It might be a bitter pill to swallow in the short term, but the rigours of frugality being forced on Canadian businesses and consumers during the current bout of inflation could pay dividends down the road for the country’s economy.
Frugality, after all, demands that discipline be applied to spending and investment. In the private sector, it is a requirement of survival; in the public sector it should be a requirement of office.
A liberal dose of that discipline is long overdue in a land where overspending has become a permanent government policy and receiving handouts from the public purse has become business as usual. Neither is sustainable.
Consider that, according to Fraser Institute calculations, Prime Minister Justin Trudeau’s government has increased per person debt by more than 35 per cent since taking office in 2015 and Canada, meanwhile, racked up the second highest increase in debt relative to its GDP between 2019 and 2021 compared with 33 industrialized countries.
Those numbers speak to a systemic lack of fiscal discipline in Ottawa that is bad for business initiative and will hurt the country’s economy in the long term. As the International Monetary Fund notes in a recent commentary, subsidies, tax cuts and other price-suppressing measures employed by policymakers in Europe to cushion consumers from escalating energy prices remove incentives to improve efficiencies and conserve energy.
That marketplace dynamic can be applied to a wide range of industries now increasingly reliant on government to provide soft landings in turbulent times.
Enforced frugality therefore could provide a remedy for that economic enfeeblement, because government should not be in the business of soft landings. It should be focused on establishing and maintaining a regulatory landscape that promotes competition, innovation and productivity. The rest is up to business agility and resilience.
So, marketplace-imposed frugality is here to determine whether Canada has the innovative and competitive backbone to survive in the new world economy.
