Instead of fearing a recession, Canada must embrace the next one – it’s an opportunity
John Rapley is a political economist at the University of Cambridge and managing director of Seaford Macro.
Instead, as a growing body of economic thought concludes, this hyper-focus on lowering interest rates has steered investment away from productive activity and intoCanada illustrates this all too well. This country followed other Western governments in using the window of opportunity that followed the 2008 financial crisis, whenand interest rates were in the basement, to cut taxes rather than invest in, say, improving its infrastructure.
One can debate the details of the current U.S. policy. It’s too early to say if the rebound it has ushered in will last, or if the new economic activity will suffice to pay off the debts incurred to do it. However, it’s growing increasingly clear that the days of rolling back the government to free up the market have passed. This is what policy makers must keep in mind for the next recession.
As well, while the way the country has gone about it may not be perfect, Canada’s openness to new residents stands a world apart from, say, our major European allies, most of which are turning darkly hostile to foreigners. Amid growing labour shortages, that will give Canada a significant edge in attracting talent.in Canada, as elsewhere, its public and civic institutions haven’t come under the relentless assault that we’ve seen in Britain or the U.S.
More broadly, building houses and infrastructure promotes job and wage growth. Not only has it been shown to create greater economic stimulus than other types of spending, it has a positive effect on labour productivity, leaving the economy stronger against future headwinds. Such efforts must be a core component of any fiscal program.
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