Open Letter from Canadian Economists
The Progressive Economics Forum’s open letter is now making the rounds. Signatories include four chairs of economicsÂ departments, two former PresidentsÂ of the Canadian Economics Association, a former federalÂ Secretary of State (Finance), andÂ a former Quebec MinisterÂ ofÂ Industry.
Here’s the text and the 88 signatories:
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 Canadaâ€™s economy.Â Complacent expressions of faith in our â€œfundamentals,â€ and other varieties of economic denial, will not protect Canadians from the coming storm.
Canadaâ€™s Economic Fundamentals are Anything but Strong
Macroeconomic performance has weakened dramatically since the current government came to power at the beginning of 2006.Â Economic growth has largely stalled.Â Productivity has declined. The recent expansion was largely propelled by high commodity prices and a housing bubble â€“ 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.Â But over-reliance on resource extraction is not a sustainable basis for our future economic progress.Â 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:Â poverty rates in Canada did not meaningfully decline and real wages have barely increased, even while corporate profits surged to all-time highs.Â But the prospect of recession now threatens all of us with hardship â€“ 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 Canadaâ€™s economy, and squander the chance to use revenue from the resource boomÂ to enhance long-run productivity, prosperity, and stability.Â 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.Â The enormous costs of this complacency have been clearly demonstrated.Â 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 Canadaâ€™s economy.Â Income support measures, employment insurance in particular, should be strengthened.Â In addition, public infrastructure projects, including those aimed at reducing Canadaâ€™s 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).Â 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.Â But that course of action would worsen the economic downturn and job losses.Â 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.Â 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 â€“ perhaps the worst crisis since the 1930s.Â Canada cannot expect to be immune from those global developments.Â 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.
Abraham Rotstein, Professor Emeritus of Economics and Political Science, University of Toronto
Allan Moscovitch, Professor, School of Social Work, Carleton University
AndrÃ© Joyal, Professeur associÃ©, DÃ©partement des sciences Ã©conomiques, UniversitÃ© du QuÃ©bec Ã Trois Rivieres
Andrew Biro, Associate Professor and Canada Research Chair, DepartmentÂ ofÂ Political Science, Acadia University
Andrew Jackson, National Director, Social and Economic Policy, Canadian Labour Congress
Andrew Sharpe, Executive Director, Centre for the Study of Living Standards
Armine Yalnizyan, Senior Economist, Canadian CentreÂ forÂ Policy Alternatives.
Arthur Donner Ph.D, Economic Consultant
Bernard Ã‰lie, Professeur associÃ©, DÃ©partement des sciences Ã©conomiques, UniversitÃ© du QuÃ©bec Ã MontrÃ©al
Brenda Spotton Visano, Professor, School of Public Policy and Administration, Economics, York University
Brian McLean, Professor, Department of Economics, Laurentian University
Bruce Campbell, Executive Director, Canadian Centre for Policy Alternatives
Bruce Wise, Research Director, transportationcentre.com
CÃ©cile Sabourin, Professor, UniversitÃ© du QuÃ©bec en Abitibi-TÃ©miscamingue
Charlotte Yates, Professor of Political Science and Labour Studies, McMaster University
Daniel Drache, Professor of Political Science and Associate Director, Robarts Centre for Canadian Studies, York University.
Donald Swartz, Associate Professor, School of Public Policy andÂ Administration, Carleton University
Edward Shaffer, Professor Emeritus, Department ofÂ Economics, University of Alberta
Eric Pineault, Professor, Department of Sociology, University of QuÃ©bec at Montreal, DÃ©partement des sciences Ã©conomiques
Ernie Lightman, Professor of Social Policy, Faculty of Social Work, University of Toronto,
Fiona MacPhail, Associate Professor and Chair, Economics Department, University of Northern British Columbia
Fletcher Barager, Associate Head, Department of Economics, University of Manitoba
Gabriel Ste-Marie, Ã‰conomiste, Chaire d’Ã©tudes socio-Ã©conomiques de l’UQÃ€M et CÃ©gep rÃ©gional de LanaudiÃ¨re Ã Joliette
Gordon Laxer, Professor of Political Economy and the Director, Parkland Institute University of Alberta
Greg Albo, Professor of Political Economy, York University
Gustavo Indart, Economics Department, University of Toronto
Harold Chorney, Professor of Political Economy and Public Policy Graduate program in Public Policy and Public Administration, Concordia University
Hassan Bougrine, Department of Economics, Laurentian University
