Looking Back
Written by Douglas P. Welbanks – Guest Blogger | Wednesday, 14 December 2011
It’s that time of year again when we do some reflecting. What should we remember or what should we forget? Looking back presents an opportunity to learn from the good and the bad. My list for 2011 begins with the Tsunami in Japan.
- Tsunami in Japan
- HST Gordon Campbell and Christy Clark March 2011
- The Federal Election
- The Royal Wedding: Kate and William
- Death of Osama Bin Laden
- Death of Jack Layton
- Debt Debt and More Debt
- Debt Crisis #1 Greece
- Debt Crisis #2 The US hits the Roof (Debt Ceiling)
- Debt Crisis #3 the Europe
- Debt Crisis for Canadians?
- Occupy Wall Street
The Tsunami in Japan
Nothing that happened in 2011 eclipses the human and economic catastrophe of the March tsunami in Japan. As recorded on Wikipedia, the 9.0 magnitude earthquake off Japan’s coast on Friday, March 11, 2011 was one of the most powerful earthquakes in the world since modern record-keeping began in 1900. It triggered waves that reached heights of up to 40.5 metres (133 ft).
The World Bank’s estimated the financial losses at US$235 billion, making it the most expensive natural disaster on record.
The Japanese National Police Agency confirmed 15,840 deaths, 5,950 injured and 3,642 people missing. Over 125,000 buildings were damaged or destroyed.
In addition to loss of life and destruction several nuclear accidents that included level 7 meltdowns at three reactors in the Fukushima 1 Nuclear Power Plant sent shivers around the world about the safety of nuclear energy plants.
HST Gordon Campbell and Christy Clark
Although not exactly a world event, the resignation of Liberal Party Premier, Gordon Campbell, on March 14th 2011 reaffirmed the power of a majority in a voting democracy in British Columbia. It was also a warning to politicians who flip flop on their election promises.
The hated HST (Harmonized Services Tax) lingered on after Christy Clark took over and subjected the matter to a referendum that was defeated on August 25th 2011.
The Canadian Federal Election
The Federal Election on May 2nd 2011 surprised almost everyone. Jack Layton and the NDP for the first time in Canadian history became the official opposition while the Liberal Party suffered a crushing defeat with Michael Ignatieff losing his own riding. The Bloc Quebecois Party lost its official party status with Gilles Duceppe losing in his riding. The Green Party and Elizabeth May won a seat in the House of Commons for the first time. The Conservative party increased their number of seats and formed a majority government.
The Royal Wedding: Kate and William
The world seemed to stop for a moment as media frenzy zoomed in on the wedding of Prince William, Duke of Cambridge, and Catherine Middleton took place on 29 April 2011 at Westminster Abbey in London. This launched a revival of optimism for the British monarchy and continued in North America with their arrival in Ottawa on June 30th and departure for the United States July 8th, 2011.
Death of Osama Bin bin Laden
The founder and leader of the militant terrorist organization Al-Qaeda was killed in Pakistan by the US Navy Seals. This has renewed confidence in the United States as a world leader.
Death of Jack Layton
Jack Layton’s death on August 22nd 2011 delivered an unexpected tragedy to the political landscape. Just as Canadians prepared to see the sparks fly in the House of Commons from one of the very best politicians Canada has seen in a very long time – someone who could effectively challenge the drift to the political right – someone who gave us from middle and lower income groups a fighting chance for the future – succumbed to his battle with cancer. A nation mourned. I am still sad. Recently I read his book first published in (2006). Speaking Out Louder: Ideas that Work For Canadians. Toronto: Key Porter Books. ISBN 9781552636886. OCLC 62346602. I highly recommend this for anyone who wants to hear Jack Layton speak.
Debt Debt and More Debt
Without any doubt the topic of debt wins the contest for top spot for 2011. It has consistently dominated the airwaves. The US struggled publicly with its debt problems. Greece received unflattering attention. Italy Portugal and Spain joined the European group of debtor nations facing default.
Debt Crisis # 1 Greece
Greece first began to stumble publicly in 2010 when it was revealed that successive Greek governments had consistently and deliberately misreported the country's official economic statistics. As mentioned on Wikipedia, the public debt hit 120% of the GDP in 2010, one of the highest rates in the world.
Since then Greece’s ability to repay its sovereign debt has been questioned, leading to a number of international conferences to develop rescue packages. Angry uprisings, riots and social unrest from the Greek public have responded to harsh austerity measures being superimposed. This led to the Greek Prime Minister George Papandreou’s proposal for a referendum that irritated the international community and intensified fears of a default by the Greek government.
A very interesting series of discussions followed from the international community. They sounded like credit counsellors as they demanded that the debtor (Greece) reduce its spending, pay down the debt and get its budget under control. Some commentators ridiculed Greece. One financial expert laughed at Greece and said who cares? Let them default.
The Greek public were painted with a familiar brush that taints all debtors – that those who mess up or default on creditor payments don’t deserve any compassion. Accordingly they needed supervision and to be controlled by some external force like the Eurozone leaders outside the country to take over and enforce strict austerity measures to prevent any default.
