Our government, along with many Canadian economists, have had a recurring subtext in the last few months: Maybe Canada could get away with not shelling out for a fiscal stimulus since we'll rebound when the US economy does. This sentiment is what led to the infamous Harper/Flaherty Economic and Fiscal Statement of November 27, 2008. If the opposition had not made an effective threat to overthrow the government unless it enacted fiscal stimulus, this attitude would probably have led to Canada - alone in the developing world - not pitching in to help avert the global catastrophe.
IMF First Deputy Managing Director John Lipsky recently said, "Governments must not fall into the 'seductive trap' of focusing only on national priorities at the expense of international health." He's talking to Canada. Most of the rest of the world gets it.
Okay, to be fair, it's not just Canada. For a while Germans also also floated the idea of skimping on stimulus and riding the coat-tails of other countries. And it's not just Conservatives: others have suggested we might duck the cost of stimulus and wait for the US. But Canadian Conservatives are definitely the main proponents of this isolationist policy.
Most countries not only get it, but they have really stepped up to the plate. When the IMF asked developed countries to enact fiscal stimulus with a combined effect of 2% of global GDP, most countries announced stimulus packages immediately.
In early December, Japan announced out of the blue that it was loaning the IMF an additional $100M. Japanese Ambassador Takeshi Kondo said when he announced the loan: "International trade and Japanese business are based on the US dollar system and it is in the interests of the country and the GCC states to support that system."
Alistair Darling, UK chancellor of the exchequer, recently wrote: "Working alone, as individual countries, there can be no solution [to the economic crisis]. But together... we could get through this global credit crunch." He calls for "coherent and concerted policy action across the world" and says the UK "needs to lead the process of managing globalisation as a force for good."
The IMF recently asked developed countries to pitch in extra cash to the IMF crisis rescue fund. Doing so is in our own best interest. By helping the countries most in peril (like much of Eastern Europe), we help stop the spiral of defaults on loans and loss of trade that will bring us down too.
We also need to rehabilitate our image. So far in this crisis we have behaved very poorly, and there will be repercussions if we don't address that. This situation is the same as if we hadn't risen to the defence of Europe in 1939. It's like turning our backs on a country that has suffered a devastating national disaster. If we don't step up on this, we don't have a lot of moral authority when we argue against the US not wanting to spend any of their stimulus money in Canada. We don't have much claim to authority at all.
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