. That seemed at the time a strategy designed for defeat, but the political landscape is changing.

According to the National Post's poll during the first week of December, "fifty-six percent said they would rather go to the polls that be governed by the coalition." That leaves 44 percent who thought otherwise.

Elimination of political funding is seen by many here as an assault on democracy, not just an insider issue among politicians.

The National Post is afraid of the coalition and wants you to fear it too. Harper designed the "Economic Update" to be provocative, but I don't think he anticipated the coalition.

Of all the countries with separatist, sovereigntist, splittist, secessionist and real or alleged terrorist movements, Canada has gone farther than any I know of in the direction of political accommodation. (The language we use for describing the problem has the power to restrict or inspire thinking about solutions.) Contrary to what the the fear mongers want us to believe, opening up the democratic process so that it becomes a valid avenue for achieving some of the Bloc's goals may be the best way to avoid tearing the country apart. Running federalist candidates in Quebec has been a marginal strategy. I suggest that is why so many anglophones are fearful. However, the coalition, if it works, has a potential to become more stable than a succession of Liberal/Conservative minority governments--which have, themselves, been a big improvement over steamrolling majorities.

But it's prudent to remember that all our political leaders are working with broken tools. The debt axiom remains unchanged--and frozen. Covering the old carbon economy with bandaids and a new bubble won't help. Time is not healing the wound to the cod fishery. Tourism and the shipping industry are on the ropes. Food and water are, for us, crises in waiting. The innovations we need are not electronic or financial. They are social and political.
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DocRichard said...

I am not quite sure how debt can be a "self evident truth". Slight categorical dissonance here. D'you mean ubiquitous? It certainly is, because the money supply is increasing, (at least it was up to last year) with a doubling rate of 5-10 years. So someone must be creating it. Here in the UK, banks create 97% of the money - through lending. Which is why there is so much debt. Only about 5 countries do not have foreign debt, and it is all to banks.

It doesn't have to be like this. In 1947, money creation was a 50/50 split between banks and State.

Jim Terral said...

Thanks for your critique of my metaphor.

I think the part of the equation that you are leaving out is the demand side. If we weren't ready to go into debt just to get through the month (credit cards, payday loans, equity loans), the money supply could increase with relatively small short-term influence on the economy. We aren't going into debt because we are forced to by inflation. We are going into debt because our desires are inflated and lead us to try to live beyond our means. The debt has become axiomatic. Maybe not in the UK.

In 1947, debt was not axiomatic. It was more like a secular sin that could even be forgiven in rare circumstances. Going for a loan was like submitting oneself to St Peter for judgement. If you got the loan, you felt validated and relieved. It was unlike shopping for any other kind of product I know of. Extra money supply was created by savings. In Canada, savings, which used to be relatively high, have dropped off precipitously in recent years and are negative in several provinces.

Now, debt is more than ubiquitous. We take it for granted, much as we do a self-evident truth. McLuhan once said, "We don't know who discovered water, but we're pretty sure it wasn't a fish."

Debt has become invisible like a cultural axiom in our fishbowl. We don't think twice about using our line of credit for dinner and a movie or a bag of socks. (That changed for me about a decade ago, but has been true for a lot of folks up to the last month or so.) Cash and carry is barely considered as an option.

At the other extreme, automakers can't get to the end of their month without credit, can't buy parts, meet the payroll, etc. All our economic activity is premised on the availability of cash on loan. When it stops, it seems to us that the entire global economy has "fallen off a cliff." Someone emptied the bowl and we are like fish out of water. And it's a crisis for everyone because practically everyone is doing it, not just a wealthy minority inured to borrowing.

Certainly keeping interest rates low--along with growth of the money supply--has played into this phenomenon. Dollar hegemony introduces a different dynamic in the US where it all started. We have been living in a virtual reality simulation of prosperity.

But the result is more fundamental than "ubiquitous." We lose track of the idea that "it doesn't have to be like this." I have known people for years who simply don't buy anything if they don't have cash for it. They have had no trouble buying cars, houses, etc.

However, the difficulty today (pain for some) of changing is like the difficulty of changing an axiom (or a paradigm), not the relative convenience of applying a band-aid, however expensive. (A golden bailing bucket is a rich man's bandaid IMHO.)