When I consider what most surprised or impressed me as an economics writer in 2017, it wasn't the surge in Canadian growth or the impressively strong footing that the global economy found in the year. It wasn't the turnaround in monetary policy among many of the world's central banks, from years of loosening to the beginnings of tightening.
It wasn't even the worrisome slide into the politics of economic isolationism and protectionism, led by Donald Trump but hardly monopolized by him, which threatens global trade institutions and the modern global economic order.
No, what strikes me about 2017, above all these remarkable and potentially world-changing things, is that this was the year the world finally got over its fears about potentially world-changing things. After nearly a decade of post-financial-crisis trauma, we finally pushed the pervasive mood of worry and uncertainty to the back burner, and got on with it.
It's not just that the global economy finally looked like the global economy again, although that was a big part of it. Economic growth has not only returned to healthy rates of growth, but it has broadened, incorporating more countries, more regions, more economic sectors. Worldwide trade grew at its fastest rate since 2011.
With that came a sense of confidence that we haven't seen since the 2008-2009 financial crisis and Great Recession beat the optimism out of us. Stock markets hit record highs. In Canada and the United States, consumer and business confidence readings soared. Perhaps most importantly, global business investment, stuck in a rut for years, finally picked up.
It's not as if there are no reasons to worry. Rising interest rates, the North American free-trade agreement renegotiations, political turmoil in Washington, Brexit in Europe, the North Korean nuclear threat, social and political upheaval in the Middle East – to name a few – presented plenty of uncertainty for global commerce and financial markets in 2017. Closer to home, new mortgage rules, small-business tax changes, provincial carbon pricing and minimum-wage increases in Ontario and Alberta gave businesses and consumers reason to hesitate.
And yet the hesitation, so pervasive during the long and routinely disappointing postrecession recovery, is gone – or, at least, has subsided so much that it no longer stands as an impediment to economic progress, in Canada as well as much of the rest of the world. We no longer have to fear fear.
This is what legendary British economist John Maynard Keynes called the awakening of the "animal spirits" – "a spontaneous urge to action rather than inaction." It's something essentially impossible to predict and quantify, but it's an essential ingredient to igniting a sustainable, healthy economic expansion.
Indeed, the concept of animal spirits is something Bank of Canada Governor Stephen Poloz has raised more than once during Canada's on-again-off-again recovery that now looks very much on again. The central bank has fretted for years about the lack of business investment even as growth seemed to warrant it. The bank has often cited a stubborn, bordering on chronic, sense of uncertainty in its surveys of business leaders as a cloud hanging over investment decisions. This uncertainty has been a serious headwind to Canada's economic outlook.
Is the uncertainty gone? Most certainly not. As we enter 2018, Canadian business faces one of the biggest uncertainties it has in decades: the potential collapse of a major trade alliance with its North American neighbours. Indeed, in a mid-December interview with The Globe and Mail, Mr. Poloz suggested that the lack of clarity surrounding the outcome of the NAFTA talks may be a bigger threat to economic activity than the direct impact of an outright cancellation of the pact, in terms of its capacity to cripple businesses' investment decisions on major long-term projects.
But once the animal spirits have been released, it may take a lot to get them back in the bottle – just as it took a lot to get them unbottled in the first place. The Canadian and global economies, and the many players within them, look more resilient than they have in a long time. That's the biggest reason to be optimistic about our ability to weather whatever 2018 has in store for us.
David Parkinson