Ottawa: Today, 85 economists released an Open
Letter criticizing the federal government for its inaction in light of
the deepening global financial crisis, the growing probability of a
worldwide recession, and structural weaknesses in the Canadian economy.
The letter challenges government claims that Canada¹s ³fundamentals² are
strong, and highlights the significant deterioration in Canada¹s
economic performance over the last two years. Despite recent government
statements, there remains a wide disconnect between the appropriate
policy response to the looming downturn, and the ³stay-the-course²
approach still being enunciated by the Prime Minister.
The Open Letter calls on government and its
institutions to show leadership and play a more active role in
stabilizing financial markets, stimulating real investment, and
maintaining employment and incomes in the face of the worsening
financial and economic downturn.
Signatories include: four chairs of economics
departments, two former Presidents of the Canadian Economic Association,
a former federal Secretary of State for Finance and a former Quebec
Minister of Industry
The letter is signed by:
Arthur Donner, Economic Consultant
Marc Lee, Chairperson, Progressive Economics
Forum
Martha MacDonald, Chair Department of Economics,
St. Mary¹s University
Fiona MacPhail, Chair, Economics Department,
University of Northern British Columbia
Mike McCracken, President, Informetrica Ltd.
Lars Osberg, Chair, Department of Economics,
Dalhousie University, Former President, Canadian Economics Association
The Hon. Douglas Peters, former federal
Secretary of State for Finance
Mario Seccareccia, Economics Department,
University of Ottawa
Brenda Spotton, Economics Department, York
University
Rodrigue Tremblay, emeritus professor of
economics, University of Montreal, former president of the Canadian
Economics Association, and former Quebec Minister of Industry.
and 75 other economists.
To access the Open Letter and the full list of
signatories go to:
For further information or comment, please
contact:
Marc Lee (Vancouver): 604-801-5121 ext.228
Marc Lavoie (Ottawa): (819) 770-4306
John Loxley (Winnipeg): 204-474-9769
Lars Osberg (Halifax): 902-494-6988 or
902-455-9486
Mario Seccareccia (Ottawa): 613-562-5800 ext
1691
The Open Letter was conceived and prepared by
the Progressive Economic Forum, a network of Canadian economists that
promotes alternatives to conservative economic theory and policy.
***********
Open Letter from Canadian Economists on the
Current Economic Crisis and the Appropriate Government Response
The deepening global financial crisis, the
decline in world commodity prices, and the growing possibility of global
recession are exposing worrisome weaknesses in Canada¹s economy.
Complacent expressions of faith in our ³fundamentals,² and other
varieties of economic denial, will not protect Canadians from the coming
storm.
Canada's Economic Fundamentals are Anything but
Strong
Macroeconomic performance has weakened
dramatically since the current government came to power at the beginning
of 2006. Economic growth has largely stalled.
Productivity has declined. The recent expansion
was largely propelled by high commodity prices and a housing bubble
both of which are now ending.
Labour markets have weakened, and employment is
poised to decline further as the slowdown takes hold. Some sectors have
already been badly hit. Over 300,000 jobs in manufacturing have been
lost. Yet less than 40% of unemployed workers qualify for Employment
Insurance benefits.
Excluding petroleum and minerals, our
international trade performance has deteriorated. Incomes for
corporations, governments, and some households have been inflated for a
time by record global commodity prices. But over-reliance on resource
extraction is not a sustainable basis for our future economic progress.
Meanwhile, in large part as a consequence of this growing resource
reliance, Canada has failed miserably to do its part in the urgent
global effort to limit greenhouse gas emissions.
Although Canadian financial institutions did not
engage as aggressively in risky practices as their U.S. counterparts,
the Bank of Canada has already had to step in to provide many billions
of dollars in short-term liquidity. Credit conditions in Canada are
becoming more uncertain, restricted, and costly, and this will
inevitably constrain spending and output in the months ahead.
Canadian households are more indebted than ever,
with $1.25 of debt for every dollar of disposable income. Amid gloomy
headlines, falling stock and housing prices, and precarious household
finances, Canadians are starting to cut back on consumer spending.
Many Canadians did not benefit much during the
good times: poverty rates in Canada did not meaningfully decline and
real wages have hardly increased at all, even while corporate profits
surged to all-time highs. But the prospect of recession now threatens
all of us with hardship whether we shared in the good times or not.
