Should Greece look to 1990s Canada for lessons on exiting the crisis?

Can Greece find a way out of the economic crisis? A success story on the other side of the Atlantic, in Canada, provides some interesting food for thought.

Dr David Zussman is a professor of public sector management at the University of Ottawa and former president of Canada’s Public Policy Forum. An adviser of ex-Prime Minister Jean Chretien, Zussman is also the man behind a number of key state sector reforms in Canada during the mid-1990s.

Zussman was in Athens recently at the invitation of the Hellenic Foundation for European and Foreign Policy (ELIAMEP), and spoke to Kathimerini about his experience of the Canadian crisis in the 1990s.

The country’s public debt skyrocketed to 104 percent of GDP, the fiscal deficit swelled to 6 percent and public spending peaked at 53 percent of GDP. However, after adopting a series of measures the country was able to see a turnaround after just three years and to record a surplus after seven.

Today Canada has an unemployment rate of just 7 percent and the country has become a magnet for scores of jobless Europeans.

What was at the root of Canada’s woes in the 1990s?

“The root of our problem was spending too much money. For 10 years at least,” Zussman told Kathimerini.

The cornerstone of Canada’s reform program, he explains, was a tough government decision to lay off 55,000 civil servants out of a total 260,000.

“We reviewed all of the programs across all ministries. And we quickly identified certain programs that were not effective, and those were the ones that were eliminated,” Zussman said.

The screening process took about six months to complete. “If the program disappeared, people lost their jobs,” said Zussman.

Some of the programs that had to go involved entrepreneurship, social housing and military procurements.

“The exercise was not to fire people. It had to be understood by everyone in the country that this was not an attack on the people, particularly on the public servants. This was a necessary action on behalf of the government to cut back on the size of the government, because we couldn’t afford it,” he said.

Some 500,000 people who make up the nation’s aboriginal population were excluded from the austerity measures and continued to receive their benefits. “They were the only exception,” Zussman said.

Canada, of course, is not Greece.

“The labor unions – which are not as big as they are here but are still important in Canada – were silent generally because they understood the gravity of the financial situation for the country,” Zussman said. “Of course they were not happy about the jobs lost, but they felt that this had to be done. So what they wanted was that at least the employees would be treated fairly. And that was a very important part of our work. To be fair,” he added.

The government of Chretien, a liberal, also received the tacit support of the conservative opposition. In fact, the opposition “was angry that the government did not do more,” Zussman told Kathimerini, adding that voters generally also showed a great deal understanding in regards to the cost-cutting measures.

“They knew the situation was unsustainable,” he said, stressing that the key to consensus was people’s trust in institutions.

“Nobody likes politicians. We don’t trust our politicians, but we trust our institutions more, like justice and police. People get punished if they get caught. And they do get caught,” said Zussman, who has studied psychology.

Differences between Canada and Greece do not stop here of course. Canada is rich in mineral resources and has its own currency.

“This is the lucky part of the story. Because, frankly, after about after three years the economy turned very positively.”

The turnaround was largely due to the increase of trade with the USA.

“Their economy began to pick up so that generated a lot of economic activity for Canada because we export a lot to the US,” Zussman explained.

Seven years later, Canada began to post significant surpluses.

“I hope Greece gets there,” he added.

The timing was also on Canada’s side as developments coincided with a boom in new technologies.

“Big American corporations like Google and Microsoft became large employers of Canadians. We became manufacturers of high-tech equipment and in fact a lot of it was in Ottawa,” said Zussman.

When Canada’s economy returned to an upward swing, the government decided to invest the surplus in research, science and education. As a result, Canadian universities currently rank among the world’s leading institutions today.

Zussman may be an optimist, but he is also a pragmatist.

“A country cannot recover spontaneously. It could take 20 years; it could take a generation. The question is what you want to leave for the next generation,” he said. “There is no reason why Greeks cannot reverse any of its problems. But part of this requires a change in behaviors.”