Canada was once an economic underperformer – until slaying deficits and balancing budgets helped turn it into a powerhouse
The 20th century did not, as Prime Minister Sir Wilfrid Laurier predict, belong to Canada. After Laurier’s death, Canada lost sight of the plan to back up his famous prediction and instead cast about in the shadows of America’s rise to power.
But with the right mix of policies, Canada can become an economic powerhouse and a bastion of individual liberty in the 21st century.
How will Canada get there? One of the key starting points is running balanced budgets – an idea that Macdonald-Laurier Institute Managing Director Brian Lee Crowley outlined in his book The Canadian Century.
Canada sleepwalked into staggering deficits between 1973 and 1994, resulting in the decimation of the public purse. Federal spending grew from 15 per cent of the economy in 1965 to 23 per cent by 1993. Parties of both stripes produced profligate deficits year after year, despite booming economic growth. By the mid-1990s, interest costs were eating up over a third of federal spending.
But that changed with the governing Liberals in 1995. After their budget subjected all government spending to intense review and cut public sector employment dramatically, the situation began to improve. Federal spending fell to just over 15 per cent of the economy by 2008 and starting in 1997, surpluses became an annual event. Importantly, debt fell from over 70 per cent of GDP to just under 30 per cent by 2007.
The Canadian Century infographic, which shows a visual representation of Canada's deficits and surpluses over the years
The economic boom that followed made Canada the envy of its rich-country peers. Economic growth, job creation, investment and poverty reduction took off in a way that cannot be explained by exchange rates, interest rates or oil prices, to name just a few of the alternative accounts sometimes offered for Canada’s stellar run.
What will the next century bring?
As Crowley and co-authors Jason Clemens and Niels Veldhuis write in the Canadian Century, Canada finds itself on a path leading itself out of the shadows into a new prosperity that could, if we stay the course, make us the envy of the world.
It won't happen without effort, however. We must be prepared to follow on reforms enacted at the end of the twentieth century, completing the work already begun. If we succeed, Canada can and will become the economic outperformer that Laurier foretold, a land of work for all who want it, of opportunity, investment, innovation, and prosperity.
The 21st century can indeed belong to Canada – and getting there starts with a balanced budget.