In this Commentary, AIMS Founding President Brian Lee Crowley explains that Canada is poised to come out of this downturn economically stronger than the United States.
Based on remarks to Finance Canada’s 2009 Senior Managers’ Retreat*, The downturn . . . and after provides lessons on moving forward through this recovery period to come out the other end in the best possible position. Among the lessons Crowley offered is this:
” . . . .concentrate the stimulus spending you absolutely have to make on displaced workers, not on failing industries, for the former will quickly be reabsorbed when the upturn comes, whereas the industries that are dying today will quite likely still be dying (or dead) in five years. And if we allow the destruction to occur in the downturn, when the upturn comes people will more quickly be placed in higher productivity and stronger firms.
This piece of advice is rendered all the more germane by the realization that stimulus money that is spent propping up dying industries or companies (autos, forestry, fishing, etc.) is actually harming Canada. Downturns play a vital role in raising our productivity and our innovation game. But this only works if we allow the process of what Joseph Schumpeter famously described as the process of ‘creative destruction’ to operate.”
Crowley concluded his remarks to the most senior and influential bureacrats within Canada’s federal finance department by explaining, “We have through sound public policy set the stage for the creation of a period of great economic strength for Canada compared to the US. We mustn’t allow it to be drained away by the twin circumstances of economic downturn and ill-disciplined minority government. We have to find new policy anchors to return the country to disciplined policy, strong growth and improved productivity. Demographic change will help us get there, but there is no substitute for well-designed stimulus spending, restraint in such spending, milestones for ratcheting back the stimulus in a timely manner, avoiding creating long-term commitments, and setting new policy anchors to get us back on track once the downturn is over.”
To read the complete Commentary, click here.
*The Senior Managers’ Retreat draws on respected experts to provide background, research and advice on key economic policies for the nation. AIMS Founding President Brian Lee Crowley has been invited several times to share his expertise and thoughts with the group.