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Over the past six years, governments around the world have responded to the global economic downturn with a focus on balancing budgets, where “balance,” under the auspices of an austerity agenda, almost exclusively means “cuts.” In these cuts we can see the legacy of trickle-down economics.
The current austerity agenda is simply the latest permutation of beliefs that have characterized Canada’s economic policy since the 1980s. Trickle-down economics is predicated on the belief that smaller government focused on investing in large corporations will lead to higher employment and a more robust economy overall. The theory is that low corporate tax rates and high corporate profits held at the top will literally flow downwards in the form of job creation and investment in the economy.
This has proven to be incorrect. Corporations are not investing money in jobs but hoarding it in huge reserves of fortress capital; a Canadian study found that the decrease in corporate taxes since 2000 did not see an increase in jobs, but a twenty percent increase in executive and shareholder dividends.
Meanwhile, Canadians are feeling the pinch of austerity measures that have resulted not only in job loss in an already perilous economy but also in significant reductions to quality public services designed to protect and support Canadians, such as budget cuts of 25% to Veterans Affairs and 22% to the Canadian Food Inspection Agency, to name only a few.
According to recent research from the Canadian Centre for Policy Alternatives the government’s debt may be shrinking – thanks to public service cuts – but the average Canadian’s household debt is increasing. These austerity measures actually come at a high cost; it’s just that it’s Canadians who are shouldering the burden.
Benefits are not trickling down.
On top of all this, austerity measures simply do not work. According to a report by Public Services International, austerity measures result in economic contraction, not growth. Furthermore, all major periods of economic growth have historically been coupled with periods of public spending above the level of a nation’s GDP. Research from the International Monetary Fund (IMF) supports the conclusion that austerity measures are actually damaging to a nation’s economy.
Clearly the austerity agenda and the trickle-down economic policy that preceded it aren’t working. It is ineffective and it is harmful to Canadians both in the short and long term. We need an alternative. We need better solutions.
It is in the spirit of seeking a solution that ACFO is hosting the Funding Democracy summit. We recognize that the austerity agenda is not limited to Canada; rather, is part of a larger, international movement whose effects are felt worldwide. Funding Democracy will therefore draw policy makers, renowned speakers and representatives of organizations and associations from around the world to discuss practical, fair alternatives to the international austerity agenda.
In anticipation of the Funding Democracy summit, ACFO will be sparking a dialogue with you over the coming weeks, on subjects including:
As financial stewards and public servants, we believe that the FI Community is uniquely positioned to contribute to and participate in the creation of new international solutions.
Our goal is to continue to share our direction and vision for the future and to engage you in conversations about important domestic and international issues that affect the FI Community and all Canadians.
Hope to see you there,
Milt Isaacs, CPA, CMA, CPFA
President, Association of Canadian Financial Officers