To the Editor,
Ever wonder what happened to our grandparents’ approach of saving money and living within your means? Keynesian economics may be the answer.
Keynesian economics was developed by a mathematician in the 1930s and it held that “excessive personal saving” was a serious problem and that personal and government spending was a good thing. It drove Western industrialization until the 1980s monetarist system, a revamped Keynesian theory, replaced it.
In the 1960s, the B.C. government had no debt. By 2000-01, total debt was $33.7 billion and by 2013, it will be $55.8 billion. In 1970, Canada’s total debt was $20 billion, by 2008-09, it was $460 billion and by 2010-11, it will be $568 billion.
B.C. has the highest personal debt to income ratio in Canada (160 per cent) and we have a negative savings rate.
B.C. residents are officially the most vulnerable citizens in Canada to interest rate increases. Canadian’s personal debt to income ratio is on average 127 per cent and growing.
When we look across the border and see our poor neighbours in an economic crisis, do we ask ourselves if our similar collective spend-no-save approach is working, is it sustainable and could their crisis be an ominous snapshot of our future?
There may be proxy indicators found in terms like recession, stagflation, inflation, debt ceilings, hegemony, bankruptcies, unemployment, deficit budgets, corporate crime, urban decay and social economic inequality.
Keynesianism has had a tremendous influence on our spending habits; it has influenced our perception of need, moved us away from saving, and licensed government control and spending of money, while ignoring that domestic saving could actually control inflation.
We loved this model because it allowed us to buy what we could not afford, have services we did not want to pay for and defer the solutions to our children.