Harper fails to share insights from 2008 financial crisis

Harper fails to share insights from 2008 financial crisis

All those wondering what Stephen Harper would have done in this pandemic now have an answer — sort of.

The former prime minister has penned a column in the Wall Street Journal excoriating all those who believe that COVID-19 is ushering in an era of big government and an increased role for the state in people’s lives.

True to his convictions, born in the time of Ronald Reagan and Margaret Thatcher, Harper makes the case that government will have to shrink when this spending splurge is over.

Or, in Thatcher’s immortal words, there is no such thing as society when the bills start coming in.

That’s when we’ll need the markets again.

“Right now, as in wartime, we face extreme needs for physical and financial security,” Harper writes.

“But as needs shift to jobs, growth and wealth creation — and those needs will be enormous — it will require more market activity and a bigger private sector, not more intervention and bigger government.”

Clear enough. From time to time, I’ve been wondering what Harper would do if he, not Justin Trudeau, were in charge during this crisis.

But it’s not the lessons he learned from Reagan and Thatcher that I wanted to hear — it’s what he and other governments learned during the 2008 financial crisis and the massive wave of bailouts they did to keep the economy afloat.

That’s the Harper column I would have been keen to read, because if he’s not thinking of lessons learned during the crash of 2008, this government certainly is.

Day by day, week by week, Trudeau’s government is increasingly making clear that its approach to bailouts will not follow the path taken more than a decade ago, when much of the aid to corporate giants never did filter down as promised to economically devastated citizens.

The Occupy movement and its cries against the “one per cent” were a direct result of the frustration and fallout of the 2008 crash and the income inequality it exposed.

Books were written about it — including one called Plutocrats, by a woman who is now Canada’s deputy prime minister, Chrystia Freeland.

“Too big to fail” was the signature line of the 2008 crash. Big in that case wasn’t big government, but the titans of industry, whose rescue, it was assumed, would save all those who depended on them. Not all of that worked out as planned.

Canada’s bruising lesson on this score came in the recent shutdown of GM’s Oshawa plant, 10 years after the federal and Ontario governments threw US$9.5 billion in aid to the carmaker to keep thousands employed.

Harper’s Wall Street Journal column is silent about that experience, which many in Canada saw as a betrayal of the spirit of the 2008 bailout.

But the former prime minister’s contention — that “market activity and a bigger private sector” are the fix for an economic crisis — may fall a little flat with those who believed ordinary people were not rewarded for the generosity shown to markets and corporations a decade ago.

Some of those people in the United States voted for Donald Trump, but that’s another story.

Do you know who has written a column about thinking what’s too small to fail in a crisis? Freeland, in her previous life as a journalist, wrote about the mistakes of the bailouts a decade ago, in a 2012 Reuters opinion piece, about a year before she made the leap into politics.

Freeland’s column appeared in the New York Times and recounted a conversation she had with Amir Sufi, a professor at the University of Chicago business school, about how the 2008 bailouts were aimed too high up in the economic food chain.

“He believes the U.S. government made a costly mistake by focusing on bankers and not homeowners,” Freeland wrote.

And then she added, prophetically, “Mr. Sufi’s argument matters, and not just because there will, inevitably, be another financial crisis.”

Freeland probably didn’t expect to be sitting in the driver’s seat in any government the next time a financial crisis rolled around, but you can see evidence of her thinking and reporting on it throughout this pandemic.

Just this week, Trudeau’s government rolled out long-awaited aid to big businesses, but with lots of strings attached, including a warning that none of the aid could end up in lavish bonuses for executives, as it did in 2008.

“If a company wants to access this public financing, this taxpayer-funded financing for large employers in order to protect employees across the country, the money has to go to support those employers and not high-paid executives,” Trudeau said.

Harper only makes one glancing reference to the 2008 crash in his column, saying decisions being made now are the easy ones; that the harder part comes later.

Equally hard is looking back and saying what governments should have done differently. That would have been a very interesting column from the former prime minister.

Susan Delacourt is a columnist with Torstar Syndication Services


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