More Bad News Predictions for 2009 and Beyond

Canada is still weathering the storm pretty well, but that's probably because the US downturn hasn't fully hit us yet. It will. There have been small US economic downturns that didn't hit Canada, but there is no way that a major recession in the US is going to leave Canada unscathed. Our economy is just too dependent on the US: not just exports (US exports comprise 25% of our GDP), but also US corporations operating in Canada that lay off Canadians when their US operations suffer; consumer confidence affected by the US (consumer spending is 55% of GDP); and tightening credit conditions. If the US dollar falls relative to the Canadian dollar, we will be in even more trouble.

A typical recession in Canada starts a bit after a US recession and is much longer. The US bottoms out and bounces back pretty quickly, while we continue to have high unemployment for a couple of years. The Report on Business and its ilk downplay the importance of this post-recession hardship because they're more concerned with the stock market, but working Canadians feel the pinch for a long time.

At this point, a recession with two or three years of layoffs is the "Good News" scenario. The US government is throwing trillions at the economy because they are in very great danger of a much worse situation than a recession. We are all teetering on the brink of a cliff and there may be no precedent for what happens next. Whole industries may shut down. We could be facing massive failures of banks, investment companies, manufacturers, retailers - even states and provinces. Every investment not protected by deposit insurance could be in jeopardy. We could enter a period of high inflation that would not only erode wealth, but undermine the efficieny of every aspect of the economy.

The economic downturn in China is particularly troubling. Just one small effect: if Chinese demand for oil declines, the Alberta oil industry could conceivably collapse. Similar shocks to other sectors that are affected by Chinese demand could be felt all over the world. The Chinese economy is vulnerable because it is still a very poor country with huge exports: it doesn't have domestic demand to cushion its vulnerability to global conditions. If it falters, it could fall hard.

The impending collapse of countries on the periphery of Europe will send shock waves around the world as they default on loans, and it's not clear (despite overwhelming evidence) that global economic leaders are preparing for it. World governments and economic organizations seem to be too much in reaction mode, and aren't being proactive enough.

If this great depression occurs - and at this point it's still just a possibility, not a certainty - then who knows what horrible political movements may grow. Hitler had his roots in the great depression of the 1930s. What might be the equivalent in a 2009 depression? Who might be the next great fascist state? Russia... China... the USA?

If we go into a depression and if it results in another world war, how will that affect the environment? Wars cause enormous environmental damage, with all the burning and sinking of ships and aramament manufacture and so on, while the environment is increasingly shaky. We could hasten the melting of the global ice caps, resulting in flooding of coastal areas and the displacement of hundreds of millions of people, just when international organizations that deal with disasters are too broke to operate in the way they were designed.

It would be comforting to know that there were people thinking about what may come and planning for it as best they could. In the short term we need to figure out what to do when the IMF runs out of money. But we also need to rethink everything we do in light of possible global economic collapse. It might not be a likely scenario, but there is a growing possibility that we're in for dark times ahead.

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Why People Deny Global Warming

Opposition to environmental protection comes, in large part, from proponents of small government who see the environmental issue as a threat to their attempt to reduce taxes, reduce regulations, and reduce government spending.

(If the threat to our country came in the form of a military threat, I'm positive that those same people would be willing to raise taxes, increase regulations, and increase government spending. Just look at recent events in the US.)

The troubling thing is that the opponents of large government do not phrase the environmental debate in terms of how we should respond to global warming; they deny the existence of global warming. Thus we have wasted years arguing about whether there is a problem, and are not making progress on how to address it.

The UN Intergovernmental Panel on Climate Change (IPCC) has been clear for some time that our pollution is causing global climate change. The most recent IPPC report states that this is "unequivocal". This isn't just a small committee. Wikipedia says, "The report was produced by around 600 authors from 40 countries, and reviewed by over 620 experts and governments. Before being accepted, the summary was reviewed line-by-line by representatives from 113 governments". I challenge anyone who doesn't believe the IPCC to say that they support big government; I don't think any such person exists.

There is a place in the environmental debate for people who are wary of big government. In fact, Canada's Green Party takes a very small-c conservative (even a big-C Conservative) approach to the environment by calling for a new tax structure that taxes waste and pollution. (I think the idea is crazy, as I have said before, on two grounds: (1) the tax system tosses out out the foundation of our current system, that people should pay proportionally more as their income rises, and so will have all sorts of unintended and negative social side effects; (2) their proposed tax system has no hope of being adopted in Canada, so the Green Party is wasting our time having this as the center of their environmental policy when they should be talking about more pragmatic, possible policy.) But the strategy is working for the Green Party - they are picking up right-wing voters.

In Europe, where big government is not such an anathema, environmental issues have been acknowledged and addressed much more effectively than in North America. And, gee willikers, the environmental initiatives haven't created behemoth public corporations, high levels of taxation or crushing regulatory bureaucracy. The free market isn't destroyed by wind power, tighter car emission standards, better urban planning, or better public transit infrastructure. It's nothing new... it's just smarter.

