Moral Economy

Wearing Two Hats Gives Me a Headache

2011-05-26T09:00:00.000-07:00

We have a new Premier in British Columbia, Christy Clark. One of her first acts as Premier was to shred my labour budget for the year. I run a retreat centre in rural BC and we’d already set our budget when she announced an increase in the minimum wage. In a three stage process over one year the minimum wage will rise from $8/hr (the lowest in the country) to $10.25/hr.. It rose to $8.75 immediately. On November the 1st it will rise to $9.50 and on May 1, 2012 it will complete its rise to $10.25 (the highest is $11/hr in Nunavut). We hire many young people for the busy summer season and this announcement shredded that budget while giving us a year’s notice that more is to come.

I have been a union supporter all my life and my children have worked for the minimum wage for many years in different parts of the country. So, the social justice part of me cheered at this announcement. At the same time the business manager in me groaned at this sudden 10% increase in my labour budget. This battle between the two parts of my brain has kept me awake more nights than I care to admit.

It reminded of Ontario farmers I know who belong to unions in the auto plants in which they work, and who also support the idea that labour laws for farm labour should be different than labour laws for industrial labour. They are living a contradiction based on power. In the auto plants there are many workers and only a handful of employers. If the workers don’t band together the employers will take advantage of their disunity and cut wages and benefits.

In the agricultural sector, farmers grow larger and larger for less and less return. With this kind of pressure, farmers want to control their costs as much as possible and so panic at the idea that the price of hired labour might increase at the same rate as fertilizer or farm fuel. What is hard to see is how this focus on unionized farm labour is a distraction from the real issues.

What is real is the lack of power individual farmers have in the bargaining for the products of their farms. There are many farmers and only a handful of grain buyers or meat packers. It is agribusiness that protects its profit margin and captures the gains in productivity while farmers continue to struggle. They would be better off organizing to lower the costs of industrial farm inputs than heaping scorn on organized labour. The real target of farm labour organizing is migrant workers from Mexico and Jamaica who harvest fruit, grapes and tobacco on farms in BC and Ontario. God bless these workers who want what we take for granted like universal health care, education and pensions.

As an employer, next year I will still be paying minimum wage but the students I hire will be earning 28% more. I will probably spend less on capital improvements but it won’t make the difference between success and failure. As a person and a citizen I am pleased that the government is forcing me to do the right thing for my employees.

Wearing Two Hats Gives Me a Headache
Another Moral Economy Column
By Christopher Lind
May 26, 2011

Visit my website: christopherlind.ca
Visit my latest book: Rumours of a Moral Economy
For other moral economy blogs see christopherlind.blogspot.com
Visit my Facebook account: www.facebook.com/christopherlind2
This column is published in The Western Producer, Canada's largest agricultural newspaper

The Issue That Dares Not Speak Its Name

2011-03-31T07:35:00.000-07:00

Some years ago I was giving a talk in Red Deer on the farm crisis. Afterwards, I was approached by a young man who had always wanted to be a farmer. Recently he had put in an offer on a pretty half section of land but he was outbid by a Calgary lawyer. The lawyer wanted to build a country house for his family to use on weekends and holidays. Now the lawyer wanted to hire the young man to work the land for him. The young farmer was confused and distraught. I wondered: why isn’t he mad as hell? He was trying to be his own boss and now he was being offered a job as a hired hand. This is really a taboo subject, I thought to myself, because this is a problem of class!

In the first half of the 20th Century there were dramatic declines in the share of the national income earned by the richest members of various countries. This was a consequence of the power of organized labour to bargain for a greater share of corporate profits. Even though most farmers aren’t unionized, they benefited from there being fewer rich city types outbidding them for land. However, in the last two or three decades in the US there has been an almost complete recovery of income share by the richest 10% of the population and a corresponding decline in union membership and power.

Income inequality in the United States is the worst of all the developed countries. By the middle of the last decade, the top 20% of income earners earned almost half the total national income, which was 13 times the share of the poorest 20%.

The trend in Canada has been similar. Since 1998 Canada’s top 100 CEOs saw a 262% increase in compensation, pocketing an average of $9.1 million in 2005 compared to $3.5 million in 1998. Meanwhile, the average Canadian worker made just over $38,000 in a year, a 15% increase over the average earnings of $33,000 in 1998.

According to economist Armine Yalnizian, in 2004, the average earnings of the richest 10% of Canada’s families raising children was 82 times that earned by the poorest 10% of Canada’s families. This is almost three times the ratio of 1976 when it was approximately 31 times.

Some people think that social class is “the issue that dares not speak its name!” but I’m beginning to wonder. We now find ourselves in the middle of a federal election campaign. In spite of a lot of posturing the issues have not yet been defined. Is it possible the election could be fought on the question of whether we want to build a Canada that is more equal rather than less?

In 2004 the Leger Marketing Group surveyed Canadians and asked whether it is possible to fight against social inequality. A remarkable 74% said: yes! When asked which kind of inequality was the most serious, 28% of Canadians said income inequality, 27% said health care, 17% said education and 12% said housing. This was how Canadians felt 7 years ago and inequality has grown significantly since then. If I could wave my magic wand I would ask Canadian voters which political platform is more likely to shift income away from the corporate dragons of Bay Street and toward my neighbours who live from one pay cheque to the next.

Another Moral Economy Column
By Christopher Lind
March 31, 2011

Visit my website: christopherlind.ca
Visit my latest book: Rumours of a Moral Economy
For other moral economy blogs see christopherlind.blogspot.com
Visit my Facebook account: www.facebook.com/christopherlind2
This column is published in The Western Producer, Canada's largest agricultural newspaper

Can an Economy Ever be Moral?

2011-02-09T05:49:00.001-08:00

Another Moral Economy Column
By Christopher Lind
February 2011

If I said Big Business can never be moral, would you agree with me? Why is that? In general, people are pretty cynical about commercial relationships. The bigger the business, the more cynical people are. With size, all relationships become more impersonal. You don’t know the owner and they don’t know you, your family or your community. “Buyer beware” is the dominant motto and you better be very careful if you want to protect yourself against the predatory practices of … (shall we make a list?) … oil companies, used car salesmen, cell phone companies, banks etc.

When I ask people what can be done to make the economy more moral, they typically respond with ideas for personal reform. Banks should have Codes of Ethics so employees are forced to be honest. Oil companies should have training programs for their executives so employees don’t lie, and so on.

These are good responses as far as they go, but that isn’t far. You see, I actually think big business can be moral but all of us are caught up in social systems that are far larger and more influential than our personal relationships. Strong personal ethics are necessary for a moral economy but they are not sufficient. A moral economy also requires a social ethic. What goes into a social ethic? There are many principles but one of them would be mercy.

Bankruptcy is an example of the principle of mercy applied to modern economies. Bankruptcy is a declaration that the commercial enterprise is broken and cannot be fixed. So, the principle of mercy is applied. The remaining assets are divided among the creditors according to certain criteria and the enterprise is over. The parties are now free to restart this or another enterprise. This principle of mercy applies both to personal bankruptcy and to corporate bankruptcy.

Sometimes bankruptcy is thought to contradict the principle of responsibility. We all agree that in general, people who borrow money should pay it back, whether they are individual homeowners or big corporations. In practice though, the larger the corporation the more likely it is to be rescued by governments. This is especially so if the corporation is so interconnected to other corporations that its failure threatens the whole lot.

In the United States pressure is building to address the contradiction as virtually bankrupt companies like the insurance giant AIG, and formerly bankrupt corporations like GM, pay out million dollar executive bonuses while homeowners continue to be foreclosed, because banks refuse to renegotiate mortgages. In this case mercy is being applied to investors and responsibility forced on homeowners. Some people argue that the contradiction should be resolved by forcing the same punishment on investors as on homeowners. I take the opposite view. Mercy is a powerful principle and should be available to investors and homeowners, farmers and students alike. It is a reflection of one of the oldest and widely supported moral rules known to humanity – the Golden Rule. Do unto others, as you would have them do unto you.

