ARE YOU surviving the biggest economic crisis in 75 years? Most of us have been watching from a distance.
First it was Lehman Brothers, Bear Stearns, AIG, HBOS, Fortis Bank and now it’s Iceland, Hungary, Ukraine and Belarus. If these events haven’t yet affected you directly, they will.
If you are a farmer, you may find that declining oil prices have reduced the demand for ethanol and lowered the price of corn. The prices of other crops will fall as well.
In Western Canada, oil and gas exploration will be reduced, meaning fewer off-farm jobs in the winter. As consumers delay discretionary purchases, manufacturing output will fall, leading to rising unemployment. Housing prices will fall and jobs will be lost in construction.
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If you work in the university sector, you will be faced with hiring freezes as have already been announced by universities in Miami, Boston, New York and Waterloo.
If you are a small business owner and you finance your inventory with a line of credit, you may find your bank reluctant to keep lending. Any institution with significant endowment funds, like charities, schools and hospitals, will be faced with reduced revenue and foundations will have less money to grant.
In my last column I quoted the work of the Hungarian economic historian Karl Polanyi. In his most famous book, The Great Transformation, he described how the industrial revolution caused economic forces to become disembedded from society. These forces now operate in their own sphere called the economy.
The relationship between the economy and society was reversed and instead of society determining the nature of economic relationships, the economy began determining the nature of social relationships.
This revolution was traumatic because it threatened humanity. The transformation of his book title was humanity’s response of self-protection. To survive, we had to invent new institutions like trade unions, pension plans and unemployment insurance. We even invented the modern nation state so the boundaries of political regulation would correspond more closely to the boundaries of economic activity.
Today, we are living through the same kind of upheaval. The global financial sectors have become disembedded from the regulatory frameworks of the nation state.
It now exists in a new space called the globalized economy. It is so threatening to human society that even U.S. president George Bush is prepared to nationalize the U.S. banking sector to prevent further destruction.
The solution to the chaos caused by disembedded markets is obviously the re-embedding of those markets in new systems of political regulation.
That’s one of the ways an economy becomes a moral economy. The other way is by making society more just.
Look to the meeting of the leaders of the 20 largest national economies as one of the places where those new global regulations will be crafted, with China, India and Brazil playing prominent roles in their design.
As for Canada, two ways we can respond to the crash and make our society more just are by strengthening our welfare system and making major investments in social housing.
Christopher Lind has published widely in the area of ethics and economics. He is a Senior Fellow at Massey College, University of Toronto.
