The Review of Economic Performance and Social Progress 2001: The Longest Decade: Canada in the 1990s

The 1990s was a long decade in Canada. It was a period of transitions and turbulence, of seismic shifts in the Canadian economy and dramatic changes in many longstanding public programs. It was also a decade in which Canadians' attitudes toward their economic future and their expectations of government seemed to evolve in new and uncharted directions. The decade began with a deep, prolonged recession yet it ended with the return of strong economic growth. The basic structure of the Canadian economy was being reshaped by forces felt around the world, such as trade liberalization, globalization and technological change. The 1990s also saw major changes in public policy. Most importantly, the basic strategy guiding macroeconomic policy shifted dramatically. Monetary authorities adopted price stability as their primary objective, producing restrictive inflation targets and high interest rates compared to many other countries. Fiscal policy was also tightened sharply, as federal and provincial governments moved aggressively to eliminate longstanding deficits, mainly through deep cuts to public expenditures. The purpose of this introduction is twofold. First, it provides a synthesis of what the editors see as the main themes that emerge from the different chapters, including a discussion of the implications for public policy and second, it provides a detailed overview of the main findings of all chapters in the volume. The chapters are written by leading experts in the field and provide more detailed views of specific dimensions of the economic and social developments of the 1990s. The chapters are organized into four sections dealing with basic concepts, the public view of economic and social trends, changes in key public policies, and the outcomes in terms of the economic, social and environmental record of the 1990s.

The Review of Economic Performance and Social Progress 2001: The Longest Decade: Canada in the 1990s

In this chapter, Don Drummond makes the case that with large deficits there was little room for the Bank of Canada to reduce interest rates to stimulate the economy and generate revenues. It was imperative that the deficit be eliminated. Tax rates were already high so the government had no choice but to cut program spending. Drummond recognizes that the cuts caused hardship for some Canadians, but feels that the suffering was relatively limited and temporary in nature. Drummond argues that the elimination of the deficit has reduced risk premia and allowed the Bank of Canada to bring interest rates down.Monetary Policy, Inflation, Inflation Reduction, Inflation Policy, Growth, Recession, Well-being, Wellbeing, Well Being, Unemployment, Expenditure, Taxation, Fiscal Policy, Deficit, Canada

The Review of Economic Performance and Social Progress 2001: The Longest Decade: Canada in the 1990s

One of the most (if not the most) highly charged public debates in this country over the past decade has been about the role of economic imperatives in dismantling the foundations of the welfare state set out in the universalist model adopted in the post-war years. Ken Battle in his chapter is critical of the ongoing public discourse on this issue, which he considers as lacking both in substance and subtlety. He argues that this has led to a polarization of views and produced persistent mythologies which in his estimation have served to insulate government from effective criticism and prevented the occurrence of a truly needed, open and informed public debate on the present and future course of social policy. Battle describes the overall process of reform and developments in social policy in the last two decades as one of "relentless incrementalism" where cumulative, purposeful and patterned change has produced a substantial shift in the structure of the Canadian income security system. He concludes that on the whole the emerging post-welfare state will better serve Canada's evolving social, economic and political needs and sees little cause for continuing nostalgia over the fading universalist welfare state, which in his estimation never worked all that well.Social Policy, Income Support, Income Security, Economic Security, Welfare State, Welfare System, Social Safet Net, Welfare Policy, Social Security, Canada

The Review of Economic Performance and Social Progress 2001: The Longest Decade: Canada in the 1990s

In this chapter, Pierre Fortin provides a critique of the conduct of Canadian monetary policy in the 1990s, a critique that he developed throughout the decade. While not denying that the US economic slowdown in the early 1990s reduced growth in Canada, Fortin lays the blame for the inferior economic performance of the Canadian economy relative to the U.S. economy squarely on the back of the Bank of Canada, and dismisses structural explanations of the recession as lacking an empirical basis.Monetary Policy, Inflation, Inflation Reduction, Inflation Policy, Growth, Recession, Well-being, Wellbeing, Well Being, Unemployment, NAIRU, Phillips Curve, Canada