Visit my website: christopherlind.ca
Visit my latest book: Rumours of a Moral Economy
For other moral economy blogs see christopherlind.blogspot.com
Visit my Facebook account: www.facebook.com/christopherlind2
This column is published in The Western Producer, Canada's largest agricultural newspaper

Fairness and Transparency in Short Supply

2010-12-01T13:08:00.000-08:00

Another Moral Economy Column
By Christopher Lind
November 2010

I will never forget a story told to me by one of my students, a middle aged woman who had been married to a farmer for many years. They lived in rural Alberta. She needed to buy a new car so she went to the nearest town and discussed her needs with the salesman at the car dealership. When she came home she discussed her options and the prices with her husband. Her husband’s reaction was “Oh, that can’t be right. I’ll go talk to Fred myself”. The next day the husband talked to the same salesman at the same dealership and obtained a price $6,000 less than his wife had obtained the day before. His wife was furious. She had been deceived. The process of buying a car was neither fair nor transparent and all because of her gender.

Of course gender is not the only reason why a business transaction might be unfair. However, one has to wonder why any transaction would not be transparent except to hide some aspect of unfairness?

In Great Britain right now people are engaging in civil disobedience because education and welfare payments are being cut back. One of the parties in the governing coalition campaigned on the promise this would never happen. They were not transparent in their dealings and people complain the result is unfair.

In British Columbia, a protest movement has forced the legislature to hold a vote on the newly implemented Harmonized Sales Tax. Why do people hate the tax so much? Part of the anger is fuelled by the reality that the governing party campaigned on a promise not to raise taxes. Then, once elected, they brought in the HST which increased sales taxes on some items from 5% to 12%. Of course this happened in the middle of a major recession when most businesses had concluded they couldn’t increase prices by an equivalent amount. It wasn’t transparent and people conclude it's not fair.

Relationships on university campuses across Canada are becoming increasingly strained. The long term pressure is a lack of funding to match increasing enrollments. However, faced with that pressure many universities have engaged in behaviours that are neither fair nor transparent. For example, the underfunding of students has reached such a critical level that over 90% of Canadian universities now have food banks on campus. The University of Alberta has had one since 1991, now even the University of Lethbridge has one.

Hundreds of thousands of students rely on student loans to pay their tuition. The governments transmit these funds to the students through the universities who charge the students an administrative fee in turn. I know of one regional Canadian university who budgets almost a quarter of a million dollars annually to be received from these fees. Why should the poorest students be subsidizing the universities with borrowed money? These are the ones relying on food banks to eat. This practice is neither transparent nor fair.

If we want to build a moral economy we can start with some very simple requirements in our everyday transactions. Whether as a seller or a buyer, a worker or a manager, let’s start with a commitment to fairness and transparency.

Visit my website: christopherlind.ca
Visit my latest book: Rumours of a Moral Economy
For other moral economy blogs see christopherlind.blogspot.com
Visit my Facebook account: www.facebook.com/christopherlind2
This column is published in The Western Producer, Canada's largest agricultural newspaper

Knowledge For All

2010-10-13T07:49:00.000-07:00

Another Moral Economy Column
By Christopher Lind
October 2010

Yeah, yeah, yeah, the world is going to hell in a handbasket. So what can we do about it? This is one of the most challenging questions I hear. On the one hand the questioner agrees with me that things are deeply wrong. On the other hand they see the engine of destruction frozen in place and no mechanic in sight. What is to be done?

My own approach is two fold. On the one hand I focus on the moral values or ethical principles that have stood the test of time and have shown themselves to be reliable guides in stormy weather.

On the other hand I focus on the new possibilities that globalizing technology and new ways of thinking are making available. Take Wikipedia for instance. Wikipedia was only started in 2001 and as of January 2010 it was attracting 78 million visitors monthly to a site created by 91,000 voluntary contributors.

So Wikipedia is not only an online encyclopedia, it is also representative of a new way of solving problems, of forming community and of sharing knowledge. It is a mechanism for harnessing the power of the crowd.

One of the ways an unregulated market economy works is it allows for capital to find or develop monopoly situations which can be exploited until something breaks. One of those little situations involves the publishing of highly specialized but very important scientific journals. An example might be Nature, the most cited scientific journal. This year the University of California threatened to boycott the Journal because proposed subscription charges were going to increase 400%. In spite of the argument by Nature Publishing Group that they were simply trying to eliminate a historical discount benefiting UC and few others, the news resonated deeply with university librarians who had seen journal subscriptions increase in price faster than any other segment of their budget, often after journals were taken over by larger for-profit corporations.

A Canadian librarian from UPEI, Mark Leggott, is leading the rebellion. In his case the last straw was a science database subscription, Web of Science, which was increasing its price by 120%. His response, and the response of UPEI, was to cancel the subscription and then to organize an alternative based on the power of the crowd. The response is called “Knowledge for All” and it is being supported by the Council of Atlantic University Libraries. Knowledge for All is not a small project. The dream is to index all the world’s scholarly journals, which means something between 4 and 5 million separate articles annually, using an approach that could be called community driven, crowd sourcing or open source, or following a wikipedia model. It will save a lot of money too.

Librarians in PEI and elsewhere are saying the system is broken. However, instead of throwing up their hands, they are teaching themselves how to become their own mechanic. Relying on the shared frustration and shared ingenuity of the group, just like the farmers of yesteryear, they are proposing to build a brand new kind of co-op. It will be light on centralized administration and heavy on group participation. It directs the new globalizing technology to the service of the community and aims at Knowledge for All. How cool is that?

Visit my website: christopherlind.ca
Visit my latest book: Rumours of a Moral Economy
For other moral economy blogs see christopherlind.blogspot.com
Visit my Facebook account: www.facebook.com/christopherlind2

Unpaid work ignored once more

2010-08-12T17:25:00.000-07:00

Another Moral Economy Column by
Christopher Lind
12 August 2010

Meet Maureen. Maureen is a single parent of a sick child and this is how she describes her day. "I administer 10 hours of peritoneal dialysis. I prepare charts which are reviewed by doctors. I dispense medications around the clock. I change surgical dressings. I oversee daily vomiting sessions.... I order medical supplies.... I lift a 46 pound child countless times along with her wheelchair. I transport and lift 60 boxes per month of dialysis fluid. I oversee physiotherapy exercises.... I have the responsibilities of a doctor, a nurse and an orderly. All of these responsibilities are over and above the task of responsible motherhood."

I think Maureen is a hero. So are the hundreds of thousands of other parents who make responsible parenting a priority in their lives. In 1985 the Canadian Government endorsed a UN call to measure and value women’s household work. However, prior to 1996, the Canadian Census asked women like Maureen to report they had never worked in their lifetime. It was absurd but true.

The wall of indifference and incomprehension began to crack in the late 1980s when the National Farmers Union began a survey to quantify the work of farm women. Under the leadership of NFU Women’s President, Nettie Wiebe, they were able to persuade Statistics Canada to change the census. Previously, the census only allowed for one person to be listed as the farm operator and it was most often a man’s name whose was listed. After 1991 there were several slots available on the form and so women’s names could be listed as well. Like magic, the number of women farmers in the country increased dramatically.

Following the effort of the NFU, in 1991 a Saskatchewan housewife refused to fill out the compulsory long form census because it did not recognize her unpaid domestic work. Her name was Carol Lees. Canadian law says you can be arrested for refusing to fill out this census. Carol began picketing a federal government building in Saskatoon as a way of goading the government into following through on its threat.

This attracted the support of other women’s groups. Members of the National Council of Women joined her protest and the BC Voice of Women called on women to boycott the next census if questions on unpaid work were excluded. In 1993 Carol formed the Canadian Alliance of Home Managers to reduce the invisibility of unpaid work. In 1995, the Canadian Government gained great mileage at the World Conference on Women held in Beijing, China, by announcing they would include a question on unpaid household labour in the 1996 census.

As a result we learned that 91% of Manitobans over the age of 15, and living in private households, contributed unpaid work each week. We also learned that the total amount of unpaid work done in Canada is equivalent to 12.8 million full-time, full-year jobs. Two thirds of these jobs would be held by women.

The Canadian Government has now decided to scrap the compulsory long form census. The head of Statistics Canada has resigned amid the furor because the government was claiming the agency supported this change when clearly it did not. Lost in the debate is the fact the Canadian Government has also scrapped the question on unpaid household labour.

Good government policy should be based on sound data. By removing this question the government is preventing all government agencies including provincial and municipal agencies and not for profit groups from having access to sound data. Is there an agenda here? Of course there is. This move rolls back advances in gender equality by almost 25 years. This is the same government that has cut funding for women’s advocacy groups.

Maureen deserves better than that.

