There's a lot for econobloggers in the US and Europe to get exercised about. They are facing serious problems, and their policy makers have demonstrated an alarming inability to deal with them. It's harder for Canadian econobloggers - okay, for this particular econoblogger - to put together arguments documenting how Canadian policy makers got things terribly wrong and what should be done to get us back on track.
So instead, I'm going to consider two "what ifs?" where Canadian policy-makers could have - but happily did not - get things terribly wrong.
Output and employment started recovering in mid-2009. But what if they hadn't? Would the Bank of Canada have followed the now well-worn path set out by the Bank of Japan and the Federal Reserve?
My own guess is no: the Bank was clearly preparing itself for a round of quantitative easing in the spring of 2009, and the necessary legislation that would have permitted it to widen the range of assets that it could purchase was passed. I don't think they really knew exactly what assets they were going to have to buy or in what quantity - who did? - but they had something the other central banks didn't: an explicit political mandate. If the Bank thought that the only way to reach its inflation target was to use its steamroller to flatten the yield curve, it had - in principle - a free hand to do so.
I can think of less rosy scenarios - what if the government decided to overrule the Bank and force Carney to resign? - but I think they are much less probable.
The other scenario involves fiscal policy. The Economic and Fiscal Statement of November 28, 2008 is best remembered for its provision to cut the subsidies to political parties, and this provoked the 2008 prorogation crisis. But it is less well-remembered that the initial instinct of the Conservative government in the face of the crisis was fiscal austerity (see especially Table 2.2 here).
As it happened, part of the Conservatives' strategy for winning the next confidence vote involved accepting fiscal stimulus as part of the plan to deal with the recession. Canadian fiscal policy - federal and provincial governments together - more or less followed the textbook recipe: strong growth in expenditures during the recession, cutbacks during the recovery. This stands in sharp contrast with what happened in the US:
My what-if question here is: what if the Conservatives hadn't thrown in that provision to eliminate the subsidy to political parties? If the opposition parties weren't so concerned with their own finances, would they have still joined forces and obliged the newly re-elected Conservatives to back down from its austerity program? I'm not so sure they would have.
Sometimes I wonder how much of our good fortune in the recession was due to the Conservatives' inability to resist the temptation to kick their opponents when they were down.