I delivered the following speech on February 3 before the Toronto Board of Trade. Yesterday, the Financial Post published an excerpt under the title “Give Keynes the boot.”
Today I would like to discuss the issues of how to solve the global economic crisis that began in 2007.
As you all know it began as a financial crisis caused by a real estate crash in the United States. It then spread around the world and caused a recession. Most governments reacted with ambitious stimulus packages that were added to the high debt levels they already had. It has now transformed itself into a sovereign debt and a budgetary crisis in particular in Europe and the United States.
Some countries in Europe like Greece are close to bankruptcy and need to be bailed out. Others such as Italy and Spain are in serious trouble. Some of them are expected to be in recession this year. Many analysts are saying that this may eventually break the European monetary union.
The U. S. for its part has been accumulating huge and unsustainable deficits for several years.
In Canada, on the contrary the situation is under control. We’ve created more jobs since the recession than we lost during the recession. Canada did pretty good in part because we had sound public finances before the crisis and because our stimulus plan was limited and well targeted mostly on needed infrastructure.
We did not lose control of our spending. We did not create unsustainable deficits. And today we are on a clear path to a balanced budget and unless the international economic situation gets worse sustained growth.
Why is it, that Canada finds itself in a relatively favourable economic situation while our partners are still having serious difficulties? Because our partners follow the economic school of thought called Keynesianism. This theory was developed by British economist John Maynard Keynes.