December 3, 2008
There is a bite in the air this morning. My four-year-old son plays on the floor in front of the fire with an old bolt inside a small empty box. He zooms his make-believe sled over the carpet. This home is a warm, safe place for my boys to learn and grow. But lately I feel like something is amiss, as if there were an iceberg floating ahead of us, just under the surface.
Winston Churchill said “the further back I look, the further forward I can see,” and so I’m brushing up on the history of the Great Depression. There are some similarities between the stock market crash of 2008 and the crash of 1929 … but there are many more differences.
North America has experienced the same sort of boom era as in the Roaring ’20s, with the mass consumption of goods and huge demand for credit by over-extended consumers. But that is about all that is similar. Through most of the 1920s there was a huge crisis in the farming industry. Farmers were supplying more food than was consumed and were unable to compete in an over-supplied market. The land went fallow and drought wreaked havoc throughout the Prairies. But today farming is stable, technology allows us to work around drought, and globalization connects supplies of food to the demands of a climbing world population.
Today governments understand that they must stimulate an economy gone flat. They are pumping billions into the economy, and have created regulatory backstops like guarantees on bank accounts that protect people from losing everything.
In 1929, the stock market crash turned confident optimism to defeat and despair, which lingered a decade until the war came along. Economists believe that the infusion of capital by the Roosevelt government for the war effort took North America out of the Depression, but the war also gave people a cause to rally around, giving North Americans an opportunity to rise out of despair.
The U.S. government has given billions to most of the large banks, hoping they will free up lending enough to stimulate the economy. Nobody knows if shoring up the big companies is good or bad. People need a reason to believe in the future. They need to be inspired and it will take both passionate leadership and tenacity to rebuild confidence in the system. Instead of focusing on big business, what if the government focused subsidies on small to mid-sized businesses?
Small businesses account for about half of all private sector employees and have generated 60-80 percent of net new jobs over the last decade.
A campaign designed to focus on small businesses in Canada is the key to changing public spirit. Government investment in people, innovation, training, research, and strengthening small businesses could go a long way towards building a stronger economy.
The government must begin to treat “subsidies” as investments rather than bail-outs.
Backing small business puts the money into the hands of people who have a stake in the economy, people who are passionate and driven. Throwing it to big corporations does little but pay off the debt their poor management practices have built up over the years. It buys employees their jobs for a few more months, but little more. Instead, government must approach this as any good investor would: Diversify the investments to minimize loss.
Instead of worrying about how this country will hold on, we should be investing in skill, training, and innovation, building a stronger future. Today’s slogan should be, “Invest in small business, it is our future.”
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Sarah Thomson can be reached at email@example.com