Visit my website: christopherlind.ca
For other moral economy blogs see christopherlind.blogspot.com
Visit my Facebook account: www.facebook.com/christopherlind2

Canada Post in Parliamentary Rummage Sale

2010-06-10T05:24:00.000-07:00

Another Moral Economy Column
By Christopher Lind
10 June 2010

Rural Canadians are resilient, multi-talented people. However, they also depend on a few key institutions to support their diverse way of life. One of those institutions is the Post Office. Fortunately Canada Post recognizes their unique role. This is how the Crown Corporation describes its self-understanding on its website:

“For longer than Canada has been a country, Canada Post has been part of the bedrock of rural Canada. Today we remain the only company that serves all Canadians, in their communities, and this is not going to change.”

The last year was a difficult one for Canada Post. Its volume of mail dropped 8% in 2009 and this decline wiped out 5 years of steady growth. Even though net income increased, the Crown Corporation was unable to issue a dividend to the Government of Canada because of the challenging financial conditions.

Canada Post has a mandate to provide postal service to all Canadians. The reason it can carry out this mandate without a massive subsidy is because it can use the profit from more profitable routes to subsidize the less profitable ones. As you might imagine, the Canadian Government faces constant pressure to allow competition on those more profitable routes. It is only the pressure and vigilance from 843,000 rural Canadian households, the ones who most stand to lose from the decline of Canada Post, that keeps the cross subsidy intact.

This makes the initiative of the current federal government all the more puzzling. It has introduced an omnibus bill, C 9, to remove an exclusive privilege from Canada Post to deliver mail to addresses outside Canada. Now Bill C 9 does other things too. In fact, this single Parliamentary Bill amends over 80 separate pieces of legislation. It changes the rules for Credit Unions, it changes the rules for pensions, it even changes the agreement on social security between Canada and Poland. Possible the shortest amendment in the whole Act is the one paragraph that removes international mail delivery from the hands of Canada Post.

Why would the Government want to do this? Maybe because they have tried it twice before and failed – once before the election in 2008 and again when Parliament was prorogued in 2009. This time they have buried it so deep in other unrelated amendments it looks like they are hiding it. Omnibus bills are best used for fine tuning and technical adjustments of legislation. They are poor choices for substantive changes in policy.

What is at stake here is the question of solidarity of urban Canadians with rural Canadians. It is also a matter of fairness and whether rural Canadians can get access to the same level of service from the government as other citizens. It is also a matter of economic development. If Canada Post has to cut back on rural accessibility in order to cut costs, it will make it more difficult for new businesses to start up in, or relocate to rural areas.

This amendment, buried in bin 15 of the rummage sale known as Bill C9, may seem small but its implications are huge. If you care about your rural postal service, call your MP and ask that this fundamental policy change be given its own bill and its own dedicated debate.

Visit the website at christopherlind.ca
Visit the YouTube channel at Moral Economy column on YouTube

This column is published in the Western Producer, Canada's largest farm newspaper. For other moral economy blogs see christopherlind.blogspot.com

Do Good and Do No Harm

2010-04-17T18:08:00.000-07:00

Another Moral Economy Column
By Christopher Lind
April 8, 2010

In the 13th century, Thomas Aquinas summed up our ethical imperatives with the phrase “Do good and do no harm”. This was not original to him. He was affirming what he learned from early Greek philosophers. The medical profession makes the same claim, which it learned from Hippocrates over 2,000 years ago. This simple formulation expresses a very powerful and complex moral command.

For example, humanity is hungry for energy. Even as we fret about the consequences of releasing so many greenhouse gases into the atmosphere from burning oil and gas, we also frantically search for new ways of expanding our dwindling supply. One of the dramatic new developments in the energy field has been the re-evaluation of our supply of natural gas stored in shale rock formations. The largest formation of this type in North America is the Marcellus Shale, which lies underneath New York, Pennsylvania, Maryland, West Virginia and Ohio. It also extends underneath Lake Erie and into southern Ontario between Port Stanley and St. Thomas. In 2002 it was estimated that this shale formation contained 1.9 trillion cubic feet (TCF) of recoverable natural gas. Only 7 years later that estimate was increased over 100 times to 262 TCF. (The largest shale gas field in Canada is the Horn River basin in northeastern British Columbia with an estimated 25-50 TCF of recoverable gas.)

The difference in the estimates has to do with new techniques of recovery. Through a process called hydraulic fracturing, small explosions are created underground by pumping in fluids to create pressure. These explosions create fractures that release the gas and allow it to be extracted. The fluids are mostly water and so many people are concerned about competing uses of water. Similar concerns about water use are raised with the Bakken shale formation in Saskatchewan and Manitoba and even the Tar Sands in Alberta. In an arid climate, who gets first use?

The fracturing can also change the flow of underground water aquifers creating risks for nearby communities. A small amount of the fluid (0.49%) is made up of a variety of chemicals like ethylene glycol (used in antifreeze) and petroleum distillates (used in makeup remover). It used to contain diesel oil, which contains benzene (a carcinogen). In densely populated eastern North America these concerns have caused intensive environmental reviews.

To be concerned about energy production in an energy hungry world is a morally good thing. However, there are two major ethical concerns that need to be addressed. Firstly, it makes a moral difference if we are working to feed someone who is malnourished or if we are feeding someone who is a glutton. No one can argue that North Americans are malnourished when it comes to energy. We are the biggest energy pigs on the planet.

Secondly, when we work to accomplish something good, we need to make sure we are not also causing harm. It would be unethical to increase our energy supply at the cost of polluting our water supply.

Some decisions do require a moral balancing of goods. We might be willing to divert water from golf course irrigation to energy production but we would probably be unwilling to divert it from food production. Food is essential but my favourite six iron maybe not so much.

Visit the website at christopherlind.ca
Visit the YouTube channel at Moral Economy column on YouTube

This column is published in the Western Producer, Canada's largest farm newspaper. For other moral economy blogs see christopherlind.blogspot.com

FOOL ME TWICE, SHAME ON ME

2009-12-16T14:01:00.000-08:00

Another Moral Economy Column
By Christopher Lind
December 2009

I have been ashamed of my country only twice in my life. The first time was when we declared war on Iraq in 1990. The second was last week when I listened to a British journalist upbraid Canadians for allowing our government to undermine new international action on climate change. I never thought Canada would declare war in my lifetime and I never thought my Canadian government would undermine collective efforts to do the right thing internationally. I was wrong on both counts.

The connecting issue for both of these events is oil, or as the Beverly Hillbillies used to say “black gold, Texas tea”. In 1990 we were protecting Western interests in the oil resources of the Middle East. In 2009 we are protecting Western interests in the Alberta tar sands. I am not sure we are protecting Canadian interests because I don’t know what interests Canada would have in polluting the Athabasca watershed, destroying 500 sq. kms of landscape, increasing the cancer risk of nearby populations and increasing Canada’s greenhouse gas emissions by 5%. On the other hand, the Government of Alberta says there are 173 billion barrels of oil that can be recovered from the tar sands using today’s technology. At $50 per barrel that means there is over $8.6 trillion to be made, and more as the price of oil rises. A lot of people have an interest in that.

People feel shame when they see themselves as others see them, and their behaviour contradicts their stated values and beliefs. It makes us want to cover ourselves, or hide because a real part of ourselves feels exposed. It was more than a little irritating to be shamed and exposed by a Brit. After all, what crime could Canadians commit that Britain hasn’t done many times over? On the other hand, the feeling of shame suggests the journalist had touched a nerve. Why would I feel shame if I had nothing to hide?

Even though it seems like this is a debate about mining in Alberta, it is really about you and me. Even though I live in Toronto I am fully implicated in this issue. I drive a car that burns gasoline. I heat my home with natural gas. My pension fund earns income from Suncor and some of the other 91 commercial projects located there. My government wants to make the politics of climate change to be about what the Chinese will or won’t do, and what the Indian government will agree to or won’t. But the climate is changing more because of what Canadians and Americans are doing than anyone else. The average Canadian produces almost 5 times more carbon dioxide than the average Chinese produces and more than 10 times what a citizen of India produces. My government is being mean and petty, selfish and deceitful; but if you and I don’t change the way we live, we’ll be no different.

If you’re old enough to remember the cartoon strip “Pogo” then you’ll remember cartoonist Walt Kelly’s most famous line “We have met the enemy and he is us”. Kelly used that on a poster for the first Earth Day in 1970. It’s still true.

Visit the website at christopherlind.ca
Visit the YouTube channel at Moral Economy column on YouTube

For other moral economy blogs see here
This column is published in the Western Producer, Canada's largest farm newspaper.

ARE WE ALL IN THIS TOGETHER OR NOT?

