Of Crisis and Protests
Of Crisis’ and Protest
With all the talk of various economic crisis and the protests in the forms of the Occupy and Tea Party movements throughout North America, I felt the need to add some clarity to the debate. Hopefully, without some of the cynicism and hyperbole.
First things first we must talk about the how and the why of the crisis within the United States of America. This requires some backtracking to the last great banking inspired crisis in the late 1920s and as to what the outcomes there were. Part of the reason that economic recession then was so severe was the fact so many banks went under. Over 11,000 banks went under between 1929-1933 and with those banks went many people’s savings. As people became aware their savings were at risk many quickly went to withdraw their funds, thereby accelerating the process in something called a “bank run”. Thus as banks only have so much money on reserve, the banks crashed, unable to fill the demands of peoples hard earned savings. Probably the most difficult thing about this crisis was that it foreshadowed our very own crisis as the banking industry manufactured the crisis all on its own.
The lesson from the Great Depression was that the banks had too much liberty to make decisions, many of them risky, that not only put peoples savings at risk but the entire U.S.’s economy and much of the globes as well. The decision was then made to keep government oversight in the banking industry through the Glass-Steagall Act. But as with all things dealing with powerful corporations in the U.S., they gradually got their way through government lobby. The companies complained about regulation throughout the decades, that it was profit limiting and generally stiffled themselves and the economy. With the rise of neo-liberalism (or the process of de-regulating and less government) in the late 1970s, and through powerful icons like Reagan and Thatcher, de-regulation quickly became common practice throughout the Western World. Driving the economy with quick and rapid growth. This process of neo-liberalism accelerated through the U.S. and the Western World throughout the 1980s and 90s.
Finally it came to be that in 1999, the Glass-Steagall act was overthrown by the bank lobby. Thus, after sixty some odd years, the regulation of the banks was pulled back. In the U.S. both parties of Democrats and Republicans share some guilt in allowing this to happen, and it certainly was not a partisan debate. The banks gained the ability to make unsafe and risky decisions with the de-regulation of the security and mortgage departments in 2004, just 5 years after the Glass-Steagall repeal, a crisis was set in motion.
In 2007 U.S. Secretary of the Treasury, Henry Paulson declared that “An open, competitive, and liberalized financial market can effectively allocate scarce resources in a manner that promotes stability and prosperity far better than governmental intervention.” Then, as we know, in 2008, the crisis hit. As the risky mortgage plans put banks into turmoil, they crashed as the mortgage defaults exposed the risky of the U.S. fractional reserve banking. As in the Great Depression, government intervention became important for the survival of the banks and peoples savings. In order to prevent a similarly massive recession as in 1929, hundreds of billions had to be injected to support banks as the defaults put billions of dollars of peoples savings at risk.
Here is where we have to look at the various protest groups and the effect on Canada. Our country, as with some other nations like Mexico, have more regulated banking systems that force banks to keep more cash on reserve than the meager sums of U.S. banks. In addition, Canadian banks are more centralized and did not take part in the folly of the high risk mortgages that imperiled the U.S. banks.
The Tea Party movement, the protest of the libertarians, and a descendent of the earlier Reaganist movements were quite clearly upset with the hundreds of billions being used to back up the banks and the other various industries within the U.S. economy. As they should be, as are most political groups. The problem is the deregulation they preached so fanatically was the issue at fault, for causing the crisis in North America itself. It was the corporations that “seemingly” do things better when liberalized, as espoused by Paulson, that plummeted the world into crisis. Canadians too have a right to be outraged, as our economy, so closely tied to the U.S.’s was also plunged into a recession with billions being pumped into the economy to keep things afloat in a crisis we did not cause.
Though we were fortunate to dodge the full front of the mortgage crisis, many consider us lucky that the crisis happened when it did as Canada was on a path to deregulation itself. Though the banking system in Canada was fortified against such issues by Paul Martin, Marxist academics were critical, saying that the path was on its way to deregulation here and had Canada not been in a minority government that Canada too could of found its way into trouble. It is certain, if I may be allowed to take at least one shot here, that if the Conservative government with the ideology it is locked into would likely have had its way with deregulating the banking system here in the Great White North. The 1990s themselves showed that leaders such as Harper and Manning pressed hard for de-regulation, a situation we should be thankful that Mr. Chretien did not cave to in entirety.
As it is however, Harper is basking in the merits of the previous governments banking system. Mark Carney himself, Canada’s Governor of the Bank of Canada is now head of the Financial Stability Board. This is the new global regulatory agency that is exporting Canada’s wonderful financial system (by chance or otherwise) to the rest of the world. Predictably, the banks in the U.S. are already grumbling about having to increase the amount they have on reserves, an issue Carney has pushed forward already. Yet, if there is something we have learned over the two financial crisis’, it is this, that banks cannot be allowed to manufacture crisis that put billions of users life savings at risk and will require billions in taxpayer bailouts to keep it that way. The banks have wasted enough. Certainly banks should be able to participate in a liberalized economy, to a degree, but they should not be able to operate with so much leash that another global meltdown is unleashed.
That describes the North American crisis in a nutshell which brings us to the Occupy movements. First of all I would like to say to the author that accused another writer of being a “communist”. First of all if you would like to present an honest statement in a paper please do not use the term communist. Communism preaching closed market systems has long since died, were you to use this term in such a way to describe socialism, you would fail any paper if I were to mark it and it crossed my desk. Not only that, but it discredits the rest of your article. I do not agree with unrestrained socialism, but to use the term communist, or socialism as a pejorative is silly, this is just an alternative viewpoint one of three main ones.
As for Occupy movements I have friends and classmates currently in the encampment. I certainly do not agree with all of their viewpoints and realistically they will likely accomplish little. However I feel it is fair to clarify their viewpoints in that. Someone spoke to me in Steinbach this weekend, enraged over the occupiers saying that they should “never be allowed to get jobs” and that “if they think things are so bad, they should go to another country”, just to paraphrase. I think if you were to talk to these people that that is exactly what they are protesting against, global inequality, and corporate greed. These are certainly issues that are tied into this most recent of crisis. These two sentences themselves break off into further longwinded arguments such as dependency theory (why some nations cannot develop despite trading with developed nations such as ours, as predicted by liberalism), and I believe I have really gone on long enough. As Stéphane Dion said recently, that the protests would have been more productive had they been larger and shorter.
Now, with the revelation of unsafe situations, the occupy camps have likely run their effective course.
Needless to say, while I remain pessimistic about their outcome, I respect the rights of these young educated citizens, many of them still working at their jobs, while others have taken time off to attend as necessary, in order to protest. In most cases I would wager that these people are doing more through activism than the majority of us who just grumble about the issues and crisis at hand. Though I do not agree with them in entirety, I respect their right to peaceful assembly as guaranteed in the Charter of Rights and Freedoms, to protest against the corporate greed that tumbled the world into the unfortunate situation that we were in. Though there is more to talk about such as the Greek Crisis, Keynesian economics (the process of a more regulated liberal economy), and much more perhaps I have taken up enough space for one week.