Imagine if you were the President of Greece! What would do do?
At the moment all the debate is about how deep the cuts and how can this be accomplished politically. But what has caused the problems in Greece and maybe in all the countries now under review? For in the end, if we can see the root causes, we might be able to create an agenda other than simply cut and hurt.
As I walked the dogs this morning my mind turned to PEI. A little state of 140,000 people. Is our story that is small enough to understand relevant?
Does PEI have a real economy?
Our energy bill is approaching our income tax threshold. Most of this money leaves PEI. As we approach the ramp up to peak oil, our energy costs may well exceed our tax base. This is so because we have done too little so far to get ready for what is to come. Greece would have the same picture. In a climate like ours about half this bill goes on heating. PEI has the highest commuter rate of any society in Canada and the most dispersed population.
These are all things that we can work on - But for now they remain as minor items.
We import nearly all our food. Our most important agricultural sector has been directed to play in the industrial cash crop sector instead. We are now at the end of this. The 2 big processors are pulling back.
The result:
Our rivers are silted up and filled with chemicals.
Our topsoil is in very bad shape.
Our farmers are broke.
Most of the energy of governments on PEI in the last 15 years has been in trying to prop this system up. Just as they are trying to prop up the lobster fishery that is also in the same trouble - too much capital tied up in an export commodity where the big players have the producers where they want them.
Just as there is lots of potential for a local energy system so there is for a local food system. This is not about 5 big farms all farming the old way, just as local energy is not about finding our own oil. It is about a new connected system of small producers using very different methods.
PEI has almost no local manufacturing. Nearly everything we buy comes from away.
PEI has only a tiny local financial system - the Credit Unions. Most of our savings leave the Island.
There is a small service sector.
There is very high unemployment and underemployment.
This has led to a large underclass that drives a large support demand in social and health services.
The government has become the centre of the economy. It employs lots of people who, as in Greece, have gold plated wages and benefits. It supports the underclass with just enough to struggle by. It pays an ever growing health bill that now is over half the budget.
There is not the real tax base to support this and other areas such as energy and food suck as much money as our tax base out of the Island economy too.
PEI has been borrowing to cover the deficit. We have been drawing down our natural capital to pay the deficit. We have been drawing down our human capital to pay.
But at some point, like Greece, the bill will have to be paid. Like Greece the pain will be politically impossible and like Greece an outcome could be chaos.
Can we avoid this?
I think that if we started to go for it in local energy and food, we might.
We start keeping more and more money in our economy. We could save at least $200 million on the heating bill alone at current prices. With real effort, we could reduce our energy bill by half. We could pump at least $100 million into food.
We could create lots of real employment as well. We would begin to restore our natural and human capital.
Please not waste this crisis. For there comes a point - maybe Greece is there - where there can be no fix.
