Don’t let business people run the economy

By Trevor Harrison, Special to the Sun – January 15, 2009 

During the 1930s, two groups disproportionately dominated the House of Commons and the federal cabinet: farmers and businessmen. Since that time, farmers have been consigned to the dustbin, replaced by lawyers, but the business class retains its lofty status.

Indeed, immune to all other efforts to democratize political representation since the 19th century, business people — usually men — continue to dominate our political landscape.

To some, this is as it should be. Before October’s federal election, a friend of mine remarked that he wanted people with knowledge of business in Parliament, as they would be best at managing the country’s finances.

In fact, the opposite is true. It is the overweening dominance of the business class — and “business-think” — that leads us into repeated financial disasters, including the current global mess.

Why, however, do so many people, including blue-collar workers and professionals, believe, despite mounting evidence, that business people are somehow more competent to run the economy than, say, a hairdresser or a graduate of fine arts? The reason goes beyond the pronounced ability of business people to promote themselves through the media and community connections. The confusion lies in the fact that both business and the economy deal with money, yet do so in different ways.

Take the current crisis. As the economist John Maynard Keynes noted years ago, the rational thing for business to do in the midst of an economic downturn is to cut costs, but this is the worst thing to do from the point of view of the economy as a whole as it further reduces spending, resulting in a further spiral into decline.

The role of business is to assemble the factors of production (money, labour and resources) to produce goods and services that will make a profit. What it does not do — is not expected to do — is to take into account wider economic considerations.

Take tax policy. Business people always want lower taxes for themselves, and business-friendly governments for decades have obliged. Business people do not consider, however, how the reproductive costs of labour, such as promoting stable and healthy families or the costs of education and training (and re-training), are to be paid.

Neither do they think about how to pay for the infrastructure costs of transporting raw resources and finished products between markets.

The business mind is concentrated, as it should be, on immediate or medium-term expenses and profits, but not the more intricate web of relationships and costs associated with maintaining a decent, cohesive and prosperous society.

Stephen Harper is, at least nominally, an economist, sporting a master’s degree from the University of Calgary among his achievements. During the election, he and his supporters proudly trotted out his academic credentials — when not playing them down for the Tim Hortons crowd — in support of his putative ability to govern Canada in the midst of the emerging crisis.

In fact, the prime minister’s master’s thesis was not economics-focused, but dealt instead with the political impact of economic downturns, a topic better fitting his political ambitions. Nor after graduating did Harper spend much time as a professional economist, instead moving from policy wonk to politician to lobbyist for the National Citizens’ Coalition then back to politics again.

But that is beside the point. While Harper is also an ideologue, his beliefs are infused with business-think: low taxes, deregulation, privatization. The interests of business — not the broad economy, even less those of society as a whole — dominate.

Harper is not alone in this, of course. Nearly every Canadian and western government has been infected by business-think these past three decades.

Consider for a moment the many times that conservative-minded politicians have said that government should be run like a business; that when times are tough, the books must be balanced — come hell or high water — no matter the harm done to individual people or the broader social fabric.

The Harper government’s slow response to the growing economic crisis, including its disastrous fiscal update in November, is explained by its entrenched business-think; hence, Finance Minister Jim Flaherty’s continued concern until recently to ensure that the country not go into deficit.

Such concerns are contrary to the advice of most economists, but entirely congruent with the way business people think about the problem. (If thy deficit offend thee, cut it out!)

Indeed, nearly every major economic decision made by the Harper government during the past two years, from cutting the GST to deregulating the mortgage industry — an emerging fiasco — have been the result of thinking first and foremost about what is good for business and how it can be packaged politically to do so.

Decades ago, the Alberta populist Henry Wise Wood called for a system of group government, whereby members of the legislature would be elected on the basis of representing specific social groups.

Such a system would likely be unworkable. But come the next election, when someone tells you they are going to vote for someone because that individual knows business, suggest they think instead about voting for the teacher, the lumberjack, the farmer or the poet.

We might then end up with more representative politics and a better understanding of how business fits into the kind of society we want.

Trevor W. Harrison is a political sociologist at the University of Lethbridge.
© Copyright (c) The Vancouver Sun

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