The Global Economic Crisis — Part 1

a Canadian Dimension Roundtable – Published on Canadian Dimension, by Jim Stanford, January 5, 2012.

The 2007-08 financial crisis marked a major turning point in the world economy. From your perspective, why was the recovery so weak and why did economic stagnation continue to characterize the core capitalist countries? 

Back in July 2009, just ten months after the Lehman Brothers collapse, Bank of Canada Governor Mark Carney officially declared that the recession was over. This verdict was celebrated with a banner headline on the front page of the Globe and Mail. According to the narrow, technical definition used by economists (namely, that the recession is over as soon as real GDP starts to increase again, instead of shrinking), Carney was right. But the same was true in 1934 — and the Depression wasn’t even half over! The so-called recovery has not been a recovery at all; rather, the economy’s been “bouncing along the bottom,” never gaining the true, broadly based momentum that characterizes a genuine recovery. Now, with financial markets and investor confidence roiled by the escalating eurozone crisis, it is very likely that we’re headed back into a true “double dip” (where real GDP begins to actually contract once again). But that, in a way, is almost beside the point: for most Canadians, it never felt like a recovery at all.

Indeed, for working people, it’s been non-stop crisis. The best measure of the state of the labour market during weak times is the employment rate. Unlike the unemployment rate, the employment rate is not distorted by the fact that many discouraged job-seekers just drop out of the labour market altogether (In contrast, the official unemployment rate “looks better” when discouraged job-seekers give up looking, because then they disappear from the official statistics) … //

… The Harper government has persistently celebrated Canada’s economic strength in the midst of the crisis. From your perspective, what does the crisis tell us about the shape of Canada’s economy and Canada’s place in the global economy?

Ottawa’s claims that Canada survived the recession better than any other major economy are blatantly and empirically false. Canada survived better than the US, the UK and other countries where bank failures created a full-on credit freeze that devastated demand and employment. In the broader world context, however, Canada’s performance was ho-hum at best. Dozens of countries recorded stronger recovery, and better labour market performance, than Canada — especially after adjusting for Canada’s relatively fast (in the developed world) population growth.

Canadian profits, exports, and capital spending have to some extent been supported by the continuing petroleum bandwagon in Alberta. But that boom, powerful as it is, cannot offset the weakness of the whole national economy. After all, less than 1 percent of Canadians work in the petroleum industry, and Canada’s international balance of payments (called the “current account”) is still deep in deficit despite record energy exports.

The Harper government has embraced Canada’s structural regression (into a “hewer of wood and scraper of tar”). It has made token efforts to address the structural danger posed by our heavy reliance on exports to a US economy that will be depressed for many years to come; but their dominant strategy in this regard (namely, sign free trade agreements with other regions — incredibly including Europe) does more harm than good. Persistent weakness in Canadian business investment, innovation, and global competitiveness (for anything other than raw resources) has been acknowledged even by mainstream observers. (full interview text).

Links
:

Inuit Focus and Occupy Movement
, Volume 46, Issue 1 /Index;

The Tyranny of Structurelessness, by Jo Freeman, January 7, 2012.

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