Hard Money, Hard Times

David Robinson, an economics professor, is dean of the Faculty of Social
Sciences at Laurentian University.

The last 25 years have been a demolition derby for economic theories.
This collection of essays on Canadian policy contains some of the
winners. Views that guided Canadian monetary and fiscal policy through
the 1980s and early 1990s are the losers. The authors are among
Canada’s leading policy analysts, and they show how Canada wasted a
decade following policies that are now discredited. If you’ve been
speaking out about economic policy, you should read what they have to
say.

Have you been saying, for example, that government spending caused our
debt crisis? The late Irwin Gillespie shows how ill-timed tax cuts by
federal finance ministers (including John Turner, Donald MacDonald, and
Jean Chrétien) undermined the government’s ability to pay its bills.
Politically popular is not necessarily economically responsible. And how
could they know the unelected Governor of the Bank of Canada would cause
an explosion of debt payments by keeping interests rates high. Ron
Kneebone shows that the bulk of our debt is really Bank of Canada
debt—debt caused by the bank’s policy.

Perhaps you believe the Bay Street view that, once the debt got away
from us, the only solution was to tighten our belts. Economists know
that Mike McCracken’s Infometrica model is probably the best macro
model in the country and certainly better than anything the Department
of Finance has. McCracken presents a stunning result: any standard
“Keynesian” policy would have done much better than the policy our
government followed.

When the politicians and the policy advisers of the 1980s finally get
around to reading this material, no doubt they will apologize to the
millions of Canadians they put out of work. Then they will invite the
authors of this volume to propose policies for the next decade. And Hell
will freeze over.