Call for Renaissance of the Bank of Canada
Organizations Endorsing the Call for Renaissance of the Bank of Canada:
We civil society organizations who work for public welfare in Canada, depending heavily on dedicated volunteers, are constantly frustrated in our efforts to obtain government funding to meet urgent human and environmental needs. We are repeatedly informed that there is never enough money available, and that we must endure austerity in order that growing public debts can be overcome. We are told that public funds—essential for infrastructure repair, for health and medical care, for education, for poverty reduction, for social justice, and for environmental protection—not only cannot be increased despite urgent unmet needs, but must be cut, and public assets for providing public services, must be privatized.
We are deeply concerned about government deficits and debt, and also about the heavy personal debts borne by Canadian citizens. Indeed we believe that governmental and personal debt should be taken far more seriously, and dealt with by far more radical means than the usual austerity programs involving cuts to social programs and privatization. Such measures have already been experienced as profoundly unjust. They shift debt burdens to individual Canadian citizens, especially to the most needy, bankrupting and impoverishing many.
Meanwhile, we see that wealthy individuals and corporations receive tax cuts they do not need, and that they often use tax havens to escape such taxes as they do owe. Lowering taxes for the rich is regularly justified by the argument that they invest their savings to create employment, but we see little evidence to support this claim. We see further that our federal government makes billions available for controversial warfare, for expensive, inappropriate new weapon systems, and for unnecessary new prisons, while poverty and environmental damage continue to increase. A just tax system, wisely spent, could go a long way toward promoting the human and environmental welfare to which we are committed. But changes in our tax system are not enough to deal adequately with our needs, including our debt problems.
Crucial to our governmental debt problems is the fact that our governments at all levels borrow from private banks and from other private money-lenders, and pay interest on these debts. Each year governments across Canada presently pay some $60 billion in interest on their debts, and as these debts increase, with interest rates probably rising, this enormous annual burden for taxpayers will increase. But this interest expense is not necessary.
Through our Bank of Canada, which has been publicly owned since 1938, the federal government has the power to borrow money in huge quantities essentially interest-free, and to make such funds available not only for its own use, but also for provincial and municipal expenditures. Such borrowing helped Canada to get out of the Great Depression, and to finance its participation in World War II. Continuance of this practice until 1974 played a key role in creating Canada’s post-war prosperity and in making possible its cherished social programs.
As federal governments, which control the Bank of Canada, increasingly catered to the private commercial banks, this practice greatly declined. Governments at all levels throughout Canada increasingly had to resort to borrowing from the private banks and other private money-lenders, including foreign sources. Moreover, the Bank of Canada in the late 1970s began raising interest rates as its primary tool for fighting inflation, driving the economy into recession in the early 1980s and again in the early 1990s. These changes from the original mandate of the Bank of Canada, combined with tax reductions for the wealthy, rapidly increased the debts of governments at all levels, justifying major cuts to social programs. Following some recent federal government economic stimulus following the 2008 global financial meltdown, the austerity agenda is bringing ever more devastating cuts to our valued public services.
In line with policies pursued through the Bank of Canada between 1938 and 1974, our federal government could revive the powers of the Bank of Canada to replace gradually interest-bearing debt carried by governments at all levels with interest-free debt, and could make available interest-free loans for new projects. This change in monetary policy, combined with changes in tax policy, would make available each year tens of billions of dollars urgently needed for actions, which can only be taken by governments, to protect our environment from such dire threats as climate change, to rebuild and to improve our public infrastructure, and to strengthen social programs meeting human needs—notably medical care. Through such interest-free loans for infrastructure, for example, our governments, instead of paying for interest that could double or triple their investment expenses, could be paying only for the principal, thus freeing tax income for other programs. Moreover, government-funded construction would create jobs, stimulate additional economic activity, and significantly increase tax receipts.
Those who oppose the revival of this monetary policy invariably charge that it would be inflationary, even though it was managed in the past without significant inflation. As the government through the Bank of Canada creates growing quantities of our money supply, the power of private banks to create money needs to be restrained, as was possible until 1991, when the reserve requirement for the private banks was surreptitiously removed from the Bank Act. This provision to the Bank Act needs to be restored to prevent inflation, as can readily be done.
Therefore, we Canadian civil society organizations, who work for public welfare, call on our federal government to revive the powers of the Bank of Canada to provide funding to all levels of government in Canada, largely with interest-free loans, as was done between 1938 and 1974 with very low inflation, enabling our nation to break out of the Great Depression, to shoulder extraordinary responsibilities during World War II, and to prosper while building our infrastructure and highly valued social programs during some thirty post-war years. We Canadians now urgently need a renaissance of these powers of our Bank of Canada.
• • • ADDITIONAL REASONS FOR SUPPORTING THIS “CALL” • • •
Note: Our understanding of what is meant by "civil society organizations" will be interpreted broadly to include not only non-governmental organizations working for such causes as social justice, environmental protection, health and medical care, improvement of education, poverty reduction, and peace, here in Canada and abroad, but also to include unions, whether private or public sector, religious organizations, and even municipal councils, provincial governments and political parties. Through unifying our many voices in the "Call", all of us are strengthened in efforts to pressure our federal government to implement the urgently needed changes in monetary policy. We encourage each endorsing organization to post its support for the "Call" on its own website, with a link to the COMER website. Indeed we would be happy to have any other endorsing organizations, especially those at the national level, also to list all endorsers. The more visible the "Call" becomes, the more effective it can be.