This time it’s different

by Paul Summerville


Two bankers walk past a giant crowd of protestors, protected by a line of police standing shoulder to shoulder. One banker is saying: I'm just hoping we can keep this whole thing under control after the police find out we're stealing their pensions. "Back in May, when our host Martin LeClair got in touch with me about tonight, he asked if I could be a little bit funny and very educational in an economist sort of way.

So an economics presentation that’s supposed to be a little bit funny – how about Alan Greenspan apologizing for destroying the American economy? Or how about the guys that ran the credit default swap team at AIG that lost $61 billion in the first quarter of 2009? How much money is that, $61 billion dollars in 12 weeks? Well, that’s $27 million dollars an hour. Losses on a scale that threatened the global banking system were only possible because of the belief that markets are sustainably self-regulating. Funny, like that?

Over the summer, I did put together a short comedy routine to soften my pretty gloomy forecast of the global economy. Gloomy because the economy is compromised by the structural damage from the financial market collapse of 2008, the erosion of trust in countries that make up the Euro zone and disturbing signs that the boom in China is slipping into a slowdown that inevitably will hurt a commodity-based economy like ours.

But the more I thought about what was happening right now with 10-year bond yields breaking to new lows, equities plunging in and out of bear market territory, the political stalemates in the United States and Europe deepening and Cairo-inspired protests gathering pace in the financial capitals of the developed world, I concluded tonight is not a time for comedy.

The time has come to tell ourselves the truth; of where we’ve been the last 30 years, of where we are right now and of the risks that we face if we don’t make the right choices. In my professional life, the nostrums, which economists peddle as insightful description and prescription for our economies and societies, have never failed to amaze me: First, markets are rational. Isn’t that funny, if it wasn’t so dangerous? Here are some more favourites. Peak oil, commodity prices will stay permanently high, central banks can control prices, economies tend to equilibrium and lower taxes guarantees economic success. The economy is better off unregulated, sovereign debt is always honoured, liberalization of financial markets reduces the risk of a banking crisis, financial firms are great self-regulators and command and control economies are sustainable.

What is becoming clear, as the fabric of our societies are frayed by constant economic crises, is that it is the state on the one hand and civil society on the other standing between individual citizens and the unpredictable forces of global economic change. And nowhere in the developed world is this becoming more obvious than in the United States… anyone travelling in the US today can see the impact of a lack of investment in roads and bridges, airports and railways. The United States may have begun the process of losing a large part of a generation of economic growth.

The Canadian challenge is different. The simple fact is that Canada is geographically vast, sparsely populated, next door to history’s most powerful country and has spent two centuries consistently finding peaceful solutions to including a distinct language and cultural population situated in the geographic heart of the country that could leave to make their own and end Canada as we know it.

Canada is a sophisticated, bilingual, peaceful, open, wealthy and increasing urban country whose growth is significantly driven by the success of new Canadians competing in the global economy. Achieving these outcomes has, in part, been made possible by social spending by the state that is larger compared to a country like the United States.

The pivotal elements of competitiveness are mostly determined by sustainable social investment, the quality of the work force, infrastructure, social peace, the rule of law and the health of cities. None of this can be built on the assumption that the individual is self-sufficient. The relationship between the state, the society and the individual must be a well-ordered balance. And Canada, better than most, has managed this balance.

Sadly, there is mounting evidence that the Canadian generation that benefitted so much from forward-looking public policy has forgotten this truth. The boomer generation has ignored a four-fold rise in the cost of post-secondary tuition since 1990. The participation rate of children from lower income families in colleges and universities has been dropping over the past decade and these children are 40% less likely to get a post-secondary education than are kids from high-income households, in part because of the cost.

This should not be surprising when the cost of completing an undergraduate university degree in any discipline has been estimated by TD Economics at $84,000 for students living away from home. Although about 50% of students graduate with no debt, the other half graduate with an average of $27,000 in debt.

What’s it like for the kid from Smithers, British Columbia, to walk into UBC the first day looking at 150 bucks a pop, geography and sociology textbooks, a $1,000 laptop, in addition to fees, tuition, living and travelling costs that, in one year of university, on average adds up to the annual medium after tax income of a Canadian family? Well, it’s not funny, that’s for sure.

Equally worrying is the decline in the commitment of universities to provide a quality post-secondary education for the undergraduate students that actually make it there. In a scathing editorial in the Globe and Mail… it was argued that high class sizes, ‘indentured’ doctoral students and poorly paid sessionals acting in the place of absent professors and the low emphasis put on teaching when ‘publish or perish’ remains the mantra at top ranked universities, has resulted in a steep decline in quality. In the words of economists, the real cost of a post-secondary education has skyrocketed, short-changing Canada’s future by short changing its students.

At the same time, students are graduating into a globalized job market with a decade of debt to pay off, whether they studied philosophy, literature, history, dance, Greek or engineering. In Canada for example, despite the evidence that, on the whole, an ‘investment’ in a post-secondary education does pay off over a person’s lifetime, the reality is that 20% of graduates earn less than half of Canada’s median income. Hmm, I guess those are the under-achieving philosophy majors.

Of note, ladies, when the payoff does come, it is skewed to favour men over women; a man with a post-secondary degree, on average, will earn about 35% more during their work lifetime than you only because you are not male and the last time I checked, tuition was not adjusted for gender; at least not But all of this is beside the point. The very fact that a post-secondary degree is a life or death requirement for a sustainable middle income Canadian lifestyle is all the more reason to ensure that a world class post-secondary education is accessible in Canada, without the financial headwinds that have built up and gathered force over the past two decades.

We’ve made an enormous error approaching post-secondary education mostly as an economic investment. This only helps justify the argument that students should ‘pay up for it’ rather than viewing education as a vital process that shapes thoughtful and engaged citizens armed with a broad range of skills. Sadly, over the last 20 years we’ve only made the chance for a post-secondary education less equal than it otherwise would be. Well, shame on us.

In conclusion, never has it been more important that we remember the lesson of the Canadian model of compromise, of fairness, of inclusion, of consumer protection and of the effort to give every citizen the equality of chance, creating, in the words of my wife of 26 years, who also happens to be of Japanese origin, “the happy country.” It is in our power to manage the opportunities of globalization, powerful technologies and the new economic success of other countries.

Of all the voices that must seize this chance in this critical moment in our history, none are more important than those right here in this room, you financial market professionals. We owe it to ourselves and our fellow citizens to advocate that social justice and the economy are two sides of the same coin.

The most healthy and sustainable societies manage to achieve the vital but delicate balance between the twin virtues of equality of opportunity and inequality of outcome from which emerges a civil society ultimately freer from both the state and the market.

In that place, the only currency that matters is the moral obligation between empathic citizens all sharing the same community.

Thank you.

Excerpted from a speech entitled This Time is Different by Paul Summerville, delivered to the Canadian Pension Benefits Institute in Ottawa, October 20, 2011. Paul Summerville is an adjunct professor at the Peter Gustavson School of Business at the University of Victoria. Email

2 thoughts on “This time it’s different”

  1. I wonder how I can share the comic from the same page as This Time It Is Different article on facebook which I found very powerful and worthy of posting?


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