Have you been out spending money on Christmas gifts? Great, you’ve been doing your part to help the economy get back on its feet. Oh, wait, you may also be hastening the next round of difficulties, as Canadians are taking on record levels of debt, now standing at almost 150 per cent of disposable income.
So, which is it?
Both, actually. And therein lies the issue that has plagued our economy for decades.
There’s been a boom in the doom-and-gloom stories in the run-up to Christmas. The media reports, and the subsequent prescriptions, have done much to support the accounts found in Naomi Klein’s Shock Doctrine.
To be sure, some of the recent flap is the kind that comes every December, decrying the commercialization of Christmas. We’re reminded that the holiday has become about trips to the mall and credit card debt rather than the simpler affair of Christmases past.
Still, the current spate of warnings about debt levels from the Bank of Canada’s Mark Carney is symptomatic of the bigger picture, namely the erosion of the middle class. Over the past three decades, we’ve been working harder and longer while wages have stagnated. With income not keeping up with costs, we’ve turned to borrowing to bridge the gap. Now, after all these years, we’re reaching a credit crunch.
While officials bemoan the borrowing and lack of personal savings, none addresses the underlying cause.
Decent jobs paying good wages and benefits would go a long way towards getting us off the debt track.
Government policy has been in direct opposition to that since the days of Reagan, Thatcher and Mulroney.
Not that we aren’t partially to blame. Rampant consumerism has many of us spending well beyond our means. Long ago, spending began to encompass wants and not just needs. Blame it on marketing, perhaps. Blame it on media images of lifestyles many of us now aspire to, with luxuries rather than just comforts. But our idea of middle-class living has expanded beyond what the previous generation would recognize as such.
We’re also to blame for succumbing to the lure of easy credit. Banks and other financial institutions have made a killing by catering to our ever-growing desires, even as, in more recent years, credit has been used to keep us afloat … in something resembling the style to which we’ve become accustomed.
And as we spent more, consumerism became an even larger part of the economy, especially as good manufacturing jobs disappeared in favour of retail and other low-paying work – Canada lost nearly 322,000 manufacturing jobs from 2004 to 2008, with more than one in seven positions disappearing.
Ironically, the massive influx of cheap imported goods – particularly the ever-cheaper electronic toys we covet – helped us maintain the illusion of middle-class buying power.
More ironically still, in the midst of the economic collapse caused by the financial services sector and government deregulation, we were encouraged to spend, spend, spend our way out of the recession.
So, yes, we have to shoulder some of the blame for the current personal debt load. But it’s really underlying government policy – read corporate priorities – that bears most of the responsibility. Free trade. Deregulation. Outsourcing. Tax shelters. Corporate welfare. Privatization. Social service cuts.
Each piece has been a step away from the kind of social contract we saw in the postwar boom years.
As Montreal-based professors Yvan Allaire (Concordia) and Mihaela Firsirotu (Université du Québec à Montréal) note, much of the decline we see today is the result of incremental changes made in the last few decades, most of them sold to us as good for the economy, but in reality benefitting only a few to the detriment of the rest.
“It is the story of how our economic system fell under the tutelage of financial markets. Misguided policies fostered by moneyed interests and the credo of market fundamentalism have produced an economic system that is unjust, short-sighted and prone to bubbles, abuses, and fiascos,” they write in their recent book Black Markets … and Business Blues: The Man-made Crisis of 2007-2009 and the
Road to a New Capitalism.
“The current design of the system features incentives linked to short-term performance, unregulated markets for all sorts of esoteric financial products, constant pressure on exchange-listed companies to deliver growing stock prices, a market for mobile executive talent, a ‘winner-take-all, loser-be-shamed reward system.’”
Yes, we need to get our personal finances under control. But the bulk of the blame lies with the greedy, short-term thinking that drives the corporate world and its political supporters of all stripes. Until we start reversing that mindset, beginning with more effective regulations, we’ll have a hard time halting the decline of the middle class. And our finances will continue to suffer.