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Canada's Business

Making tough choices

Many must share responsibility for our present economic troubles. The financial community is among the major culprits. But, overwhelmingly, the lion's share of guilt must be attributed to politicians. They allowed, in fact aided, the changes in policy, claiming that self-regulation was all that was needed to prevent abuses such as the development of bubbles in housing and stock markets. In view of the growing complexity in financial markets and the tides of greed this was just plain foolish.

All this came about as a result of the so-called Era of Excess. The rationalization was that credit standards and a money supply soaring to the moon were the ingredients for a new and lasting period of strong economic growth. They were looking for a painless shortcut to prosperity. It was implied that savings and longer term investment could be discarded, as debts and mortgages could be "taken care of" by asset inflation.

Now policy makers must face the consequences of that false belief. They were attempting to recreate the economic conditions that prevailed in the previous decade. They have faith that artificial insulation from basic economics will work. All that matters, they claim, is the present economic expansion, disregarding the reasons for it. This is dangerous, and surely will end badly.

What is at stake here is the ultimate question. Do politicians have the will and courage to look beyond the normal short term horizon and make the tough choices so essential now? This is a test that democratic politicians indeed must make.

In the late 1930s politicians failed to heed the obvious warnings from expansionist nations. In the United States against heavy odds President Franklin D. Roosevelt bucked public opinion and gradually nudged that nation into a position of helping the countries fighting the rising tide of nationalism that so threatened our civilization.

Nowadays, our politicians must point out that continuing our course of action of endless consumption, growing indebtedness, monetary debasement, and a lack of rea1 investment is a sure path to ruin, confirmed by history again and again. We must hope this will be acknowledged by politicians, and that they will have the integrity to demand belt-tightening by us. If our elected officials fail to do so, the coming decade promises to be very troubled.