1. In Pursuit of Knowledge Lecture Series University of Victoria, Continuing Studies February 6, 2014 By Michael J. Prince

2.  So, what happened? What were the origins and causes?  What are the consequences?  What was Canada’s place in it?  What does it tell us about Canadian politics, macro-economic policy, budgeting, and democratic governance? 2

3.  About economics and politics, private and public power  Essential decisions governments make on a regular basis about taxing, spending, borrowing, lending, purchasing, selling, planning, messaging and spinning  A high-profile, yearly agenda-setting occasion for how values and interests are ranked and allocated in terms of actions and inactions, winners and losers 3

4.  Crises are constructed and contested forms of political-economic reality, discourse, analysis and advocacy  Different types of crises: ◦ Speedy, unexpected periods of shock and disorder in a short time period ◦ Slowly developing from continuous failure to recognize or act ◦ Senses of continuous trouble or turmoil in some persons’ lives compared to others ◦ Intergenerational problems and looming tensions ◦ Talk of gloom and doom as a way to exert influence 4

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6.  Banking and financial institutions: collapse of Lehman Brothers, others threatened  Housing crisis of sub-prime mortgages and lax mending practices  Economic recession and rising job losses  Growing federal deficits and national debt  Credit rating of US government downgraded for first time in history  Republicans and Democrats clash over national debt ceiling and tax reform 6

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9.  Banking crises: in the UK, Northern Rock, Lloyds TSB, Royal Bank of Scotland; in Iceland; Ireland; and elsewhere in Europe  Economic slowdown and deepening recession  Government deficits grew rapidly  Sovereign (national) debt problems of several EU and eurozone countries, notably Greece, Spain, Portugal, Italy and France  Borrowing costs for governments driven up by bond investors and debt rating agencies 9

10.  What would happen if a country defaulted on its national debt?  Should one or more countries withdraw from the eurozone?  Actions: ◦ bailout funds ◦ debt rescheduling ◦ new stabilization tool ◦ tighter coordination on fiscal policies ◦ closer scrutiny of European banks 10

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12.  Act 1: 2008, slow recognition by Harper government of the global fiscal pressures and threats of economic recession  Act 2: 2009-11, major stimulus program, Canada’s Economic Action Plan; auto industry bailout  Act 3: 2011-2014, austerity policies and future budget balance 12

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14.  Large budget surpluses Harper Conservatives inherited in 2006 from Martin Liberals seen as excessive taxation, tax cuts in 2006 and 2007 (e.g., GST) and spending increases  Federal election May 2008 and second Harper minority government  Economic statement in fall 2008 gave no real acknowledgement of global troubles  Belief in capacity of markets  Political crisis and prorogation of Parliament 14

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16.  January 2009 and March 2010 federal government budgets, Keynesian-style demand management stimulus program of $62 billion  So-called “shovel ready projects”  Partnered with provinces and municipalities  Auto sector bailout of 2009 by Canada and Ontario: job saving social policy as much as industrial policy  Federal budget went to a $56 billion deficit 16

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18.  October 2011election, Harper wins majority government  Canadian economy recovering  Temporary stimulus measures expired  Deficit reduction through program restraint and reductions and further economic growth  Aim to balance federal budget by 2015  Low taxation policy of Harper government and low interest rate policy of Bank of Canada  Visible boutique tax credits 18

19.  American crises: banking and mortgage systems, economy, auto sector, government budgets, national debt ceiling and political brinkmanship in Washington  European crises: banking, economic, deficits, sovereign debts of several countries, viability of EU  Canadian crises: mainly economic recession, auto sector, and fiscal deficits, political dysfunction and function, (social deficits) 19

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