Does character matter? We are obliged to say yes. Character must matter. But where does character show itself in the pre-eminent economic conundrum of our times – the market meltdown of 2008 and the deepening recession of 2009? Yes, Chrysler workers accepted pay and cuts to benefits to save their jobs. But that concession was forced on them, and they remain ready to bill the people of Canada for any pension defaults down the road. In this case, the retreat on wages speaks more to strategic necessity than moral choice.
The Chrysler workers are not alone. They exhibit the same traits as the other special interest constituencies that rely on government for economic advantages denied to the people who wind up paying for them. As Fraser Institute senior economist Niels Veldhuis put it in his critique of the federal budget in January, the government “caved in to the special interest groups lined up in Ottawa with their hands out for federal cash.” In the lineup this year, he noted, were such “select groups and preferred industries” as senior citizens, farmers, the auto industry, forestry, tourism and arts and culture.
The phenomenon is sustained by an exaggerated sense of personal entitlement and by the time-tested principle of the squeaky wheel. It is a characteristic of governments, whether affluent democracy or criminal gang. It is ostensibly economic in nature, but is actually political (enabling governments to appear benevolent). It is amoral (giving governments cover to buy elections, which is otherwise a crime). And it imposes consequences (letting governments determine corporate winners and losers). How can people still believe in the concept and promise of equal treatment before the law when so many other people are singled out for special treatment? They can’t.
Against all odds, though, some integrity remains. The Fraser Institute itself, for example, accepts neither government grants nor government research contracts. This is character – which, in part, is simply the refusal to nationalize your personal wants and needs. But with trillions of dollars already pumped into the economy around the world, how many have said “no thanks” – aside, this time round, from Ford? (Thank you, Mr. Ford.) For its part, the U.S. government now requires companies to accept federal money whether they want it or not. Why? The answer lurks in the explanation that the Wolf gave Little Red Riding Hood when she asked him about his big hands: “All the better to hug you, my dear.”
We are tempted to think things were different in the old days, that character played a more important role than it plays today. Did it? The answer is an unequivocal yes. Until the Great Depression, more or less, governments discharged their responsibilities with only single-digit resort to GDP. A fierce independence was the default position of good citizenship. As one Canadian historian put it, Jeffersonian democrats – deeply distrustful of expansive government – “littered the ground” on both sides of the U.S.-Canada border.
In his recent blog on the devastating recession that followed the War of 1812, New York author C.J. Maloney wrote persuasively on the question of character: “The response of America’s intellectual and political elite to the Panic of 1819 was, in most ways, vastly different from what it has been so far in our current [crisis],” he writes. “Although we live under the same legal constitution and within the same lines on the map, the America of 1819 had a citizen who was, culturally speaking, utterly alien to the modern American.”
The panic of 1819 had its origin in the easy-credit economy of the War of 1812. The United States was on the gold standard when the war began but was compelled – by war debt – to abandon gold in 1814. For the next five years, the federal and state governments printed money with great abandon. Prices rose by 25 per cent, import prices by 70 per cent, in three years. In 1817-1818, credit increased by 40 per cent.
Although guilty of the same credit excesses as modern consumers, people responded differently in the recessionary days of yore. The Massachusetts Legislature repudiated stimulus spending in 1819 because, it said, this would simply increase the state’s indebtedness; rather, it determined to leave the solution to “the community itself, according to public wants and needs.” Virginia’s United Agricultural Society, an important coalition of farmers, declared that it would “not harass our representatives with high-wrought pictures of distress which their wisdom could not have anticipated and cannot remove.” The Union newspaper of Pennsylvania castigated state plans to extend emergency credit, asserting correctly that more excess credit would only make things worse.
“Who … would dare express such heresy today?” Mr. Maloney asks. “In my lifetime, I have never seen nor heard such a thing.” He mourns for “ideals long dead to my time.” Left to the people, the panic of 1819 was over in three years. The Great Depression, in contrast, lasted 10 years. The current recession deepens. Who knows how indebted to governments we will be when it ends, or how more dependent on governments we will be? And who cares in our own times that the best plan – as Mr. Maloney astutely expressed it – is often no plan at all?
By NEIL REYNOLDS
Globe and Mail
April 29, 2009