False Promises: The Failure of Conservative Economics

L.M. Read was a Philosophy of Religion and Economics professor at
Carleton University.

The economic history of Canada since World War II can be divided,
broadly, into two periods: (i) a period of roughly three decades of
unprecedented economic development; and (ii) a period of much slower
development and two recessions.

The first period saw the development of what was, for the time, a very
successful mixed economy—mixed in the sense of combining a free,
private market and public management of the economy. Encouraged by
wartime experience and Keynesian economics, Canadian governments used
fiscal and monetary (typically easy-money) policies to promote full
employment and maximum growth in the GNP.

The second period was characterized by higher unemployment, combined
(unexpectedly) with continuing inflation. The higher unemployment
greatly increased the social welfare expenditures of the public sector
relative to government gross revenues, which led to high government
deficits and rapid expansion of the national debt. Control of inflation
through a tight-money policy and reduction in high government deficit
spending became key government policies, in spite of rising unemployment
levels.

False Promises argues that the conservative economic policies of this
second period have substantially failed. The tight-money policy has
discouraged private investment, and has tended to reduce national
product and employment (and hence to perpetuate and enhance high
government deficits). According to the 10 authors included here, an
easing of the money supply and interest rates (coupled with a less
fearful attitude to Government deficits, would have mitigated the
problem of government deficits in the longer run, as well as addressed
the most important problem of the economy—high unemployment.

This book is required reading for all citizens who wish to consider the
other side of the argument with respect to the fiscal and monetary
policies that have prevailed in recent years. There is much good
material here. Largely unaddressed, however, is the basic question of
why the successful developments of the first postwar period were not
self-sustaining.