Lessons from the recession
TheGlobeandMail.com – ROB/Economy
Posted on Tuesday, November 16, 2010. Barrie McKenna
Still eager for a little post-financial crisis reflection? The Conference Board of Canada has a new book out Tuesday, Crisis and Intervention Lessons From the Financial Meltdown and Recession.
The book is a compilation of post mortem reflections by the private think tank’s economists about the recent crisis. Among the dominant themes is that governments still have a vital role to play.
“This book makes clear that responsibility for the recent financial crisis is shared by the public and the private sectors,” explains John Manley, the former Liberal cabinet minister and now president of the Canadian Council of Chief Executives, in the forward to the book.
Here’s a quick rundown of board’s key findings:
1. Good fiscal health mitigates the depth of recessions by giving governments the ability to quickly react with infrastructure spending and lower taxes. Canada. for example, lost fewer jobs and economic output than it did in the recessions of the early 1980s and 1990s.
2. The recession is only a temporary reprieve from a worsening skills shortage crunch as baby boomers start retiring.
3. Oversight of the global financial system needs to be guided by minimum standards and best practices for capital requirements, transparency, and accounting rules.
4. The financial crisis demonstrated the vital importance of central banks, government treasuries and other state agencies as “Sleeping Beauties,” ready to jump in when the private sector fails.
5. Global financial institutions, including the newly created Group of 20, have a key role to play in co-ordinating international financial policies.
6. Regulators must identify all systemically important institutions and then work to reduce and eliminate the risks they pose to the broader economy.
7. Countries should adopt “integrative trade policies” to thwart rising protectionism. That means removing barriers, not just to trade, but to investment, services as well as imported inputs and technologies.
8. The best help local government can provide in a recession is to stay the course to ensure communities are welcoming to newcomers and investment.
9. Early and strong intervention by governments and central banks is critical in offsetting the psychological dimension of recessions.
10. Countries need to put in place tough deficit and debt control measure to pay off the fiscal bills they ran up in the recession so they’re ready for the next big crisis.
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