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Identity crisis

Everyone connected to the economy seems to be having an identity crisis.

Everyone connected to the economy seems to be having an identity crisis. The economics profession has lost its way, the global financial system is confused, Ontario is showing a multiple personality disorder, and I am being confused with Milton Friedman. All these identity problems are related, but only some will affect Northern Ontario.

In the wild world of economics I think I am one of the good guys. Milton Friedman, now, there was a bad guy. He was a good economist and he won the Nobel Memorial Prize in Economic Science in 1976. He was one of U.S. President Ronald Reagan’s advisors, and leader of the radical free-market wing of the economics profession. His ideas helped lay the foundation for the current world economic crisis.

Imagine my dismay when a recent letter to the local paper called my views “Friedmanesque.” Apparently anyone who discusses prices and markets in public – any economist — must be a devil. And the devil’s name is Milton Friedman.

I was worrying about turning into a Milton Friedman clone when the Globe and Mail told me that the entire economics profession is having an identity crisis. “Economics has met the enemy, and it is economics,” said the headline for the business section. It claims Milton Friedman and this year’s Nobel prizewinner, Thomas Sargent, have led the profession astray. Sargent’s theories “may not have wrecked the world,” but they have “blinded economists to reality.”

Fortunately, some of the early economists are coming back into fashion. More and more economists are remembering the early economists like Adam Smith, John Stuart Mill and Karl Marx. These pioneers wanted to eliminate unearned income. They saw land rent, monopoly, usury and banking charges as deductions that didn’t actually add to output. These unproductive ways of getting an income let landowners, capitalists and financiers siphon money out of the system. They prevented growth and increased inequality. They might even lead to revolutions. These parasitical activities seemed to be declining in the early 20th century, but they have been growing rapidly since the 1970s. The Occupy Wall Street protesters seem to agree. They believe that the banking system, growing inequality and slowing growth are part of a package that is hurting “the 99 per cent.”

Mark Carney, the governor of Canada’s central bank, seems to agree as well. He thinks the Occupy Wall Street protesters are on the right track, and he has said publically that the bankers and finance ministers should take them seriously. Central banks were set up to save the public from the bankers and the bankers from themselves and Carney is just trying to do his job, which is keeping the bankers from getting too greedy.

And now we find that the Province of Ontario is suffering identity problems. The election revealed the urban, Liberal identity that is more or less in control of the body politic. There is a suburban/agricultural identity that shows up as blue on the electoral map. In the North, where extractive industries dominate, the map is orange. It is a clear case of multiple personality disorder.

How do all these identity problems affect the North? Ontario’s multiple personality problem raises the possibility that the four Liberal and five NDP members from the North might. Two-party support in a minority government almost guarantees the Northern caucus could get major policy changes through. Whether our MLAs can deliver the bacon remains to be seen.

The identity problems in the banking system will lead to some minor reforms that are unlikely to affect Northern Ontario. The entire sector exists to capture wealth from the rest of the economy, and only a revolution will change that. To paraphrase Flannery O'Connor, a good revolution is hard to find.

As for the identity crisis in economics: who cares? Policy makers and propagandists listen to the economists who say what they want to hear. And like the fellow who can’t tell the difference between Milton Friedman and me, they don’t listen to economists who tell them things they don’t want to hear.