The question of deficits dominated a lot of the economic debate in Canada during the 2015 federal election and even today. Jeremy Corbyn’s Labour Party introduced a new fiscal policy last week that, on surface, appears to mirror the NDP’s anti-deficit stance from the 2015 campaign. Looking closer, however, Labour’s policy diverges quite substantially and points to more honest and transformative economic policy for the left.
You know something is up when the social democrats are trailing the centrist pundits on the economy. The space for a just a mild Keynesian alternative in Canada is wide open. Such an alternative, however, needs a political rather than merely a technocratic push.
Here is a fragment of a piece that just appeared in Canadian Business magazine and is typical of recent centrist commentary:
No one would counsel a return to unchecked spending. But the magical thinking around balanced budgets should stop. Canada’s debt is a sunk cost, not an anchor. The IMF now advises that countries with enough fiscal room to manoeuvre should think twice about reducing debt for the sake of it. If debt is manageable, economic growth should be the priority. An expanding economy will reduce the debt burden organically.
After establishing centrist credentials via the bogeyman of “unchecked spending”, the author quickly offers an argument to the left of all three major political parties, including the NDP. Debt reduction for its own sake is contrasted with restarting economic growth and there’s even an appearance of the now-common progressive appeal to the IMF as the voice of technocratic reason.
The left counterpart to this centrist line is the “Varoufakiste” argument of trying “to save capitalism from itself…to minimise the unnecessary human toll from crisis.” This argument concedes that today even the meager gains from growth that would go to the many are better than redistributive austerity that encourages stagnation amidst the “creative destruction” of social protections. It is a modest Keynesianism fit for neoliberal times.
Last week it was Andrew Coyne; this week it’s Jack Mintz. Seems all the National Post’s favourite conservative commentators have suddenly decided to offer their Very Serious Advice™ to Alberta’s new government. While Coyne made a spurious comparison between raising the minimum wage and instituting a minimum income, Mintz outdoes him with an even more spurious comparison between Alberta and Greece.
Simply put, it is completely disingenuous to compare Greece to Alberta. Greece has seen its economy lose a quarter of its GDP since 2008 – a level of economic crisis unseen since the Great Depression. Unemployment has spiked to over 25%, youth unemployment is over 50% and poverty is widespread. While private creditors who participated in the pre-crisis boom have been bailed out, Greece has been forced into a vicious spiral of austerity driven by an unsustainable debt.
What’s the situation in Alberta? Alberta is still expected to grow, albeit very slowly, in 2015 according to most economists. Unemployment is up by 1% from a year ago, before the oil price crash. In part this is due to firms trying desperately to find efficiencies and cut costs to maintain profits. The picture is not rosy to be sure, but Alberta is in a wholly different category from Greece.
However, not only are Alberta’s problems completely unlike those of Greece, Mintz is wrong about Greece itself. Mintz joins the chorus of mystification that presents Greece as profligate rather than insolvent. It’s not the flow of “unsustainable deficits” but the stock of crushing debt and insolvency that is driving Greece deeper and deeper into crisis–one openly abetted by creditors hoping to make it an example for anyone else in Europe hoping to free themselves from the yoke of austerity.