The Review of Economic Performance and Social Progress 2001: The Longest Decade: Canada in the 1990s

In this chapter, Jim Stanford agrees that measures were needed to eliminate the deficit. But he argues that Paul Martin's program spending cuts were larger than necessary and caused real pain in many areas of Canadian life. He shows that a strategy in which program spending was frozen in nominal terms, but not cut, would have produced more growth and employment and still yielded almost the same deficit by 1999 (although slightly higher debt levels) as the program-cutting path actually followed.Deficit, Debt, Program Spending, Expenditure, Fiscal Policy, Growth, Unemployment, Deficit Reduction, Canada

The Review of Economic Performance and Social Progress 2002: Towards a Social Understanding of Productivity

In this chapter, William Scarth examines the relationship between population aging, productivity and growth in living standards and reaches a more optimistic conclusion about the effects of aging on productivity. Indeed, he finding that aging may in fact lead to increases in productivity, even if no policy initiative is taken. He argues that our economy possesses at least three adjustment mechanisms that insulate living standards from the adverse effects of an aging population.Aging, Ageing, Population Aging, Demography, Demographic Shift, Baby Boomers, Baby Boom, Dependence, Indebtedness, Debt, Investment, Productivity, Simulation, Growth, Consumption

The Review of Economic Performance and Social Progress 2002: Towards a Social Understanding of Productivity

In this chapter, Joseph Heath argues that we tend to overestimate the contribution that further productivity growth will make to the welfare of Canadians. Traditionally, productivity growth was thought to contribute to increased leisure time, greater consumer satisfaction, the elimination of poverty and greater public support for redistributive efforts to narrow social inequality. While accepting that such benefits have flowed in the past, Heath argues that in the last 25 years, productivity growth has contributed less and less to the well-being of Canadians. The key puzzle for Heath is why further economic growth does not lead to greater happiness. In attempting to solve this puzzle, he canvasses three currents of thought in the literature. One possible explanation is that increased consumption does not generate lasting increments in welfare because the process of satisfying our desires generates new desires. A second explanation, which Heath describes contends that consumption not only satisfies needs but also communicates status, class, upbringing and tastes. A third possible explanation draws on the work of Fred Hirsch, who argued that the supply of some goods such as waterfront property, which he labels positional goods, is fixed.Social Priority, Productivity, Social, Labour Productivity, Labor Productivity, Growth, Free Lunch, Redistribution, Poverty, Consumption, Happiness, Competitive Consumption, Positional Goods, Externalities, Leisure, Welfare, Satisfaction, Living Standards, Quality of Life, Public Goods, Wants, Needs

The Review of Economic Performance and Social Progress 2002: Towards a Social Understanding of Productivity

In this chapter, Peter Dungan investigates the sensitivity of Canadian government fiscal balances to alternative long-run productivity growth rates using elements of the FOCUS macroeconometric model to conduct simulations on a 'base-case' projection of the Canadian economy, and of its fiscal detail, through the year 2030. The simulation strategy employed here in part parallels the technique used by the Department of Finance in recent budgets and fiscal statements to estimate the implicit size of the 'fiscal dividend'. A total of five alternative growth paths and sensitivity tests are presented. As Dungan points out changes in productivity growth rates can occur for a variety of reasons and can have many different possible effects on the economy. Therefore, these types of simulation exercises inevitably require a number of simplifying assumptions which must be taken into account in interpreting the results.Productivity, Fiscal Balances, Fiscal Policy, Revenues, Government Revenues, Taxes, Tax, Taxation, Social Programs, Social Spending, Social Policy, Expenditures, Government Expenditures, Government, Econometric Forecasting, Forecasting, FOCUS, Macroeconometric, Macro-econometric, Econometric Modeling