By Theo van de Kletersteeg

Our federal government, our provinces and our municipal governments have never owed more than they do today. On top of that, consumers owe near-record amounts of consumer debt, and record amounts of mortgage debts.

Our federal government, our provinces and our municipal governments have never owed more than they do today. On top of that, consumers owe near-record amounts of consumer debt, and record amounts of mortgage debts.

There are some who would have you believe that record debt levels are simply the “new normal”, that they are nothing to be concerned about. This is like the “greens” saying that oil is bad, and the sooner we get rid of it, the better. Right!

Of course, government debt is nothing new. Except that we have never seen anything like it in Canadian history. We have never seen such huge indebtedness, and we have never seen this level of public apathy about the dangers of carrying irresponsibly high levels of debt.

By and large, government debt represents an accumulation of government budget deficits. Just like household finances, when you spend more than you take in, you’ll end up borrowing more and more to pay for your house, your car, your Starbucks coffee, and everything in between. Canadian love to spend money they don’t have, so it’s no surprise that citizens owe near-record levels of debt. And, regrettably, Canadian governments of all stripes and colours love to spend too, especially during the past few years, and at no time more than in 2020.

At the tail end of the 1960s, government debt levels were very low, after the economy had enjoyed two decades of record economic expansion. The future looked bright, and this was the time that most of today’s social programmes were introduced. But, what politicians did not consider was that while the good times might not last forever, the obligation to continue those social programmes, once implemented, was irretractable. This resulted in two major shifts in attitudes. Citizens who had previously been relatively conservative, knowing that one needed to save for “rainy days”, no longer felt compelled to do so – after all, if government provided “safety nets”, what was the point of individuals saving their money instead of spending it? And so the consumer economy was born. As many industries found themselves unable to meet international competition, and closed up shop, the consumer stepped in to buy houses, cars, white goods, furniture, etc., aided by the Bank of Canada, the banks, and credit card companies. In the process, consumer lending became one of Canada’s most profitable industries. The second impact of the implementation of social programmes and the creation of the consumer economy was government support to keep the good times rolling, at the expense of industry. It’s as if governments had given up on Canada’s ability to compete internationally and, instead, figured it could keep the economy going through massive annual immigration (after all, immigrants need to buy clothes, and food, and cars), and ever-lower interest rates, to encourage people to buy things that in ever-increasing numbers they could not really afford to buy.

This government strategy has been in place for well over a decade, from well before Covid-19 struck. When Covid-19 struck, however, we suddenly became aware of our vulnerability, and the fragility of our economic and social systems. We discovered that, in its quest to fuel the consumer economy, Canada had not spent on preparedness – we had grossly inadequate supplies of PPEs, ventilators, as well as hospital beds, and we discovered that seniors had often been warehoused in cramped quarters, attended to more often than not by employees who lacked proper training. Most of the human toll of Covid-19 was suffered by seniors in long term care facilities. This tragic situation had come about because of the choices we had made: elder care had become a social expense, but one that needed to be contained to a minimum. Moreover, by and large, seniors do not participate in the consumer economy.

Meanwhile, our federal government responded to the pandemic by doling out money to vast numbers of people, many of whom did not need it, and to support businesses and landlords, many of which would obviously not survive a prolonged period of shutdowns. In short, while some of the expenditures were well justified, most of the money spent was of highly dubious value. Meanwhile, taxpayers are on the hook for all the incremental money that was spent because these funds were financed through borrowing. And it’s not as if the borrowing has stopped. In fact, even before the pandemic started, the present government projected almost never-ending budget deficits.

Why should we be concerned about these seemingly forever government deficits? Sooner or later, we will no longer be able to borrow, or no longer on terms we can afford. Perhaps the most worrisome aspect of all this borrowing is that it takes away the choices that Canadians have about what to spend their money on. As debt climbs and interest rates increase, an increasingly large share of overall taxes paid will need to be devoted to repaying debt and paying interest. This is money we can’t spend on improved senior care, clean water and decent housing for indigenous peoples, better education, better healthcare, improved pensions, etc. Moreover, we can’t spend it on initiatives that will improve the competitiveness of Canada’s business enterprises that, it is important to note, provide the jobs to enable employees to pay the taxes to enable Canada’s governments to keep providing the social services that most Canadians take for granted.

With the exception of only one country, China, which continued to produce positive GDP growth throughout the pandemic, all other countries saw declines in GDP, and increases in debt. While Canada was among the worst hit economically, in comparison with other western nations, we must remember that while Canada enjoyed the luxury of being able to spend a lot of money, numerous third-world countries lacked such luxury. Developing nations found that long years of slow progress were wiped out, and are now facing uncertain futures.

In Canada, we face important choices: we can continue on our current path, the path of an economy led by consumer spending, or we can make an effort to improve the productivity of industry to enable us to be more competitive internationally. If we were to choose the latter course, we must raise educational levels and training to enable more of us to participate in higher value-added segments of the economy. At the level of national policy, we should aim to provide greater opportunity for a greater number of people by encouraging growth and increased efficiency in the goods-producing sector of our economy, and our industrial/commercial service sectors. Our current path leads to plenty of jobs for waitresses, retail clerks, and warehouse and delivery employees, but this path creates very little wealth, and does not allow those who participate in these industries to create sufficient value-added for the nation, or for themselves as individuals. Our present economy produces far too many low-skill, low-wage jobs that should not be the trademark of a country that prides itself as being an “advanced” nation. Instead, we should develop a national economic plan that emphasizes the growth of “knowledge” enterprises and entrepreneurship. Canada needs dozens and dozens of enterprises like Shopify and Blackberry, and we should not be scared to death when one of our larger enterprises runs into trouble, and fail to provide support.

We have choices. Canada can become a nation of warehouse and fast food restaurant employees. Alternatively, we can create a nation that our children will be proud of. Canada once did such a thing when it mobilized to fight World War II. We need to mobilize our resources again, to create an aspiring and inspiring Canada. We need to come to grips with our debts, resolve to consume less, and invest a lot more in the asset that will allow us to compete in the future: education, education and education, and promotion of entrepreneurship. If we resolve to do so, we can emerge from this pandemic with a plan for a better future. After we have mortgaged our children with our debts, don’t you think they deserve the opportunity?

What kind of legacy do we want to leave for our children? A nation in a state of near-bankruptcy that was not able to implement its numerous promises of greater equality, that can provide quality education only to those who are lucky enough to have wealthy parents, and that increasingly relies on immigration to provide the low-cost workers that the consumer economy increasingly relies on? We have choices. Let’s make sure to make choices that will make for a stronger Canada that will be able to provide opportunity for the greatest possible number of its citizens. If we choose not to follow that path, you should be prepared to explain to your children why we didn’t.