Sunday, 26 September 2010

Diss Integration

For twenty-five years we have been told that economic integration, convergence, and deregulation are the only way to raise everyone’s standard of living and reduce income disparity on earth. The embryo of Adam Smith’s groundbreaking and logical theories in The Wealth of Nations has slid down a three hundred year slippery slope, twisted and perverted through its evolution into recent history’s hydra of global supply lines, financial speculation, industrial agriculture and unchecked energy consumption with their accompanying “free market” justifications. These activities are harmful and unhealthy to the earth and to humanity, and yet are assumed to be innate to our nature (for no other reason than they are what we happen to be doing right now), and heralded as modern technological solutions without which any attempt at solving our global problems of which they are the principal cause is a non-starter.

Boldly leading this march to obsolescence and destruction are western governments, both individually, and speaking as a group at global symposiums such as the UN, Davos, G20, etc. These governments, initially created to be at the service of the people during the advent of revolutions and republics in the 18th century when the masses determined their right to govern themselves, are now the most guilty for what ails us. They talk tough about the excesses and irresponsibilities of bankers, short sellers, and credit default swaps, and the need for better regulation to pretend they have things under control and curry populist favour with their electorate. They don’t seem to realize that where the system really went wrong is, in fact, when the one-time “citizen” governments they lead decided that Smith’s laissez-faire logic applied to them. This allowed them to be present in all sectors of life and claim to take responsibility for everything, giving them and the companies whose pockets they’re in free reign to monopolize everything. Now we find ourselves in a situation where we are unable to provide for any of our own needs, but conditioned to retain a ridiculous illusion that the government will take care of our health, give us an income even if we squandered our own recklessly, “manage the economy”, etc, forever and ever. I do think government can and should do these things to some extent if they are self financing and within a nations’ means. What governments have done is allow themselves to balloon to the same obesity levels and lose money at the same rate as some of the stupendous failures of capitalism we’ve witnessed in the past two years, to the point that they will soon be justifying their legitimacy with the same ridiculous premise that they are “too big to fail”. Worse, they have given themselves carte blanche to behave as actors in the economy in the unprecedented way of the bailouts of ’08 and will not hesitate to do it again. It is symptomatic of a system that is crumbling under its own weight. How did this happen?

When entities expand too quickly and are sprawled across too many domains, the accompanying overhead and lack of accountability (too many chiefs) leads the obese beasts to collapse. General Motors’ costs running 15-20 brands in 70 countries and retiree pensions and benefits far exceeded anything it ever could have possibly hoped to earn selling cars. It tried to “stimulate” itself for many years by selling, financing, and manufacturing cheap and throwing in all kinds of rebates and incentives. By the time they were totally insolvent they were $90 billion in the red. (And thanks to the transfer of Canadian and American tax dollars to this company, they are now only 17$ billion in the red. Even though many people believe they have “paid it all back”. Doesn’t that make you feel good?) It is a game you cannot play catch up in. Even almighty Walmart, every well-meaning citizen’s favourite evil punching bag, started to fall out of favour with Wall Street in 2010 (see USA Today, March 2010). It has saturated so many markets to the point that the exponential growth the street pathologically craves has become mathematically impossible. As a result, its share price can now only be expected to stagnate or decline (which means BO-ring! in capitalistish). Of course, they are much better positioned than GM was (no obligations to underpaid workforce, massive low-class market cornered, shameless cheap and short sighted middle and upper class market segments also cornered), but what happens when their supply lines experience disturbance by shortages/energy prices? Same result: small blips will transform the now impressive and unimaginable number of square feet into an impossibly expensive to maintain albatross. You can extend this analysis to all business monopolies that exist with the overt and covert sympathy of Western governments, all of whom consider themselves, no doubt, too big to fail (mortgages, agriculture, finance, tech, telecom, staples), and indeed, to Western governments themselves. It is not that these enterprises and the governments that support them with our money will be done in by some inherent evil. Their massiveness assures their eventual redundance.

