"A Citizen"s Eye View"

Friday, August 3, 2012

Could Harper be the World's Worst Economist?

Jim Flaherty
"I Spend, therefore I am"
First of all, lets get something out of the way. Jim Flaherty might be the Finance Minister, But Prime Minister Stephen Harper calls the shots. This is not a scenario peculiar to Flaherty. It is the same with every other cabinet portfolio in the government. The Ministers might be the front men, but the policies are the Prime Minister's. This is how Harper does business. Those who work with him know this. Those who challenge him are no longer with the government. 

Harper Fancies Himself an Economist:

Harper fancies himself an economist. He has a degree in economics from the University of Calgary.- A word here about the Calgary School of Economics. The name is meant to be a take-off of the Chicago School of Economics who's most famous and influential participant was Milton Friedman, the God Father of Disaster Capitalism and the guy who helped Augusto Pinochet rebuild Chile's economy after his brutal Coup d'etat in 1973. Both the Chicago and Calgary schools can be called "schools of Neoliberal thought"  (economic Liberalism as opposed to social Liberalism) in that they believe in economic Liberalization and deregulation, free trade and completely open markets.  In addition, these schools are vehemently anti-union in that they feel:

(1)"People are "egoistic, coldly calculating, essentially inert and atomistic". Being egoistic, people are motivated solely by pain and pleasure. Being calculating, they make decisions intended to maximize pleasure and minimize pain. If there are no opportunities to increase pleasure or reduce pain, they will become inert. Therefore, the only motivation for labor is either the possibility of great reward or fear of hunger. This belief led classical liberal politicians to pass the Poor Law Amendment Act 1834, which limited the provision of social assistance. On the other hand, classical liberals believe that men of higher rank are motivated by ambition. Seeing society as atomistic, they believed that society was no more than the sum of its individual members. These views departed from earlier views of society as a family and, therefore, greater than the sum of its members". 

So as a result, "Neoliberal adherents are also completely anti-social safety-net as well, believing that these programs are "demotivators" to the work force who should be spurred on by the "fear of hunger" or the possibility of "great reward".

Harper the Man and Harper the Economist:

So this gives us a glimpse into Harper's values as an economist. They are cold, pragmatic and ruthless, which, for the most part, is a reflection of the man himself.  It should be noted however, that Mr. H was never, ever a "practicing" economist. He went straight from post secondary studies into the waiting arms of the Reform Party, a group of social-hooligans who's modus operandi seemed to suit young Stephen's economic and political theories. And that is the key word here: "theories".

Harper's knowledge of Economics is purely theoretical. With the exception of his years as Prime Minister, he has no real-world experience in the field. With this in mind, lets take a brief look at Harper's track record as an economist.

- In 2006, Stephen Harper became the 22nd Prime Minister of Canada. He inherited from Paul Martin, his predecessor,  a $16 billion government surplus. By the time of the Great Financial Melt-Down of 2008, that surplus was completely squandered. This is in part, due to  decreasing the Governments revenue stream that was generated by the GST from 7% to 5% at a cost of $19 billion from 2007 to 2009 alone. 

- In 2008, the great recession enveloped the world. Even though Canada was in a better position to weather the storm than our neighbours to the south, largely as a result of banking and economic regulations implemented by previous governments, it was an election year so Harper needed to be seen to be doing something about it. He was failing miserably on the environmental front so the recession provided him with the opportunity to play on his perceived strengths - the economy and "fear" - and to divert the national consciousness away from the environment which was, and remains, nothing but a nuisance to him anyway. So what did dear old Stephen do? He emulated the U.S. strategy which was largely unnecessary in Canada. In direct contravention of his Neoliberal roots, Harper got all Keynesian and spent truck loads of money the country didn't have. In a matter of three short years, Harper, the great economist, spent us from a $16 billion surplus to a $53 billion deficit. 

- Even while he was being Keynesian in his spending, Harper continued to be Neoliberal in other ways, as though he couldn't make up his mind how best to handle the nations purse strings. He decided to make good on campaign promises he had made to big business by reducing the corporate tax rate from 21% to 16.5% which is even lower than the US which is the self-proclaimed world capital of capitalism. This has greatly reduced yet another revenue stream  and cost Canada $22 billion in income since 2006. 

- So now that Harper has unnecessarily spent like a drunken sailor, accumulating the largest debt in Canadian history while slashing major sources of revenue, Harper's Neoliberal strategy is to make the poorest people in the country pay for his spending habits. He is doing this by slashing social programs,  laying off thousands of federal employees, changing qualification criteria for Employment Insurance, making people on EI accept lower paying jobs farther from home, upping the age for old age security from 65 to 67 (despite information from various real economists that this was a completely unnecessary move) and making immigrant workers work for 15% less than their Canadian counterparts. 

Stephen Lectures the World:

OK STEVE! Stop begging you're embarrassing yourself
You can sit at the BIG KIDS table this one time
But only if you promise to keep your trap SHUT!
Harper, especially of late, is prone to lecturing the leaders of the G20 and the European Union about how to handle their respective economies, saying they should emulate Canada (and of course, Stephen himself) He sites fiscal restraint and deregulation as the way to beat the global crisis. However, he fails to mention that economic regulations from previous governments are a major reason for Canada fairing better than many countries and that, rather than being fiscally responsible, he has spent Canada into a record breaking debt. I wonder then, at what point the other world leaders are going tell Stephen to "take a long walk off  a short pier"? It's no wonder he had to beg to be allowed to "observe" the Trans Pacific Strategic Economic Partnership talks recently. I wouldn't be surprised if Barack Obama told Stephen he could come along for the ride on the condition he kept his mouth shut!

(1) From the Wikipedia article on Classical Liberalism