Thank you, Mr. Chair. Thank you, committee members.
I will continue in French.
I would like to quickly tell you about a study published in the spring by the Institut de recherche et d'informations socio-écononiques. The study was an attempt to understand the current economic recovery by comparing it to the country's past recoveries in the wake of the last three major recessions—in 1975, in 1980 and in 1990.
The idea was to take up a hypothesis established by the IMF about a year and a half ago, whereby there is a major difference in the way the recovery is unfolding today. I worked with that hypothesis in 2008. In 2009, I published an article in the journal Options politiques regarding the notion of an L-shaped recovery, rather than a V-shaped or a U-shaped recovery.
That idea of an L-shaped recovery refers to an interpretation that I will present to you—an interpretation involving stagnant structural forces in the economy. I think it's very important to keep that context in mind in order to understand how the budgetary policy will behave. I will only talk to you about the diagnosis, leaving it to others to deduce from that policies moving in one direction or another. I would like to point out that this interpretation is similar to the one Larry Summers just presented to the IMF last week, and to Paul Krugman's interpretation. It is starting to make its way through the mainstream circles. However, when I started working on this, people looked at me in disbelief.
One of the tables illustrates the performance of the Canadian economy. The figure of 100—which stands for 100%—shows where the economy was just before the recession began. You can see two curves in the chart. The first one represents the average of recoveries since 1975, and the second one represents the current situation.
You can see that the performance of our economy is weak, that the economy is having difficulty recovering from the crisis and that we are going through a “non-recovery” or an extremely weak recovery, without experiencing a double-dip. How can that be explained? We can come back to the explanation later, but one thing is clear—ours in an open economy that is highly dependent on the global market. The U.S. finds itself much deeper than us in that stagnant crisis, but we are still affected.
How has the state reacted to that crisis? When we consider all the public spending, at all levels of government in Canada, we can clearly note a major difference in the way the state is handling the crisis. This means that the level of spending is significantly lower. In addition, as of the third year, we see that the state's impact has been neutral—that is, the spending stopped progressing and has been stagnant. So this is a new way to react to a crisis—instead of stimulating the economy, the government decided to apply policies characterized by austerity that neutralize the state's impact.
Let's now look at federal transfers. The 1990s were marked by major reforms implemented by Paul Martin. You can see that the federal government's impact on the economy was very neutral. In fact, the major economic stabilizers we have had in the past—such as transfers to provinces and municipalities, employment insurance, and so on—have not had an impact and were not triggered by the recession. The remaining tools consist of discretionary spending, whereby a decision is made in the budget to increase spending on infrastructure or ongoing expenses.
You can see that in this curve. Year 0 is the year of the recession. The figure “minus one” is my starting point. You can see that there is only the countercyclical curve, which represents government investments. Yet that accounts for only 4% of the GDP. The leveraging effect is very weak because, unfortunately, our tool has very little control over the economy. Household consumption expenditures, as we know, make up most of the Canadian economy. They accounted for 56% of the GDP in 2012.
I want to draw your attention to the following: we can see that the export sector has really dragged the economy down, but we are not just talking about the export sector, as investments and companies also have a major impact. Household consumption expenditures appear to be stable.
The last issue I wanted to discuss with you is somewhat worrisome. The following three curves should be considered: consumer credit as a total volume, expenditures and household income. You can see that, until the crisis, the expenditures and household income were in line with one another....