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Running out of economic options

Columnist/economist David Crane is remarkably honest in his assessment of the Canadian economy (Red Deer Advocate, April 2). He identifies the problems, backing them up with facts and figures.

But there is no real explanation as to the cause of the current crises or indeed a workable remedy.

If we accept his premise that we need to buy less and sell more, we must ask ourselves how this will be achieved in a competitive economic system?

Competition exists not only between companies but also between nations that are all in the same situation, trying to export more and import less.

Achieving an advantage depends on having more industrial investment than your competitor, be it a company or a nation, but as Crane points out, industrial investment is falling.

The basic problem is one of overproduction or overcapacity, which means the same thing. We can produce an endless amount but companies refrain from doing so because more things are being produced than can be sold at a profit.

Why invest in more productive capacity when you are unable to sell at profit what you already produce?

As Crane points out, Canada is becoming less competitive, accumulating a $275.5-billion current account deficit that is financed by borrowing.

In order to overcome the limits of the world market, where working people cannot afford to buy back the things they produce, credit was expanded to unheard of levels from the 1980s until the financial crash of 2007-8. This is what financed the last world economic upturn and it has now gone into reverse, as the debts from the bailout of the banks have to be repaid.

In an effort to repay these massive state debts, accrued from the collapse of the banking system worldwide, countries are implementing a policy of austerity that is only adding to the problem.

Every cut in welfare, every pay cut, every privatization and closure that cuts out well-paid jobs reduces spending power, exacerbating the lack of markets and adding a further disincentive for productive investment.

There is no easy way out on the basis of the present economic system.

Those at the top want the ordinary working people to pay for the crises but why should they pay when the crises is not of their making? Workers will be unable to bear the massive cuts to their living standards that are planned and without doubt there will be repercussions.

Political parties will be tested during the coming stormy and eventful period. Eventually, just one particular political party will offer the alternative of a democratic, socialist, planned economy. This will be a precursor for fraternal, co-operative, international trade that will benefit all nations.

Keith Norman Wyatt

Innisfail NDP

(personal capacity)

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