We went from economic basket case (an honourary 3rd world country according to the Wall Street Journal in the early 1990s) to leading the G7 in economic growth for a decade from 1997-2007. While Canada has unfortunately regressed in a number of areas of fiscal policy over the past few years, the reforms of the 1990s continue to provide enormous benefits.

And by the way, those reforms were by no means limited to Ottawa or the Liberal Party. These reforms were embraced in every part of the country and by every political party: the Saskatchewan NDP, the Alberta Tories, the New Brunswick Liberals and others all played their part in reforming Canada’s fiscal position and, along the way, reforming the way we run government and the expectations we should have of the state. This tremendous Canadian success story, which stands in marked contrast to the partisan gridlock and inability to control spending of our American neighbours, is a little understood and very under-appreciated Canadian success story that has conferred tremendous competitive advantage on us compared to the US.

In this commentary, based on a talk to the Ottawa economics Association, AIMS Senior Fellow Brian lee Crowley highlights the lessons to be learned from our great turnaround and the growing importance of those lessons as we move from a generation taxed with massive labour surpluses to the next, which will be taxed with labour shortages.

As Crowley points out “We had workers to spare in the old days, and could be profligate with them. In the Canada we can see ahead of us, every worker will be a precious resource and we will be obliged to spare no effort to attract them and keep them in the workforce at high levels of productivity. The reforms necessary to meet these new circumstances will require us to return quickly to balanced budgets, to keep our taxes and the size of government from expanding so as to encourage investment in our capital stock and hence our productive capacity, just as these circumstances will require us to keep social programmes and income support tightly focused on those who cannot work, giving those who can every reason to contribute their productive capacity to enriching themselves and their fellow Canadians.”


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