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Proposing a green economic direction in the face of conservative confusion

In the lead-up to the 2013 budget it is worthwhile recalling the Conservatives’ economic record thus far. Faced with the 2008 economic bust, and a potential ouster from government, the Conservatives were eventually forced into providing “economic stimulus” after the Liberals rejected a coalition with the NDP.

Harper later championed the exit from economic stimulus and austerity on the world stage, but all indications are that the economy is still in a rut. Corporations are holding onto hordes of money instead of undertaking new investments (the “dead money” problem). Households are heavily indebted,and growth and jobs have been only temporarily sustained through a housing bubble.

History has shown that the private sector, from time to time, produces major financial bubbles and runs itself into a ditch. Long-term patterns in economic history also demonstrate that a return to economic prosperity is often only achieved after profound structural changes towards new technologies and forms of production and consumption.

Keynes demonstrated that the government sometimes has to pick up the slack for the private sector and households to generate jobs and demand, a lesson that highlights the self-defeating impact austerity will have at this moment.

Yet, there is another problem that can afflict the market. It concerns the private sector losing direction with respect to the technologies and consumption norms that will facilitate the next stages of economic prosperity. When this occurs, governments have to become more proactive by providing a stable framework that shines a light on the new pathways for innovation and productivity.

What could such a new prosperity pathway be? Given the need to dramatically reduce greenhouse gas emissions by mid-century, orienting real, productive economic activity towards a green revolution is an obvious focal area. Meeting environmental objectives will provide an avenue for recently developed core technologies (e.g. information and communications, nanotechnology) to show their full potential in sectors like electricity, and provide opportunities for a diverse array of sectors to shift their entrepreneurial focus towards building products that are durable, efficient, and recyclable.

Given this context, the ad-hoc nature of the Conservative’s stimulus spending did little to lay the framework for a new paradigm of economic prosperity. The primary objective seemed to be to help the Conservatives get re-elected, with the signature items being home renovations (not targeted to energy efficiency), hockey rinks, and propaganda.

Other countries such as China, South Korea and the United States invested in green infrastructure and technologies. These countries are preparing a foothold in a green economy, while the Conservatives will have backyard decks and cardboard signs to show for their effort.

Through their other policies however, the Conservative government has actually picked a very narrow direction for the Canadian economy: back towards resource lock-in. They are encouraging an economic specialization in the bitumen sands through continued subsidization of fossil fuels, but perhaps more importantly the reduction of environmental monitoring and safeguards.

There is a certain spirit of defensiveness and vulnerability behind the Conservatives’ economic choices. Ideologically incapable of admitting that the private sector can run into real problems, Flaherty pleads for corporations to start spending money again but has no policies aimed at making that happen. Unwilling to recognize the benefit of pro-active government policy the Conservatives see the bitumen sands as their sole salvation. Yet, such an economic trajectory could be disrupted if the world decides to take action against climate change.

Far from promoting economic security, the Conservatives appear incapable of dealing with the economy’s most vexing problems (dead money, personal debt, productivity, pollution) and their reaction in the face of their confusion is to pigeon-hole the country into a rather vulnerable long-term economic position, placing all of our bets on a global economic trajectory dependent on climate catastrophe.

In contrast to the conservative confusion, a social democratic agenda is especially suited to today’s challenges. More proactive government strategies are needed to deal with the private sector’s stagnation and loss of direction. Smart government strategy can coordinate economic activity towards building a green, diverse, and innovative economy.