We need public investment
Governments, leading economists and even the International Monetary Fund agree that cutting interest rates alone will not save the day. We must have an immediate, significant and co-ordinated public investment program to stop the financial crisis from turning into one of mass unemployment.
Every crisis presents an opportunity. In this case, it is the opportunity to address a huge deficit in basic public infrastructure that has been allowed to built up over the past 20 years of spending cuts. The Federation of Canadian Municipalities estimates that deficit to be $123 billion, and it consists of roads, bridges and buildings not repaired, and of water plants and rapid transitways never built.
Flaherty can use his economic statement to announce that the federal government is prepared to invest major new funds immediately in a focused public investment program that would create jobs now, promote our environmental goals and also help support new industries for the future. That program should, at a minimum, include roads, bridges, water and sewer projects, mass transit, and public building and residential retrofits to save energy. These investments will also move us toward a new and green economy that is more energy efficient and uses less carbon fuel.
Projects that will have to be completed in the future can be built today at very reasonable cost. Governments can borrow at low rates of interest and the construction sector is hungry for work. These public investments will prevent growing unemployment, keep our community economies alive and help governments maintain their tax revenues.
A study by the Ottawa-based firm Informetrica Ltd. shows that $1 billion in additional spending in basic infrastructure would create 11,500 jobs, half in construction and half in other sectors. That is twice as many jobs as would be created by a $1-billion income tax cut because some individuals would either put that money into savings or spend it on imported consumer goods.
By contrast, infrastructure spending goes mainly into local wages and into buying Canadian-made materials. Energy conservation projects such as retrofitting homes and buildings are even bigger job creators. Investments in community social services such as child care and home care also create many jobs for the money invested.
Ottawa could also create a public and environmental infrastructure bank, based on the model of the Business Development Bank of Canada. Such an independent institution could, with a federal guarantee, borrow funds from public and private pension funds and other investors seeking a secure haven from the plunging stock market. That money could be lent to provinces, municipalities and other public sector bodies.
Given current low federal borrowing costs, a small federal government subsidy would allow such a bank to lend at a rate of zero interest over at least the next two years. This would encourage provinces and cities to rapidly bring forward projects that they know are needed, and which will eventually more than pay for themselves.
A national infrastructure program will have an even bigger impact on jobs if it is linked to made-in-Canada procurement policies, as called for by both the Canadian Labour Congress and the Canadian Manufacturers and Exporters.
There is an opportunity here to help the manufacturing sector by increasing the market for public transit vehicles, energy efficient building materials and other goods.
Let’s also remember that a lack of public investment has been identified as one of the key factors behind sagging business productivity in Canada.
Projects on the books include, for example, badly needed upgrading of our border infrastructure, which slows down trade and increases costs.
A program of public investment should also promote the inclusion of women and put more money into training skilled workers. For example, firms hired to build the Vancouver Island Highway under a previous government in British Columbia were encouraged to support apprenticeship programs and to include women in them.
This is one of those occasions where there is broad agreement among the provinces, cities, employers and the labour movement that the time to invest in public infrastructure is now.
Let’s hope that Flaherty has heard the message.
Ken Georgetti is president of the Canadian Labour Congress, the largest union federation in Canada with 3.2 million members.
thanks Andrew, and colleagues, this could be a very useful and practical option right now:
“Ottawa could also create a public and environmental infrastructure bank, based on the model of the Business Development Bank of Canada. Such an independent institution could, with a federal guarantee, borrow funds from public and private pension funds and other investors seeking a secure haven from the plunging stock market. That money could be lent to provinces, municipalities and other public sector bodies.”
i’m assuming that this public bank would borrow from private investors via some generic public process rather than specific sectoral products so that we don’t have a situation where private investors are directly holding bond products in eg. water, hydro, health services which could then make these public services vulnerable to NAFTA investor-state provisions…
of course the federal government could get far more ‘bang for their buck’ if they simply created the money directly via the Bank of Canada, loaned it to lower tier governments and skipped borrowing from private interests at interest rates that will, one day, go up again. i suppose a public ‘development bank’ can still set a lowish-rate, enough to build back the principal that pensioners have lost in the last while.
of course we’d prefer full and direct public spending for public services and solid public pensions, but i guess that’s probably too much to ask at this time.
if any from CLC or PEF want to elaborate on the mechanisms envisioned in this aspect of Georgetti’s letter, please do, thx.