OECD Endorses Canadian Opposition
I was out of the country but have the impression that the extremely gloomy OECD forecast and critical recommendations for Canada released just before the G20 London summit were not given the attention they deserved.
The OECD released its intermim outlook largely to push the case for more stimulus by G20 countries, particularly those, like Canada, with strong fiscal positions. It also urged much more decisive action to deal with insolvent banks.
For Canada, the OECD forecasts the national unemployment rate to average 8.8% this year and 10.5% next year, indeed rising through 2010 to a stunningly high 10.8% in the fourth quarter. That compares to a fourth quarter of 2010 projection of a 10.1% unemployment rate for the OECD as a a whole, and 10.5% in the US. (p.65.) So much for all these mainstream projections of how much better we are doing than other countries where the “fundamentals” are less sound – (though Canada compares less badly in terms of projections of GDP growth.)
What is even more stunning about this report is the very sharp tone which is adopted when it comes to policy recommendations – recommendations which are usually massaged away when national government officials vet early drafts.
The OECD state (p.89) that “given well anchored inflation expectations and a strong fiscal position, both monetary and fiscal authorities are in a position to do more. The Bank should consider quantitiative easing measures. Provinces should use their scope for fiscal action, and the federal government also has room for further fiscal measures.” They even call for favouring income support to laid-off workers. (p.91)
In sum, this report was clearly at odds with the federal government position that enough stimulus is already in place, that Canada will weather the storm relatively well, and that we can afford to wait and see. It is much closer to the position of progressive economists than is, to say the least, usual for this impeccably neo liberal institution.