Every day the wartime analogies seem more apt. Governments are borrowing massive amounts – as much as 10 per cent of GDP – to bankroll equally massive increases in spending. Central banks are pledging to buy all of that newly issued government debt, if necessary, and every other kind of debt besides, in whatever amounts may be required.
Whole industries are being retooled to provide materiel for the “war,” only today it is ventilators and test kits under requisition, not bombs and fighter jets. We may even see hotels being commandeered as makeshift hospital wards before this is over.
Wherever you live and work, chances are your workplace has been affected by the coronavirus pandemic. Many businesses have closed, either voluntarily or under provincial bans on non-essential services, and those closings and layoffs have affected hundreds of thousands of people.
- If you have been laid off, the Canada Emergency Response Benefit will help you stay afloat. And: additional career advice.
- Here’s how to apply for EI and other COVID-19 emergency government income supports
Toronto employment lawyer Daniel Lublin answered frequently asked questions about COVID-19′s impact on the work force. Some questions include:
- If my employer shuts down because of COVID-19, am I entitled to severance?
- If I have COVID-19, am I entitled to my salary while quarantined?
- What types of questions can my employer ask me related to COVID-19?
Though the federal and some provincial governments have introduced income supports for workers that don’t qualify for EI benefits, many businesses have called for larger wage subsidies to prevent layoffs, as well as a broad freeze on payments to government.
Get a second opinion:
- What are the rules around temporarily laying off employees?
- My boss wants me to self-quarantine without pay. Is that legal?
- Is this a bad time to be switching jobs?
Because the pandemic is such an unprecedented event, the legal landscape will be changing quickly. There may be considerations about your personal situation which make the information here inapplicable to you. To obtain advice that relates to your personal circumstances, the best route is to contact an employment lawyer.
Then there are the range of new income-support programs in the works or being considered: from emergency benefits for workers who have been told to self-isolate, to wage subsidies aimed at persuading firms to keep workers on their payroll, all the way to simply sending cheques to every adult citizen – a full-blown universal basic income.
All in all it’s a good time to be a fan of the activist state. “There’s nothing like the threat of a deadly pandemic to make us appreciate big government,” a Toronto Star headline chirped, happily. Online, the hot takes are everywhere: Wait, so deficits aren’t the devil’s handiwork? Maybe printing money to pay off debt is not so crazy after all. Looks like industrial policy is back in style. Basic income for the win!
The gist of them all is that the use of such extraordinary measures to address an economic crisis such as we have not seen since the Second World War vindicates their use more generally. If that sounds simplistic, it is not without precedent. The great expansion of the state across the developed world in the 1950s and 1960s would not have been thinkable without the experience of the Great Depression, but even more the War.
The successes of governments in mobilizing resources for the war effort led to increased faith in government’s capacity generally. If governments could plan a wartime economy, it was asked, why could they not plan a peacetime economy just as well? All it took was the brightest minds, and a lot of cash: the combination that led to victory in one theatre would assure it in another.
But of course a wartime economy is entirely different from a peacetime economy – as different as war and peace. First, it’s temporary. It goes on for a while, then stops, at which point so do the spending and other measures enacted to fight it. Federal spending hit 44 per cent of GDP at its 1943 peak, half of it borrowed, but by 1947 it had fallen back to less than 15 per cent of GDP and the budget was in surplus.
Most if not all of the measures that are being brought in to fight the current war seem likewise crafted to be temporary. A tax holiday, such as the federal government has promised, only cuts into federal revenues for as long as the holiday, or the crisis, endures. The emergency support payments can similarly be unwound quickly once the emergency has passed. The assets central banks purchase to keep financial markets liquid can be sold off soon enough.
So the kind of deficit that would be extremely worrying in peacetime – there is now talk of a federal deficit for 2020-21 of $100-billion or even $150-billion, roughly 6 per cent of GDP – is less so in the current situation. This isn’t about “stimulus,” or fanciful claims of “multiplier effects.” This is about keeping the lights on, in the middle of a government-ordered shutdown. In that context, it’s entirely appropriate.
The second thing that makes a wartime economy different has to do with what an economy is for. A wartime economy is designed to do one thing above all: win the war. Everything else is subordinated to that singular aim. Productive resources that might have been devoted to making consumer goods are instead diverted to the military, and by and large the public accepts the sacrifice, in part because, again, it’s temporary.
Governments are pretty good at that sort of thing. When there is only one economic objective, and everyone agrees what it is, central planning works tolerably well. But a peacetime economy, at least in a market-based democracy, isn’t about making one thing that everybody wants. It’s about harmonizing millions of individual, and competing, wants – wants that change constantly, and in unpredictable ways. Central planning is no good at all at that.
That doesn’t mean we can’t learn from wartime experience. Good policy ideas that are, for one reason or another, politically impractical at most times often become possible in crises, when the risks and rewards of experimentation are seen rather differently. The baby bonus came out of the Second World War. Perhaps some form of basic income will be the legacy of “World War C.”
Sign up for the Coronavirus Update newsletter to read the day’s essential coronavirus news, features and explainers written by Globe reporters.