Canadians Blame Central Bank for A Slow Rebound Debate Focuses on Interest Rate Issue: Fight Inflation or Spur Growth. RECESSION REDUX

By Fred Langan, | The Christian Science Monitor, April 15, 1992 | Go to article overview

Canadians Blame Central Bank for A Slow Rebound Debate Focuses on Interest Rate Issue: Fight Inflation or Spur Growth. RECESSION REDUX


Fred Langan,, The Christian Science Monitor


CANADA'S economic recovery seems to be over almost as soon as it began, according to most economists reading the latest reports.

Unemployment has surged ahead again to more than 11.1 percent; bankruptcies are up 8 percent in the first two months of the year and manufacturing jobs continue to disappear.

"We're not just stagnating, we're in a downturn," says Douglas Peters, chief economist with the Toronto Dominion Bank in Toronto.

Many economists, including Mr. Peters, are putting the blame on the tight money policies of the Bank of Canada.

While unemployment is high, inflation is low. Canada's inflation rate has been below 2 percent since January. Peters has been critical of the federal government's policy of fighting inflation with high interest rates that have kept the Canadian dollar high, hurting exports.

"Canada has achieved a low inflation rate but that has been attained at a cost of two years of recession, the destruction of Canada's manufacturing industries, and $100 million {Canadian; US $84.2 million} increase in international debt" says Peters. "While I applaud the low inflation I deplore the method of achieving it and the destruction of the Canadian economy that has resulted."

But some economists do applaud the work of the Bank of Canada and its governor, John Crow. For them the central bank has been right in making inflation public economic enemy No. 1.

"The Bank of Canada policy has been essential," says Michael Walker, head of the Fraser Institute, a free market think tank in Vancouver. "It won't be long before people are saying John Crow was right to ignore that type of advice on interest rates and the dollar."

The unemployment figures, announced April 10, mean an extra 72,000 Canadians are out of work, bringing the total to 1.52 million. The nation's highest jobless rate was in Newfoundland, where a decline in offshore oil drilling and the collapse of cod fishing has put more than 20 percent of the labor force out of work.

Statistics Canada, a federal government agency, reported that the jobless rate for adult men was 10.4 percent, the highest rate since World War II.

Mr. Walker says the statistics spell gloom on the surface but don't tell the real story.

"We're at a turning point and back to growth," says Walker. …

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