Is Chrystia Freeland coming for your stuff? Canada’s finance minister raised eyebrows by following up her insanely profligate fall “fiscal update” with cheery musings about prying loose the savings of the middle class, if not those who’d be working hard to join it absent the lockdown. But as usual we should seek not dark conspiratorial intent but coherent and plausible meaning in her unsettling comments.
By plausible I don’t mean something that might work. I mean something she might expect to work. And it’s not to eat the rich, if only because if she were planning to raid your house and stuff you into the pot she would not say so.
She did speak of “better off people” on the premise, correct as far as it goes, that they have more money than worse-off people. But she burbled it cheerfully in an interview before adding, “If people have ideas on how the government can act to help unlock that pre-loaded stimulus… and particularly unleash it in the parts of the Canadian economy that really need support, tourism, hospitality, domestic services, let me know.” Then she smiled an even more than usually self-satisfied smile, which can’t have been easy, as if convinced she’d just said something even more than usually clever and open-minded rather than presenting a baffling tangle of metaphors.
The key to this mental and political mess is the phrase “pre-loaded stimulus.” Which is actually quite clear. Except for the adjective “pre-loaded.” And the noun “stimulus.” But she used it twice in one minute so it’s evidently part of her mental toolkit, and thus we must ask what stimulus means. Economically, I hasten to add.
It means we’re in the presence of Keynesianism. This “stimulus” is what you get if you abandon marginal utility and Say’s Law for Keynes’ odd notion that interest is not a market-clearing mechanism so saving is irrational hoarding, then refuse to recoil when the implications become so absurd you start trying try to convince people they’d be richer if they blew their savings on present indulgences forbidden by law.
Keynesianism is not the first or last theory to mistake money for stuff. Social Credit did it too. But Keynesianism is amazingly hard to slay.
Not because of its inherent plausibility. Keynes General Theory of Employment Interest and Money was popular not because it was clear but because it was so turgid it let a gnostic priesthood talk over the heads of the public and critics alike.
Nor because of its satisfactory results. Deficit spending to stimulate the economy worked about as well as Friedman or von Mises expected. Rather, I fear, the lure of something for nothing is irresistible, especially in the political sphere where offloading costs is a way of life. And people cling to Keynes because there’s no substitute that isn’t as obviously ridiculous in theory as it is disastrous in practice.
Well, except monetary policy marinated in the Keynesian bog until printing money “injects” something called “liquidity” into an economy and thus… irrigates a desert? Lubricates a machine? Nobody knows. Or asks, because if you go “Whoa Nelly, you’re just crankin’ up the printing presses” you’re an irresponsible yokel excluded from A-list cocktail parties. But I digress.
The point is, with Freeland as with virtually all politicians, what you see is what you get. Which here is Keynesianism taken to its desperate logical extreme. And by logical I mean convoluted, scholastic, and silly, so instead of needing a government borrowing stimulus because savings are stagnating, savings are a “pre-loaded” stimulus that isn’t firing for some reason only the wise know, and they aren’t saying.
Possibly because it’s too obvious for deep thinkers. “None of us have a crystal ball,” Freeland allowed, apparently magnanimously conceding that for the first time in history a government could not predict the future with anything like the accuracy its smugness might lead you to expect. But her government’s inability to foresee that, if you close restaurants and hotels, people won’t spend money there is unusual even by historical standards.
Her “It would be great if, for instance, that money could go toward driving our recovery” embodies the central Keynesian fatuity of overlooking that what one person saves and lends, another borrows and spends. But mixing targeting specific sectors with stimulating “aggregate demand” then spawns a beast with two heads, neither working properly, because it also overlooks that people aren’t spending, or investing, because we’re legally forbidden from doing it, nervous about governments treating wealth creation as a frivolous luxury, and horrified at the mountains of debt they’re building with play money and blithe unconcern.
So my suggestion, Minister, is stop talking scary nonsense and unlock the savings by unlocking the economy. It’s not cool or sophisticated. But on the plus side, it would actually work.