How did we decide that federal economic policy matters more than anything else

Posted on in Governance Debates

NationalPost.com – Full Comment
September 4, 2015.   Robert Fulford

The mini-recession that recently coincided with the federal election campaign has heightened and intensified a dangerous tendency that Canada has been developing for a long time. We have become obsessed to an unhealthy degree with the way government economic policy affects the health of the country.

We now take it for granted that our country prospers or declines according to decisions made by government. In this year of election talk, politicians and nearly everyone else assume that legislators in Ottawa are to be praised or blamed for the state of the GDP, our dollar, the stock market and employment. Whichever party forms the next government will be judged by the same numbers a year from now.

Decades ago we started blaming governments for high unemployment and governments began accepting credit for prosperity. This is a dubious and distorted approach to reality. Ottawa’s decisions usually have only a marginal effect on how the economy works. We forget the obvious truth, that we prosper as a trading nation when we possess natural resources and make products that other people want and can afford to buy.

Public education, one of the great ideas at the heart of modern democracy, gets narrowed down to the production of “human capital.” Hardly anyone even remembers that education has other purposes, some of them vital to a healthy civic life

The mini-recession of this period results from conditions beyond our borders, notably the world price of oil. How did we decide that federal economic policy matters more than anything else? How did we develop such a narrow way of shaping our attitude? Do we really believe that we will be seriously affected by either the NDP’s plan for a balanced budget or the Liberal proposal to accept deficits as necessary?

We can blame Keynesian economists for teaching us that economic health depends on government action. Keynesianism began as a theory and became a way of life. It has come to shape our language and our assumptions. John Maynard Keynes at first tried to even out the brutal “boom and bust” periods by state intervention, stabilizing the economy over the course of the business cycle.

It made sense that governments should spend to restore balance when the marketplace temporarily falters. After the Second World War many countries, including Canada, adopted that idea.

It worked well for a time but Keynesian theory lost stature in the 1970s, in the face of increased inflation and detailed criticism from classical economists. It came alive again in the deep world-wide recession that began in 2008. It was the reason the U.S. and Canada invested in major industry.

It is with us still. The thinking of Keynes has become what Richard Dawkins, the evolutionary biologist, called a “meme” — the kind of “thought package” that takes root in our minds, replicating itself as it burrows deep into our unconscious. Its continuing life appeals to economists, bureaucrats and politicians. Having tried central planning in emergencies, they’re tempted to imagine it might be the best way to sustain permanently a nation’s economic health. Many of us, it appears, think that we have already made that decision and that our everyday transactions are shaped by Ottawa in the name of a healthy economy.

The thinking of Keynes has become what Richard Dawkins, the evolutionary biologist, called a “meme” — the kind of “thought package” that takes root in our minds, replicating itself as it burrows deep into our unconscious

In recent years that same thinking has been transferred into education, with unfortunate results. A long time ago, taxpayers agreed to fund schools and universities in order to produce wise citizens — people with “enlarged moral imaginations,” as the American philosopher John Dewey put it. In current politics, government funding of education emphasizes economic development first and everything else not at all. Every educational innovation must be justified as a way to expand the economy.

In fact, we increasingly assume that the purpose of education is to make us economically competitive. Public education, one of the great ideas at the heart of modern democracy, gets narrowed down to the production of effective job-holders who acquire what economists call “human capital.” Hardly anyone even remembers that education has other purposes, some of them vital to a healthy civic life.

Since the 1960s the public has also paid for general health care. But what this means, or should mean, is seldom discussed. In provincial or federal cabinets, who are the philosophers of health, or even the experts?

We spend our time arguing about the price of health care, and which government should spend how much. We spend almost no time debating the central issues, including the balance among various health services, such as hospitals, general practitioners and specialists. Those differences are sorted out by the professionals, more or less in private. That’s because in public we only discuss how much everything costs and how governments can be made to pay. It’s as if we have lost the ability to think about anything that doesn’t fall under the heading “fiscal.”

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