Tag Archives: economics

Strat Plan Part 4: Economic Vitality

CartoonstockWhat, you may ask, is meant by the term “Economic Vitality” – the third objective in our town’s strategic-plan-in-the-works? Apparently it’s one of those motherhood statements people make on soapboxes and campaign platforms that have little grist in them to mill into actuality.

Sure, we all want a town that has a lively, thriving economy. but how do we achieve it? No one has an answer – not one-size-fits-all answer. certainly it isn’t found in the woo-hoo strategic plan. The economy’s health depends on creating a suitable, supportive environment that both attracts and sustains business and commerce.

Let’s start with an understanding that governments do not create private sector jobs. They can only create an environment where the private sector feels it worth the investment to do so. And the cost of doing business in a town plays a major role in that decision (i.e. low taxes and low utility fees).

Last term, council’s collective attitude towards business and keeping taxes low saw much growth and development: Goodall expanded, the glass plant expanded, Pilkington Glass added shifts. New restaurants and bars opened. Three microbreweries opened. The mall was revitalized with new stores and shopping opportunities. Cranberry Mews mall grew.  it was a boom time.

The previous council can’t take credit for private growth and expansions: what it can take credit for is being welcoming, supportive and keeping taxes and utility rates as low as possible. Last council also initiated the hiring of a new, dynamic marketing and economic development director, and created a new small business centre that brought together a wide range of community partners and NGOs to work together cooperatively and successfully for common goals.

Yet I hear you say that our current council went against this grain right off the bat by raising taxes and water rates while giving themselves a pay hike – making the town less attractive to business (and making themselves look avaricious and petty). That’s pretty anti-business!

So, you ask, how can they say they want economic vitality when council is deliberately undermining this goal? That’s a bit of a conundrum. The overtly anti-business attitude of this council is a hurdle that will not be easily overcome until the next election. They have created the reputation that Collingwood is closed for business. It will not easily be reversed.

Also, word on the street says this council is poised to divest itself of the airport – one of the few actual economic success stories in Collingwood. Council has already irrevocably damaged the once-good relationship with our municipal neighbours who are partners at the airport to the point Wasaga Beach is planning to pull its financial support. Instead of developing this as a regional success story and promoting it, council will destroy it like it did our utility service board.

So let’s examine the goals and proposed action items in the strategic plan that relate to economic vitality. Try not to guffaw too loudly.

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How Marx Presaged Today’s Canada

“The bourgeoisie has through its exploitation of the world market given a cosmopolitan character to production and consumption in every country,” wrote Karl Marx and Fredrich Engels, in 1848, in the Communist Manifesto.

I came across this paragraph in Prof. David Harvey‘s book, A Companion to Marx’s Capital, recently and the quote from the Communist Manifesto struck me as very modern; one that presaged our current internationalism and the changes affecting Canada today.

No one on this continent has been unaffected by the rampant, unchecked, corporate globalism that has seen thousands of North American factories closed, jobs discarded, and production moved to Asia in order to render more profits for shareholders and bigger bonuses for CEOs. This utterly ruthless and unrestrained capitalism is the one politicians on the right proclaim as the only viable economic policy to pursue.

We think of this as a recent trend, and yet Marx warned about this more than 160 years ago:

…it has drawn from under the feet of industry the national ground on which it stood. All old-established national industries have been destroyed or are daily being destroyed. They are dislodged by new industries, whose introduction becomes a life and death question for all civilised nations, by industries that no longer work up indigenous raw material, but raw material drawn from the remotest zones; industries whose products are consumed, not only at home, but in every quarter of the globe. In place of the old wants, satisfied by the production of the country, we find new wants, requiring for their satisfaction the products of distant lands and climes. In place of the old local and national seclusion and self-sufficiency, we have intercourse in every direction, universal inter-dependence of nations.