Almost everyone agreed with this depiction except for one that I heard from a Canadian economist Jim Stanford. He raised the issue of the democratic rights of Greek citizens to have a say about economic measures that would significantly impact the quality of their life.
As reported on Wikipedia, Europe's Finance Ministers approved a rescue package worth €750 billion aimed at ensuring financial stability across Europe by creating the European Financial Stability Facility (EFSF). In October 2011 Eurozone leaders agreed on another package of measures designed to prevent the collapse of member economies. This included an agreement with banks to accept a 50% write-off of Greek debt owed to private creditors increasing the EFSF to about €1 trillion, and requiring European banks to achieve 9% capitalisation. To restore confidence in Europe, EU leaders also suggested creating a common fiscal union across the eurozone with strict and enforceable rules.
George Papandreou, under enormous pressure, withdrew the referendum proposal and later resigned November 10, 1011 being replaced by Lucas Papademos.
The US Hits the Roof (Debt Ceiling)
The US debt ceiling crisis in 2011 demonstrated to the world how pathological the American political-economic system has become. The two Houses of Congress were unable to agree on a revision of the debt ceiling. Political gridlock prevailed until August 2nd 2011 with the passing of the Budget Control Act of 2011 which immediately increased the debt ceiling to $14.694 trillion and established several complex mechanisms to increase the debt ceiling and reduce federal spending. This was the third increase in the debt ceiling in 19 months, the fifth increase since President Obama took office, and the twelfth increase in 10 years.
A super committee of Democrats and Republicans was created in August 2011 by President Barack Obama and Congress to reach a long-term deficit-reduction deal of approximately $4 trillion. Its failure to reach agreement was announced on November 21st 2011.
The US debt (ceiling) crisis illustrated the complexity of debt problems and the inability to find solutions. The debt ceiling crisis also revealed the global quality to the crisis of debt – and that solutions are not being found ‘voluntarily’. This leaves the future suspended in doubt and speculation. What does it take to find agreement amongst political leaders and find common ground between debtors and creditors, business and taxpayers, advanced industrial democratic societies and the social justice framework committed to equality for all?
Debt Crisis in Europe
In addition to the American rumble with crushing levels of debt the year ends in Brussels with a landmark summit of 27 nations from the European Union. A new agreement with strict caps on government spending and borrowing to sort out the debt crisis was reached. Britain was the only dissenting nation to withdraw. A climate of economic uncertainty continues into 2012.
Debt Crisis in Canada
Is there a debt crisis in Canada? The short answer is: not yet – at least for the federal government. The story of individuals and families throughout 2011 has been different, especially for middle and lower income families. The costs to raise a child have been going up. As reported (by Daniela Minicucci) in Global News on June 10, 2011, citing Tom Drake, an Edmonton-based financial analyst, as well as data provided by Manitoba Agriculture, the average expenses related to raising a child to 19-years-old is $191,665.00. This does not include post secondary education. And in the United States, according to data released by the U.S. Department of Agriculture, the average cost of raising a child born in 2010 will be $226,920.00 (US).
Also in June, 2011, CTV News reported that, when mortgage debt was combined with consumer debt, Canadians owed an all-time high of $1.5 trillion. The Certified General Accountants Association of Canada found that if household debt was spread evenly among all Canadians, a family with two children would owe an estimated $176,461.
If you take away the mortgage debt this leaves $482 Billion in consumer debt (Bank of Canada December 2, 2011) owed by individuals and families. The consumer debt load has more than doubled since 2000.
As published in the Vancouver Sun on December 13th 2011, Statistics Canada new evidence verified that the household debt in Canada is greater than ever. Household debt as a proportion of annual disposable income in Canada reached a record 152.98 per cent in this year's third quarter. That was up from 150.57 per cent in the second quarter of 2011 as personal debt — including credit-card balances and mortgages — rose without any corresponding increasing in income.
Overall government net debt (expressed at book value) increased to $795 billion in the third quarter, compared with $772 billion in the second quarter. The ratio of total government net debt to gross domestic product rose slightly from 46.3% in the second quarter to 46.9% in the third quarter.
Occupy Wall Street Protest
The Occupy Wall street movement was the first mass North American protest in recent times to address social and economic inequality, high unemployment, greed, corruption, and the undue influence of corporations, particularly from the financial services sector, on government.
The slogan “We are the 99%” referred to the growing difference in wealth in the U.S. between the wealthiest 1% and the rest of the population. A Congressional Budget Office report, released before the protest, disclosed that the top 1 percent of income earners more than doubled their income over the last thirty years. In 2007 the richest 1% of the American population owned 34.6% of the country's total wealth, and the next 19% owned 50.5%. Thus, the top 20% of Americans owned 85% of the country's wealth and the bottom 80% of the population owned 15%.
Occupy Wall Street (OWS) began in a July 13, 2011 by the Canadian-based Adbusters Foundation. The protest quickly spread the message about the human costs to the debt crisis around the world.
What is now called the Occupy movement is a serious response to the economic problems in North America and signals governments to take decisive remedial action.
I hope they are listening.
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