In the ancient Indian parable of the ‘Blind Men and the Elephant’, a group of blind men conceptualize what the elephant is like by touching it. Needless to say, perspectives vary greatly depending on what part of the elephant is touched. The parable teaches us that we need to seek out deeper understanding and respect the range of observations.
Canada and the world’s policy response to the first global pandemic in 100 years is an enormously challenging and complex task. To me, it could feel like a group of blind men trying to understand the elephant. Given the enormous strength of the elephant, it could be just as risky. The policy stakes are extremely high for our future health, economic livelihoods, and the capacity of the world to work together to address a common foe.
From an economist’s perspective, it is one pandemic, but it is three large shocks – health, economic and uncertainty. There are significant impacts to both demand and supply. To contain the virus (in the absence of a vaccine) countries across the globe have largely chosen to shut down large portions of their economies. Early forecasts indicate this policy response will result in the largest decline in output and increase in unemployment since the 1930s.
In effect, policymakers have chosen to use a recession as a tool to fight a global public health crisis. To flatten the recession curve, policymakers have unloaded the full arsenal of macro tools. There are record levels of supports for household, business, and liquidity. Direct fiscal supports for 2020 currently total about $150 billion. PBO estimates the federal deficit could rise to $250 billion, close to 13 percent of GDP. This is uncharted macro territory in modern times. In addition, there are $100s of billions in liquidity measures to ensure credit markets continue to function under considerable economic stress.
In times of crisis, there is an added premium on trust, credibility, and confidence. We need public health officials to guide us out of this crisis. We need government supports to buffer the blows of an economic recession, and to be there to strengthen confidence in a post COVID-19 world. The policies they choose and implement in these uncertain times is mission critical. To garner support, public officials and governments must be transparent about the strategic objectives of policies and operational considerations.
I think a balanced consideration of the policy transparency conducted by public health officials at the World Health Organization (WHO) and in Ottawa indicate a high degree of openness and honesty at both the strategic and operational levels. Is this a good or bad statement? No. Are there shades of grey? Yes. Could the WHO have signaled an earlier start to human to human spread in China? In retrospect, I am sure the wished they would have. While progress in slowing the growth in new cases is taking place in many parts of Canada, there are a few provinces where growth continues at high levels, such as Quebec and Ontario. Could information be improved to discern why reproduction of the virus remains high? Possibly.
Similarly, I think a balanced consideration of the policy transparency conducted by the Bank of Canada and the federal government with regard to monetary and fiscal supports indicate a high degree of openness and honesty. Over the past few months, new policy announcements have come weekly. Government departments have rushed to set up program delivery mechanisms. Parliament has moved quickly to pass legislation. Are there shades of grey? Yes. Many. We are launching new programs without a fiscal plan (no budget or fiscal update). Costing of many programs is limited. Will there be a fiscal reckoning in the years ahead? Possibly, but we are likely a number of years away from having an economy strong enough to withstand the impacts of significant austerity.
What is the reward of the government’s efforts to promote policy transparency? Higher trust, according to the latest Edelman Survey. It is the essential ingredient for leadership. Public health officials and the government must use it to take the bold steps required. Trust, like public health in the face of mother nature, is fragile. To be resilient, trust must be earned over and over again. We are still in the midst of the crisis.
This briefing note was prepared by Kevin Page in response to his webinar delivered on May 6, 2020. You can watch that webinar below.
Appointed Canada’s first Parliamentary Budget Officer in 2008
Kevin Page is President and CEO of the Institute of Fiscal Studies & Democracy, University of Ottawa. He has 25 years of experience in the Canadian federal public service including Finance Canada, the Treasury Board Secretariat and the Privy Council Office. He teaches the Complexity Seminar Achieving Policy Transparency at the Max Bell School.