2009-10-31T17:53:00.000-07:00

Another Moral Economy Column
By Christopher Lind
October 2009

Every other day I open the newspaper and read some new speculation about another federal election. Will we, won’t we, and what story will we tell ourselves this campaign is about? Given the crisis we are still in the middle of, the story should probably be an economic one.

Prime Minister Harper seems to be anticipating this because he keeps goading the Leader of the Opposition into saying how he would deal with the new fiscal deficit. Harper inherited a fiscal surplus and proceeded to eliminate it by cutting taxes and increasing spending. Now he is trying to scare the electorate into believing his opponent would raise taxes, whereas Harper would not. Liberal Party leader Ignatieff is then put in the fantastic position of declaring that he would not raise taxes because a growing economy would automatically raise government income.

Can we please start speaking honestly to each other? The fiscal deficit has been created in three ways. Firstly the federal sales tax (GST) was cut from 7% to 6% and than to 5% by the Conservatives. Secondly, the economy has gone into recession because of the fallout from the collapse of the housing bubble in the US. Thirdly, government spending has increased in order to stimulate the economy and all the parties agreed to this.

I am confident that things will turn around. However, when they do, our increased income won’t pay off the deficit all by itself. We will also have to reduce our discretionary spending so we can get back to reducing our debt, which is now much bigger than when all this started. (Societies always have a debt because we are constantly investing in the future, but that’s another story)

There are only two ways we can do that. Either we can raise taxes or we can cancel or reduce services. The Liberals like to trumpet their achievement of slaying the deficit dragon in the mid-90s. How did they do that? Well, first of all they refused to reduce or eliminate the 7% GST introduced by Brian Mulroney’s government, thereby increasing revenue. Then they reduced funding to the Provinces to pay for health, education and welfare, thereby cutting expenses. Those provincial funding cuts caused provinces to cut back welfare rates, introduce or increase healthcare premiums and reduce funding to school boards. So, the deficit was paid for in part by the poor, the sick and the young.

So, here’s a News Flash: I do want taxes to be raised and I want a debate about whether that should be through increasing the GST (a 1% increase generates about $11 billion/yr) or increasing income taxes. I worry about Harper’s plan because I am afraid he will ask the weakest members of society to pay for it. I worry about Ignatieff’s plan because this is exactly what the Liberals did last time. From my point of view we should all pay for this together because we’re all in this together. Is that so hard to talk about?

Joseph Heath tells a funny story that relates to this. He is in an auto repair shop when the customer ahead of him starts criticizing her bill. “How much of this is taxes?” she asks, “I just want to know how much those bastards are taking from me!” After further conversation the woman announced she had to leave because she was late for her shift as a nurse. “Wait a minute”, replied Heath, “you’re a nurse, at a public hospital? That means you work for the government! Those ‘bastards’ are using this money to pay your salary. That’s like Tom Cruise complaining about the price of movie tickets.”

Heath’s point is that the right wing has convinced the population that the government is a consumer of wealth (like a parasite) whereas the private sector is a producer of wealth, whereas the public sector actually contributes to the economy just as robustly as any other sector. This attitude is deeply rooted in some segments of the US. One of the attitudes I commonly heard expressed in Saskatchewan was that the government is the biggest co-op going – healthy attitude that!

Joseph Heath teaches philosophy at the University of Toronto. His latest book, Filthy Lucre was published this year by Harper Collins.

Visit the website at christopherlind.ca
Visit the YouTube channel at Moral Economy column on YouTube

For other moral economy blogs see

WHEN MORALITY IS AGAINST THE LAW

2009-08-29T09:17:00.000-07:00

Another Moral Economy Column
By Christopher Lind
27 August 2009

Have you ever downloaded music from the Internet? Do you know anyone else who has – a son or daughter perhaps? Have you ever sent a copy of a song you liked to a friend? When you did, were you sharing a treasured experience and giving a gift; or were you shoplifting and passing along stolen goods? Those are very different images for the same activity aren’t they?

Joel was 16 in 2003 when he received a letter demanding $5,250.00 for 7 songs he had downloaded through a file sharing service on the Internet. Joel was scared by this official and legal letter demanding payment so, with help from his parents, he sent along a cheque for $500 and explained that he was a high school student and couldn’t afford anything more than that. They offered to settle for $3500 and his cheque was returned.

Joel graduated from high school and moved to Boston to attend university. Four years had passed when he received a notice requiring him to appear in court. He was being sued, along with some 30,000 other people, by companies like Sony Music, Warner Brothers and Arista records, all coordinated by the Record Industry Association. Joel offered to settle for $5,000 but the record companies now wanted $10,500.

At this point a Law Professor offered to represent Joel in court. Charles Neeson holds the William F. Wed Chair in Law at Harvard University where he is also the founder and Co-Director of the Birkman Center for Internet and Society. Prof. Neeson believes that the Internet is a digital version of the old common grazing lands of the 17th century. Prof. Neeson believes the Internet was started as an open domain but has recently been fenced off by capital investors who want to increase their profits through new exclusive property rights.

Joel lost his court case this summer, as expected. He was found guilty of downloading 30 songs and required to pay compensation of $22,500 per song. That means $675,000. He will appeal.

Sociologists will tell you that markets are embedded in society through law, politics and morality. However, it is possible for markets to partly embedded and partly disembedded. The market for property rights in digital music is embedded in American law through the Digital Theft Deterrence Act. However, it is not embedded in morality. Not only are there professors and academic institutes that think digital file sharing is not theft, there are artists too. John Perry Barlow, lyricist for the famous musical group, the Grateful Dead, believes that the online world presents us with a new form of the ‘gift economy’ “where no moral blameworthiness attaches to non-commercial sharing”. When new markets are created, morality is often contested. When public libraries were created, large publishers campaigned against them because borrowing books was going to take away their profits. It is still possible to find old paperbacks with a notice inside the front cover warning the reader that this book could not be lent or even resold.

Markets require legitimacy – political, legal and moral legitimacy. When Mahatma Gandhi marched his followers to the sea in order to make their own salt, he was breaking the British law by refusing to pay the salt tax. Was he a criminal? According to the British colonial legal system, yes. Was he morally right? According to the Indian people, even more so.

You can follow Joel’s story for free at http://joelfightsback.com

Visit the website at christopherlind.ca
Visit the YouTube channel at Moral Economy column on YouTube

THE MORAL ECONOMY OF THE HEART

2009-07-03T05:34:00.000-07:00

Another Moral Economy Column
By Christopher Lind
June 25, 2009

There is a story I often heard in Saskatchewan about a farmer who had to make his way to the barn in the middle of a blizzard. In order to find his way back to the house, he tied a rope to the back door. When he was finished tending to the animals in the barn, all he had to do was follow the rope in order to find his way back home.

If the truth be told, I never actually met a farmer who had done that, but I heard the story often. It may not have been historical truth but it contained great truth all the same.

Part of its appeal is that the story is archetypal – there are many versions of it in different cultures. For example, in Greek legend, Theseus, the son of the King of Athens, volunteers to enter the maze on the Island of Crete in order to kill the dreaded Minotaur, a monster who was half man and half bull. Theseus’ lover, Ariadne, gives him a ball of thread which he unrolls as he travels deeper into the confusing cave. This allows him to find his way out after the Minotaur is dead.

We can relate to the story of the farmer in winter in many ways. The farmer’s journeys from home to the workplace. The winter blizzard is beyond his control – success is represented only by survival. The blizzard is dangerous and ultimately disorienting. In the middle of this life threatening confusion, how do we find our way back home?

The current economic recession is like the blizzard. It may be caused by humans but from the perspective of any one person it is dangerous, confusing and beyond my control. The best I can hope for is survival.

The current storm is causing all kinds of damage to the workplaces of our lives. For some of us, our workplace has disappeared; for others it will be a long time before it is fully functional. What is the rope we cling to? What thread can we follow to guide our way home?

In the myth of the Minotaur we learn that the thread comes from the desire of our heart. It is Ariadne’s thread. It links the head and the hands and the feet but it is governed by the heart. We sometimes call it vocation. Over the years I have found that farmers are equally divided between those who see farming as one business among others, and those who see it as a ‘calling’ – a vocation. The American writer Fredrick Buechner says that vocation “is the place where your deep gladness and the world’s deep hunger meet”.

In this time of economic recession, confusion and disorientation, many people will be searching for a way home. Now is the time to test your and my fundamental values and ask if we have organized our life in a way that connects our deep gladness with the world’s deep hunger. Now is the time for each of us to build a moral economy of the heart.

