COLUMN

Marching bravely towards recession

While our allies tread warily in the ongoing fight against inflation, Canada is in the process of completely turning off the ignition

DIANE FRANCIS October 2 1989
COLUMN

Marching bravely towards recession

While our allies tread warily in the ongoing fight against inflation, Canada is in the process of completely turning off the ignition

DIANE FRANCIS October 2 1989

Marching bravely towards recession

COLUMN

While our allies tread warily in the ongoing fight against inflation, Canada is in the process of completely turning off the ignition

DIANE FRANCIS

Great leaders have vision. Great leaders have commitment to their causes. Great leaders are rare. In fact, most countries are shortchanged when it comes to their leaders. Britain is the exception. Like rain and football violence, it seems to have more than its fair share. Consider that, in this century, it has had two standouts: Sir Winston Churchill, who stirred the world into making huge sacrifices to fight Nazi dictator Adolf Hitler, and its current Prime Minister Margaret Thatcher, who has step-marched Britain out of an entrenched socialist morass and near-bankruptcy toward balanced budgets, economic growth and lower taxation. Meanwhile, Canada remains the land where the bland lead the bland.

But thanks to one of the country’s most powerful postwar leaders, Bank of Canada governor John Crow, Canada now verges on greatness. Unspoiled by the need to be elected, Crow has a vision and steers an exceedingly straight and narrow path towards it. He is determined to make Canada an inflation-free nation, something never achieved before without the assistance of a full-blown recession or the saturation bombing of industrial sites. Undaunted, Crow persists in his policy, imposing high interest rates on Canadians from coast to coast, to destroy inflation.

Such unflagging resolve promises victory soon, if it hasn’t already arrived. On Aug. 20, Statistics Canada published figures showing that, for the past three quarters, ending on June 30 of this year, the country’s economy began slowing down. Employment growth increased by only one per cent during this period. Inventories in factories and stores climbed to levels which threaten to trigger layoffs and slowdowns. And finally, best of all, high interest rates and the concomitant higher Canadian dollar translated into a plunge in exports.

To Crow and his inflation-fighting cronies at the Bank of Canada, this is singularly good news, because if a high-priced Canadian dollar is pushing exports down, the converse is true:

imports are up because they are cheaper due to a lower U.S. dollar by comparison. And conventional wisdom holds that cheap imports mean less inflation.

Unfortunately, not everyone agrees with Crow’s strategy. Detractors say that fighting inflation with high interest rates is like fighting fire with fire—as the rates go up, so does inflation. While correct, they are slightly misinformed. Crow’s interest rates would fuel inflation figures if the rates themselves were included as part of the consumer price index—a survey that Crow monitors constantly for signs of inflation. But they are not included (other than mortgage rates), and only seep in, usually many months later, in the form of higher prices.

Crow is a consummate leader, untainted and unaffected by petty concerns. What better person should manage our economy than one who has always been a bureaucrat? Add to that the fact that the man is untouchable. A British economist from world-famous Oxford University, he enjoys greater job security than does the Prime Minister, as former Tory prime minister John Diefenbaker discovered. When Diefenbaker drove his governor, James Coyne, from office in 1961 over Coyne’s refusal to

back government policy that would have expanded the economy by increasing the money supply, the governor’s departure triggered a run on the dollar. It also produced fears, both domestic and foreign, that a politician in charge could simply print Canadian dollars in order to buy votes. The resulting political and economic backlash made the governor’s position untouchable.

Without a doubt, we can all sleep more soundly in our beds tonight knowing that Diefenbaker’s lesson has been learned. Crow’s tenured position allows him to be as rigid and inflexible as he needs to be, free to chart his own course even when the citizenry and its elected leaders disagree with both the destination and the route. More importantly, Crow’s privileged perch frees him from tacky political pressure and question-and-answer periods in the House of Commons, where he might have to explain why it is fair, or appropriate, to impose one national interest rate on a country with rates of inflation, and even deflation, that vary greatly from region to region.

Unfettered by such niggling details, Crow can avoid the aggravation of having to devise workable regional interest rates, as Japan has done to slow down some regions and speed up others, or some form of levy to do the same.

Unimpeded, he gains stature continuously, even requiring his own employer, the federal government, to make the greatest sacrifices. As Crow raises interest rates, the federal government deficit becomes more and more expensive to finance. Currently, $1 out of every $4 spent by the federal government goes to paying lenders. Ottawa’s interest payments are now about $33 billion, or the equivalent of twice the money spent on benefits for the elderly.

Some decry all this. But would Churchill have stopped bombing Germany because of a little civilian bloodshed? Would Margaret Thatcher be deterred by disastrous economic indicators, if export success stood in the way of greater economic goals? Get real. Crow’s critics should lighten up. Think of the trees and resources saved as a result of collapsing exports.

And Crow pushes us to the forefront internationally. While our allies tread warily in their fight against inflation by slowing down their economies just a little to engineer a so-called economic soft landing, we’re in the process of completely turning off the ignition.

The bottom line is that Canadians who are not already on their knees over Crow’s policies should get down on them. I, for one, am proud to be a part of Crow’s draconian policies. Of course, my home is paid for, I have no other debts, my employers don’t rely on exports, and my savings are securely locked away in taxsheltered treasury bills. I’m also grateful. Face it. Crow saves us from ourselves, notably those misguided few who would invest in, or work for, heavily mortgaged steel mills that struggle to pay high interest rates at home by exporting goods that are too expensive abroad because our dollar is too high. AU I can say is, John Crow, this is a nation on its knees because of you. Keep up the good work.