For the past several years, we’ve been told that austerity is the way for the international economy to grow. Well, we have seen the results in the European Union, and they proved dubious at best. Across the pond, Obama’s 2009 financial stimulus package in part led to the rise of the Tea Party, yet considering the state of the economy, many economists agreed the legislation was at best a tepid response. Citizens across the globe who were kicked in the gut after the 2008-2009 fiscal crises felt knee-capped by their governments’ fiscal restraint.
Some countries were able to ride the wave over the commodities boom, thanks largely in part to China’s continued ravenous demands for everything from soy to oil to almonds. Leaders of nations such as Argentina, Brazil and Canada were able to stay and prosper in office thanks to the financial windfalls resulting from China’s continued imports of raw materials. But now China is cooling off, and while a 6.7 percent GDP increase is a figure in which most countries would revel, that drop in economic growth is the equivalent of a crash to many of China's trading partners. And the leaders of those aforementioned countries are either gone or deeply unpopular.
So, speaking of Canada, where the economy has slowed down and revenues decreased due to the falling demand for oil, its government is going against the grain and is actually increasing spending on social programs.
Despite volatile markets, a collapse in oil prices and a steep downtown in global commodities, Canada’s current government is drawing up a budget that it says is focused on securing the country’s middle class, even if that means a temporary spike in deficits over the next five years.
Sparked by Prime Minister Justin Trudeau and his coalition’s landslide win over predecessor Stephen Harper, Canada’s current government, with Finance Minister Bill Morneau at the controls, seeks to capitalize on the nation’s current low debt burden and low interest rates. Morneau presented a plan that boosts spending on what Canada says are much needed “innovation, jobs and training.”
At a recent G-20 meeting in Washington, D.C., even the stodgy International Monetary Fund (IMF) described Canada’s fiscal policy as one with strength and a strategy that other countries should consider. The 2016-2017 Canadian federal budget hearkens back to the New Deal era under U.S. President Franklin Roosevelt, with its modest tax cuts for middle class income earners, funds for infrastructure and technology, and tweaks in the country’s unemployment insurance program.
Over the next 10 years, in fact, Canada is targeted to spend about CAD120 billion (US$95 billion) on infrastructure. To put that in perspective, Canada’s population is a little more than a tenth the size of the U.S. Despite that spending, the accountancy Deloitte suggests that economic growth the next five years means that the federal government’s debt-to-GDP ratio will actually decline.
Such a policy is a bold move for Trudeau, but that is what Canadians expected after 10 years of Harper. First seen during his political rise as vapid with little between the ears and under that mop of hair, Trudeau’s approval ratings are still high as he has taken on issues from climate change to gender equality. He wowed many with his adroit explanation of quantum computing (though some say that he staged that event), and yes, his yoga pose shows he has got quite the core. Some say his financial largess is only possible because of Harper’s prudent financial management, and his finance minister has raised eyebrows for perceived inexperience.
Nevertheless, at a time when leadership worldwide seems to be in retreat while demagoguery is building steam, Trudeau shines as one not afraid to take risks and not quick to blame the unfortunate for society’s problems. Most importantly, he’s fearless when it comes to rattling cages and showing that, for Canada, it's not going to be business as usual during his mandate.
Image credit: Prime Minister’s Office
Leon Kaye has written for TriplePundit since 2010, and became its Executive Editor in 2018. He's based in Fresno, CA, from where he happily explores California’s stellar Central Coast and the national parks in the Sierra Nevadas. He's worked an lived in South Korea, the United Arab Emirates and Uruguay, and has traveled to over 70 countries. He's an alum of the University of Maryland, Baltimore County and the University of Southern California.