1. Since the 2008 financial crisis, governments went into massive debt to bail out banks, which had apparently become “too big to fail”.
2. Seeing debt levels rise, economists Carmen Reinhart and Kenneth Rogoff published a study showing that higher debt was associated with slower economic growth.
3. A chicken-and-egg debate ensued: does more debt slow the economy, or, more logically, would a worse economy cause more debt?
4. International finance organisations, such as the IMF, the World Bank, and the WTO, believed the first conclusion, and decided that to stimulate economic growth, debt must be eliminated; austerity was born, along with its québécois cousin, “zero deficit”.
5. These organisations pressured governments into reimbursing their debt as quickly as possible by cutting their expenses, or in other words, their social programs.
In April 2013, an economics student found four major errors in the Reinhart-Rogoff study, including a calculation error in the Excel file! Once these errors were corrected, the correlation between debt and economic recession became insignificant.
Following these discoveries, the IMF quickly stated that austerity policies have not had and would not have the expected effects, while warning the government of Canada against its excessive zeal in the matter.
If we look at Quebec’s net debt (and we compare it to that of other countries), we see that it’s among the lowest in the world, at 134th place worldwide.
Gross debt, the figure used by neoliberal institutions such as the Montreal Economic Institute, doesn’t include the State’s assets in its calculation, rendering it dishonest and overly alarming.
To make a long story short, Quebec isn’t in enough debt to justify austerity measures, which are ineffective in any case.
In the 1960s, corporations in Quebec were taxed at around 40%, whereas today, they only pay 15% in taxes.
We see that the government prefers handing the fiscal burden over to taxpayers rather than corporations, while dismantling our social programs.
Rather than announcing useless and harmful cuts to our public services, the government should ask corporations to pay their “fair share”.