Visit the website at christopherlind.ca
Visit the YouTube channel at Moral Economy column on YouTube

WHAT’S FAIRNESS GOT TO DO WITH IT?

2009-05-07T09:43:00.000-07:00

Another Moral Economy Column
By Christopher Lind
May 7, 2009

The French working class really has style. You have to hand them that. When 20 angry workers at the 3M plant in Pithiviers, south of Paris, told Director Luc Rousselet he couldn’t leave until he improved the severance packages for 110 laid off workers, they fed him mussels and fries for dinner. What a way to get noticed.

It sure beats the leaden style of the European ruling class. The French energy giant Total, announced the biggest annual profit in French corporate history and less than a month later announced the elimination of 550 jobs. French President Nicolas Sarkozy provided 12 billion Euros to the automotive sector and the German tire maker Continental, responded by eliminating 1210 jobs in Clairoix, north of Paris. No moules et frites for this CEO, they threw eggs at him. In the ultimate French insult, the eggs weren’t even cooked!

Scottish pensioners took a more pedestrian route when they picketed the home of former Royal Bank of Scotland CEO Sir Fred Goodwin. How could he have been rewarded by having his pension doubled to over Cdn $1 million when he led the bank into bankruptcy and their savings into ruin? In Connecticut, activists organized a bus tour to homes of AIG executives who received $220 million in retention payments after the US federal government invested $182.5 billion to prevent total collapse.

Canadians are so much more restrained. Where were the pensioners of the Toronto Star when CEO Rob Pritchard resigned after 8 years on the job and received an $11 million cushion for his fall? Does it make a difference that the Toronto Star is not bankrupt yet? They only lost $180 million last year, the stock price fell 70% and they laid off 500 people.

On what basis would we say that people are justified in their outrage? Pritchard’s settlement was approved by the board. The German tire company broke no laws when it laid off 1210 workers.

The common complaint is that these payments are not fair. Why should the bosses get a fat severance check while the workers lose their pensions and get a pink slip? What’s fairness got to do with it, you ask?

Well, contrary to certain ideological claims that economics is a value-free science, all economies are embedded in a set of moral assumptions about how our common life should be organized. When we limit the discipline of economics to matters of scientific technique, we render the moral foundation of our economy invisible.

Communities can tolerate a lot of variation in economic practice but when the variations become both extreme and common, then people react. In times of crisis, ordinary people rise up and insist on a renewal of the moral foundations of our economic life. They insist on fairness rather than bias. They insist on subsistence for all rather than affluence for a few. They insist on compassion for the vulnerable rather than indifference from the elite.

These are the characteristics of a moral economy and they become visible in times of crisis – just like these.

For other moral economy blogs see christopherlind.blogspot.com
Visit the website at christopherlind.ca
Visit the YouTube channel at Moral Economy column on YouTube

So You Want To Be A Moral Billionaire?

2009-03-13T06:25:00.002-07:00

“Do you know any billionaires who are moral?” He looked like he could play nose guard for the Hamilton Tiger Cats but he was actually a commerce student at the Mississaugua campus of the University of Toronto. We had just finished an interfaith seminar on the economic crisis.

“What you’re really asking is whether it is possible to be both rich and ethical”, I replied.

“Yeah. That’s right.” My mind was immediately flooded with images of people I knew who had become rich through indifference to the welfare of others but I knew that’s not what the student wanted to hear. He wanted a role model – someone he could look up to and hold onto. I told him the story of Bob Stollery.

Bob was an engineer who led a management buyout of Poole Construction Limited in 1977 when all the management consultants told him he was crazy to do so. He then proceeded to build up the renamed PCL Ltd. Into the largest construction company in Canada and one of the 10 largest in North America. Among it’s other high profile projects it is currently in charge of rebuilding and expanding the Pearson International Airport in Toronto without ever shutting it down.

Having transformed the company Bob proceeded to sell off his ownership stake over time through an employee share ownership plan. As part of his personal succession planning he put his wealth into a family foundation as a way of teaching his children how to be philanthropists.

After the destruction of 9/11 I said to him in passing “Oh, you must be pretty busy now, bidding on all those construction projects in New York City.” “No, not busy at all” he replied. “Why not?” “Well, we decided a long time ago that there was too much corruption in the building industry in the American north-east. If we entered that market, it would change the culture of our company. So we decided we just wouldn’t go there.” I almost fell over. This man had built his company into one of the largest construction companies in North America without competing in what must surely be one of the largest single markets – and on moral grounds. I thought Bob would be a great role model for the aspiring Islamic billionaire before me.

It was a good and necessary answer but it was also an insufficient answer. The students in the seminar knew there was a connection between the failure of our economic system and the failure of our morality but they kept wanting to interpret the problem as a failure of personal morality. If only we had had honest moral people in charge, instead of liars and thieves, (they seemed to be thinking) we wouldn’t have gotten into this mess. Well, actually, I don’t think that’s true.

There is a difference between personal morality and social ethics. Personal morality has to do with the decisions made by individuals and social ethics has to do with the cultures of organizations and the behaviour of corporate and social systems. Many of these thoughtful and upstanding students will be hired by Canada’s banks and they should have prosperous careers in front of them. However, if shareholders continue to judge bank performance only by the rise in share price each quarter, the CEO will be forced to ratchet up the pressure on each division to increase profit. Eventually that trickles down to the 30 year old loans officer who is pressured to shift a farmer into a variable rate loan or increase the interest rate on a line of credit to a small business owner. When increased profit is the only criteria by which we judge all of economic life, social ethics disappears and only personal morality remains.

A parallel took place in the 1970s and 1980s during the debate about the ethics of lending money to the apartheid South African Government. Canadian banks were heavily implicated in this activity and the South African government was using some of the money to re-equip its military and police force. The first reaction of Canadian banks was to say information on its lending activity was private and it would be unethical of them to divulge this information. The second line of defense was to say it would be unethical of them to pass moral judgment on how the money was to be used. They were lending to a sovereign government with a good credit rating and that’s where the conversation should stop. The public pressure increased and eventually the Canadian banks stopped supporting the apartheid regime. More interesting for our purposes were the unofficial reports from bank insiders. They indicated that pressure from the public changed the debate around the boardroom table. Conversations about ethics were now happening for the first time and the cultures of the banks as organizations were changing.

Our current economic crisis has been precipitated by reckless and unethical behaviour in the investment banking sector (Lehman Brothers, Bear Stearns etc.) and by the shadow banking sector – insurance companies like AIG operating as if they were investment banks. This behaviour could only succeed if good people were kept silent on a continuing basis. They can be silenced by organizational cultures that reward deceit and punish truth telling.

Bob Stollery is a good role model not just because he was rich and moral at the same time. He is also a role model because he understood that corporations generate and maintain cultures that can promote ethical or unethical behaviour and these cultures are more powerful than any one individual.

Among his many gifts to the community, he was instrumental in building the Stollery Children’s Hospital in his hometown of Edmonton, Alberta. Bob Stollery died in 2007.

Posted 13 March 2009 . For additional reading on the moral economy, visit www.christopherlind.ca The Moral Economy Column by Christopher Lind is published in The Western Producer, Canada's largest agricultural newspaper. Your comments are invited on this blog.
For other moral economy blogs see

WHAT MORAL VALUES WILL GUIDE THE FUTURE?

2009-01-14T19:14:00.000-08:00

At the end of January Canada’s Parliament will reconvene and the federal government will introduce a new budget. Later in the spring, provincial governments will also introduce new budgets following the lead of their federal cousins. The failure of Canada’s government to recognize the seriousness of the global economic crisis last fall led to a political crisis and almost a constitutional crisis when the Governor General agreed to prorogue Parliament. Everyone expects the new budget to represent a change in course with a plan to stimulate the economy through tax cuts, infrastructure spending and deficit financing. This represents the new consensus strategy in the world’s largest economies but it fails to explain what moral values will guide the new plan.

We are in the middle of a systemic failure in global financial markets. Over the last 30 years, these markets have been deregulated by governments who worshipped the cult of efficiency and saluted the flag of freedom. This political shift, known as neo-liberalism, has allowed global markets to be manipulated in favour of the short-term interests of the wealthiest and most powerful among us. They have been directed to support the private goals of a few rather than the shared goals of the many. The same failed global economic system that has now crippled international trade is also responsible for the increasing disparity between rich and poor.

