Comment
Looking ahead
We should talk about what happens next. Certainly our focus today must be trained upon containing the spread of COVID-19 and caring for those threatened by this virus. We must do all that is in our power to equip and assist the healthcare professionals combatting this pandemic. We must, as well, scramble to manufacture ventilators, personal protective gear and support efforts to develop a vaccine. But those of us not on the frontlines of this fight might also want to give some thought to the days after this plague has subsided.
We seem bound to face challenges unknown to those who did not live through the Great Depression. Savings, wealth, jobs are being decimated in massive swathes on a trajectory similar to the virus itself. When at last we leave our homes, what will we find? Will our jobs still be there? Will customers return? Will we keep our borders closed? Will global trade return, or will we wall off our economies?
Governments are making the right noises about supporting the economy and workers. Canada though, so far, seems a bit more timid than other governments in scaling up supports to face this challenge. That I expect will change. (Far better had we managed to reduce our debt in good times, but there is little value in belabouring this now.)
Rather, what we need to talk about now is how to ensure there is an economy when we get through this. Many of the notions being floated in recent days involve cash payouts to individuals in the form of enhanced employment insurance to a guaranteed basic income. These plans have the advantage of speed—they can be rolled out quickly to alleviate immediate hardship endured particularly by those on the margins.
Payouts to individuals, to the exclusion of business-based economic supports, bear the risk, however, of causing long-term economic destruction. Government can’t support us. Not for long anyway. We will print money for a while. But eventually, we will devalue our currency to a point where no one trades with us. Government revenue sources—i.e. taxes—will dry up quickly.
We will need jobs. Better that they are the jobs we have now—rather than to conjure new jobs from the wreckage of a post-COVID- 19 world. If we merely pay folks to stay home while business bankruptcies and closures mount, we had better learn to enjoy crude oil and hard rock minerals on our wheat.
Part of any government support, therefore, must necessarily be aimed at businesses in order to support their workers. I can hear folks howling at this notion. And while I can countenance some restrictions, we must nevertheless work quickly to ensure there is the semblance of the economy when we retreated into our homes, once the worst has passed. This means propping up existing businesses and jobs.
It is not at all clear that policymakers fully comprehend the significance of this last point. In an age of populist politics—unburdened by principles or historical insight—the expediency of cutting cheques to individuals is tempting.
These notions are gaining traction among those eager to turn any crisis into a new world order or a more powerful electoral base. The choices we make in the coming weeks, however, will define the next decade—the wrong ones could propel us toward mayhem.
Governments can, and should, prioritize a wage subsidy program similar to Denmark and Britain, which have already moved to cover the bulk of workers’ wages to employers who agree to keep their staff employed rather than cut them loose only to queue up in the employment insurance line.
But more will be needed. Restrictions on registered savings accounts for such things as retirement or education must be eased in order to release this capital to reduce the mounting debt burdens Canadians are carrying—or at a minimum buy some time until an economic recovery takes hold. Creditor protection. Debt and mortgage payment deferrals. There are many smart proposals on the table. And, yes, targetted payouts to individuals outside the reach of the economy will be required. Just bear in mind we will need jobs to return to when this is over.
It is snowing on this fifth day of self-isolation. Spring seems a long way off. It is not at all clear what we will find when we meet again. Let us use this time wisely.
Comments (0)