When the COVID-19 crisis struck, and governments around the world began responding with unprecedented levels of income support, many felt we were on the verge of a fiscal revolution (Blanchard et al., Reference Blanchard, Felman and Subramanian2021). While it was always understood that most of the COVID spending was temporary, many economists also saw considerable scope for deficits beyond the pandemic. The assumption—widely held by central banks and even within the IMF (Gopinath Reference Gopinath2020)— was that the advanced economies were at risk of secular stagnation, that the COVID shock would depress aggregate demand even further, and that only fiscal authorities could return the economy to full potential with interest rates at or near their zero-lower bounds. Five years on, it is safe to say enthusiasm for deficits among mainstream economists has waned, while the long-term path of aggregate demand—and its implications for fiscal policy—has become anybody’s guess (and that is what I wrote before the re-election of Donald Trump).
It is in this moment of great uncertainty that Michael Atkinson and Haizhen Mou have published Fiscal Choices: Canada After the Pandemic—a broad and comparative overview of Canada’s fiscal challenges in the wake of the pandemic and the 2008 Global Financial Crisis. The book explores a range of economic and fiscal challenges, including economic stability and growth (chapter 3), income and wealth inequality (chapter 4), fiscal sustainability (chapter 5), fiscal federalism (chapter 6) and democratic accountability (chapter 7). It also describes the perspectives of Canada’s economic elite on these issues—drawing not only on recent academic and policy debates but also interviews with 24 public economists and 47 sitting or retired politicians and bureaucrats.
The book’s main conclusions, as I see them, are four. First, Canada and other wealthy democracies face a polycrisis. Growth is stagnant. Goods and services have become more expensive. Income and wealth inequalities are widening. Climate change is accelerating. Trust in government is in decline. And populism is on the rise.
Second, solutions are in short supply. Economic growth remains the principal objective of economic policy (an observation supported by the authors’ interviews), but other problems—including inequality and climate change—are equally pressing and will not be solved by growth alone. Growth is also hard to produce. Canada and other wealthy societies are aging, and the age of big productivity gains appears to be over.
Third, the failure to find solutions is due, in no small part, to radical uncertainty. National economies—and their relationships to society, fiscal policy and the broader global economy—have grown increasingly complex—outstripping our capacity to comprehend and steer the economy in purposive and collectively beneficial directions.
Fourth, the failures also reflect a lack of leadership. Our elites are “intelligent, and well meaning,” argue the authors, but also “fearful and conservative.” They cling to old solutions and assumptions, while the economy and politics shift beneath their feet.
The book has much to commend it. It is broadly comparative—providing a broad sense of Canada’s relative performance and situating its challenges and debates in a broader international context. It is also genuinely interdisciplinary—drawing on the expertise of a political scientist and expert in public policy and public administration (Atkinson), and an economist and expert in fiscal federalism, and fiscal and social policy (Mou). The result is a breadth and depth of analysis that no single author or discipline could match (the coverage of relevant literature in economics and political science is truly vast). Finally, it makes a number of important empirical contributions, including the collection and analysis of original interview data, which add a lot of colour and perspective to topics non-specialists often find technical and dry. Fiscal Choices will find broad appeal among economists and political scientists—particularly ones interested in questions of fiscal federalism, democratic accountability and the politics of economic and fiscal policy. It will also find broad appeal among policymakers.
Alas, no book is perfect, and if this one has one weakness, it is the failure to fully appreciate and link the implications of its core arguments and themes. An example: the authors pay a lot of attention to the challenges of radical uncertainty and the failures of democratic accountability, but far less to the ways in which these topics relate. How, for example, do we hold politicians and civil servants accountable for outcomes that no observer—no matter how expert—can confidently predict? And how do we continually adapt and readapt our systems of economic governance to an increasingly turbulent and uncertain set of economic and political conditions? It is probably too soon to expect satisfying answers to these questions, but they are ones other political economists have been asking (Ang, Reference Ang2023; Best, Reference Best2016), and it would have been nice to see the authors engage them.
The good news is Fiscal Choices provides an excellent and inspiring foundation for taking this step. Let us hope the authors and other students of Canadian political economy take it.
