Friday, December 26, 2008

Liberals face their own economic challenge

This is from the Star.

This article makes it clear that as a supporter of the ruling class and capitalism the Liberal Party has to forge a new ideology. Of course as any libertarian will tell you all the crapola about free markets has always been that. There is not now nor has there ever been a free market capitalism. Just to give one crucial example, global economic agreements are based upon the protection of patents a scheme to ensure that protected products cannot face competition. Intellectual property rights are at the forefront of global trading. Another obvious example is the protection that advanced countries grant their agricultural producers most often. It is true however as the article points out that there has been an emphasis upon less government regulation and an increased rhetorical emphasis upon free markets. What could have been noted as well is that there has been increased privatisation and opening of areas to profit such as jails, ancillary health care services, security, and even roads.
As the financial bubble bursts and profits in many areas begin to shrink more socialisation of risk is demanded of the capitalist class. This is what the emphasis upon greater state involvement entails. However that involvement will also see increased government debt that will be left for future generations to pay. As is made eminently clear governments do not want structural deficits. As soon as recovery begins in fact before that there will be pressures to cut social programs and unions. The Flaherty attack on public sector labor unions and cutting subsidies to political parties is part of that. Only the parties who are able to finance themselves with donations from the well off will survive. The Liberals have to prove themselves a fit vehicle for the ruling class to rule and that is why they need a new ideology to sell themselves. With a newly crowned leader blessed by the kingmakers Liberal bagmen should be able to refill their coffers. The Liberals simply need a middle of the road economic and social policy. They will probably avoid what was for a time quite trendy environmental issues. Of course there will be considerable rhetoric but little policy action the same as when they were in power. The environmental brand promoted by Dion did not sell so it will be unceremoniously consigned to the dustbin of history. Harper will need to show himself a moderate for the near term and swallow the new ideology of more govt. involvement and necessary deficits even though it makes him a bit nauseous so that he will always try to sneak in some old ideological favorites to ease the nausea.

Liberals face their own economic challenge - Opinion - Liberals face their own economic challenge
December 26, 2008 David Crane
The Liberals have a new leader, Michael Ignatieff. But this is not enough. The once-proud political party is today a pale shadow of its former self and needs to rethink what it stands for. The Liberal party needs new ideas as well as a new leader.
While the most immediate concern is how to deal with next month's federal budget, the bigger challenge is to define what the Liberal party will stand for in the global society of the 21st century.
Over the next decade and beyond, the world will be transformed by globalization and the shift of economic power and wealth from the West to the East, continuing and rapid technological change, the need to address climate change before it is too late, and competition for energy, mineral resources, food and water.
Where will Canada fit in this world and how will we prosper at a time of intensifying competition for jobs and growth? As a hint of what lies ahead, a Chinese company, BYD, has just unveiled the world's first mass-produced plug-in hybrid car, two years ahead of GM's planned Volt.
The ability to provide a 21st-century agenda for a successful Canada is critical if the Liberals are to appeal to more voters, attract more members, recruit better candidates and spark more grassroots funding. Attacking the Harper government is not enough.
As prime minister, Jean Chr├ętien succeeded in restoring Canada's fiscal health and putting Canada on the path to sustained budget surpluses along with tax cuts. This was a major accomplishment. He also boosted Canadian spending on fundamental science and higher education. But he was not interested in recharging the Liberal party as a force for broad policy leadership
His successor, Paul Martin, displayed an enthusiasm for many different policies, but seemed unable to set priorities. As leader of the Opposition, St├ęphane Dion was fixated on a single idea, a carbon tax, which was a good idea if clumsily presented. But he, too, lacked a broader view of the challenges facing the country.
To start, Liberals need to redefine the role of the state in the 21st century. What is it that we should expect government to do, on its own or in partnership with business, labour and NGOs?
The global financial crisis has demonstrated, at enormous human and economic cost, the failings of the ideology that has dominated policy-making for the past generation. That ideology is grounded in the Thatcher-Reagan revolution, which celebrated low taxes, deregulation, small government and the minimalist state. It is now abundantly clear that markets are not all-wise.
A key role of the state must be to set the rules of the game and vigorously enforce them, not rely on a blind faith in the "invisible hand" of market forces. The cost of light-touch regulation of financial markets is clear. But this applies in other areas as well, from climate change, safe workplaces and land use to clean water and food safety.
In the free-market world, social policies were criticized as unaffordable or ineffective given the faster pace of change. Government polices to boost innovation were denounced as meddling and inefficient interventions in picking winners and losers.
But the state is now seen as a necessary force to help countries achieve collective prosperity and good jobs. Globalization and rapid technological change are big reasons why. We are now moving to a new era of the active state.
The shift to an active state should not mean, however, a return to bigger government, or the abolition of the role markets and competition can usefully play.
But the worst crisis since the Great Depression certainly points to the need for more active government, with a clearer role in helping individuals cope with globalization, providing appropriate regulation and ensuring that businesses can capitalize on opportunities for the future economy.
A challenge for the Liberal party is to demonstrate that it recognizes the fundamental importance of an innovative, entrepreneurial economy where the state is an active and supporting partner. For example, that Liberals should champion government that is more proactive in facilitating innovation and entrepreneurship to create the businesses and jobs of the future. It also means stronger support for city-regions, which are crucial engines of innovation and job-creation.
Markets do a poor job, by themselves, of supporting the kind of higher-risk, long-term investment that leads to new technologies and new industries. Nor are markets reliable in addressing long-term societal goals – such as dealing with climate change – unless governments use their powers to create a different market through regulation and incentives.
Good social policy is also important. As Peter Mandelson, Britain's Secretary of State for Business, said recently, some countries have fallen into the trap of using the share of government spending in the economy as a measure of freedom or efficiency.
"But where that spending is done well it can actually be a measure of the extent to which a state has adapted to the fundamental reality of living with rapid global economic change," he said, arguing that "a society that leaves individuals to cover the often catastrophic costs of health care or unemployment will spend less collectively." But "it will be an insecure society, and insecure societies are not societies equipped for long-term success."
Canadians need a new unifying set of ideas that show how to build a prosperous, just and sustainable society in a world where the old ways are collapsing.
The question is whether the Liberals are capable of rising to this challenge. If they can't, who needs them?
David Crane is a commentator on economic issues. He can be reached at

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