Radical economic policies show a path forward, and powerful interests are nervous

Please chip in to support more articles like this. Support rabble.ca for as little as $5 per month!

Skyscrapers on Bay Street. (Image: PebblePicJay/Flickr)

"Nobody told us we could do that!" exclaimed a startled British commentator when Britain suddenly abandoned the gold standard in the depths of the 1930s Depression.

The move came as a shock because everyone had assumed the gold standard -- an international agreement linking currency rates to gold -- was an immutable law of nature, along with much else about the economy.

And then, just like that, it was gone.

That sense of shock is probably not unlike what many people are feeling today as all our long-held assumptions about how the economy works -- and what is and isn't possible -- suddenly seem no more certain than when we'll be able to get our next tattoo.

For years, we've submitted to the economic orthodoxy dictated by Bay Street: that governments must deliver balanced budgets and low spending or economic disaster will follow -- as surely as gravity will bring a heavy object plunging to the ground.

Then along came the pandemic. Suddenly the Bank of Canada is creating vast amounts of money, which the federal government is distributing to Canadians across the country.

Nobody told us we could do that!

In fact, it's just what's needed. To prevent an economic collapse, our central bank is buying $5 billion a week in government bonds, which is effectively creating money out of thin air.

Private banks do this all the time; they effectively create money whenever they issue a loan. It's one of the reasons banking is such a lucrative business.

Now, the Bank of Canada is creating enormous sums of money to help pay for the federal government's huge increase in spending during the pandemic.

Bay Street financial interests are grudgingly accepting this, given the emergency, but they want it to stop as soon as possible.

But wait! Not so fast! Now that we see how it can be done, one is tempted to ask: could this be a way to pay for increased government spending on future things we truly need -- like building hospitals and public transit and investing in renewable energy?

This is the sort of dangerous thinking that a phalanx of powerful interests -- from the Fraser Institute to the financial press -- are keen to crush, realizing it could spread more easily than coronavirus at a crowded, maskless beach party.

But, as economist Jim Stanford suggests, "the genie is out of the bottle."

Bay Street is determined to return to low government spending and to ensure that the recovery focuses, not on new aspirations, but on restoring the corporate world so that it's as rich and dominant as it was before the crisis.

As the Fraser Institute's Jason Clemens insists, the priority must be on tamping down government intervention and encouraging entrepreneurial innovation, while avoiding tax hikes.

In other words, resurrecting the old orthodoxy -- and making sure the rich aren't asked to pay a penny more.

This is exactly what financial interests urged during the 1930s Depression and it only prolonged the downturn.

The brilliant British economist John Maynard Keynes pointed out at the time that private enterprise wasn't investing during the Depression because, with everyone out of work, there was little prospect of making a profit. He argued that the only solution was for government to step in and spend massively on needed projects.

"We have the savings, the men and the material," he declared. "The things are worth doing."

Keynes said that putting people back to work would create productive capacity -- the very source of wealth: "It is utterly imbecile to say that we cannot afford these things. For it is with the unemployed men and the unemployed plant, and with nothing else, that these things are done."

Keynes' point was proved when U.S. president Franklin D. Roosevelt’s vast government spending on New Deal projects put millions of Americans back to work building roads and power plants, and helped kick-start the recovery.

Roosevelt also defied economic orthodoxy by dramatically raising taxes on the rich.

Certainly, today, nobody is telling us we can do that!

But then, under the new reality of the pandemic, that looks like another bit of economic orthodoxy that now seems so 24 hours ago.

Linda McQuaig is a journalist and author of The Sport & Prey of Capitalists: How the Rich are Stealing Canada's Public Wealth. This column originally appeared in the Toronto Star.

Image: PebblePicJay/Flickr

Related Items

Thank you for reading this story…

More people are reading rabble.ca than ever and unlike many news organizations, we have never put up a paywall – at rabble we’ve always believed in making our reporting and analysis free to all, while striving to make it sustainable as well. Media isn’t free to produce. rabble’s total budget is likely less than what big corporate media spend on photocopying (we kid you not!) and we do not have any major foundation, sponsor or angel investor. Our main supporters are people and organizations -- like you. This is why we need your help. You are what keep us sustainable.

rabble.ca has staked its existence on you. We live or die on community support -- your support! We get hundreds of thousands of visitors and we believe in them. We believe in you. We believe people will put in what they can for the greater good. We call that sustainable.

So what is the easy answer for us? Depend on a community of visitors who care passionately about media that amplifies the voices of people struggling for change and justice. It really is that simple. When the people who visit rabble care enough to contribute a bit then it works for everyone.

And so we’re asking you if you could make a donation, right now, to help us carry forward on our mission. Make a donation today.


We welcome your comments! rabble.ca embraces a pro-human rights, pro-feminist, anti-racist, queer-positive, anti-imperialist and pro-labour stance, and encourages discussions which develop progressive thought. Our full comment policy can be found here. Learn more about Disqus on rabble.ca and your privacy here. Please keep in mind:


  • Tell the truth and avoid rumours.
  • Add context and background.
  • Report typos and logical fallacies.
  • Be respectful.
  • Respect copyright - link to articles.
  • Stay focused. Bring in-depth commentary to our discussion forum, babble.


  • Use oppressive/offensive language.
  • Libel or defame.
  • Bully or troll.
  • Post spam.
  • Engage trolls. Flag suspect activity instead.