Doesn’t that sound like something written about modern globalization? It’s important to understand what Marx meant by capitalism, too: production and trade for the sole source of accumulating wealth (capital). He wasn’t criticizing the market economy, the buying and selling of commodities, the exchange of goods, and a free market. It has nothing to do with your ability to buy a flat screen TV or an iPad or a $250 pair of running shoes.

I’m not sure what he would make of eBay and Kijiji, but I suspect he would have approved of the ability of the individual to adopt and survive in this sort of commodity market where the ‘use-value’ of any items was determined by a mutual agreement between buyer and seller rather than determined for the amount of profit it would make for the elite.

I was struck by a piece in the Toronto Star this weekend by Thomas Walkom, titled, How to save Canadian capitalism from itself:

The economy is not working. A new one needs to be built.
It is not working on a global level, where the world continues to falter.
It is not working at a national level, where incomes stagnate, unemployment persists and good jobs are outsourced abroad.
As a study released Friday by the United Way shows, it is not working at a Toronto level.
That study makes the point that, even within Canada’s premier city, the gap between the rich and poor is growing.
Experts may tie themselves up in knots over the precise trajectory of inequality, depending in part on what is measured and when.
But the general point is beyond dispute: On its own, the free market is providing increasingly less equal rewards.

Which is exactly what Marx predicted would happen: the gap between haves and have-nots is widening. Walkom adds:

Failing a social revolution (which, I suspect, most Canadians don’t want), the alternative is to save capitalism from itself.

Marx predicted social revolution as the inevitable result of this growing inequality, but in this he has been proven only partially correct, and arguably even wrong at times. Cultures in Western nations have a natural inertia against revolution. We tend to be easily swayed by material comforts and convenience. Marx didn’t foresee the internet or 500-plus TV channels, didn’t foresee pornography, game consoles or other things that distract us from thinking about Big Ideas, let alone social upheaval. A culture that is too lazy to walk three blocks to a store for milk is not likely to rise up.

Marx’s communism simply doesn’t work here – at least no implementation has to date. But neither, it seems increasingly, does our unrestrained capitalism. There has to be some reasonable place between them, some place where capitalism’s more predatory urges are blunted, yet its entrepreneurial tendencies are not. As Azar Gat wrote in Foreign Affairs:

Capitalism has expanded relentlessly since early modernity, its lower-priced goods and superior economic power eroding and transforming all other socioeconomic regimes, a process most memorably described by Karl Marx in The Communist Manifesto. Contrary to Marx’s expectations, capitalism had the same effect on communism, eventually “burying” it without the proverbial shot being fired.

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Was Marx right after all?

While Marx didn’t say exactly that the “rich get richer and the poor get poorer,” he did state that under capitalism, poverty would inevitably increase while more and more wealth would concentrate in fewer hands. Increasing profits and increasing wages, he claimed, were contradictory. Adam Smith – the “father” of capitalism – said much of the same thing, by the way. They were right.

Karl MarxMarx’s economic and world views were fermented in the mid-19th century’s industrial age, an age without any of the mass communication technology of today. He was right about many things, but wrong about others. He did not, for example, see the rise of the financial class, nor did he predict the offshoring of manufacturing jobs. To be fair, none of his contemporaries did. But he got quite a bit right, given today’s economic crisis.

Nope, I’m not a Communist, let alone a Marxist, and certainly not an economist. But look around you: if you’re not a banker, investment or hedge fund manager, if you’re not the CEO of an international corporation whose products are being made overseas, if most or all of the manufacturing jobs in your town have moved overseas, if your wages are proportionately lower compared to your expenses than they were a decade ago, if your prospects of a good-paying job are slim because those are getting sparser in your city and being replaced by minimum-wage Mcjobs, or if you live in Greece, Portugal, Italy, Ireland or Spain, then capitalism has probably failed you.

