We are back in recession. Of course, after 10 years in power, this is not Prime Minister Stephen Harper’s fault. Steady as it goes, everything is OK, or it could be worse, keep the course (downward?) are his government’s election slogans.
Previous two per cent and now projected 1.5 per cent yearly GDP growth is miserable. Canada is one of the richest countries in the world with best resources, natural and human, and we are performing poorly. The reason is systemic malaise of the economy. Neoconservative policies have backed the economic system in a corner. Long-recognized economic laws of impact of finance, investment, wages, risk, profit and interest rates are not working anymore or they are not allowed to work.
The best examples are low interest rates. Low interest rates have always been a major tool for stimulus, but now they do not work. They have been brought to the bottom, and economy is still not growing – actually, quite the opposite. Low interest rates are causing serious problems with low corporate liquidity. Not many want to buy corporate bonds, which are the major source of corporate financing. Interest rates have nowhere to go but up, thus the value of bonds will be reduced.
The main cause for this failure is the supply-side model started in 1980s with Reagan and his Reaganomics, the so-called trickle-down economics that is being embraced wholeheartedly by Harper and the Conservatives. The theory is to reduce taxes for the wealthy, and they will invest and prosperity will trickle or filter down to working masses. This wrongly assumes that very wealthy people were willing to share at least part of their wealth, but just the opposite is happening. Wealthy people are accumulating more and more of the wealth because wealth means power. It is never enough. So instead of trickle/filter down prosperity, we have “French-press economics.” French-press coffee compresses coffee grounds to the bottom – the same way wages of the working and of the middle class are now being compressed – so that the good stuff – wealth – can float to the top and be skimmed by the rich.
Drago Arh
Whistler
