Genevieve Simms

We are caught in an economic and environmental storm. Looking to the past, we see that history repeats itself. Are we prepared to learn from history and make fundamental changes?

The most immediate concern is the economic storm. The year 2009 is the 80th anniversary of the stock market crash that signalled the start of the Great Depression. As the famed economist John Kenneth Galbraith said, “What is necessary for a new disaster is only for memories of the last one to fade.” Therefore, we should refresh our 1929 memories.

The roaring ’20s saw the beginning of a blissful marriage between mass production and advertising. A new innovation called credit instalment rounded out the threesome. With credit in hand, mass advertising convinced people to buy the goods that were mass produced. The result was that washing machines, radios, cars and other goods were often bought on credit. Over the 1920s, household debt, factoring in inflation, increased 100 per cent. Prosperity and economic growth was said to be unlimited. Unfortunately, reality set in. Wages were unable to keep pace with the buying spree. High debt load was one of the main causes of the Depression.

The problem now, is that we are more in debt than we were in the 1920s. As a percentage of gross domestic product, household debt loads are now 90 per cent higher. Savings rates today are just barely above zero. With wages stagnant over the last 25 years, growth in our economy has been achieved mainly through the expansion of debt.

Increases in the price of stocks and housing created the equity to finance this debt, but it looks like this party could be over. In 2008, the stock market in Toronto went down 35 per cent. Back on October 28 and 29, 1929, the stock market in New York tanked 25 per cent. By July 1932, the stock market was down 89 per cent from its high in 1929. Only the future knows how bad the hangover will be this time.

A larger problem today is the possibility of a housing crash. Speculators went on a house-buying get-rich-quick binge. The result was that the price of housing in Calgary increased 68 per cent from the beginning of 2006 to the end of 2007. About 50 per cent of us have some money in the stock market, whereas about 70 per cent of us own our homes. The ramifications of a housing crash could be devastating, because its impact is twice as large as a stock market crash. Thus far, Calgary’s housing market hasn’t crashed. The median price of a home in 2008 decreased only four per cent. As we’ve seen with the price of oil, though, what goes up real quick can come down real quick.

Even the positive assurances offered to the public in both eras are eerily similar. Days before the 1929 stock market crash, the market experienced extreme volatility, but the president of the Toronto Stock Exchange stated that, “Fundamentally, conditions are sound in Canada.” These are almost the exact words that Prime Minister Stephen Harper used during the most recent federal election. This is not very reassuring.

What is reassuring is the acknowledgement of the need of government intervention. The Canadian government has purchased $75 billion in mortgages and has loaned out $4.2 billion to the auto industry. This is in stark contrast to prime minister Mackenzie King’s adamant refusal in 1929 to go into a deficit because of his strong belief that the market would naturally sort things out.

The 1920s was the golden age of belief in the free market system. This belief was shaken to the core when the unemployment rate climbed to over 32 per cent by 1933. With today’s governments actively intervening in the economy, we are unlikely to reach these same lows, but the shakeout could still be painful.

What is the solution? Extending more credit and bailing out businesses will just delay and inflate the inevitable bust. Albert Einstein once said, “Insanity is doing the same thing over and over again and expecting different results.” To prevent such a scenario, we need to start living within our and the Earth’s means. Our savings need to be invested in eco technologies and superior public services.

A democratic transformation must occur. Instead of people serving the economy, the economy must serve the people. In addition, the quest for unlimited economic growth must stop. Mindless, unfulfilling and ecologically destructive consumerism needs to be replaced with a more co-operative, equitable, sustainable and meaningful way of living.

This is a time not of crisis, but of opportunity. It is time to dream out loud and unleash the potential of humanity.

David Wilson is an activist working for a more equitable and sustainable Calgary and works for a community economic development organization.