There are those who believe that engaging in "what might have been" speculation is wasted energy. But Linda McQuaig does precisely that in today's Toronto Star. Doug Peters -- the former chief economist for the TD Bank and former Liberal cabinet minister -- died last week. Peters grew up in Brandon, Manitoba during the Great Depression. That experience -- and the training he received on the way to getting a PhD in finance from the University of Pennsylvania -- made him a committed Keynesian.
But it was Peters misfortune to be at the the cabinet table when Milton Friedman was all the rage. McQuaig writes:
Despite his Bay St. pedigree and a PhD. in finance from University of Pennsylvania, Peters rejected the business world’s obsession with deficits and smaller government.From his seat next to [Paul] Martin at top-level budget meetings, the soft-spoken, articulate Peters repeatedly challenged the deficit hysteria that gripped the Finance department and increasingly controlled government policy. To Peters, the key problem was unemployment — which hovered above 10 per cent — not the deficit.Indeed, the way to solve the deficit problem was to reduce unemployment, Peters argued. As he once told a parliamentary committee: “Unemployed people pay less tax. That is one of the most certain laws of all economics. It should be inscribed on plaques and hung in the offices of prime ministers and premiers across the country.”
There were some who sided with Peters:
He got support from an unlikely source — a Goldman Sachs report in September 1994 identifying unemployment, rather than excessive government spending, as Canada’s key problem, and noting that once full employment was achieved, “the budget gap of Canada vanishes.”
But Friedman had received the Nobel Prize. How could be be wrong?
Time has proved Friedman wrong and Peters right. Another one of history's ironies.
Image: Toronto Star