Double-dip, L-shaped, V-shaped recession. These are terms Paul Martin doesn’t have time for.
“Call it what you want, we didn’t come out of it,” he says.
We’re sitting in a private room in Le Muscadin, an Italian restaurant a few blocks from the Old Montreal headquarters of Canada Steamship Lines Inc. – a company in which his family has had an ownership stake for 30 years. Canada’s 21st prime minister has been given office space by his sons on a floor that houses their private equity fund.
When he’s not on his farm about an hour outside Montreal, it is from that office that Mr. Martin, the man who fixed Canada’s fiscal mess in the 1990s as Jean Chrétien’s finance minister and gave rise to the Group of 20, is waging his many post-political battles. He chairs the Congo Basin Forest Fund, which aims to end poverty in the 10-nation region. He advises the Coalition for Dialogue on Africa, which examines critical issues facing the continent. He guides the Martin Aboriginal Educational Initiative, a not-for-profit organization he established to help native youth.
And these days, as governments and central bankers around the world grapple with punishing debt loads, painful public spending cuts and the shocks of the 2008 financial meltdown, his focus is on ensuring such a collapse doesn’t happen again. Frustratingly, he says, people aren’t grasping just how desperate the situation is.
“They think this is an American or British or European problem. It is today, but tomorrow it’s going to be a Chinese problem or it’s going to be an Indian problem. And there’s no reason to think that Chinese banks, Indian banks, when they’re as big as Citigroup, aren’t going to have the same problems.”
So here’s how Mr. Martin, who still advises the International Monetary Fund, would fix the world: First, create one international body that oversees financial regulations. Ensuring that all countries’ banking and insurance sectors abide by harmonized global rules – at least to minimum levels – is key to preventing another crisis, he argues. At the moment, authorities in various pockets of the globe are implementing a patchwork of new rules, with relatively little co-ordination.
Now is the time for global financial authorities to get their act together, and turn regulation into a finely tuned machine, he says. “I think there is [currently] a continuation of the Great Contraction into a period of very, very slow growth,” he says, using the only phrase he feels accurately describes the economic situation. “And we’re not going to increase [spending] substantially as long as governments are deleveraging and consumers are deleveraging, and that’s happening in Canada, it’s happening in the United States, and it’s happening in Europe.”
“They can each have the best banking regulation, shadow regulation, everything you want, but banking is a global industry, so unless there are minimum standards, it isn’t going to work.”
Second: Europe must move toward greater economic integration, adopting a form of economic federalism (somewhat akin to the Canadian model) that will allow the continent to issue euro bonds. “If you’re not prepared to have that political and economic integration, then you’re not going to have the euro bond and, under those circumstances, I don’t see how there’s a solution to their problems.”
Third: End the discord. For the most part, politicians have been making bad situations worse, he says. “If they had allowed Greece to default in the beginning, it would have been a one-week story and that’s that. They built it up, like the debt thing in the United States. It’s a problem that actually the government built up into a big issue.”
