Chris Aylward

Photoshopping the G8


From Northern Ireland comes this sad, instructive story that illustrates perfectly what is wrong with the current austerity fad. Representatives of the richest eight nations in the world—including Canada—are meeting in Enniskillen, in County Fermanagh, and they’ll be driving past bankrupt shops that are pretending to be doing well by displaying fake storefronts. And, ironically enough, the government there is paying to construct this latter-day Potemkin village.

Austerity is the notion that a badly-performing economy is best healed by measures that make it work even worse—a kind of economic homeopathy. It’s Depression-era thinking: when the economy contracts, stop spending money.

After two or three years, it’s abundantly clear that austerity has provided useful cover for what Nobel prizewinning economist Paul Krugman refers to as “the obviously intense desire of policy makers, politicians and pundits across the Western world to turn their backs on the unemployed and instead use the economic crisis as an excuse to slash social programs.” But austerity hasn’t remotely achieved its declared aim of repairing economies, in part because it was based on a spreadsheet error.

Northern Ireland, indeed the UK as a whole, is suffering badly from austerity measures. Down south, in the Republic of Ireland (Eire), austerity has been ruling the roost as well, with similar results—so self-defeating, in fact, that Eire’s largest business group, and the centre-right Fianna Fáil party, have called for an end to this failed experiment.

The official line from slash-and-burn governments has been that debt is bad, in and of itself. OK, do you have a mortgage, or know anyone with one? Where do you think the housing market would be, not to mention homeowners, if mortgages—substantial but manageable debts—didn’t exist? How many homeowners would there even be?

Our own economy was not hit as badly by the 2008 recession as a number of European countries, so the austerity measures of the Harper government have not been deep enough to cause riots in the streets. But the same blinkered thinking is in play, as public sector jobs are slashed by the tens of thousands and social supports for the poorest members of society are kicked away.

Finance Minister Jim Flaherty, meanwhile, vows to “slay the deficit,” assuming we’ll all agree that deficits are bad, too. Once again, Krugman is having none of it—and neither should we.

A commentator from the Canadian Centre for Policy Alternatives points out the obvious:

So we now have a country that in constant dollars is far wealthier than it was in the mid-70s, but one that somehow allegedly can’t afford to improve or even maintain the social programs we managed to fund with far less national income four decades ago.

He goes on:

The share of its GDP that Canada devotes to social spending has dropped steadily and when last measured stood at just 16%, a dismal 22nd out of 30 OECD countries. The average OECD nation spends about 23% of GDP on its social programs, and some countries, such as Sweden and France, spend as much as 27%.

Clearly the problem in Canada is not one of revenue insufficiency, but of revenue maldistribution. The underfunding of Medicare and other social programs has been a matter of choice, not necessity. The money is readily available - or could be made available - for any project or program that is considered important enough to deserve it.

Such as F-35 jets. The scandal of huge cost overruns forced the abandonment of that scheme last December, but the Harper government is still very much in the market for a fleet of warplanes. No austerity there.

In the meantime the government’s announced intention to collect outstanding taxes from wealthy corporations is more for show than anything else. Uncollected taxes stand at $100 billion, with another $88 billion squirreled away in offshore accounts—but the government is cutting jobs by the hundreds at the Canadian Revenue Agency.

The long and the short of it is this. Austerity has proven to be a convenient alibi for conservative governments to do what they have always wanted to do anyway—cut social spending, gut the public sector, and allocate revenues according to their own priorities and values. The results have been disastrous.

“We pretend to work and they pretend to pay us,” was the cynical comment of workers in the old Soviet Union. Now, in a little village in Northern Ireland struggling to exist under modern capitalism, it’s “We pretend we’re well-off while you pretend you’re fixing the economy.” The government there paid for the facade, and ours is paying for a more expensive one— the “Economic Action Plan” advertising blitz. Maybe it’s time for everyone to stop pretending.

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This page contains a single entry by Chris Aylward published on June 6, 2013 8:30 AM.

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