Crisis Demands an Active Government Response
The general approach of Canadian economic policy
in recent years has been to reduce the scope of government (through tax
cuts, deregulation, and privatization), ratify the growing resource
orientation of Canada¹s economy, and squander the chance to use revenue
from the resource boom to enhance long-run productivity, prosperity, and
stability. Some politicians wish to further reduce the size and
influence of the public sector.
The dramatic events of recent weeks have
destroyed the idea that markets are best left to their own, unregulated
devices. The enormous costs of this complacency have been clearly
demonstrated. Government and its institutions must now show leadership
and play a more active role in stabilizing financial markets,
stimulating real investment, and maintaining employment and incomes.
The spreading downturn in both the financial and
the real sides of the economy is likely to undermine spending and
employment levels in many regions and sectors of Canada¹s economy.
Income support measures, employment insurance in particular, should be
strengthened. In addition, public infrastructure projects, including
those aimed at reducing Canada¹s greenhouse gas emissions and expanding
affordable housing, should be ramped up to maintain employment and
production (as private-sector activity declines).
The federal budget is narrowly balanced, and may
slip into deficit (especially if real GDP begins to decline). The
current government has pledged to prevent such a deficit at all costs,
and this will mean significant cuts to public spending as the budget
balance deteriorates. But that course of action would worsen the
economic downturn and job losses. It is far better to maintain public
programs to support employment and incomes, even at the cost of a
cyclical deficit.
The Bank of Canada must continue to support the
financial industry with liquidity, and should reduce interest rates to
stimulate borrowing. But the government must also explore other avenues
(including the use of public institutions, like the Canada Mortgage and
Housing Corporation, the Business Development Bank of Canada, Export
Development Canada, and other conduits) to expand lending to households
and businesses. At the same time, the financial industry must be
re-regulated to prevent the unproductive speculative excesses that
caused the current crisis.
The global economy is heading into a
challenging, dangerous period perhaps the worst crisis since the
1930s. Canada cannot expect to be immune from those global developments.
Economic history teaches us that government intervention is essential in
times of crisis: both to stabilize markets and to shorten downturns with
counter-cyclical measures.
Signed by: 85 economists
***************
POUR DIFFUSION IMMÉDIATE :
Le 8 octobre 2008
Lettre ouverte de la part d¹économistes
canadiens demande des actions concrètes pour répondre à la crise
économique.
Ottawa : Aujourd¹hui, 85 économistes diffusent
une lettre ouverte critiquant le gouvernement fédéral pour son inaction
à la lumière de la crise financière mondiale qui s¹accentue, de la
probabilité croissante d¹une récession internationale, et des failles de
l¹économie canadienne. Cette lettre conteste les affirmations du
gouvernement selon lesquelles les « fondements » du Canada sont solides
en faisant la preuve de la détérioration significative du performance
économique du Canada depuis deux ans.
Malgré les affirmations récentes du gouvernement,
il existe encore une disparité significative entre la politique
appropriée pour répondre aux risques de récession et l¹approche du
laissez-faire que nous sert le premier ministre.
Dans cette lettre ouverte, on incite le
gouvernement et ses institutions à faire preuve de leadership et à jouer
un rôle plus actif dans la stabilisation des marchés financiers, la
stimulation d¹investissements réels, et le maintien de l¹emploi et des
revenus à une période où le ralentissement financier et économique ne
fait que s¹envenimer.
Les signataires de cette lettre sont :
Arthur Donner : Conseiller économique
Marc Lee, président, Progressive Economics Forum
Mike McCracken, président, Informetrica Ltd.
Martha MacDonald, chaire du Département
d¹économie, Université St. Mary¹s
Fiona MacPhail, chaire du Département
d¹économie, Université de Colombie-britannique du nord
Lars Osberg, chaire, Département d¹économie,
Université Dalhousie, ancien président de l¹Association canadienne
d¹économique
Hon. Douglas Peters, ancien secrétaire d¹État
fédéral (Finances)
Mario Seccareccia, Département d¹économie,
Université d¹Ottawa
Brenda Spotton, Département d¹économie,
Université York
Rodrigue Tremblay, Professeur émérite en
politiques économiques, Université de Montréal, ancien président de
l¹Association Canadienne de science économique et ancien Ministre
québecois de l¹Industrie.
Šet 75 autres
économistes. Pour consulter cette lettre ouverte et
la liste intégrale des signataires, rendez-vous à l¹adresse :