By all means, let us change course, and do so dramatically – but in which direction?

The goal of the consensus strategy involving massive spending plans or tax cuts seems to be the resuscitation of the very same pattern of unsustainable consumption that has recently collapsed. For example, worldwide, governments seem prepared to spend trillions of dollars to recreate the old destructive model while simultaneously refusing to invest meaningfully in efforts to combat climate change. [1] We have already heard some Canadian political leaders say their anti-poverty initiatives may have to be delayed as if social and ecological justice initiatives were luxuries we cannot afford in these distressed economic times. [2] I find myself asking: are there any moral values guiding public policy in response to the economic crisis?

For over 30 years in international ecumenical circles, the Christian Churches have been developing a series of ethical principles that have come to be known as principles of Ecojustice. These principles affirm there is no contradiction between seeking justice in human society and seeking wholeness in all of Creation. They were articulated at the World Council of Churches assembly in Nairobi in 1975 and developed further at the WCC Assembly in Vancouver in 1983. Though we affirm these ethical principles out of our own tradition, they are not exclusively Christian. They have developed in other religious traditions as well. [3] They have also developed in a parallel way through the United Nations, first with the World Commission on Environment and Development in 1983 and 1987 [4], then with the Rio Earth Summit in 1992 and finally with the Earth Charter in 2000. The Ecojustice principles involve attention to solidarity, sustainability, sufficiency and equity.

Solidarity

This ethical principle involves a commitment not to abandon other people or creatures, but to stand with them as companions and allies – in one earth community. Using the principle of solidarity as a guide to economic and political restructuring means strengthening our social safety net with a national social housing initiative and living wage provisions.

Sustainability

This ethical principle requires us to adopt environmentally fitting habits of living and working that enable life to flourish. It involves utilizing ecologically and socially appropriate technology. Where this technology is new, it will require major new investments appropriately organized so everyone can benefit. Our current carbon based economy, which treats the atmosphere as a sewage lagoon without end, is clearly unsustainable. The principle of sustainability is key to the ethical re-orientation of our economy and society.

Sufficiency

This ethical principle requires a standard of organized sharing, which requires basic floors and definite ceilings for equitable or “fair” consumption. The scandal of child poverty in Canada is an example of the absence of this basic floor for consumption. The outrageous escalation of executive compensation in recent years is an example of the absence of any meaningful ceiling for equitable consumption. The resources of the world are sufficient for everyone’s need but not for everyone’s greed. If we enacted the principle of sufficiency, we could eliminate poverty and redress the imbalance in Creation.

Equity

This ethical principle refers to fairness in decision-making as well as in outcomes. It requires socially just participation in decisions about how to obtain sustenance and to manage community life for the good in common and the good of the commons. It also requires an examination of the ethical floors and ceiling referred to in the principle of sufficiency above. Particular attention needs to be focused on those who have historically been marginalized in decision-making and power sharing. A political crisis has forced pre-budget consultation with opposition political parties. What would it take to enact the equity principle by having pre-budget consultations with those living in poverty, women, Indigenous people and racial minorities?

Footnotes

[1] two months ago the parties to the Kyoto Protocol (which include Canada) refused to contribute any more than US$80 million to the UN Adaptation Fund designed to help the poorest countries tackle the effects of climate change they are already experiencing। The real need is for almost ten times that amount.

[2] “Economic woes might delay poverty agenda: McGuinty”, Canadian Press, 16 Sept। 08।

[3] See the multi volume book series World Religions and Ecology edited by Mary Evelyn Tucker and John Grim, Harvard University Press।

[4] The World Commission on Environment and Development was first formed in 1983. The Commission was chaired by Gro Harlem Brundtland and issued a report in 1987 entitled Our Common Future.

christopherlind.ca

For other moral economy blogs see christopherlind.blogspot.com

RE-EMBEDDING THE GLOBAL ECONOMY

2008-11-13T07:43:00.000-08:00

Are you surviving the biggest economic crisis in 75 years? Most of us have been watching it unfold 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 also fall as speculators unwind their positions. In western Canada, oil and gas exploration will be reduced meaning fewer off farm jobs in the wintertime. As consumers delay discretionary purchases, manufacturing output will fall leading to rising unemployment. Housing prices will fall and jobs will be lost in construction. If you work in the university sector (as I do) 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.

Some of these effects are typical characteristics of a recession and so some people interpret this as just another turn of the business cycle. However, normal recessionary cycles respond to falling interest rates and fiscal stimulus by governments. This phenomenon is not responding to such stimulus and the American Federal Reserve Board has reduced interest rates almost to zero. What’s really happening and what can we do about it?

An alternative explanation is that we’re in the middle of a global crash. The roots of the crisis are in the global financial sector and the crash is the direct result of the globalization of that sector. In this process of financial globalization, national financial markets have been linked to form a single global market for credit, debt and currency. This global market has become either unregulated or insufficiently regulated because the corporations that dominate this market are larger than the national governments that used to regulate them and we have not yet invented the new global institutions that will be required to regulate this new market. For example, Iceland has had to be rescued by the International Monetary Fund after its largest banks failed. The largest Icelandic bank had assets 6 times larger than the GDP of the whole country. Could Switzerland rescue UBS, which has assets 484% larger than that country’s GDP? Credit Suisse is 290% larger than its home country’s GDP as is ING in relation to the Netherlands. Three of the five largest banks in the world are headquartered in the UK (RBS, HSBC and Barclays). Britain has already rescued RBS. Can it afford to rescue the other two without help? (For a chart showing the relationship between the assets of banks and the GDP of their home countries, go to this website from the Financial Times).

In my last column I quoted the work of the Hungarian economic historian, Karl Polanyi, whose name is now popping up all over. In Polanyi’s most famous book, The Great Transformation, he described how the Industrial Revolution caused economic forces to become dis-embedded from feudal 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. Society was refashioned in the image of the economy and we inherited a market society governed by a market system. This revolution was traumatic because it threatened humanity. The Great Transformation of his book title was humanity’s response of self-protection. In order to survive we had to invent new institutions like trade unions, pension plans, and unemployment insurance. We even invented the modern nation state so that 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 corporate agents of the national financial sectors of our economies have become dis-embedded from the regulatory frameworks of the nation state. They now exist in a new space called the globalized economy. This space is now so threatening to human society that even as prominent a champion of free market capitalism as George W. Bush is prepared to nationalize portions of the U.S. banking sector to prevent further destruction.

When economic forces are becoming disembedded from the restraints of the old society, there emerge champions of deregulation – “let the market decide!”, they cry. In the late 18th century it was Adam Smith who was arguing that if everyone was simply left to pursue their own self-interest, these actions would be guided to achieve the common good of wealth creation as if by “an invisible hand”.

The social upheavals associated with the rule of the invisible hand included market induced famines, periodic shocks of industrial unemployment, dramatic increases in the gap between rich and poor, homelessness and waves of human migration as landless farmers sought to escape their poverty traps.

In the late 20th century, at the time of the globalization revolution, it was Milton Friedman who was arguing that markets freed from regulation were a precondition to human freedom in a modern society. We are currently living through the same social upheavals as before, following once more on the implementation of policies of market deregulation. Unsurprisingly, conservative think tanks like Canada’s Fraser Institute and America’s Heritage Foundation have been celebrating Iceland as one of the freest countries of the world. The deregulation of Iceland’s financial sector was engineered by disciples of Milton Friedman, like Davíð Oddsson the Prime Minister from 1991 – 2004.

The solution to the chaos caused by dis-embedded 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. An economy dis-embedded from society is an amoral economy because an economy left to itself has no conscience. An economy embedded in an unjust society is an immoral economy. Society supplies the conscience but in this case it is a bad conscience.

Where might those new systems of just political regulation come from? As I write this, leaders of the 20 largest national economies are preparing to meet in Washington at a global summit to plan a response to the global financial crisis. What’s symbolically significant about this meeting is that it is no longer sufficient for the leaders of the seven largest national economies (the G7) to meet, consider and decide for the world, as they have done so often in the past. It is neither politically, nor economically feasible to make decisions about world trade without China, India and Brazil being at the table – and they will not be silent. Some commentators call this meeting the new Bretton Woods, recalling the meeting in Bretton Woods, New Hampshire in 1944 when representatives of the Allied nations met to establish the institutions and rules required to re-establish world trade after the cessation of World War II. These expectations are too grand for this meeting but the hope is exactly correct. It may be that this meeting will set the wheels in motion and we may, in time, look back on it as the start of a new Great Transformation.

