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Selling the Myth of Powerlessness in the Global Economy

Linda McQuaig’s book, The Cult of Impotence: Selling the Myth of Powerlessness in the Global Economy, is a refreshing new approach to viewing the current state of global economy and Canadas place in it. In recent years, such mysterious terms as fiscal deficits, natural rate of unemployment, stock market fluctuations, interest rate cuts and zero inflation and so on, have received an exceptional level of public consideration.

Nevertheless, in spite of the now generally acceptable importance of the terms, their meaning an the effects of the domestic economic policies is left for the professional economists to analyze and present the public, as well as nations governing bodies with a list of remedies. Their guiding logic and principles are rarely questioned and more rarely fully understood. In such an environment, McQuaig has earned a wide audience for her writings by stripping away the aura of complexity from controversial economic issues and making them accessible and relevant to a general audience.

Challenging the opinions of the experts, she is trying to bring back the debatable economic policies of the global age to democratic accountability. McQuaig is a notable journalist and a writer, who has written a number of books on the state of affairs that Canadas economy is. Unlike her previous books that she has written ,discussing deficit reduction and cuts to social programs among others, this time she drifted away from the specifics and focused on our general view and acceptance of the economic processes.

In the book, she attacks nations political passivity and acceptance of the believed fact that the domestic economy fully depends on the global market situation and that is should follow the trends. Trapped in this view, governments act as a victims to the global economic process and accepts an its people and impose this view on the electorate. Canadas economic troubles is not unique. Although, Canada is enjoying a period of relative economic growth, and the level of unemployment is at its lowest level since April 1976 at 6. 8% in January 2001 (Tam). However, these 6. 8% still mean 1. illion people jobless.

McQuaig argues that combating the unemployment should be the number one national economic policy, at times at the expense of the corporate and governmental financial institutions and currency speculators. The fiscal conservatism of Bank of Canada under Gordon Thiessen, the banks governor, and anti-inflationism which have become, it seems, the ide fixe for most state financiers became a source of tremendous political apathy, hindering the capacity of elected officials to carry through on their more progressive and egalitarian campaign promises.

Afteral, Jean Chretiens government has been elected in 1993 and re-elected again in 1998 because the electorate bought their promise of the increased social spending and more social programs, which mean more jobs. Instead, Chretien and the Liberals suddenly forgot their election promise of a spending program to create jobs, and decreased the government social programs by about 30 percent for a start. As a result, the country has eliminated its deficit at the expense of the government involvement in the economy, which has been reduced to the level of the 1940s.

Linda McQuaig argues that a policy of economic growth through lowering interest rates would have cut the deficit without the side effects to the Canadian society. The core of the dispute actually goes back to Keynesian-Friedman economics debate. In its essence, which should have been made clear for the voters at during the election campaign, Keynesian economics about active role of the government in the nations economy to manage the level of demand.

Demand, according to the theory, is the economy, because adjusting it, it is possible to indirectly affect all other economic derivatives. When economic activity is depressed, the government should spend more, and when the economy is booming the government should spend less to achieve equilibrium. If aggregate demand in low then the government should pursue reflationary policies such as cutting taxes or boosting government spending to push aggregate demand higher and boost employment and output.

However, if aggregate demand is too high and causing then the government should pursue deflationary policies. The theory was conceived by English economist John Maynard Keynes (hence the name), in 1930s at the times of Great Depression that influenced the worlds further economic development. McQuiags remedy is strikingly that of Keynesian origin, placing the responsibility of the economic welfare on the government. The opposing theory, which is favored by the Canadas most influential economic policy makers, namely Chretien, Thiessen, and Preston Manning, Canadas finance minister.

Milton Friedman in 1968, although he accepted Keynes’ definition of recessions, he rejected the cure. Government should butt out of the business of changing the money supply, he argued. It should keep the money supply steady, expanding it slightly each year only to allow for the natural growth of the economy and a few other basic factors. Market forces would cause inflation, unemployment and production to adjust themselves automatically and efficiently around this fixed amount of money. This policy has became known as monetarism.

One apparent problem with monetarism is that it tries to manage the economy by focusing solely on the money factor. According to the classical economic views, that are going back to the 18th century Adam Smith, money is a nothing but a means of exchange. The nations goal, the theory goes, is not to accumulate gold (the gold standard was active up until August 15, 1971 when it was abolished by United States), but to gain the goods scarce in the local economy through trade with another nations.

The 20th century brought about an increasing role that capital flows play on the global scale. Within one trading short periods of time the massive amounts of capital can travel the globe and return, quite often wrecking havoc on its way (the 1998 global economic downturn that started in Asia is a recent example of this). Linda McQuaigs fear of being trapped by the financial speculators profit race is quite understandable. She is raising her voice against succumbing to the power of money short-term speculative gains to the benefit of the healthy economic growth.

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