Are Christy Clark and Mike de Jong practising depression economics?
Last weekend, the Vancouver Sun published a fairly glowing profile of Finance Minister Mike de Jong. It was promoted on the front page with these words: "Right man, right job, right time."
The article focused a great deal of attention on de Jong's frugality and how unfazed he is by criticism. He's transferred this desire to save money in his private life to the public sphere, bringing forward a budget with an $879-million surplus.
The article reinforced my perception that de Jong and his boss, Premier Christy Clark, sometimes don't fully appreciate the differences between running a household and overseeing a $45.8-billion provincial budget, which can have an enormous impact on the consumption of goods and services.
Statistics Canada reported this week that the country's gross domestic product declined by 0.6 percent in the first quarter of 2015. Final domestic demand (private consumption plus government consumption plus gross fixed investment) fell by 0.4 percent.
"Household final consumption expenditure grew 0.1% in the quarter," the agency stated. "Nonetheless, this was the slowest growth in household spending since the second quarter of 2012."
From the Statistics Canada data, it's clear that a lack of demand for goods and services is hampering the economy.
Economist Jim Stafford reacted to the news by tweeting: "Govt spending cuts (govt current spending fell 0.2% in 1Q) now adding to the macro malaise. #Austerity is a self-inflicted, needless injury."
Paul Krugman defined depression economics
Nobel Prize–winning economist Paul Krugman wrote a book about this issue in 2009 called The Return of Depression Economics and the Crisis of 2008.
He defined depression economics in this way: "Essentially it means that for the first time in two generations, failures on the demand side of the economy—insufficient private spending to make use of the available productive capacity—have become the clear and present limitation on prosperity for a large part of the world."
Here in B.C., there are opportunities for the provincial government to use its financial clout and its surplus to stimulate the economy just as it appears on the verge of going into recession. But that's not the de Jong way.
Krugman acknowledged in his book that the "usual objection" to using public spending as a stimulus is the delay it takes. That's because by the time the money is allocated, the slowdown has ended.
"That doesn't seem to be a major worry now, however: it's very hard to see any quick economic recovery, unless some unexpected new bubble arises to replace the housing bubble," Krugman noted.
Clark could have acted much earlier
There was an opportunity after the 2013 election for the Clark government to finance rapid transit in Surrey as a stimulus to lay a foundation for future economic growth. Instead, the premier decided to hold a nonbinding transportation and transit plebiscite, delaying this necessary infrastructure by a couple of years or more.
If there's another quarter of negative economic growth, Canada will officially have fallen into a recession. Yet our provincial government continues practising depression economics, in part because the premier appointed a finance minister with a fetish for saving money.
If the economy continues sinking, Clark risks becoming B.C.'s version of former Conservative prime minister R.B. Bennett, whose tight-fisted fiscal policies drove Canada deeper into depression during the Dirty '30s.
May 30, 2015 at 12:15pm
If any one thought a radio talk show mouthpiece could run a province, Clark is proof that they were mistaken. Her mostly aged followers think she looks good and that's good enough for them.
May 30, 2015 at 12:47pm
Christy Clark is not a radio talk show mouthpiece: her political career is much more extensive than her radio career.
Having said that, I'm depressed about her economic policies so that supports the headline.
May 30, 2015 at 1:34pm
Further to Mr. Smith's article above, a concrete example of an economic situation exacerbated today by the insistence of the Christy Clark government that the Vancouver School Board had to <a href="http://www.vancouversun.com/news/School+board+borrows+million+from+fund+... target="_blank">borrow</a> $1.6 million to help build the new and necessary school in False Creek, when the province would not live up to its mandated responsibility to fully fund construction.
May 30, 2015 at 2:36pm
nobody moves to BC for a job, BC has the worst job opportunity and worst wages in Canada
May 30, 2015 at 3:23pm
The fool ya brand , HAA they fooled ya fools
May 30, 2015 at 8:42pm
Charlie is calling for Victoria to do what the Harper Conservatives did in 2009 when they went into deficit spending to stimulate economy.
As it is right now there's a chance some of the provincial debt can be reduced. Isn't that what we hear is a good idea?
May 30, 2015 at 9:05pm
Cristy Clark Canada's Sara Palin and she would think that was a complement nuf said
May 30, 2015 at 11:21pm
I wonder if the crappy Canadian dollar is to blame with the low spending?
May 30, 2015 at 11:26pm
Dumb, dumbs: You elected Cristy the Clown. Did you also vote YES for the transit tax? Will you also vote to electing the Federal Conservatives this October?
May 30, 2015 at 11:30pm
We all know the Vancouver Sun is pro federal conservative and provincial liberal so that explains why they gave such a glowing profile of our finance minister.