Canadian mythology: Bob Rae, NDP and socialists to blame for Ontario’s deficit.

One of Canada’s enduring mythologies is that during the NDP reign in Ontario from 1990 to 1995 a whole plethora of woe was inflicted as the result of Bob Rae and his mismanagement. Most people point to the fact that during that time the deficit of Ontario increased quite a bit – this is true.

A common article for the Toronto Sun outlines this:

Rae tripled Ontario’s deficit to $9.7 billion and raised taxes in his first budget in 1991, saying he was proud to fight the recession rather than the deficit.

 But, to be fair, Rae was facing a recession, just as Harper did in 2008 when the federal Conservatives blew the budget on economic stimulus (albeit at the insistence of the Liberals, NDP and Bloc in a minority Parliament).

To be fair, it was an international recession – keenly happening in America, which invariably and inevitably will affect us so long as NAFTA ties us – and to put the brunt of the blame on the NDP is absurd. A Premier of a province can’t control the international market, but even in this article it lobs the blame on Bob Rae quite thoughtlessly. 

It’s post hoc ergo propter hoc with a convenient ignorance of what governmental action actually exacerbated the recession in Canada. The early 90s recession, by the way, which caused the deficit in the first place. Hundred of thousands laid off, diminished tax base, money being paid for EI, money being paid for welfare – these things lead to governmental debt.

The government action that worsened the already terrible recession wasn’t from any socialist or left-leaning peoples, but actually a right-wing government with many business interests: the Progressive Conservatives under Brian Mulroney.

The reason this recession hurt particularly in Canada can indeed be blamed on John Crow and the Brian Mulroney Progressive Conservatives. John Crow was the then-Governor of the Bank of Canada – Canada’s central bank which controls and regulates the financial market –  from 1987 to 1994. He was appointed by Brian Mulroney.

One thing the Bank of Canada does is regulate, and to a degree, control interest rates. When your borrow money from a bank, or store your money in a bank, our Bank of Canada decides the limits on what you can earn and what you can lose in terms interest payments.

John Crow’s grand idea was to end inflation, supported by then Progressive Conservative Finance Minister Michael Wilson,

Like [John] Crow, [Michael] Wilson had a staunch, almost obsessive commitment to fighting inflation, and the two men agreed in the spring of 1987 that the battle should be stepped up. (1)

How could this be done?

…perhaps the most potent method – a method which, if applied with sufficient force, could stop inflation dead in its tracks – was to raise interests rates. (2) 

Raising interest rates means it’s more expensive for most Canadians to pay for their personal loans – such as a mortgage or a line of credit. Raising interest rates, which Jim Crow did, caused significant damage to a substantial amount of Canadians,

Exerting such a strong influence over interest rates was like exercising a life-and-death power over the economy. In a sense, controlling interests rate was like controlling the country’s supply to fresh air. Money was the economy’s oxygen; it allowed the system to function, to breathe. If oxygen became scarce, the economy would start gasping for air. This is exactly what higher interest rates did; by driving up the cost of borrowing money, higher interest rates made it harder to get access to money. Thus, businesses couldn’t expand their operations and perhaps couldn’t even pay their employees, consumers couldn’t buy houses and cars and large appliances, and perhaps could no longer even afford even little expenses like having their clothes dry-cleaned or their hair cut. If their interest rate lever was cranked up high enough, and oxygen became sufficiently scarce, the economy would start choking in a desperate struggle to breathe.

…the significant result of all this was a recession. (3)

Another problem that raising interest rates caused was driving up the Canadian dollar, which made it more expensive for manufacturers to invest in Canada (4). The reason our dollar increased was that high interest rates attracted wealthy people looking to invest and make a return, as high interest rates disproportionally benefit the rich*. Reminds you of something?

The worst year of the John Crow rule was the same year the NDP was elected to government in Ontario: 1990,

He jacked up interest rates sharply in the spring and summer of 1990 – until they were five to six percentage points higher than the U.S. rates. This plunged the economy into a deep recession, which turned into the longest period of economic stagnation [in Canada] since the thirties. (5)

And academics agree that this recession was the main cause of Canadian debt:

These findings are in line with those of other well-known mainstream economists. As we’ve seen, Pierre Fortin concluded that roughly $30 billion  of the total deficit for all levels of government in 1992 could be attributed to the recession, which Fortin blames largely on an over-tight monetary policy. Ernie Stokes, head of WEFA Canada and a former Finance department economist in Ottawa, also concluded that Canada’s deficit would have been much smaller –  by about $25 billion in 1991, for instance – if it had followed the looser monetary policy of the U.S. during the Crow years. (6)

Thanks to the right-wing, business-dominated Canadian print media (and otherwise) Bob Rae and the NDP get the blame for the Ontario deficit, while the Progressive Conservatives (and the business community that backed them) seem to remain immune for accusation. Take action, dispel these myths and put the blame where it ought to be on: the wealthy and greedy business elite who back the policies which would benefit themselves at the cost of the majority of Canadians lives and well-being. Progressives, liberals and socialists are seldom the problem in Ontario, or Canada, or even anywhere else; rather, it’s the capitalists to blame. These sneaky bastards are so dastardly they’ve managed to subdue the population and shift the very blame onto those who would rather liberate us from their grip. We’ve been duped.

Fight the power.

Because the power is fighting you. And winning.


To end, the book (Shooting the Hippo: Death by Deficit and Other Canadian Myths) where I got the majority of this information, I would give two thumbs up and recommend it to you all.

* Just to flesh out an example, high interest rates overwhelmingly benefit the already wealthy:

In 1991, Canadians with income between $10,000 and $15,000 received interest income averaging $1,500 per person – an amount that largely reflected the interest collected by seniors and low-income groups. But rich Canadians, with incomes over $250,000, enjoyed interest income that year averaging #51,000 per person… thirty-four times the size of that received by the lower-income group. (7)

(1) McQuaig, Linda. “John Crow and the Politics of Obsession.” Shooting the Hippo: Death by Deficit and Other Canadian Myths. Toronto: Viking, 1995. pag 73. Print.
(2) Ibid. Page 76
(3) Ibid. Page 78
(4) Ibid. Page 103
(5) Ibid. Page 109
(6) Ibid. Page 115
(7) Ibid. Page 84

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