Protesters need a better understanding of the facts

Up to a point, I have some sympathies for the Occupy Wall Street protesters, and those who have followed this movement in other countries. They express a legitimate dissatisfaction with the current situation in Canada, the U.S. and other countries. However, we have seen that, in a few places, the “hard left” seems to have taken the lead and turned it into a violent movement.

But, overall, are they right? It’s complicated.

The protesters do have a legitimate beef about the bailouts to the financial industry and other large companies. The fears of financial contagion that accompanied the recent (and lingering) recession motivated governments all over the world to spend or risk trillions of dollars to subsidize or support companies deemed to be “too big to fail.”

I think that there would have been less overall damage, now and in the future, if some of these companies had been privately restructured.

This being said, one should understand that business subsidies are, in normal years, a tiny proportion of government expenditures. For example, in 2008, according to Statistics Canada data, subsidies to businesses represented three per cent of all government expenditures (which totalled $562 billion at all levels of government). And this three-per-cent figure includes subsidies to businesses that operate in the agricultural sector.

I suggest that the protesters’ goals and messages would be different if they got a better understanding of how the economy works and what the facts are.

They would then be better able to put the main blame at the right place.

Just consider two facts. Before the recession, the typical state member of the Organization for Economic Co-operation and Development spent 41 per cent of gross domestic product; in other words, it took, in actual or future taxes, 41 per cent of what people produce and earn, and spent it itself.

The proportion in Canada was 39 per cent.

Second fact: the budgets of the regulatory agencies in the U.S. were multiplied by 14 in constant dollars (i.e. adjusted for inflation) between 1960 and 2007 (and this is excluding Homeland Security). Such powerful states, which claimed to regulate the macro economy, must certainly shoulder at least part of the blame for the recent (and lingering) crisis.

Indeed, the current sovereign debt crisis, which might kill the hesitant recovery, is caused by government overspending that took place over several decades.

The protesters’ understandable dissatisfaction and anguish should not lead to the rejection of economic and logical analysis.

Many of the protesters express inconsistent demands like, as David Suzuki noted, both opening frontiers and increasing protectionism.

One of the main arguments of the protesters has to do with the inequality of the distribution of income. Indeed, according to the Conference Board of Canada, income inequality has increased over the past 20 years in Canada.

But World Bank data show that Ethiopia, Bangladesh and Pakistan are more egalitarian than Canada. Within Canada itself, the poorer provinces are more egalitarian than the richer provinces.

So I ask: is it better to be all equal in poverty, or unequal but more prosperous? There is no question in my mind that civilized people will choose prosperity and freedom over equality and poverty.

We also need to guard against the authoritarian temptation. I don’t think the 15 proposals put forward by Democracy Watch for bank and corporate responsibility pass the test.

Just read the list (you can find it at dwatch.ca) and note the frequency of the words “require” and “prohibit.”

The authors of the 15 proposals seem to want the state to exert surveillance on everybody – except themselves. Contrary to what they claim, it is for consumers to decide, by voting with their feet, which suppliers don’t serve themselves well – not for government.

The “Occupy” movement should remember that the state, given its coercive powers, is the most dangerous monopoly of all.

Michel Kelly-Gagnon is President and CEO of the Montreal Economic Institute.

Back to top