Taxpayer money going to those who need it least

Big banks, business interests profit from misguided policies

Recently, economist Steve Keen lamented the state of the United Kingdom’s economy, including consumer debt at a level that is reasonably expected to be followed by a financial crash. In Keen’s view, the U.K. has dangerously abandoned its real economy in favour of consumer debt and financial-sector profits.

For the U.K., that pattern might be explained — if far from justified — by the perception that a large financial sector could serve as an economic engine. In Keen’s words, the U.K.’s government has acted like a “fully owned subsidiary of the City of London.”

If that explanation at least implies that some narrow local interest is being served, it’s hard to fathom Canada’s excuse for falling into the same trap.

The data analyzed by Keen shows few countries with a higher level of private debt to GDP than the U.K. — and many of those are also associated with major international financial centres. But Canadians are currently saddled with a higher private debt-to-GDP ratio than our counterparts in the U.K. (or the U.S.) have ever confronted, including in the lead-up to the 2008 global financial meltdown.

And unfortunately, the response of far too many Canadian governments has been to further inflate financial-sector bubbles, rather than easing the debt burden people are facing.

The end of British Columbia’s provincial election campaign has featured revelations from the New York Times about $140 million in provincial funds funnelled to well-connected firms in a program that has only been expanding — despite a lack of any evidence it’s done anything but enrich donors.

Like most corporate giveaways, the program was initially billed as being aimed at job creation. But the government’s own figures show it creating as few as 122 jobs, while the giveaway has been expanded to specifically fund foreign workers and buyers while excluding any local benefits. And the fact that one of the businesses involved has been labelled a “significant transnational criminal organization” for its role in money laundering hasn’t stopped it from being a recipient of public largesse.

Saskatchewan has learned that in addition to paying out massive profits to businesses selected for public-private partnerships, Brad Wall’s government has been handing out millions of public dollars even to losing bidders. (So much for the private sector bearing any risk.)

And in a profiteering scheme that looks to trump anything happening at the provincial level, the federal Liberals are barging ahead with an infrastructure bank designed by financial insiders for financial insiders. Once the bank starts using public money to pay for projects, we’ll have to shell out more in private debt servicing costs than it would cost for the government to borrow directly, while the same firms who set it up will pocket the difference.

Needless to say, the attention being lavished on the financial sector has done nothing to help Canadians in general.

In fact, a recent Ipsos survey revealed that over half of Canadians are teetering within $200 per month of being unable to pay their bills, while nearly a third already fall short of being able to meet their financial obligations.

Both of those numbers are alarming enough on their own. But they’re also both up substantially since just last year — signalling that our personal finances are getting ever more precarious.

Unfortunately, the public policy response of our governments has been to make matters worse — both by squeezing the general public, and by systematically delivering unsustainable levels of wealth to the top. And we should ask why anybody would want to expand the reach of the financial sector at that price.

So much for the private sector bearing any risk.