Paper Boom

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

In 1997 Boom, Bust and Echo was the book everyone had to read. In 2000,
it could be Jim Stanford’s Paper Boom. Paper Boom is simply the best
business book of the year. It is being mismarketed as left-wing
analysis, but it is really the only decent description of what is
happening to the Canadian economy.

Stanford has a Ph.D. in economics. He actually collects data and runs
his own statistical analyses. Unlike most academic economists, he has a
broad and detailed knowledge of policy issues and the way financial
markets work. And he can write.

To understand what Stanford has accomplished, we have to recognize the
contradictions that bedevil both left and right. As Canada becomes more
“business-friendly,” real investment declines. As the public sector
shrinks, economic growth falls. Although corporate taxes penalize job
creation, leftists want them increased—but business cries for
income-tax relief instead. Although stock markets produce almost no real
investment, the government subsidizes stock-market speculation in
multiple ways. When business gets reduced regulation and freer trade,
profit rates fall. As financial markets create more and more ways to
hedge against market risk, markets get more and more fragile. In the
book’s first 300 pages, Stanford untangles the connections between the
macro-economy and the financial sector. This is the section that
policymakers and businesspeople involved in the “real” economy need
to read. Much of what Stanford says is quite conventional, but then most
of Keynes’s General Theory was familiar too—Keynes, too, made it
comprehensible.

The last section is actually a second book. Called “Kick Start:
Putting Money Back to Work,” it is a 112-page agenda for those on the
centre and left in the political spectrum. Readers who lean to the right
should probably avoid this section (if they have read the rest of the
book, it may make more sense than they like). Readers who lean to the
left will benefit from having some sacred cows kicked.