Global Economic Slowdowon Strangles Recovery

                              
Headlines scream "Markets Tumble",  "Recession Looms",  "Recovery Falters".  Pundits around the world look for causes and spin out all kinds of reasons, explanations, theories.  It's like a vast universe of information overload.  Overwhelming!

Let's try to narrow down the villains behind this debacle.  In my view, too many countries are relying on the theories of 1940's economist John Maynard Keynes.  He postulated that more government spending would stimulate higher economic growth.  So let's look at 3 sample countries - France, Italy and America.  In 2013, France spent 57% of its GDP  (total economic output)  versus 56% in 2009, the peak of the economic recession.  The result?  The French economy has not grown in more than 6 months. Italy spent 50.6% of its GDP in 2013 but its  economy is actually shrinking.  The best of the 3 is the United States which only spent 36.5% of its GDP in 2013 but its recovery is the slowest since World War 2.  America's National debt is skyrocketing and its "easy money"  program, quantitative easing (QE), designed to boost economic growth has failed dismally.

The simple fact is that every economy can be divided into 2 parts:  public and private sectors.  The larger piece of the economic pie spent by government leads to a smaller slice for the private sector which leads to fewer jobs and a lower standard of living.  But if this is true, why do governments spend so much?  The answer may sound cynical but in my view, governments are run by politicians who will promise nearly anything to get elected.  And promises cost money.  But to them, that's no big deal.  Just borrow long term and pass on the debt to the next "unborn"  generation. (whatever you do, don't raise taxes on the "living"  - you won't get re-elected!)

However, to end on a positive note, there are examples of countries that have made difficult decisions in the best long term interests of the people.  Germany, 2003, Chancellor Gerhard Schroeder passed labour-market reforms that stimulated an effective economic recovery.  Poland, 1991, pro-market reforms of Leszek Balcerowicz.  America, 1980's, Ronald Reagan's tax-rate reductions and regulatory reforms.  And of course, my own country Canada, 1995, Liberal Finance Minister Paul Martin's public spending reductions, continued by current Conservative leader, Stephen Harper.

But the difference between the current crop of politicians who just spend, spend, spend and these true patriots of the past is that they had the guts to make tough decisions and stay the course - in the interests of the people, not re-election.