In a column published on the IRIS blog (and translated for Behind the Numbers), Guillaume Hébert says that the COVID-19 crisis marks a point of no return on a global scale that could definitively change “our relationship to the community, to public services, to governments, to supply chains, to borders and to relations between nations.”
The current situation is indeed unique, and it will have a lasting impact in a number of areas. We are seeing the application of a series of measures by the three levels of government—municipal, provincial and federal—that are leading us directly toward an economic recession in the name of public health. The economic slowdown is also accompanied by an increase in public expenditures, as seen in the opening of 31 COVID-19 testing clinics in Quebec and the establishment of temporary federal support programs to make up for income lost by businesses and workers.
In addition to these macro-economic and political factors, which are themselves unprecedented, our relationships to others and our habits of consumption are being rethought. These reflections will no doubt continue to have an important place in public discussions well after the end of the pandemic. This column is intended to extend the thoughts of our colleague by reflecting on the concept of “return to normal.”
The first factor to take into account in analyzing the question of returns to normal or “crisis exits” is the capacity of public institutions to adapt, as well as the strength of the incentives and constraints that lead these institutions to want to create a climate favourable to private investment. A second factor to consider is that the existence of discontent or dissatisfaction with the present situation, characterized among other things by a major increase in socioeconomic inequality and an increase in Canadian household debt, is a necessary but not a sufficient condition for achieving significant social change.
It seems likely that, once the pandemic has run its course, the institutions that helped normalize the current situation will propose the same measures as before, with even more force and determination if these measures allow for thwarting emerging desires for social change.
There are many signs, for example, that governments will seek to stabilize their national economies and balance their respective budgets by strengthening certain so-called strategic economic sectors. The federal government is presently considering a plan to rescue the Canadian oil and gas industry and a draft regulation that would allow it to eliminate environmental assessments for exploratory oil and gas drilling east of Newfoundland.
In addition, the phenomenal increase in government deficits for the current year leads us to believe that it will be easy to brandish the spectre of debt to reduce, once again, public spending on goods and services. While these prognostications are highly speculative, we think that most governments will try to implement these various strategies despite the many social consequences associated with them.
The president of the World Bank, David Malpass, moreover, said in a telephone conference with the finance ministers of the G20 countries on March 23 that governments, in the context of the post-COVID-19 recession, are going to have “to implement structural reforms to help shorten the time to recovery and create confidence that the recovery can be strong. For those countries that have excessive regulations, subsidies, licensing regimes, trade protection or litigiousness as obstacles, we will work with them to foster markets, choice and faster growth prospects during the recovery.”
Taking these two factors into account, we want to participate more broadly in discussions on what stance to take with respect to the pandemic by stating the following: a return to normal, by which we mean the relative stabilization of economies, will eventually take place, but the exact parameters of this return, as well as the way in which “normalcy” will eventually be defined and promoted in the public square, are wholly political questions.
In other words, we can identify at least two definitions of return to normal: (1) the establishment of an institutional environment that fosters a degree of political and economic stability; and (2) a return to normal in the sense that Guillaume Hébert understands it, i.e., the application of the same neoliberal measures that have dominated the field of public policy for three decades in Quebec and in Canada.
Our assumption that the “return to normal,” understood as an effort at stabilization, will take place leads us to advocate for the importance of a very careful study of current macroeconomic trends in order to identify the future trajectories that are most likely to arm us to prevent a “return to normal” as defined by our colleague.
The first important question relates to the handling of the government deficits caused by this crisis and the general role of the state in the economy. This question is particularly sensitive in an economic environment characterized by slow growth just about everywhere in the Global North, limited inflation, and quite low interest rates in Quebec and Canada.
While Quebec has been in a generally favourable position for some years, with budget surpluses, the recently announced tax relief combined with weak growth forecasts for the current year, lead us to believe that a gradual return to a cycle of austerity-stagnation is a plausible scenario. To prevent this, we know that the battle against tax evasion could not only increase government revenue but also help to reduce socioeconomic inequalities, which are themselves vectors of macro-economic stagnation.
Another factor to take into account is the fact that the pandemic is more likely to increase than to reduce socioeconomic inequality. For one thing, wage earners and other members of the middle and working classes are more at risk of losing their jobs and other sources of income on a long-term basis than are the upper classes. The income of the latter depends in large part on the performance of stock markets, and they can usually protect themselves against possible losses, as was the case in the 2008 crisis.
Despite the current instability of stock market indices, it is likely that the performance of financial assets will be one of the surest sources of income after the pandemic because periods of recovery have often led in recent decades to overperformance of stock markets. This in part explains why financial crises tend to increase inequality in the long term.
In addition, Premier Legault said at a late afternoon news conference on March 16 that, “when the private sector withdraws, it is important to stimulate the economy with the public sector. So, we are going to take this approach, which is the one usually taken during recessions.” It is plausible therefore that, once the crisis is over, the government's current interventionist approach will be presented as a situational anomaly.
Recent government announcements, such as the speeding up of public infrastructure investment plans and the federal and provincial governments' plans to assist businesses, which respectively add up to $55 billion and $2.5 billion, lead us to believe that economic stabilization and renewal strategies will probably be based on the private sector. In these circumstances, the public sector could play an auxiliary role in the implementation of projects already scheduled rather than taking a greater role in the economy. Such a strategy is in line with the governing idea that has guided our public and democratic institutions for several decades, whereby the primary role of the public sector is to create conditions favourable to the growth of the private sector and its investments.
In his column, Guillaume Hébert rightly emphasized that the economic revival strategies that will be advocated after the pandemic may either reinforce already established institutional practices, which would result in increased inequality and greater concentration of economic power in the hands of a “very small class of individuals,” or lead to a course change that would serve the collective interest. We wish to pursue this line of thought by contending that the macroeconomic and institutional path that will be taken after the COVID-19 pandemic will be determined, here and elsewhere, by the way in which the constraints and opportunities resulting from the ongoing crises will be dealt with or seized upon in the political field by various organizations and coalitions of actors.
One of the best ways of contributing to this joint effort of reflection in the coming weeks is to focus our attention on the probable paths of institutional adaptation in the wake of this pandemic and on the strategies that can be used by progressive organizations and movements to ensure that the path taken by Quebec and by Canada is as much as possible in line with their political priorities.
Emanuel Guay and Raphael Langevin are research associates with l'Institut de recherche et d'informations socioéconomique (IRIS). This article appeared on the IRIS blog on March 29 and was translated for the CCPA by Frank Bayerl.
