Government - the last and best hope for people

Only public intervention can smooth out the rough spots in the economic cycle

Commentary from Larry Solway

  During the horrible recession of 1989/90 I remember people in the building trades saying they would be unemployed if not for the public building being done by the government of the day. The downfall of that government and its apparently wanton spending is at the heart of our dilemma about who does what and whether government should step into the breech.
  Do I have trouble with Nortel cutting thousands of jobs worldwide, about a thousand in Canada? Certainly not. Nortel dizzied down from over $100 a share to less than $50. Billions of dollars in "wealth" disappeared. Banks trembled. The stock market shuddered. Nortel had to stem the hemorrhage by placating the investment world. In the parlance of The Street (Wall or Bay) - the company that cuts costs (fires people) "is serious about its bottom line," Bay Street bafflegab for improved profit from cost reduction. "Everybody" is happy. Except the people whose jobs disappear. Except the communities depending on the payroll for local business prosperity. Except for the institutions holding mortgages and credit card debts. The domino effect of jobs reduction is profound.
 

When the economy slows down business stops spending. They cut costs, cut jobs. Government should do the opposite.

  Read the financial press any day. Without a glimmer of remorse (they write about business not about people) they report plant closings and layoffs. Blood-letting at Daimler Chrysler. The loss of 505 jobs in Barrie at the region's largest employer. Alloy Wheel International (Canada) Ltd. is restructuring under bankruptcy protection. CNN of all people, will lay off up to one thousand, NBC will pink-slip more than 500. Ad revenues are down. NBC hasn't had a hit since Seinfeld.
  It gets better. NBC is owned by GE Capital, an "asset management" corporation. No emotional attachment to the business it owns, just a money pump. And when the pump runs dry? So 250 money-losing Montgomery Ward department stores owned by GE closed? Thousands of jobs gone. But that's business in the real world.
  GE Capital, began as General Electric, Thomas Edison's company. Little remembered in the patriotic applause for America's great inventor, folk hero, and a close friend of Henry Ford, is the fact that Edison was not a nice man. He was a monopoly builder. In the interests only of protecting his electrical business, he savaged Nicolai Tesla, the creator of Alternating Current. Tesla, according to Edison, would electrocute millions.
  But I digress. The chairman, and financial guru at GE is a man named Jack Welch. He's a hard-boiled businessman. He was pictured recently on the front page of the New York Times standing next to George Dubya, one of the business brains the president-elect called on to determine the future of America. Welch is also the guy who fought a bitter, unseemly (for a multi-gizillionaire) and very public divorce battle with his wife who simply wanted a larger share of the estimated 700 million he was worth. Any company would love to have Welch. Most people working in the trenches would not. But business decisions are made about profit. No quarrel. Like I wrote last week - business is for profit, government is for people. Don't get confused.
  Again, government has to be the last and best hope for people. It certainly can't be, nor should it be General Motors or GE Capital or Nortel. Last week's opinion generated opposition from the usual suspects. One letter said that all of us Left guys want government to be the first hope. One writer, speaking like a card-carrying Libertarian, wrote "Let government be responsible for education, health care, roads, policing, the military, some basic food inspection etc, but get it out of the other three-quarters of nonsense it is involved in. Who really needs a lot of it? Not most of us."
  I have no quarrel with the realities of business. When things get tough the tough get going - out of town that is. When the economy slows down business stops spending. They cut costs, cut jobs. Government should do the opposite. When the economy goes soft government has to step in. Government spends when the private sector saves. Government should fill the void. It's what we should expect.
 

Most wage earners, even executives, may be one or two pay cheques away from financial ruin

  In California deregulation and privatization have brought electrical chaos. Peter Gorrie, writing recently in the Toronto Star quoted Mindy Spratt of the Utility Reform Network saying to Ontario: "Don't do anything we did."
  Calling California's two-year experiment in electricity deregulation a "colossal and dangerous failure," Gov. Gray Davis proposed several major steps today to reassert the state's control over its power market, including the creation of a new state energy authority that could buy generating plants from private utilities and build new plants.
  In his annual address to the California legislature, Mr. Davis, a Democrat, also promised that he would not allow California's two largest private utilities to continue their recent slide toward bankruptcy, saying that he would use all the state's powers, including taking control of power plants and transmission grids if necessary, to keep the system working...
  Do you remember who made political hay proclaiming that Canada's most important issue was "Jobs, jobs, jobs?" Brian Mulroney!
  In the New York Times financial forecast for 2001, they looked back at the panic-driven year 2000, and about that kernel of fear that underlies the entire crisis: jobs. The biggest concern for people is whether or not they will hold their jobs. That will make them shy about buying anything which will quickly deflate the consumer-driven bubble of prosperity. Most wage earners, even executives, may be one or two pay cheques away from financial ruin. The bubble has encouraged them to buy more cars, bigger houses, better holidays, go to finer restaurants, drink imported wines.
  When times are good people applaud "less government". When times turn sour they should expect government to pitch in. When we were in the depths of our worst downturn 1989/90 big bad Bob Rae and his ambassador to the Kremlin (according to the Citizen's Coalition) Pink Floyd Laughren tried to spend our way our of the recession. It was bad timing. It was worse politics. But they knew that when the economy goes sour the government is the last resort and the best hope. It is the time to spend money on infrastructure improvements, transit, and housing.
  The fatal flaw was that we failed (once again - it's becoming boring) to save for the rainy day. When we're up everyone wants tax cuts. When we're down, everyone wants us to stop spending money we don't have. Politicians have abandoned the theory that predates Keynes by a couple of millenia, about seven fat years and seven lean years. Read Exodus for heaven's sake. But at least (according to the Scriptures) Pharoah listened. The Rae/Laughren mistake was to spend money we didn't have. They had no choice. But the money should haave been there, saved from fatter years, saved (didn't we learn this on mother's lap) for a rainy day. It's raining. Will we be ready?
  If the truth is, as Brian said, "jobs jobs jobs", then the government becomes the employer of last resort. When private corporations pull in their horns we have no alternative other than pressing the right fiscal buttons to keep people working.
  We have never had a long term economic policy. We have never known for sure where our next problem was coming from. Who will be to blame if the projected surplus doesn't materialize and it's too late to take back the tax cuts? Who will carry the load of new E.I. claims? Who will hire the kids coming out of colleges and universities?
  Only government can smooth out the rough spots. Only voters can endorse a government that understands both fiscal prudence and economic responsibility. Government has to take charge, just as California realizes it has to take charge of the vital electric power system. Just as the old Tory government of Arthur Meighen realized it had to take charge of the railroads back in the 20s.

Is Government the last, best hope for people? What do you think?

And don't forget to take the Straight Goods poll.

Posted, January 22, 2001

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