‘Spend, spend, spend,” says former PM

If there’s one person with an insider’s knowledge about finance and current economic woes, it’s Paul Martin.

Former Canadian prime minister Paul Martin spoke to Western’s Economic Students’ Association about the state of Canada and the world’s economic crisis.

The former Canadian finance minister and prime minister spoke to hundreds of students, staff and faculty Nov. 26 as part of an Economic Students’ Association speaker series.

Martin says all the issues the financial world is currently dealing with ultimately has an impact on Canada’s economy, adding no one should be surprised many countries find themselves re-balancing their budgets.

“Financial crisis are not the exception, they are the rule,” says Martin, adding in his nine years as finance minister he oversaw five of them.

“Governments should expect the unexpected. They should understand that financial crises are the norm and be prepared for them.”

While Martin says the cause of most financial crisis is the flip side of the strength of the democratic system, the current free market system is “by far the best economic system we’ve been able to come up with.”

The worst financial crises are those that occur in the banking system, which has become evident in the United States. Without credit to build homes or expand businesses, the wheels tend to grind to a halt.

“Credit is the oil that makes the economic machine work,” says Martin. “And credit is based on trust and confidence. If that doesn’t exist, there is no way the market system is going to work. You need to have a sound banking system.”

While Martin joked spending our way out of the financial crisis would have been the “total opposite of what economists and your professors would have thought last year”, he says it needs to be done.

“For years we’ve been told to save, save, save,” he says. “Now we’re being asked to spend, spend, spend.”

Martin says this spending should also include bailing out the Canadian auto industry and ensuring that Canada needs to think globally when working on solutions.

“The worst thing we could do at this time is to propose protectionism in any way, shape or form,” he says, noting it would be a major mistake and led to the Great Depression.

Martin says one of the best tools available, and for which Canada needs to become a strong vocal advocate, is the G-20 group of finance ministers and central bank governors whose economies compromise 90 per cent of the global gross national product and 80 per cent of world trade.

“If I was asked what is the single most important thing that could be done to get us out of this mess, it would be to recognize that we are one common humanity,” says Martin.

“While we may be divided by economic entities called countries, the time has come for us to work together.”