I know libertarianism is on the rise these days, and I assure the reader I have not bought in and am not clamouring to take my chainsaw to parliament tomorrow. The most outright manifestation of the phenomenon in the media is the American Tea Party, screaming that there is "too much government in our lives" and the "expansion of government is unconstitutional and must be curbed". The sentiments are echoing the "government is the problem, not the solution" zeitgeist of the Reagan-Thatcher 1980s. However, as Thomas Friedman so aptly pointed out in his NY Times column this week, the movement is more about blowing off steam about a whole bunch of things than proposing any meaningful changes in the governance structure. The political anger they're capitalizing on is justified, but it is misplaced. As opposition they are not exactly taking advantage of an oppurtunity; they are proposing to solve the problems by playing to people's worst instincts of more free rides and more taking the easy way out. These tactics may get them in power, but because they don't deal with the real problems at the heart of the matter, their honeymoons will last for about a day. A changing of the guard in America will create a different coloured party and different faces to yell out, while the so-called agents of change avoid taking any responsibility for a system which is, after all, theirs to shape, if only they could remember what things like revolution and civic engagement were.

N’empêche, the Canadian commentariat is waxing philosophical these days about whether this “tea party effect” is contributing to the wave of anti-incumbent sentiment here. The premiers of the four largest provinces are all waiting out their majorities hiding in their offices now, for different reasons. They are fearful of their citizens' discontent and malaise that they did largely earn during their mandates, but is now being stoked and exacerbated by the mainstream media on a daily basis. It used to be conventional knowledge in Canadian politics that being in opposition is a hard and thankless job. You must criticize the government non-stop while not elaborating any policies of your own, for this makes you vulnerable to the sitting government which from its incumbent position has more visibility and an advantage to ridicule your untested plans. It seems this is no longer the case. These are good times to be a challenger, and indeed the opposition seems to be relishing their incumbent opponents’ falls from grace with glee. Good for them, because again it is just a lot of hot air. Change in any of the provincial or federal regimes in Canada will produce the same result as our tea party friends winning the midterm elections in December: More decay and disillusionment, and no change or improvement. For it is considered “political suicide” to deal in the realities and truths that are becoming apparent everywhere, it seems, but on the campaign trail.

And that’s where I differ from Mr. Friedman in his analysis that I cited earlier: leadership. He is still waiting for some trailblazing visionary to rally the troops and get everybody on board for the great extreme nation makeover of 2010. Not only have I abandoned the illusion that such people exist, seeing no reason why we should waste our time waiting for some mythical messiah who’s never going to come to solve our problems, but a person demonstrating such leadership will be summarily ignorned and scorned just as the many people who propose ideas and solutions are now. What will happen, though, is every provincial challenger in Canada will attempt to self-style themselves as this figure by appealing to optimism and vagueness, and everyone will be exposed as a fraud shortly after their victory just like Barack Obama was.

Past and future failures should not be blamed solely on politicians, and this is not a rant against them. There are deep cancers in the system which are far betyond their ability to fix even if they wanted to. Basically, the state no longer collects the money it needs to buy people, and its willingness to go further and further into debt to achieve this end is more and more transparently bald and offensive. The tea party is right that government has expanded in an exponential and unsustainable fashion to a ridiculous size, but they are wrong to think that paying the bill can somehow be circumvented (which is what they are advocating by proposing a large tax cut) before the size of the state is reduced. If the taxes that needed to be collected had been up until now and the entitlements issued were within the means of those revenues, we would be fine. Obviously, it was quite the opposite that happened. The system collects from about 35-40% of the productive population and guarantees entitlements for 100%. Now, as everyone but the political class can plainly see, the only way out of this mess is raising taxes and cutting spending, which is what I meant earlier when I said political suicide.

None of this is new or revolutionary - it is hammered relentlessly by all kinds of commentators day in day out. I'm not writing today to say that the problems can be solved by kitchen table logic - "You have more money going out than you do coming in and you need to reverse this!", although a bout of that could only help. I'm also not writing to say "Throw the bums out!" as if the opposition (or rather, the oppurtunimisition) had any credible soltuins. I'm writing to say that the problem lies literally in the size and the scope of the government itself. The size is totally unmanageable, and the layers ensure endless buck-passing, running up new bills to throw money at every new problem, and zero accountability for what is happening.

