Through the publicly-owned Bank of Canada, which was established in 1935, the federal government can borrow money, essentially interest-free, and make such funds available not only for its own use, but also for provincial and municipal governments. Such borrowing helped Canada get out of the Great Depression, and to finance our participation in World War II. Continuation of this practice until the early 1970s played a key role in creating Canada’s post-war prosperity, as well as launching Medicare and other national social programs.
For the past four decades, however, our governments at all levels have increasingly been borrowing instead from the private banks, and paying steep interest on those mounting debts. Each year, governments across Canada now pay some $60 billion in interest on their debts – interest payments that need not be incurred.
This enormous debt burden deprives our governments of revenue that could be used for much-needed improvements to social and economic services – and also to help civil society groups that work for the public welfare. Such organizations depend largely on government funding, but are repeatedly told there is never enough money available.
Governments themselves also use their deliberately incurred borrowing debts as an excuse for cutting public programs and services instead of preserving and expanding them. At the same time, however, they keep cutting the tax rates on wealthy individuals and corporations who don’t need tax relief – and many of whom evade the taxes they owe, anyway, through tax loopholes or by hiding their wealth in offshore tax havens. There also doesn’t seem to be any shortage of funds for unnecessary new prisons, for unjustifiable military interventions, or the wasteful purchase of new weaponry.
One of the organizations that has tirelessly called for a return to government borrowing from the Bank of Canada is the Committee on Monetary and Economic Reform (COMER). Since its formation in the 1980s, COMER has produced reams of statistics, reasons and arguments for reviving the lending powers of the Bank of Canada. It has shown how the massive interest-bearing debt now carried by our federal and provincial governments could gradually be replaced with interest-free debt.
Such a change in monetary policy, combined with crucial changes in tax policy, would make available tens of billions of dollars that are urgently needed to rebuild our public infrastructure, protect our environment, and strengthen Medicare and other social programs so vital in meeting human needs. Such expanded government spending on worthwhile projects would also create jobs, stimulate additional economic activity, and significantly increase tax revenue.
To start a campaign for the monetary reforms needed to achieve these national gains, COMER recently issued a “call for the renaissance of the Bank of Canada.” The call is directed at civil society organizations. It urges them to join with COMER in demanding that the federal government revive the power of the Bank to provide funding to all levels of government, mainly with interest-free loans, as was done between 1935 and the early 1970s. These loans, of course, would be for needed public investments, primarily to protect and improve social programs and repair and build public infrastructure. (Go to the COMER website – www.comer.org -- to read the full text of the call.)
COMER has been dismayed that civil society groups have not pushed for these changes in monetary policy on their own, since it could make abundant funding available to meet a wide range of the social and environmental needs for which they advocate. This is perhaps because they are unaware of this possible answer to their funding shortages. The COMER campaign hopes to raise their awareness as it calls for their endorsements.
Of course the COMER people have to be realistic. They know the monetary policy changes they propose challenge the power of the private banking system, and they know this system has the support of the new majority Harper government. But the enhanced status of the NDP in the new Parliament (and the election of the first Green Party candidate, leader Elizabeth May) heightens the prospect that a revival of the Bank of Canada’s lending powers will be more frequently and effectively raised in the House of Commons. (Maybe every time the Conservatives cite the debt as an excuse for cutting social programs and services.)
Significantly, the NDP convention in 1995 and the Green Party convention last year both passed resolutions calling for a return to government borrowing from the Bank of Canada instead of the private banks. It would be in accordance with those resolutions for both parties to put this key monetary policy reform on their parliamentary agendas.
Indeed, it may be essential for the opposition to take this stand in the House, if only to deter Harper from making the Bank of Canada even less beneficial to the public interest. This could happen if Harper decides to act on his earlier support for the creation of a common U.S.-Canadian currency, or to bring Canada into a proposed new global currency system – both, of course, controlled by the private bankers. Such a loss of monetary policy independence would gravely impair the Canadian campaign for monetary justice.
Right now, however, the renaissance of the Bank of Canada, though very difficult, is not beyond achievement. Particularly if the campaign garners the support it deserves from the civil society groups that now suffer so much from the Bank’s disuse.
(George Crowell is a retired University of Windsor professor who has been working with COMER on monetary policy since 1994.)