Statement by Canadian Economists Against Austerity

OTTAWA, Feb. 11, 2014 /CNW/ - We, the undersigned, strongly urge the federal government to stop implementing fiscal austerity measures just to achieve its political goal of budgetary balance by 2015.

Since the mid-1990s, we have witnessed an era during which, under the influence of the same economists who had also advised the deregulation of the financial sector in the US, Canada, and other G20 countries, government policies brought the international economy to the edge of economic meltdown in 2008. After initially implementing a series of necessary fiscal stimulus measures to prevent the Canadian economy from slumping into depression, the current government did a policy U-turn and, at the time of the G20 Summit in Toronto in 2010, decided to go back to the pre-2008 era of targeting balances and budgetary surpluses. This turnaround occurred despite the fact that employment rates remained, and continue to stagnate, below pre-recession levels.

We believe that such austerity policy is terribly misguided. Not only are cuts in government spending completely inappropriate in the current context, but also the primary macroeconomic concern of the federal government ought to be the achievement of high levels of incomes and full employment for all Canadians, rather than the attainment of an elusive political target of budgetary balance that condemns the Canadian economy to remain stuck in a state of long-term stagnation. Unlike the countries of the Eurozone, as a sovereign country with its own national currency and a floating exchange rate, Canada faces none of the constraints on spending that prevent Eurozone governments from engaging in deficit-spending to stabilize their economies.

At a time when growth rates remain low and unemployment high, and with a world economy facing mounting uncertainties not seen since the 1930s, the government must pursue deficit spending, at least for a while, especially in the form of public investment, whose effect will be to repair private sector balance sheets and spur on private sector growth. A sustained and forceful investment effort on the part of the government would induce the private sector to follow suit. Cutbacks, by contrast, would create further uncertainty for many Canadian households and businesses and dampen economic activity.

The prime minister gave a speech (in November 2008) affirming that he was once studying to become an economics professor with interests in macroeconomic theory, political economy and economic history. It would seem unwise not to learn the lessons of history. Economic history teaches that the current fiscal behaviour, which characterized government policy of the 1930s, merely placed the Canadian and world economy on the path of stagnation throughout that era prior to the Second World War. During the war years, fiscal deficits no longer seemed to be a problem and the Canadian economy quickly restarted. It is time to pursue pro-growth policies and not fiscal austerity. Low interest rates by themselves were not enough to stimulate growth during the 1930s and they are not enough to guarantee strong growth today. What is needed is a rise, not cuts, in public spending and the abandonment of the ideology of austerity.

Signed by some 70 economists including the following:

Fletcher Baragar (Associate Professor of Economics, University of Manitoba)

Robin Boadway (Professor emeritus of Economics, Queen's University)

Paul Bowles (Professor of Economics, University of Northern British Columbia)

Mathieu Dufour (Assistant Professor of Economics, John Jay College, CUNY, NY)

Pierre Fortin (Professeur des sciences économiques, Université du Québec à Montréal)

Andrew Jackson (Packer Professor, York University)

Marc Lavoie (Professeur de science économique, Université d'Ottawa)

John Loxley (Professor of Economics, University of Manitoba)

Brian MacLean (Professor of Economics, Laurentian University)

Mike McCracken (Economist, CEO, Informetrica Limited)

Anthony Myatt (Professor of Economics, University of New Brunswick, Fredericton)

Lars Osberg (Professor of Economics, Dalhousie University)

Kari Polanyi Levitt (Professor emerita of Economics, McGill University)

Louis-Philippe Rochon (Professeur agrégé d'économique, Université Laurentienne)

Mario Seccareccia (Professeur de science économique, Université d'Ottawa)

John Smithin (Professor of Economics, York University)

Brenda Spotton Visano (Professor of Economics and Public Policy, York University)

Jim Stanford (Economist, Unifor)

Mel Watkins (Professor emeritus of Economics, University of Toronto)

Erin Weir (Economist, United Steelworkers and President, Progressive Economics Forum)

The full list is available at http://www.progressive-economics.ca/2014/02/11/economists-against-austerity/

SOURCE Progressive Economics Forum

For further information:

Louis-Philippe Rochon (lprochon2003@yahoo.com) Tel.: 647-505-1976
Mario Seccareccia (Mario.Seccareccia@uOttawa.ca) Tel.: 613-562-5800 x 1691