Dragging the Canadian economy out of crisis

Dragging the Canadian economy out of crisis

Canada’s new finance minister has a tough challenge ahead of her, but also the opportunity to fix many of the country’s lingering economic problems.

There’s no job quite like running a national economy during a time of crisis—especially with a minority government. Furthermore, there are those who say that Canada’s new finance minister Chrystia Freeland is not adequately qualified for the role. Yet as a journalist and author whose articles are readily accessible, Freeland is highly transparent in her economic thinking. Perhaps even more revealing as a framework for fixing Canada’s problems is her book Plutocrats, which is also conveniently summarized in her 2013 TED Talk.

Freeland is an unashamed defender of capitalism yet also points out that one of the system’s biggest weaknesses in its current form is the still growing rich-poor divide which, she believes, could see a mass rejection of the status quo. Furthermore, with the Canadian economy shrinking due to COVID-19, the wealth-gap widening, and the deficit exploding, a traditional small-government policy of austerity and low taxes seems untenable. So far the money distributed by Canada’s Liberal government, including Friday’s announced $37-billion extension of the emergency response benefit (CERB), has been useful in tiding the country over an economic shock that no one saw coming. But while this may be inevitable and will work for a while, most advocates of emergency government spending believe it cannot outgrow GDP forever, but must jump-start the economy so that the spending eventually pays for itself.

Pumping money into green growth as Europe and even pro-coal Australia have done certainly has widespread support from the expanding environmental business sector and if packaged wisely, could have even broader appeal. Following Australia’s example of striving to become a “renewable energy export superpower” is hardly less realistic than the billions spent by former prime minister Stephen Harper to promote a similar plan for fossil fuels, or Prime Minister Justin Trudeau’s multi-billion dollar investment in a pipeline, now that oil prices are falling and demand shrinking.

All the same, to create jobs, especially in the booming tech sector, means creating businesses and keeping them from being bought up by foreign giants. And how to stop inequality from increasing further? The Green Party last week got behind universal basic income. The New Democrats have argued for universal child care. Gradually raising the federal minimum wage might also play a role. Yet at the same time, some Conservative politicians have called for an election to stop public spending from spinning out of control. Freeland knows all too well that there is only so much money available to the government, yet tax historians have suggested this might be a rare moment when Canadians would support a more distributive tax regime.

Canada’s new finance minister Chrystia Freeland is undoubtedly qualified for the role, but without a majority government her job will be extremely difficult. Crucial will be the opportunities that present themselves and whether she can seize upon them.

2020-09-18T00:47:22+00:00

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