Heryk Flakierski, Professor Emeritus, Economics department, York University
Hugh Armstrong, Professor, School of Social Work and Institute of Political Economy Carleton University
Ian Hudson, Associate Professor, Department of Economics, University of Manitoba
Iglika Ivanova, Researcher, Canadian Centre for Policy Alternatives – BC
Jesse Vorst, Senior Scholar, Department of Economics, University of Manitoba
Jim Sentance, Chair, Department of Economics, University of Prince Edward Island
Jim Stanford, Economist, CAW
Joan McFarland, Professor of Economics, St.Thomas University
JoÃ«lle J. Leclaire, Assistant Professor, Department of Economics and Finance Buffalo State College, SUNY
John Brohman, Associate Professor, Department of Geography Simon Fraser University
John Calvert, Associate Professor, Simon Fraser University, Health Sciences Faculty
John Loxley, University of Manitoba, Economics Department
JosÃ©e Lamoureux,Â Ã‰conomiste, Service des relations du travail-Recherche ConfÃ©dÃ©ration des syndicats nationaux (CSN)
Karen Grant, Associate Professor, Department of Sociology, University of Manitoba
Lars Osberg, Research Professor and Chair, Economics Department, Dalhousie University
Louis Lefeber, Professor of Economics (emeritus), York University
Louis-Phillipe Rochon, Department of Economics, Laurentian University
Lynne Fernandez, Acting Director, Canadian CentreÂ forÂ Policy Alternatives-Mb
Manfred Bienefeld, Professor, School of Public Policy and Administration, Carleton University
Marc Lavoie, Professor, Department of Economics, University of Ottawa
Marc Lee, Senior Economist, Canadian Centre forÂ Policy Alternatives; Chair, Progressive Economics forum
Marina Morrow, Assistant Professor, Faculty of Health Sciences Co-Director, Institute for Critical Studies in Gender and Health, Simon Fraser University
Mario Seccareccia, Professor, Economics Department, University of Ottawa
Marjorie Griffin Cohen, Professor, Political Science/Women’s Studies Simon Fraser University
Martha MacDonald, Professor and Chair, Economics Department, Saint Mary’s University
Mathieu Dufour, University of Massachusetts, Amherst, and Dalhousie University, Economics
Maurice CAREL, Professeur titulaire dâ€™Ã©conomie rurale et dÃ©veloppement UniversitÃ© Laval
Mel Watkins, Professor Emeritus of Economics, University of Toronto
Michael Goldberg, Retired Research Director, Social Planning and Research Council of BC
Michael A. Lebowitz, Professor Emeritus, Economics Department, Simon Fraser University
Mike McCracken, President, Informetrica Ltd.
Neil McLaughlin, Associate Professor, Sociology, McMaster University
Pat Armstrong, Professor, Sociology, York University
Paul Bowles, Professor of Economics, University of Northern British Columbia
Paul Leduc Browne, Professeur de Science Politique, UniversitÃ© du QuÃ©bec en Outaouais
Paul Tulloch, Livingwork.ca, Labour Economist
Pierre-AndrÃ© Julien, Professeur Ã©mÃ©rite, Institut de recherche sur les PME, UniversitÃ© du QuÃ©bec Ã Trois-RiviÃ¨res
Pierre LalibertÃ©, Economiste, FÃ©dÃ©ration des travailleurs et travailleuses du QuÃ©bec
Pierre Paquette, Dept. Political Science and Economics, Royal militiary College of Canada
Radhika Desai, Professor, Department of Political Studies, University of Manitoba
Ricardo Grinspun, Associate Professor, Department of Economics, York University
Richard Lobdell, Professor of Economics, University of Manitoba
Rob Moir, Associate Professor of Economics, University of New Brunswick, Acting Chair of Social Science, President of the Atlantic Canada Economics Association.
Robert Chernomas, Professor, Department of Economics University of Manitoba
Rod Hill, Professor of Economics, University of New Brunswick
Rodrigue Tremblay, Emeritus professor of economics, UniversitÃ© de MontrÃ©al,
Salimah Valiani, Doctoral Candidate, Department of Sociology and Anthropology Carleton University
Seth Klein, Director, BC Office, Canadian Centre for Policy Alternatives
Shauna Butterwick, Department of EducationalÂ Studies, University of British Columbia
Sid Shniad, Research Director, Telecommunications Workers Union
Simon Black, PhD Candidate, City Institute, York University
Stephen McBride, Professor & Director, Centre for Global Political Economy, Simon Fraser University
Sylvie Morel, Department of Industrial Relations, UniversitÃ© Laval
Terry Heaps, Associate Professor (retired), Dept of Economics, Simon Fraser University
Honourable Douglas D Peters PhD PC Retired, Former Chief Economist Toronto-Dominion Bank, and former Secretary of State (Finance)
Theo Meijer, M.Ed. (Brit.Col.), Ph.D., Retired Senior Secondary Business Educator
Thierry Roy, Department of Economics, CÃ©gep de Sherbrooke
Toby Sanger, Economist, Canadian Union of Public Employees
Trevor Harrison, Chair, Department of Sociology, University of Lethbridge
William Rees, Professor, School of Community and Regional Planning University of British Columbia