Stimulus Package: Everybody’s Broke

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Call it the Credit Crunch, Depression 2.0, or whatever. The fact is, due to a set of cascading financial circumstances, businesses all over the world are now dealing with the problem of no money. It’s not that labour and capital are too expensive, there is just no money to pay for it all. Since I belong to a relatively high turn-over industry, I’ve been watching out for the stimulus packages that are being passed to get the world’s industries humming again.

The Canadian government’s plans did not produce much in the way of debate. The Liberals and Conservatives simply agreed to disagree and Jack Layton was left alone with a torch and pitchfork in his hands and a stunned expression on his face. Granted, with the regulatory environment our banks have, there seems to be much less at stake in Canada. In America, the numbers are bigger, the stakes are higher, and the tempers shorter.

I understand the debate as the gross generalization that I am about do describe. We have one side in favor of the stimulus package. They want the 800 billion to go into projects that will pay workers who will in turn spend that money again in the general economy. This way of thinking subscribes to the Keynesian school of economics. The other side is against government spending of any kind, and states that such a package will bankrupt the country and they’ll all be cleaning trillion dollar bills out of the gutter by the year’s end. The people saying this proudly say they hail from the Austrian school of economics.

I find the Austrian Solution for the problem very interesting because it seems to consist of the following:

Stage 1: Let Companies Fail.

Stage 2: ???

Stage 3: Profit.

Of course, that’s not the whole plan, but out on the internet I heard a lot about of the doom-saying about runaway inflation and not much in the way of an alternative plan. It turns out that many followers of the Austrian School of economics are supporters of Republican Congressman Ron Paul, who has come up with what I suppose is the vision for their philosophy. This includes abolishing of many government institutions, including the Federal Reserve. Military bases would be closed all over the world, and the US would pull out of the UN and NATO. Drug regulation would be turned over to the states, who could legalize and criminalize as they pleased.

While that leaves out the interesting question of the power vacuum that would be left behind if the US Military were to take its ball and go home, I can see this strategy’s appeal. It certainly is different, and it challenges many assumptions of value in the US structure of power. However, it completely enshrines the idea that government never does anything right, spends taxpayer’s money on hookers and blow, and kicks puppies for good measure. As a product of a government-run medical system, I have a problem reconciling that with the successes of government institutions around the world. It would be destruction for its own sake if the stimulus packages aren’t passed and unemployment is just allowed to increase. Furthermore, these packages include projects like roads and bridges that the market depends on, but can’t reasonably benefit from in the short run. Radical ideas are attractive because they encourage debate and lead up to things that are truly creative. However, we have to be aware that we sometimes cling to these ideas simply because they allow us to believe that we are right and everyone else is wrong.

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