We’re terrified of the economy, and we’re terrified of the banks and most of all, we’re terrified by the word “deficit”.
Historically speaking, Canadians have been running deficit budgets whenever necessary, and no one seems to have worried about it… deficit budgets are found most often in conjunction with prosperity. They used to be a sign that your economy is growing, and in the middle of the previous century, that was indubitably true. 1963 was not a panicky year, nor was anyone talking about belt tightening. Go ask you grannie, she’ll tell you. Or, look here:
Don’t believe me? Well, there’s this:
“…fiscal deficits hold a distinguished place in Canadian history and have been called upon as a way to achieve the goals of an activist state. Deficit finance has been used for three purposes: to build a new country, to fight world wars and to stabilize the economy [emphasis mine].
“Deficits and debt built Canada. The objective of building a national economy swept aside doubts about the wisdom of borrowing because the transportation infrastructure (originally canals, then railways) needed to exploit Canada’s natural resources was expensive and could not be privately funded. From before Baldwin and Lafontaine’s responsible government in 1848 to Confederation in 1867 to Sir John A. Macdonald’s National Policy in 1879 and beyond, Canadian governments ran nation-building deficits. By 1866, in fact, debt interest payments amounted to 29 percent of colonial spending, with more borrowing needed to finish the job. Confederation was in no small measure about deficit finance and the need to create a more creditworthy borrower—Canada.
During both world wars, the federal government used borrowing as a key method for financing Canada’s participation. In part as a reaction to the World War One approach of borrowing now and paying later, World War Two was funded on a so-called pay-as-you-go basis. Nonetheless, by the end of that war, the national debt exceeded the annual gross national product, a level not seen before or since in Canada. The scale of the Second World War required significantly more planning, coordination and central direction than had previously been asked of capitalist liberal democracies. As a result, the modern Canadian state was built.”
The word deficit probably didn’t even get a mention outside of Parliament until 1970.
In fact, it wasn’t until the oil crisis of the 1970s that deficit became a dirty word.
Oil prices had skyrocketed, contributing to inflation.
(Hey, wait a minute. That’s the exact opposite of why everything is supposedly going to hell in a handbasket now: oil prices are too low! I know. There’s a reason for this. It is not because economists know more now, or that things have changed. It is because anything that can be used to create fear works for businesses and corporations, as a mechanism to get people to agree with things that will obviously be bad for them. Watch and learn.)
Anyway: Doom was just around the corner, and the parties and people whose views were to the right of centre used this to create irrational and unfounded fears that we would go bankrupt. They fostered the notion that a government budget is exactly the same as a “guy-on-the-street’s” household budget would be. (It isn’t.)
We were told that the banks would just declare Canada bankrupt and take all our stuff, turn out the lights, and leave. (They can’t. They won’t.)
For starters, the government has its own bank. The government creates the money they manage. The government has a host of options available to it that you and I don’t have. They can, for example, float bonds to help finance themselves: can you do that? Governments can, if necessary, print more money. Can your average mortgagee, coming up short after Christmas indulgence, run off a few extra hundreds to make sure the payments go through? No? Well, then.
But the bankruptcy thing – it played well. It sounded dire. It sounded imminent. We started to demand balanced budgets, and were willing to accept all kinds of cuts to services to achieve it.
And every time we began to think that perhaps this wasn’t really the best way forward, that maybe we weren’t getting any prosperity or stability out of this, there was always a scary story to be screamed to us and whip us back into line.
In 1985, it was New Zealand – Rex Murphy did an entire program on it, an hysterical doom-and-gloom piece that has (perhaps not surprisingly) been excised from the series’ archives on the CBC website.
New Zealand had hit the Debt-Wall! They were done, toast, and the only remedy was to put themselves into the hands of the bankers and “restructure” their entire country from top to bottom. It was the only way out!
(And, Rex implied, we were next. Canada’s deficits and debts had already doomed us to failure, but if we acted quickly and cut everything except parliamentary salaries and military spending, we might just survive into the next decade. No promises, though!)
New Zealand went from a fairly egalitarian country with virtually no unemployment to one where over 300,000 people (around 10% of the total population, based on 1985 figures) were unemployed and a few major companies sucked up billions of dollars.
A cautionary tale, interesting mainly because most economists now agree that New Zealand was nowhere near imploding financially and that the wholesale restructuring of New Zealand society was completely unnecessary.
Maybe that was too long ago. Maybe you think that this proves nothing. So they were wrong, that one time. (Okay, two times, because, of course, high oil prices are not the problem, silly old 70s people.)
But now, we’re in a global economy. We’re too small to control this. We have to do whatever it takes, we haven’t got the power to stand up to the banks. They might just crush us, out of spite.
In 2008, Iceland (whose total population is around the same as the number of people thrown out of work in New Zealand in 1985) was very much in the news.
They were bankrupt. Kaput. The meltdown had taken its first total annihilation victim, on account of they were so small and simply had no weapons to counter the global meltdown.
Their only hope was to become an indentured servant of the world’s bankers and the IMF, grovel till the EU agreed to rescue them, and hope like hell they’d be allowed to keep their name.
But, wait, hold on: Do you hear anything about Iceland and their terrible woes anymore? Do the politicians agitating for more austerity hold up the awful plight of the Icelanders fleeing their country, or worse, staying on, shivering in their impoverished frozen wasteland?
And if not, why not?
Because that’s not what happened at all.
Unlike Ireland and Greece and a whole raft of other countries whose people have swallowed the fictions as we have, Iceland did the exact opposite of what all the conventional wisdom and every political pundit said they must do.
And they’re fine, actually.
Nobody is refusing to do business with them, and nobody’s freezing, and there was no mass exodus, apart from a bunch of felons from the banking industry, who can’t go back because Iceland will jail them if they do.
Now, someone is about to point out that Iceland is different – that they are small – TINY, in fact – and that’s the reason they survived. They could get away with it because they don’t matter.
You’ll notice that this was not mentioned when everyone was telling Iceland what kind of axe the executioner had to use, and how many innocents would need to be slaughtered. Size of country did not appear to matter, then.
Canada is different. Now the chorus is: We’re bigger. That’s what someone is getting ready to shout, right now.
It’s true. We are bigger: bigger land mass, bigger population, bigger world profile. That’s an advantage, folks.
Do you think that the prospect of losing a much bigger market, a much bigger supplier, a much bigger overall entity with a much higher profile in the world is going to make it easier to mess with us?
The 2015 Alberta election should be your guide here: to date, although Rachel Notley’s NDP government at least started to make good on every one of the promises that had the Tory voters and mega-companies frothing at the mouth before the election, not a single one left.
Oil prices remained in the toilet – and yet every single oil company is still here. Every. Single. One.
Sure – a government that was going to put social safety nets and working- and middle-class people at the head of the agenda and tax the people who could afford to maybe make do with one less yacht this year – they probably spent some extra money, and maybe some of their plans didn’t work out too well and we had to rethink a few things.
We didn’t see instant prosperity. And, like toddlers, we started whining about that.
But we could have changed the rhetoric, turned down the heat, made people’s lives better, and started gearing up to confront a future that is undoubtedly going to look different from the past.
We didn’t have to be afraid.
We were, as Canadians, quite free to choose a different course, and that even if that course didn’t work out, it was not really that big a deal, and we could have tinkered with it, we could have fixed stuff, and the economy would not have imploded: deficits are not the problem, there was no looming debt-wall that would have knocked us on our butt.
You needed to ask yourself this one question
Do you value the freedom of everyone over the promise (likely undeliverable) of a few extra bucks on your paycheck?
Alas, Alberta, you did not.
Alas, Canada: you will not.