“The problem with capitalism,” quipped G.K. Chesterton, “isn’t that there are too many capitalists, but not enough.” Chesterton’s wise words have been coming to mind these last few weeks as I’ve watched up close the nationalisation of a large portion of the North American automobile industry.
The problem, explained Canadian Prime Minister Stephen Harper in an interview on June 1st, the day GM ceased meaning General Motors and became Government Motors, is that GM was too big to fail and too important job-wise for Canada to lose. “Once the United States decided to get involved and decided to restructure the company, we faced a simple choice; to either be part of that solution, or see that entire segment of the auto industry restructured out of the country.” While the American government now owns 60 percent of GM, the Canadian government controls 12 percent of the company after pumping billions of tax dollars into what was once the mightiest company in America.
The idea that one government could force another government to join in the takeover of a private company such as GM, would have seemed ludicrous just over a year ago; now we’ve seen it time and again. The banks and insurance companies that made Wall Street hum were too big to fail, their colossal mistakes are now covered by the taxpayers. In Britain, the decisions of the Royal Bank of Scotland and its chief executive Sir Fred Goodwin, will be covered by British Prime Minister Gordon Brown and passed on to British taxpayers. Goodwin may have helped ruin the bank and put it into government hands, but he’ll still pocket his ₤700,000 per year pension. Why? The Royal Bank of Scotland was simply too big to fail.
Some are hailing these moves and the preceding market crash as the end of laissez-faire, unfettered market capitalism. I find the suggestion laughable; in fact at a news conference as short while ago, a politician making that claim was met by laughter. I didn’t mean to laugh, in fact laughing at politicians is not considered good form for journalists, but the fact is, no country in the so-called capitalist West comes close to a laissez-faire system.
As a share of the GDP, government revenues in the US, Canada and the UK were just under 40 percent in the days before the massive nationalisations we’ve seen. With government spending at these levels; with regulation of everything from where businesses can be located, to who can own them (foreign ownership restrictions), even the so-called capitalist West has a large degree of state control in matters economic, yet none of it is shielding the average person from the economic meltdown. Shielding wayward CEOs, yes; protecting families, no.
There are many on the right who are suspicious of big government while many on the left are suspicious of big business,. How, at the moment, can we tell them apart? The author and political blogger Rod Dreher has written, “Big business deserves as much scepticism as big government.” I agree with that concept, but can’t really tell Frick from Frack at the moment.
As I sat discussing the nationalisation of General Motors with Prime Minister Harper, he assured me that government, his government at least, was a reluctant partner. One of the prime motivators was saving jobs and helping the families those jobs support; truly, one can see the desire to help those workers retain some dignity and no one wishes to see thousands lose their jobs. Still, thousands have. Smaller business have closed up or reduced their workforce to stay afloat. Many of those business owners will dust themselves off and re-emerge as something else; the great majority of those unemployed workers will find new jobs.
The fact that this same process of renewal did not happen with GM or the Wall Street banks points to a flaw in our economy. I’m not calling for each village to have its own car maker or denouncing successful corporations such as WalMart, but when so much of the economy is “too big to fail”, our economy has ceased to function properly.
Perhaps the lesson of these last few months is that bigger is not always better; that local has benefits over trans-national; that there is beauty in small things, be they business, community groups, or governments. My fear is that the lesson big government and big business will take away from these last few months is that when business leaders like Fred Goodwin make mistakes, you and I will be there to not only pick up the pieces, but the tab as well.
Brian Lilley is the Ottawa Bureau Chief for radio stations 1010 CFRB in Toronto and CJAD 800 in Montreal. He is also Associate Editor of Mercatornet.