Wednesday, December 17, 2008

Towards Creating the Active State

Buried in a New Yorker profile of Naomi Klein (Outside Agitator, December 8, 2008) is a quote from Stephen Lewis: "I'm more fundamentalist now. I have no patience for capitalism at all. I see now that there is almost nothing that is positive in this ugly international system, and that's why I embrace Naomi's view of the way the world works. I'm actually tired of my rhetorical outburts - I'd like to engage in physical aggression."

I was more taken by one quote from Stephen Lewis than an entire article about his daughter-in-law because Stephen Lewis was an influence on my early political formation. I grew up supporting him as head of the Ontario New Democratic Party, arguing with my friends about his expulsion of the "waffle" (a left-wing group) from the NDP, listening to him being a pundit on CBC radio, reading his memoirs about growing up in Uganda. His influence was reinforced by my admiration of the newspaper columns of his wife, Michele Landsberg.

To see Lewis's change in viewpoint is not exactly shocking - while UN special envoy for HIV/AIDS in Africa his speeches grew increasingly angry - but it is important to me, especially at this time when the world is poised to change the nature of capitalism.

The current economic collapse has both necessitated a fundamental change in our economic worldview and created a climate in which it is possible to achieve change. The questions for us now are: how will it come about, who will bring it about, and what will the new economics be?

It is tempting to wait for Barack Obama to provide the new vision, just as the current/old vision was (arguably) created by Margaret Thatcher, Ronald Reagan and Milton Friedman. That's not such a good idea. Barack Obama used "change" as a slogan, but he's fundamentally a right-wing hawk, at least by Canadian or European standards. He doesn't even propose true universal health care. We can hope that he will offer a new, fair, sustainable vision of capitalism with which to continue, but chances are slim that he will. Bill Clinton truly wanted to bring about change but was able to do no more than improve management processes, and that was because of the right wing nature of the American populace.

Unless we get serious about defining a vision and popularizing it, change may very well be determined in the board rooms of international organizations that create regulatory standards for international financial transactions. Those bureaucrats may be well-equipped to implement the details of someone else's vision, but they should not define the vision.

In terms of creating a vision, the adage "think globally, act locally" is very apt. We need to create a new vision for Canada, and spread it through our influence as a G8 economy. Stephen Harper is an anacronism: he can't even get his head out of the 1980s long enough to cope with the idea of fiscal stimulus. He's still trying to deregulate in a world that requires more - and more creative - regulation. Harper may seem important now, but he's not. It is the next Liberal leader who will be the important historical figure for Canada.

Criticism of corporations (such as Naomi Klein's) is important groundwork for proving why we need to change to an "active state" framework, but it's not helpful to forming the vision. Our new economy must respect the fact that prosperity comes from business, and must understand that regulation can hinder and distort business operations. For example, our current financial regulations are both too weak and distorting: they don't protect against failure that requires bailouts, and they increase the chances of failure by implicitly promoting the severity of business cycles. Thus we live in a world of booms and busts: booms where the rich get richer, busts where the non-rich bail out the rich.

It's important to become more environmentally responsible, but the environment is not a fundamental part of the new economy: it is just a policy detail. The new economy must be based on a recognition that the state shapes economic activity - necessarily, and because it should. Our main problem in the last 25 years is that we tried to convince ourselves that the state doesn't necessarily have this role, and then we chipped away at a few regulations, distorting the overall operations of the economy in a way designed to concentrate wealth in the hands of the already wealthy. Likewise, we pretended that taxes were unnecessary and bad, even though our entire society is based on taxation, and we let governments reduce certain taxes in distorting ways.

Once we all come to the realization that regulation and taxes are both necessary and good, then we can start to create regulatory and tax systems that not only work for everyone, but that enhance our lives. We can reduce the severity of business cycles so that millions aren't plunged into unemployment by recessions every 5-10 years. We can fund education so that we have enough doctors and nurses, and so that we can compete with India in the world of software.

The active state that we create should be bigger government. We need more regulation and higher taxation. It must also be smarter government, with less corruption, less waste, and less acceptance of the ruling class paying itself off.

In a sense we all, along with Stephen Harper, live in the 1980s. As a society we haven't completely emerged from the Cold War. We fear big government as some sort of Soviet mass repression, with inefficient factories and few personal freedoms. In fact, the Active State should be just the opposite: it should free us from oppression by the economic elites.


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