Unnecessary Debts

Jane M. Wilson is a Toronto-based chartered financial analyst in the
investment business.

These essays on Canada’s past and present fiscal and monetary policy
will have central bankers yearning for the days of grey anonymity prior
to 1969. The editors are joined by fellow economists W. Irwin Gillespie,
Ronald D. Kneebone, Michael C. McCracken, Gideon Rosenbluth, and Marc
van Audenrode in identifying the tight monetary policy pursued by the
Bank of Canada since 1989 as the chief cause of the increase in
Canada’s national debt. While sometimes disagreeing on the role of
government and the extent of the debt problem, the authors are unanimous
in recommending alternatives to sole reliance on the harsh fiscal policy
of government cutbacks. Complementing the book’s discussion of the
relationship between monetary and fiscal policy is James Tobin’s
wonderfully lucid piece on Keynes and his misinterpreters.

Regrettably, Unnecessary Debts reinforces the common misconception that
interest-rate changes over both the short term and the longer term are
exclusively controlled by, if not synonymous with, monetary policy. In
addition, by accepting interest rate movements as a major destabilizing
influence on government finances and by using only comparative measures
of debt load, the book leaves unchallenged the assumption that
significant government debt is preordained. Such simplifications may be
the cost of extending the debate on a complex political and economic
matter beyond the grove of academe to a wider public.

While not light reading, the book also does not require an advanced
grounding in economics. Graphs and tables are easily understood, a
glossary defines elementary terms, and the few equations demand no more
than basic algebra. Whether it is appropriate to present the general
reader with such a one-sided argument is another question.