I’m not the only one who thinks capitalism today has serious problems (its failings have been analyzed to the nth degree since the last recession and the US bailout of its financial sector). Many now think that perhaps we should not have dismissed Marx so cavalierly when Communism fell. And some of those who think Marx may have got more than one thing right are pretty prestigious thinkers.

Over at the conservative Harvard Business Review, Umair Haque, author of Betterness: Economics for Humans and The New Capitalist Manifesto: Building a Disruptively Better Business, wrote about Marx in late 2011:

Marx’s critiques seem, today, more resonant than we might have guessed. Now, here’s what I’m not suggesting: that Marx’s prescriptions (you know the score: overthrow, communalize, high-five, live happily ever after) for what to do about the maladies above were desirable, good, or just. History, I’d argue, suggests they were anything but. Yet nothing’s black or white — and while Marx’s prescriptions were poor, perhaps, if we’re prepared to think subtly, it’s worthwhile separating his diagnoses from them.

Marx, it seems, it getting a sort of facelift from intellectuals today; people are beginning to realize that after the Berlin Wall fell, that Communism – a fault-ridden, overly-bureaucratic system few will miss in the nations that cast it off – was not actually based on Marx’s theories, just used Marx as a sort of bumper-sticker economics, so perhaps the old guy deserves a re-think.

In spring 2011, Yale University Press published “Was Marx Right?“, by Prof. Terry Eagleton. He examines ten of the most common objections to Marxism and attempts to demonstrate “what a woeful travesty of Marx’s own thought these assumptions are.”

In an interview with Bezinga in August, 2011, noted economist Nouriel “Dr. Doom” Roubini stated that, “Karl Marx had it right. At some point capitalism can self-destroy itself. That’s because you cannot keep on shifting income from labor to capital without not having an excess capacity and a lack of aggregate demand.” Roubini continued, “We thought that markets work. They are not working. What’s individually rational…is a self-destructive process.”

The article that follows goes on to criticize Roubini for his comments, but makes the classic fallacy of not dissociating Marx from Communism, or rather from the systems that took the name Communism but were usually little more than military dictatorships with poorly implemented, centrally-planned economies, and only nodding allegiance to anything Marx wrote. It’s easy to point to the collapse of the Soviet economy and claim it proves that Communism and therefore Marx’s economic ideas were faulty. But that’s really Leninism, and not what Marx meant by “Communism.”

It’s popular among the uber-right in the USA to label anything left of Genghis Khan as “Communist” or “socialist” but that only underscores the intellectual poverty of the right. It doesn’t actually mean anything in the political debate except that you’re arguing with fools.

Communism as Marx saw it was never actually implemented, and probably never could be today. We’re as far from his industrial age world as the Internet is from Gutenberg. But that doesn’t mean that every aspect of Marx’s thinking was wrong. Despite being drearily dense and notoriously difficult to read, his economic works contain some valid points about capitalism that – like his predecessor Adam Smith’s writings – make some salient points about capitalism that we can’t reject by tossing them out with the Soviet-tainted bathwater.

None of the above writers would be classified as Marxists or even neo-Marxists, but there are still some old, dogmatic Marxist thinkers around who treat Das Capital as gospel. As Mike Beggs wrote in Zombie Marx,

What I call Zombie Marx is different – the reanimation of a corpse which still holds organically together in some way. This is the reconstruction of Marxist economics as a coherent body of thought, not a collection of quotations… the need to ground everything in a 140-year-old text…. it is obviously a lot of intellectual hard work to “interpret Marx correctly.” It cannot be taken for granted that Marx was right; it must be proven anew with each generation, against both rival interpretations and the revisions the previous generation had found necessary to make.

Marx got some things wrong. And he got some things right. That’s pretty much true of every economic theory or policy since Adam Smith. Marx was probably more right than some – say Alan Greenspan, whose disastrous economic polices have led to much to today’s problems – but I think the point here is that we should be re-evaluating Marx in light of today’s failing capitalism and not simply dismissing him as the tail wagging the Communist dog.