Image: Joe deSousa/Flickr

The COVID-19 pandemic has revealed the folly of imposing government austerity on citizens. With half of the Canadian population living hand to mouth before the coronavirus era, and little being done about it, suddenly it was possible for the federal government to step in and spend the money it supposedly did not have for the previous 40-plus austerity years. 

The traditional strategy of relying on increasing shareholder value for capitalists to deliver widespread prosperity will not get it done; the economic world is rejecting return on capital investment as the best measure of success. 

In the rapid expansion of the Canadian economy after 1945, consumer spending provided the engine. With wartime restrictions ended, families negotiated home and car loans, opened charge accounts and wrote cheques. 

Those who qualified for CMHC-approved mortgages bought houses, filled them with major appliances from U.S.-owned Ontario branch plant producers, and Quebec made furniture and textile operations. Workers in rental accommodation also shelled out for household goods.

Unlike today, most of the cars sold were American models “made in Canada.”

Corporations struggled to keep up with consumer demand, until it levelled off, and businesses discovered they had over-invested and pulled back.

Recessions occurred frequently (1951, 1953, 1957, 1961, 1975, 1980, 1981, 1990 and 2008). 

Social wages, called automatic stabilizers, cushioned the impact on workers and their families, and prevented a downward spiral into depression. They grew slowly until 1978. Then successive federal governments introduced austerity programs.

By European standards, Canadian social programs are pathetic. Not only does employment insurance cover less than 60 per cent of the unemployed, governments have failed to provide child care, dental care, sick leave, and adequate investments in culture and recreation.

The Canada and Quebec pension plans, student loans, child benefits (finally bumped up in 2016 by the Liberals), and senior income supplements were to a shameful extent measures of “legislated” poverty.

As the 20th century ended, Canada, “free trading” with the U.S., had given up making major appliances, and the auto and steel industries were shrinking. The once leading forestry sector was in long-term decline.

Smart phones, tablets, computers, televisions and most consumer goods of the exploding digital era were imported. Stagnating and disappearing industrial wages led to a falling standard of living for many.

Workers in the dying domestic consumer industries had earned better wages than in the emerging services sector, which now accounted for a greater share of employment and economic activity.

The new international division of labour has produced growing inequalities. The powerful market forces of late capitalism were outsourcing manufacturing globally, leaving Canada with an expanding services sector divided between services to the wealthy and corporations, and servant services. 

Well-paid services included lawyers, bankers, accountants, real estate agents and developers, financial advisors, doctors, dentists, full-time academics, and other professionals. 

The exposed servant-services sector was made up of hotel employees, cleaners, servers, clerks, ticket agents, taxi and truck drivers, and part-time low-income professionals. 

An extended stock market boom generated further inequalities as the growth of invested funds outpaced wage income. 

The great financial crash of 2008 ended with the socialization of bank losses, but the 21st century “to do list” for everybody else was set aside in favour of more business as usual.

In the new century Canada was investing heavily in high-cost oil and gas production for export to the U.S. Meanwhile, the U.S. was on its way to self-sufficiency in petroleum thanks to fracking.  

In the 21st-century economy, exports of energy and other national resources were expected to grow enough to pay for imported consumer goods. 

Now, as world prices fall below the break-even point for oil and gas — Canada’s largest export sector — the pay your way in the world with oil and gas idea looks like a bad joke. 

Fossil fuels have been identified worldwide as sunset industries due to climate change.

Canada now needs to transition out of the COVID-19 emergency economic mode into a more democratic economy, one where none go without, all have opportunities, and well-being is ensured.

With the COVID-19 shutdown ending, Canada needs an ecologically friendly economic recovery that improves the quality of life of the majority of its citizens: one that creates full-time jobs at decent wages for all desiring paid work.

What is needed is debt write-offs and free tuition for students; minimum wage increases across the country; a multi-pronged public sector investment strategy; a re-do of employment insurance and pensions; a real social safety net; new goals for economic policy; and new words for economic success. 

Economic policy designed to extend well-being requires governments to invest in promoting healthy, culturally rich cities, towns and villages for citizens, sane environmental practices for the land, and a green economy.

Duncan Cameron is president emeritus of and writes a weekly column on politics and current affairs.

Image: Joe deSousa/Flickr

Duncan Cameron

Duncan Cameron

Born in Victoria B.C. in 1944, Duncan now lives in Vancouver. Following graduation from the University of Alberta he joined the Department of Finance (Ottawa) in 1966 and was financial advisor to the...