As for Canada, two ways we can respond to the crash and make our society more just at the same time is by strengthening our welfare system and making major investments in social housing. Increasing transfer payments to the poor will address social inequality and boost consumer demand for economic staples. Investing in social housing will boost employment in the construction sector and help make poverty history.

Posted 13 November 2008. For additional reading on the moral economy, visit www.christopherlind.ca

For other moral economy blogs see christopherlind.blogspot.com

MORAL HAZARD OR MORAL ECONOMY: THE ETHICS OF ECONOMIC BAILOUTS

2008-10-18T09:34:00.000-07:00

Another weekend, another financial bailout. Will it be enough? Last week it was Washington Mutual, America’s largest Savings and Loan being packaged up for the government’s favourite financial holding company JPMorgan Chase. Last March the American government intervened to ensure the investment bank, Bear Stearns, was sold off to the same outfit. Who will it be next week? Which pillar of Hercules will come tumbling down signaling, once more, the end of the world as we know it?

On September 7th the government rescued the two largest mortgage insurers, known by the nicknames Fannie Mae (FNMA) and Freddie Mac (FHLMC). Many commentators worried that the March and September interventions created a “moral hazard”. This is an obscure term from the insurance industry that tries to predict how someone insured against a risk may act in such a way as to make the risky behaviour more likely. For example, some people think it is more likely that a house insured against fire is more likely to burn down than one not so insured. In this context, the lack of a mid-September government bailout for Lehman Brothers was said to be an object lesson for investors – the government will not insure you against your own reckless investments. In the light of the subsequent rescue of the insurance giant AIG, a better definition seems to be the privatization of profits and the socialization of losses.

In the Canadian context, there is a different kind of moral hazard at work. For many years now, the Canadian government has been encouraging people to contribute more to their personal Registered Retirement Savings Plans (RRSPs). In 2000 the contribution limits started to increase after years of fixed rates and even cuts in the mid 90s. In 2008 the RRSP limit is 18% of earned income to a maximum of $20,000. This increase typically means an increase in investments in the stock market. Since the percentage of working Canadians with company pension plans has decreased over the last 10 years, this means the federal government is encouraging Canadians to rely on their own private investments to secure their retirement.

Canadians clearly are prepared to do that since approximately 50% of Canadians who file income tax also invest in RRSPs. But Canadians also expect that these government sanctioned and supported investment vehicles are properly regulated to ensure their interests are protected. To the extent that Canadian banks and investment houses have participated in sub-prime and higher risk mortgage pools from an insufficiently regulated American housing market, it appears that these institutions have behaved with less attention to risk than their fiduciary responsibility warranted. Did they believe the American government would bail them out? Do they believe the Canadian government will bail them out? Are Canadian financial institutions exhibiting signs of morally hazardous behaviour? I think they are.

Moral hazard is not just a matter of outright dishonesty. (Extreme versions of it are called fraud.) According to the Insurance Institute of Canada, moral hazard is more likely a consequence of carelessness and poor management. In a political climate where de-regulation and self-regulation is the flavour de jour (see the food inspection industry), Canadians properly expect their government representatives to ensure they are not exposed to the excesses of the cowboy capitalism they see to the south. Government encouragement of private investment to secure the common good of stable and dependable retirements, implies an obligation on the government to ensure those investment markets and managers are not reckless.

However, there is also something going on bigger than issues of moral hazard. The financial crisis is being described as a crisis in the American housing market caused by imprudent lending to homeowners. This is true as far as it goes, but it doesn’t go far enough. The sub-prime mortgage crisis is just the presenting issue. Any number of events could have precipitated this crisis. Rather, the crisis reveals the extent of and risks in the globalization of deregulated financial markets, and it could be worse.

The German government has rescued three banks in the last year because of American mortgages. However, they probably wouldn’t be able to rescue Deutsche Bank, which is so large it has liabilities the equivalent of 80% of Germany’s Gross Domestic Product. The British Government has now rescued two banks, Northern Rock and HBOS, because of their exposure to this debt. They probably wouldn’t be able to rescue Barclay’s Bank, the buyer of Lehman Brothers assets, whose liabilities are greater than Britain’s entire GDP. The largest insurance company in the world, AIG, has needed rescue because it has been selling insurance against this kind of default. The American government has been forced to act not only because it is an election year, but also because they need to satisfy Japanese and Chinese lenders. Foreigners hold 45% of the debt issued by the US Treasury with the largest investors being Japan (13%) and China (10%). If those countries start moving their money into Europe instead, the American dollar would fall rapidly - just as rapidly as interest rates would rise.

So, the world’s financial markets have expanded and integrated. But there has been no corresponding expansion and integration of regulation. Instead, the dominant voice of the last 20 years has been one of de-regulation. In consequence the livelihood of the whole modern world is now at stake.

In the 17th century, Isaac Newton proposed three laws of motion. His third law states that “for every action, there is an equal and opposite reaction.” In the 20th century, the economic historian Karl Polanyi proposed a similar kind of law. He said when market forces under capitalism expand, they are met by a countermovement aiming at the conservation of society, nature and production, using protective legislation and other instruments of intervention. This double movement in the 19th century he called the Great Transformation. It was how modern industrial society was born, complete with trade unions, pension plans, social housing, and healthcare.

We now desperately need another Great Transformation and if we’re lucky, we may be at it’s beginning. It is timely, then, to ask: by what values will this intervention be guided? Let me suggest four.

Matthew’s Gospel (7:26) reminds us to build our houses on a solid foundation, not on sand. That means our financial systems, like our ecological systems, have to be sustainable.

In order for the system to be sustainable, we have to be clear about what is sufficient for our common life. So far we have organized our affairs to achieve the maximum growth possible. What would “enough” look like?

Most people want some basic standards of fairness applied to income and employment, hence the desire to limit CEO pay for companies receiving public financial aid. This is the principle of equity.

Finally, ordinary people are wondering why all the government money is going to rescue private investors when ordinary homeowners are under water. They are looking for some collective support. They are looking for solidarity.

We’ve had enough of moral hazards. It’s time we had a moral economy.

Faster, Higher, Stronger

2008-09-13T20:36:00.000-07:00

We‘ve been hearing a lot about excellence in sport recently and it always gives me an uneasy feeling. What do people really mean by it? It sometimes sounds like this: gold means excellent, bronze is close but not very.

I believe in excellence but my excellence includes ethics.

I don’t want to rain on the Michael Phelps or Usain Bolt parade but doesn’t the Olympic movement need them so we will forget about past champions like Canadian Ben Johnson or US track star Marion Jones? Johnson had his gold medal in the 100 M race at the 1988 Seoul Games rescinded because of steroid use. Jones won 3 gold and 2 bronze at the 2000 Games in Sydney. She is not competing in Beijing for two reasons. First, the IOC has barred her from these games and stripped away her medals after she admitted to using steroids before the Sydney Games. Secondly, she is currently in a Texas jail having been convicted of perjury.

The Tour de France is the most famous cycling race in the world. It is currently on the brink of collapse because drug cheating is so widespread. Tour champion Floyd Landis has been discredited in spite of his denials. Several corporate sponsors have refused to back their teams and now whole teams have quit the race after their riders were caught blood doping. The American satirical magazine, The Onion, has started selling versions of the yellow bracelets made popular by cycling champions. Their bracelets read “Cheat to Win”.

Can sports ever be ethical? Let me tell two stories that will say yes. The Velux 5 Oceans yacht race covers 30,140 nautical miles and is held once every four years, just like the Olympics. In 2006, in the middle of the Southern Ocean, British racer Alex Thomson was in 3rd place when his boat overturned causing irreparable damage to his keel. His nearest competitor was Mike Golding, 80 miles ahead of him in 2nd place. Mike Golding turned his boat around and sailed back to perform a very complicated rescue.

Mike Golding’s actions were not unprecedented. This kind of accident is common enough in sailing that assistance is obligatory. Failure to assist is grounds for disqualification. Mutual assistance is part of what it means to be excellent in sailing.

Story #2: In April of this year, the Western Oregon Wolves were playing the second game of their softball doubleheader against the Central Washington Wildcats. The winner would proceed on to the Division championships. In the second inning, with two runners on base, Wolves outfielder Sara Tucholsky hit the first home run of her college career. In her excitement she neglected to touch first base. As she turned around to retrace her steps, he knee buckled and she lay on the ground writhing in pain.

