Taking a long, hard look

Purchasingb2b: September 2011 Print Edition

I think we’ll look back at the summer of 2011 and realize that the developed world hit an inflection point. We’ll look back at the debt crises that popped up in countries as different as Greece and the US—we’ll look at the riots that broke out in the UK—and we’ll realize something is very, very wrong in the way the western world conducts its affairs. And the challenge for the next generation (have no doubt, there are no quick fixes) will be how to regain the values that led to a general prosperity that was unimaginable even 50 years ago.
People or countries take on debt when consumption exceeds production. That’s a truism. Yet, there can be good reasons to take on debt, just as there can be bad reasons. The US took on a tremendous amount of debt during the Second World War. But it was fighting for its survival. It was an eminently defensible public policy position. The same can’t be said for the explosion in borrowing we’ve witnessed in the past three years. In real (that is, inflation-adjusted) dollars the US federal deficit in 1943 was US$669 billion. It was US$1.65 trillion last year. And for what? To fuel undeserved and conspicuous consumption by a people too lazy to put in an honest day’s work.
And isn’t that what the riots in the UK were really all about? That is, undeserved and conspicuous consumption by people too lazy to work for what they want. The casus belli was a fatal shooting by police. There’s question to what extent racism played a part. That’s one issue. But the rioting and looting had nothing to do with colour. I saw enough television footage to see there were plenty of white people who took part. No, the riots were about something else. It’s a sign there is at least a significant minority of young people—all of whom are products of the welfare state—who must feel that looting is morally (if not legally) defensible behaviour.
In previous generations, the UK would have been able to literally paper over the problem, spending money on various make-work and feel-good projects. Those days are gone. Unless developed countries want to devalue their currencies and crush any hope
for future investment and economic growth, we’ve got to tighten our belts. We must also re-discover the virtues that made us wealthy in the first place. That means consuming only what you produce. That means forcing individuals to be personally responsible for their well-being—and their misdeeds. It means re-writing the social contract and rejecting the nanny state and its essential cowardliness.
Toronto-based Michael Hlinka provides daily business commentary to CBC Radio One and a column syndicated across the CBC network.