Beyond Tinkering

It may seem strange to refer to remedies to this recession as tinkering, but in retrospect they have been unprecedented in scale but not at all unusual in scope: vast fiscal and monetary stimulus but still just the usual.

It is beginning to appear that, as in both the early 1970s and 1980s, we have, over the past eight or nine months experienced cataclysmic economic decline, only to recover quite quickly through increasingly massive applications of standard policy tools.

If this is the case, and if, as with the last several crises, we are only laying the groundwork for the next, then it is time to begin thinking about the types of reforms that might allay these increasingly violent cyclical swings. It is time to admit that this instability is not the result of exogenous "shocks" but of problems inherent in our economic and financial institutions. Our attempts to return to the stability of the immediate post-war decades has obviously failed.

A quarter century ago, economist Hyman Minsky made a case, that is only stronger today, that the problem lies in two sets of institutions: first, a financial sector given to speculative excesses and second a productive sector that requires massive capital investments.

Moreover, Minsky understood that the reconstruction of these institutions was too important to be left either to economists or bureaucrats and their erstwhile political masters. It required an informed public capable of speaking on its own behalf.

In Canada, it is difficult to be optimistic. Our press simply does not engage the larger issues, preferring the easy and captivating story instead. And the level of economic literacy is abysmally low.

Recently, one wag suggested that the Canadian Labor Congress buy the ailing National Post. They could do worse. This country desperately needs informed debate on these issues.