I have been following the growing global financial crisis as it has unfolded over the last year or more. Or at least kind of. I have to admit that I don't really get it -- there's a great quote from Ursula LeGuin's novel The Dispossessed about the mind-numbing ridiculousness of capitalist economics, but I'm not at home at the moment so I can't look it up. However, that's more or less how I feel about the topic. But I have had the sense for some time now that this crisis is really, really important, way back from when the odd lefty article was popping up about how this whole subprime mortgage thing was going to blow up and going to be big and going to be awful while the mainstream media was still pretending nothing was going on.
I've found information on it in a few places I read regularly. Stan Goff posts links to related material fairly frequently. CounterPunch also publishes quite a few articles on the topic. Look back through the archives on both of those sites and you'll find lots of background material. And Lenin's Tomb, though it usually focuses on other things, has had a couple of good relevant posts in the last few days.
In those sources, I rarely encounter any material that mentions the implications for Canada. However, the reason I am writing this post is that today I came across a detailed and interesting article in the Toronto Star (hat tip to P.C. for pointing me towards the article). I recommend everyone read it, because it talks about things that are going to be shaping all of our communities over the next couple of years, and not in good ways.
Now, I don't feel that I have any expertise to comment on where this article gets it right and where it is off base, or where within the best-case to worst-case scenarios presented in this article and elsewhere the truth will actually fall. Is it going to be replay of the Great Depression, or just a hard bump of a recession and then it's back to business as it has usually been over the last quarter century? Who knows. Though based on all I have read, my gut guess is that this is going to be more than a routine downswing in the business cycle.
However, one thing I must say about learning about such things from left sources is that, on average, you do get a bit better predictions about what is going on in the world than if you rely mostly on mainstream sources. You don't get perfection, or anything close. There can still be a tendency to use hyperbole and melodrama to sell copy (or increase hits). But, on average, there seems to be a clearer vision of what's going on in the world than in mainstream sources. An almost embarassingly obvious example of this clearer vision was the entire lead-up to the Iraq War, but the global financial crisis has also been a good illustration.
I say that because of the following experiences: Almost exactly a year ago, my partner and I were in a bit of a panic about housing because the building in which we rent was being sold and we were afraid that could mean we would have to move. It didn't, but it stimulated a lot of worry and thought about home ownership and debt and so on. The net result was that it pushed us to start thinking about buying a house in a much more serious way. One step was to start learning about it all, and part of doing that was that a few months after our initial panic my partner talked to a couple of local professionals with expertise related to mortgages and money and so on (given that neither of us really know a whole lot about it).
The key thing is this: At the time those initial conversations occurred, the subprime mortgage crisis in the U.S. was already happening and it was already clear from things I was reading that the ripple effects were going to be big. Yet when my partner asked about implications for the housing market here in Sudbury, the experts she consulted with at that time -- who presumably have the resources and mandate to be on top of such things -- were of the opinion that it was full boom ahead for the forseeable future.
So we took some early preparatory steps, and consulted again in the New Year, this time with a different person at the same organization. And now, though their message is still much less bleak than some of the things I've been reading, there is a lot more caution and a sense that a downturn is indeed in the works, and the take home message was that if we are fine living where we are, we might as well postpone buying and wait to see what happens.
The article I've linked to says, "The high commodity prices for everything from oil to wheat that have largely insulated Canada from the early phases of the U.S. economic slowdown are due for a fall, pulling down Canada's economic growth rate in 2008." This is relevant to the anecdote above because one of the experts my partner first consulted cited the role of nickel, particularly consistently strong demand for it from China, as the reason why the local economy in Sudbury would continue to be red hot no matter what happened in the U.S., with the side effect that the local housing market would also be red hot.
The article observes a few paragraphs down: "But the speculators' ardour for nickel and soybeans will decline sharply as China finally pulls back on its GDP growth, creating big world surpluses – and price declines – in everything from zinc to cold-rolled steel. Roche forecasts a 30 per cent price drop in refined oil in 2008, and a decline of 20 per cent to 30 per cent for base metals."
That's going to have huge implications for Sudbury, because by far the largest non-governmental component to the local economy is the mining of metals, especially nickel. Obviously a slower housing market is a pretty minor and unimportant impact if this gets as bad as it could, in Sudbury and in Canada as a whole. More people will be living in poverty, and poverty will be deeper for more people. Locally, however much the mine owners, mine workers, real estate developers, and folks in a few other sectors of the economy have described the local economy as "booming" in recent years, Sudbury is a very poor city by Ontario standards. If the mining sector gets hit with a 30% price reduction, that will mean more people in Sudbury are worse off in very significant ways.
And as lots of writers who are talking about the financial crisis from a left perspective have observed, we are in a poor position to respond. Whether you cite Naomi Klein's latest book or marxist writers whose analysis focuses on class struggle, it's no secret that crisis of whatever origin is an opening for intensified class struggle. There is evidence that the financial crisis has already been an opportunity for intensified class struggle from above in various contexts, and there's no reason to think that won't continue globally and in Canada. Perhaps the most worrisome aspect of this is that popular movements in Canada are not in great shape. What are we doing to be ready to respond to this intensified attack, if and when it starts to happen in earnest?