Baseball rules prevent teammates from helping each other to round the bases. Acting on instinct, Wildcat first baseman Mallory Holtman looked at shortstop Liz Wallace and together they carried Tucholsky around the bases, allowing her to touch her one good leg on each one. The Western Oregon Wolves ended up winning the game 4 – 2 and went on to the NCAA tournament.

Most news reports described that as a tale of good sportsmanship. I call it excellence.

For other moral economy blogs see christopherlind.blogspot.com

Fuel vs. Food

2008-06-27T12:48:00.000-07:00

Do you support Bill C33? This is the Canadian legislation requiring biofuels as a percentage of all fuels sold in Canada. The legislation currently before the Senate, allows the Government to require up to 5% renewables in all gasoline sold here or up to 2% of all diesel fuels. I was asked this question recently and my answer is yes, BUT! Here’s why.

Some people claim that converting corn to ethanol is driving up the price of food. Others say it is taking food away from the poor. Let’s deal with the price of food first.

Commodities are enjoying record high prices due to droughts, crop failures, increased demand from China and India, and financial speculation. Some of the increase in the price of corn comes from the diversion of 30% of the US corn crop to ethanol production. The elevated price of corn does affect the price of some other crops and in Canada there is some conversion of wheat as well. However the long term price of wheat and other grains continues to go down not up. If you factor inflation out of the price, wheat sold for $800/tonne in 1918 but that was during wartime. At the end of WWII it peaked again at almost $600/tonne. The long term trend is around $200/tonne except for occasional spikes, like now. When people criticize our government for an ethanol policy that will increase the price of farm commodities, I say hurray because the current high prices won’t last and anything that prevents farm bankruptcy is a good thing.

Now what about the other argument, that biofuels take food away from the poor? This is a more powerful argument but it is confusing if we only look at it from a North American perspective. We think of agriculture and oil both in terms of exports not imports. In Europe, most oil is imported. Europeans want 10% of all transport fuels to be agriculturally based by 2020. According to the UN Right to Food program, Europeans would have to dedicate 70% of all their arable land to this purpose in order to meet this target. Clearly they expect to meet their targets by importing agrofuels from Latin America, Africa and Asia. Not only can they preserve their own farm land but it is cheaper too. Ethanol that costs $1 to produce in Europe costs $0.30 in Brazil.

So, it is in the southern hemisphere where food will be taken away from the poor. Already edible maize is being replaced by industrial maize. Last year the cost of maize tortillas in Mexico increased in price by 400% causing riots by people for whom this is their staple food.

My guess is everyone would agree that the real payoff with this new technology is not the conversion of seeds (food) into biofuels. It is the conversion of waste (used oils like French fry oil) into biodiesel and wheat straw and wood chips into what is known as cellulosic ethanol. My “yes” has to do with my support of a market for biofuels, making the investment in new technology commercially viable and increasing the income of farmers. My “BUT” means I refuse to be indifferent to the hunger of peasant farmers in the global south. Our goal has to be the conservation of fuel, conversion of waste and the guarantee of the right to food.

Speculators Have Two Faces

2008-06-03T16:42:00.000-07:00

Speculators are never popular. We associate such people with naked greed. They profit from our misery. No one wants to be known as a speculator.

An alternative word is investor or risk manager. To be an investor is to have confidence in the future. To be a risk manager is to be prudent and wary, concerned about dangers ahead.

These two words can sometimes be two faces of the same activity. When I purchase life insurance, I am managing a risk. I don’t often think about how the insurance company that sells me the policy is speculating on the chances of my death, even though they are.

Farmers invest in the future with every spring planting. They manage their risk by pre-selling their crop. Investors purchase those contracts for future delivery because they are speculating that the price will be higher on the delivery date than the price they have paid ahead of time. In order for this market to work properly, farmers need investors prepared to speculate and investors need farmers prepared to speculate too. When the environment stays stable, this market works, and adds to the stability overall.

The market for managing risk in food commodities has started to become dysfunctional. The futures market for wheat on the Chicago Board of Trade is twice as volatile in 2008 as it was in 2007. How volatile is that? Well, that’s six times as volatile as the price of gold, the Dow Jones Industrial Average or the price of European currency on the foreign exchange market.

What is the explanation? Some people blame the drought in Australia, and some blame the low level of wheat stocks world-wide. After all, world wheat consumption has exceeded production in six of the last eight years. Some blame a general increased demand from China and some blame a spill over effect of tight rice supplies and transferred demand. Some even blame increased ethanol use since 30% of the US corn crop is now going to ethanol production and farmers are switching out of wheat and into corn.

Probably all of these factors contribute to the volatility but drought and changes to supply and demand are factors we have seen before and they haven’t had this level of impact. One of the new features is the dramatic increase in investments made by Wall Street pension and hedge funds. According to the New York Times, as much as $300 billion of new money has been invested in these speculative plays. Although the Chicago Board of Trade has offered futures contracts since 1959, only recently have they also offered options on those futures contracts.

Where have we seen this before? In 1971, when President Nixon took the American dollar off the gold standard, a market was created for foreign exchange. Such a market always existed but the volatility of the market was very low since most currencies were related officially or unofficially to the American dollar and it was pegged to the price of gold at $35/ounce. The market was considered so insignificant, the Swiss based Bank of International Settlements didn’t start measuring it until the 1980s, and then only on an experimental basis. That same institution now estimates that market to handle over $3 trillion dollars daily. The danger of this market is that it is bigger than all of its regulatory bodies. When the market was only a third of its current size it was already larger than all of the reserves of all of the central banks of all of the industrialized nations put together.

There is not yet a consensus on the causes of increased volatility in the commodities markets, but, if I had to speculate (!) I’d say the unregulated increase in speculative investments has destabilized long standing relationships between producers and consumers, increased costs to farmers, and increased risks to us all.

For other moral economy blogs see www.christopherlind.blogspot.com

Is Agriculture a Public Good?

2008-03-17T21:07:00.000-07:00

Soft fruit growers in Ontario are currently caught between two competing visions of the role of government in protecting the public interest. CanGro Foods (part of Kraft Foods Canada until 2006) recently announced that they were closing their fruit and vegetable processing plants near Niagara-on-the-Lake (St. David’s) and London (Exeter). This closure will put nearly 300 people out of work. It will also leave 150 pear and peach growers without a buyer for their products. The pear harvest of 3,000 tons is worth $1.8 million while 6,000 tons of clingstone peaches are worth $2.5 million. One more plant closure might not seem remarkable except that the St. David’s plant is over 100 years old and is the last tender fruit cannery east of the Rocky Mountains.

The federal government has refused to stop the closure but has offered about $1600 per acre to help with the costs of removing the fruit trees. According to at least one study, the cost of removing trees and replanting for a different crop is closer to $15,000 per acre. It only takes three months to close a processing plant but it takes 10 years to rip out mature pear trees, replant and bring the fruit to a marketable stage. How long does it take to secure the future of domestic agriculture in Canada?

Underneath the question of whether the government should be directly involved in ensuring the viability of domestic agriculture in Canada lies a conflict of visions over the meaning of the public interest. On the right side of the debate is a vision of the public interest as the accumulation of intersecting private activities. They have no meaning as such but they do generate conflict and the role of government is to set the rules of conduct so disputes can be resolved. When modern American style conservatives call for small government, this is what they have in mind. The federal government response to the CanGro closure reflects this vision.

On the left side of the debate is a vision of the public interest as a version of the common good. Some activities contribute to the common good and some do not. Protecting the most vulnerable members of our society would contribute to the common good even though they do not represent a numerical majority. From this perspective the role of the government is to actively contribute to, promote and defend those aspects of our common life that help to define who we are and who we want to be.

Donald Ziraldo is the former President and co-founder of Inniskillin Wines. He thinks another buyer for the cannery could be found if a market for its production could be secured. Since CanGro will be keeping their Del Monte, Aylmer and Ideal brands, even if they’re now filled with pear halves from China, he wants the government to help create a new “Niagara” brand. He then wants the Ontario Government to adopt a “buy local” policy for all its institutions. The Government of Ontario employs 65,000 people and is the second largest employer in the Province after the Federal Government. If the Government adopted a “buy local” policy just for the food services catering to employees, and if every employee spent just $5 a day on lunches and snacks, $6.5 million a month would be directed towards local agriculture.

This is a bold and imaginative vision but it treats domestic agriculture as a matter of the public interest, and the government as its defender. Where we stand on the vision has a direct and practical impact on the future of domestic agriculture in Canada.