I originally posted this yesterday under Newfoundland and Labrador Political Pot Pourri but I then realized it has implications for all the governments in Canada, especially in the age of Covid when virtually every government is carrying a large debt load. Many have argued that Covid has shown that debt doesn't matter when a great crisis like Covid hits, much as was the case during WWII when the elites themselves were under threat from the Nazis and the Japanese militarists. People expect the government to act without worrying about the debt when literally thousands are dying every day. Many who went along with the conventional argument of it being necessary to keep the debt low or even wipe it out have seen that at least sometimes, such as during the Covid crisis, that that is highly problematic. However, at some point we will be out of the Covid crisis, even if it sticks around from year to year like the influenza. Free market parties will want to re-establish the necessity of keeping the debt low and re-establishing austerity.
What happened in Newfoundland looks like what Naomi Klein called a dose of the Shock Doctrine for Newfoundlanders. "Klein argues that neoliberal free market policies (as advocated by the economist Milton Friedman) have risen to prominence in some developed countries because of a deliberate strategy of "shock therapy". This centers on the exploitation of national crises (disasters or upheavals) to establish controversial and questionable policies, while citizens are too distracted (emotionally and physically) to engage and develop an adequate response, and resist effectively." (https://en.wikipedia.org/wiki/The_Shock_Doctrine) Newfoundland could be a model for other governments in Canada to follow.
What has happened in Newfoundland during and since its election this year shows that a government can do this even during the Covid crisis by initially misleading the people on what it intends to do. It. Liberal Premier Andrew Furey turns out to be Liberal Premier Dwight Ball redux on steroids. Less than two months after the election where Liberal Premier Furey painted a things are okay going forward and denying that there was a hidden agenda the Big Reset was published. It was supposed to be released on February 27th, after the original February 13th election date, but on the eve of its supposed release the Liberals said that it wasn't finished and would be released after the election. Nothing to worry about. How convenient the original release date was fine until it was no longer convenient for election purposes. And of course we now get a report from Canadian business woman Moya Greene, who was the onetime CEO of Canada Post and later CEO of Royal Mail where she oversaw its privatization.
Of course how could Premier Furey have ever forseen that Greene would report things need to be reset in the Newfoundland economy, reset in a BIG RESET way? After all, "Greene was named as Financial Times Person of the Year in 2014. Judge Luke Johnson said "She did a fantastic job managing the unions, politicians and media and floating the business last year. It was an almost impossible task to reconcile demands from all the competing stakeholders – and sell a declining business such as post and parcel delivery to the stock market – but she pulled it off." And she did very well by herself although she when a minor slip "In August 2013 she repaid £250,000 in expenses she had claimed to fund buying a house, after Business Secretary Vince Cable objected to the payment". Who would have guessed the report would recommend "sweeping cuts" and a "radical reform of the public sector". (https://en.wikipedia.org/wiki/Moya_Greene)
However, not to worry, business people like Greene and their political allies like Furey, always do well personally in these situations.
Schools with no students. Ferry runs with no passengers. A 22-year freeze on university tuition. A population that is lower than it was 50 years ago. A bloated public service. Soaring deficits and debt loads. A devastated fishery. Tourism on its knees because of COVID. Declining oil and forestry sectors.
There’s nothing much positive to say about the economic situation in Newfoundland and Labrador. All that was made clear last week with the publication of The Big Reset, the comprehensive report of the economic recovery team tasked by the provincial government to set a future path for the province.
Chaired by Moya Greene, the onetime CEO of Canada Post and later CEO of Royal Mail in the U.K., the task force report pulled no punches, pointing out that the province already is hanging over the precipice, teetering on the brink of a crisis that could lead to it running out of cash if interest rates rise and the province can no longer borrow to keep the lights on.
Greene noted that the province has Canada’s oldest population, highest jobless rate, highest per-capita health spending along with the weakest health outcomes in the country.
And with a constantly rising level of debt, the generational inequities which are evident throughout Canada after deficit spending to fight the pandemic, are even more evident in Newfoundland, where the elderly are leaving a massive bill to a shrinking population of young people.
Reacting to the report Thursday in a special televised statement to the province, Premier Andrew Furey admitted that the province was spending “more than we have,” noting that the province was borrowing $1-billion a year simply to pay interest on its debt. “Our credit card debt is out of control.”
The task force proposed a series of sweeping measures, including big cuts in spending on health and post-secondary education, a series of increases in taxes and fees, a radical reform of public sector pensions and consolidation and privatization of provincially-owned businesses.
The report calls for the abolition of Nalcor, the provincial energy firm responsible for the disastrous Muskrat Falls hydro-electric project in Labrador, an always iffy project whose construction costs were wildly over budget, leaving the province with a debt it can’t repay and residents with looming rises in electricity costs.
Furey pointed to the need to act urgently on several proposed measures, including higher taxes, deciding on the future of Nalcor, merging health authorities and making a new arrangement with heavily-subsidized Memorial University. ...
Though it’s tempting to make comparisons with another troubled island that’s beset with bad finances, poor political leadership and demographic decline, Puerto Rico, the situation isn’t comparable. Puerto Rico was even more of a basket case but its unique relationship with the U.S. Congress could make its financial reorganization, essentially a managed default, a one off affair.
If Newfoundland were allowed to default, it could prompt lenders to look at other weak jurisdictions in the Atlantic and wonder who’s next? And in any case, Ottawa is on the hook for billions of dollars of Muskrat Falls debt, having foolishly given the province a loan guarantee during the Harper years.