WISDOM, WEALTH AND THE LESSONS OF HISTORY

If a society
wishes to endure it ought to rely on its wisdom more than on its wealth.
   

The idea
suggests we have to use our heads, employ intelligence and rely on analysis
rather than risk being swept into a whirl-wind of indulgence.   

An essential
component of wisdom is discipline, both personal and collective. Discipline
speaks to self-control, to living within ones means, to thoughtful planning,
and to the ability to make adjustments even when they are painful; discipline
suggests a pre-occupation with a larger prize, more than that afforded by
immediate gratification.

Following
the Budget last year, some asked: how it is possible that financial whiplash
could again be suffered so quickly; the music suddenly muted on our celebration
of nascent wealth?

Others
rightly express bewilderment that we have not taken care to prevent successive
deficits of $200 million and $450 million for the past two years and a forecast
deficit for the 2014-2015 fiscal year will be higher again.  We have also done little to resolve the
accumulated debt of the first five decades of Confederation.    

The question
is: are we any more enlightened than our 20th Century forbears?

That is not an
unreasonable question; though the mindlessness which has characterized the
Budgets of the Williams/Dunderdale Administrations suggests we possess no
historical memory nor give any thought to the plethora of countries suffering unbearable
debt burdens.

A much older
generation still expresses bitterness that NL paid a high price for its
insolvency; our national sovereignty having been surrendered in 1934. 

Lord
Amulree, The British Parliamentarian, appointed to study Newfoundland’s
financial condition, was blunt in his assessment of our lack of fiscal
discipline.  Many regarded him unnecessarily
harsh because NL shared similar economic challenges as other countries during
that time. Still, modern analysis offers only slightly less judgmental repartee. 



In a 2003 Paper
entitled, “THE NEWFOUNDLAND LESSON”   by David Hale, Chairman, Prince Street Capital Management of Chicago for International Economy Magazine, the author notes how quickly and easily
the problem developed: “The government had borrowed heavily to finance military
expenditures…to finance the construction of a railway, and to cover operating
deficits…by 1933, there was a public debt of over $100 million compared to a
nominal national income of about $30 million”.


Hale reminds
us, too, that the politicians of the 20
th Century failed to remember
the problems suffered in the late 19
th century.  Wrote Hale: “The 1933 debt crisis was not
Newfoundland’s first brush with economic calamity. There had also been a major financial
crisis in 1895; the island’s two largest banks in the country failed. The bank
failures destroyed many local businesses and left the government without
adequate funds to make a payment on the public debt”.
  


Since
Amulree, we have not succeeded in moderating public expectations; nor have we
installed a set of fiscal brakes to ward off another calamity.  That seems to be too high an expectation for a
leadership that believes the public purse bottomless.

We have paid
a high price for our forbear’s failure of governance.  Now, it is us, whom history will judge. What
is our duty? Just possibly it includes a commitment to not repeat past failures. 

The problems
of Greece, Cyprus and Ireland, playing out as a wound upon the Eurozone, will
not result in a ‘confederal’ adoption as did our ‘structured default’. 

But loss of
sovereignty is no minor consequence. 

Few imagine
that 1934 could ever be repeated. Perhaps that is the reason we are still
prepared to ignore risk even as we passively watch the Finance Minister rack up
huge deficits at a time when historical revenues are at their highest.  

Bad luck is a formidable visitor when a ‘speculation’ is
contrived; last time, it was the Newfoundland Railway and other ostensibly
legitimate reasons; today, the excuse is infrastructural deficit, ‘investments’
in social development and a plainly uneconomic hydro megaproject.

When is any excuse not legitimate?

Could it be when you can’t afford it? When a large part of
the Budget is reliant on volatile commodity prices (oil)? When you have, again,
engaged in a high risk speculation (Muskrat Falls)?

The right to accumulate debt does not constitute an
obligation to borrow; it is an option, a choice; one to be managed carefully
and always with an eye to the future.

Are we capable
of relying more on our wisdom than on our wealth?

Perhaps the
new Minister of Finance will address those questions when she delivers the next
Provincial Budget in a couple of weeks.
Des Sullivan
Des Sullivan
St. John's, Newfoundland and Labrador, Canada Uncle Gnarley is hosted by Des Sullivan, of St. John's. He is a businessman engaged over three decades in real estate management and development companies and in retail. He is currently a Director of Dorset Investments Limited and Donovan Holdings Limited. During his early career he served as Executive Assistant to Premier's Frank D. Moores (1975-1979) and Brian Peckford (1979-1985). He also served as a Part-Time Board Member on the Canada-Newfoundland Labrador Offshore Petroleum Board (C-NLOPB). Uncle Gnarley appears on the masthead representing serious and unambiguous positions on NL politics and public policy. Uncle Gnarley is a fiscal conservative possessing distinctly liberal values and a non-partisan persusasion. Those values and opinions underlie this writer's views on NL's politics, economy and society. Uncle Gnarley publishes Monday mornings and more often when events warrant.

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