The political-economic system in North America is filled with an ever expanding array of popular (and expensive) value-sapping drags that most of these so-called "libertarians" are loath to forego. The most absurd example would be tax deductible mortgage interest in America, which effectively subsidizes the housing market with taxpayer money, and which I’m sure more than a few tea party members no doubt duly file for on their annual return. Then how about all those six figure outsize public sector salaries? This is a relatively recent development, and there are a few bucks in there. Then there is the fierce opposition to taxes on resource extraction, which the status quo set claim will make precious foreign investment flee. These people don't understand that resources are not call centres - they can't be shipped to poor countries. I cannot go on for the rest of the night about expensive bills for health care system, free roads, indexed pensions, individual and corporate welfare, political advertising and rural vote buying, and onward and upward that need to be paid and aren’t getting paid. I can only say that there are more sucklings on the teat than there have ever been before, and every new event representing the least upheaval (floods, hurricanes, going out of business) prompts yet another instinctive bee-line to it

If you let me at the provincial or federal books, I could balance the budget. But not without drawing the ire of public service union cartels, the howling of editorial boards, and the rage of people who now get paid to do everything from buy transit passes to working in industries that cannot stand on their own two feet like auto and fisheries. However, this will be nothing compared to the agony that will be felt once the financial collapse we are headed for hits. Even if people stand don’t really understand or want to hear that the Western democracies they live in are insolvent and line up firmly behind the government’s “fuck it, we don’t have to pay attitude”, if it decides to go that route eventually, the nation would end up defaulting, the currency would be massively devalued, and suddenly your 400,000 home you signed your life away for is worthless

In Thursday’s Globe and Mail, there were all kinds of catastrophic warnings. In an otherwise saccharine and whiny analysis of the perils faced by the Canadian "middle class" which has placed itself in record levels of indebtedness, former liberal speechwriter Scott Reid says Canadian debt levels are approaching that of Greece’s. And columnist Neil Reynolds today says despite the federal government's bragging about our low debt-GDP ratio, it is actually as high as the United States' when federal and provincial debt are taken into account, which after all is all debt owed by Canadian citizens. Given that we owe nearly 100% of our yearly output which keeps us afloat, it is difficult to imagine how we would ever dig ourselves out of the hole.

We won’t. The size of the entreprise is the problem is so great and provides comfortable liefstyles to so many people that it will persist until it abruptly stops. As Vanity Fair editorialist Graydon Carter pointed out in this month's issue, the United States had a smaller army than Romania in 1915. Today, no fewer than 1,200 government agencies and 1,900 private companies and contractors suck up the three quarters of a trillion-dollar defence budget, greater than all other defense budgets of earth’s countries combined. Although this is certainly the most "obese" government department in human history, the same logic has infiltrated all levels of North American governments who, after all, cannot afford to neglect any of their citizens or regions.

However, the federal republic model clearly creates rivalries and cleavages between regions, and is ultimately artificial. It is imposed by a central authority and has created bloated bureaucracy which is unsustainable and has no credibility in the eyes of many citizens because it is has no relevance or real value to them. Equalization payments in Canada that cause endless rivalries and tension between provinces have ensured that that no elusive “big tent” party will ever get the free hand to govern that past majorities have, and the current political logjam looks set to last for years to come. Across the pond, no less than 1.3 trillion euros have been transferred from West to East Germany in 21 years, where unemployment remains high and the biggest employer is the government. And to lead a country like America, where the citizens of 15 or 20 cities economically productive hub cities’ lives have nothing to do with and zero exposure to the masses dwelling in suburban or rural areas with zero economic prospects other than working at Mickey Ds or wall mart, as a “unifier” is a dubious proposition in itself. These countries are not (or at least, no longer) meant to be governed by all-powerful, central authorities. We are starting to see cracks in the unity that will evolve into full blown fractures as strains and tensions on centralized structures increase.

Once powerful ideas like "strength in unity" "divided we fall" and "bigger is better" will be discredited once central authorities realize they have nothing substantive to base such claims on, and that the satisfying of certain constituencies can no longer be done at the price of alienating and ignoring others based on the political calculation that you can take them for granted. When they are cut off from the central structure and lose the instinct to run to it to solve our their problems, people will re-learn to do the things they did for themselves for thousands of years – trade, commerce, provide skills, exchange with those around them, circulate in a human-scale space, grow food and no longer segregate themselves by age. The world will be truly liberated when it dis-integrates, or un- or de-integrates if you like to use whatever the correct word that is the opposite of integration. Not when it disintegrates. Sounds the same, but we need to get off the track headed towards the latter and onto the one towards the former. Integration is a popular widely used buzzword but it is forced and unnatural and cannot remain so. This is why we must loudly, forcefully, diss integration in all its forms.

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