Germany, which is leading the way in environmental initiatives, now produces one-third of the world's wind power. It has the highest targets for cutting greenhouse gases in the EU, and is ahead of schedule. It has pioneered energy-sufficient towns and carless towns. It is the world leader in development of solar power. As one blogger writes, "Bad choices aren't banned outright (you can still buy a Hummer in Germany if you really want one), but better choices are encouraged. Discouragements: $6 a gallon gas, and special taxes on extremely inefficient vehicles. Encouragements: An efficient public-transport system, and compact, diverse neighborhoods." That kind of encouragement is no different from the Canadian government encouraging us to drive cars by paying for hiways but not for rail transit, or by zoning so much low density housing.

Germany is showing us all how to meet environmental targets. It has made huge environmental improvements without curtailing freedom in any way. An example: only one-third of German hiways have a speed limit. Argue that one if you like, but Germans like to drive fast, and they do.

Me, I'm a proponent both of free markets and of big government. In fact, I don't think markets work without a lot of government "interference". Take financial markets as an example - stock exchanges are arguably the most tightly regulated markets going, and that's what keeps them humming. If you lose investor confidence you lose investors. Hence the biggest proponent of free markets - the US - has the most tightly regulated financial sector.

I love government regulation, and I want more regulation and more enforcement throughout society. But I can see that not everyone agrees with me, and I respect that. So let's get down to work here and find a way to address the environmental issue that we can all live with, as Germany has done. Otherwise we're heading for a fall.

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Reliving History?

When civil war broke out in Spain in 1936, Adolf Hitler was quick to support the fascist side. The Spanish Civil War proved to be an important training ground for the Germans. It distracted the world from Germany's rearmament (in defiance of the WWI treaty); it provided combat experience for German troops, especially its air force; and it allowed Germany to develop and test its armaments. With German support, the fascists prevailed in Spain in January 1939; Germany waged full-scale war later that year.

The 1937 bombing of Guernica by the German Condor Legion was a massive PR offensive against the rest of Europe, and was part of the reason European countries were frightened into appeasing Hitler in the disastrous Munich Agreement of 1938. But the fascists played it both ways, creating controversy about who actually bombed Guernica that was only settled in the 1970s.

In fact, western opposition to the fascists was slow to develop. Many did not want to support communism. The little that Britain and France did to oppose the civil war ended up hurting the socialist side more than the fascist side. Both sides had their good points and bad points, which led to controversy that distracted the world from the real threat.

Here we are 70 years later, and I think there are some lessons to be learned as we consider the activities and aspirations of Iran. I am by no means supporting the idea of bombing Tehran or following George Bush-style "democracy" at the end of a gun. Nor am I suggesting that there's anyone in Iran who compares to Hitler. But I think there are some disturbing historical similarities and that we should forget for a moment whether we sympathise more with the Palestinians or Israelis, put aside our disgust and outrage at the US, and think in a clear and non-partisan way about what might be coming.

What might be coming is Iran. Iran has clearly-expressed territorial ambitions in the Middle East, and it sees the west as its enemy. How will it achieve its ends? Probably in some ways we can predict (such as an Iranian-backed coup in Egypt; the gradual, partly democratic take-over of Lebanon and Iraq; and increased support for terrorism against the west) and some we can't (something wholly unexpected like a deal with Turkey to take on the Kurds; or a deal with the UAE or Oman that would allow them to close the Persian Gulf). Iran is not now a superpower, but that would change quickly if it had nuclear weapons, control of the world oil supply, and the support of a large proportion of the world's billion-plus Arabs.

It would be foolish to underestimate the intelligence or determination of Iran. Iran is a large, stable parliamentary democracy (it's an Islamic theocratic republic, but it also has free elections and a parliament) with a millennia-old civilization and a history as a colonial power. Just this week Iran demonstrated its Thaqeb submarine-to-surface missile. Iran's Hoot torpedo travels four times faster than conventional torpedoes (223 mph), and its Shahab-3 missile can travel 1,200 miles and carry a nuclear warhead.

I hope that all this comes to nothing. I would very much like to live in a world where Iran was our ally and we all co-existed peacefully. However, there is a chance that a few years down the road we will be embroiled in World War III and it may have eerie similarities to WWII, with the Middle East taking the place of Europe and - who knows - Iran, Syria and North Korea taking the place of Germany, Italy and Japan. (An old joke goes, "Just because I'm paranoid doesn't mean everybody's not out to get me." Just because the idiot George Bush called them the axis of evil doesn't mean they're not going to become just that.)

We need to keep our eyes open to the big picture. Also, we need to be a lot more careful about electing national leaders who will be up to the challenge of avoiding and possibly fighting a world war.

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