If only Charles Dickens could see us now. The debtors’ prisons he despised are long gone — and it’s a good thing, because if the law still allowed debtors to be jailed, even Stephen Harper couldn’t build enough prisons to satisfy the need.
In Dickens’ era, the barbarity of Victorian ethics deemed it just that creditors be given legal recourse to have delinquent debtors imprisoned.
Add “no debtors’ prisons” to the list of why we’re lucky to live in the 21st century.
Not only are debtors no longer criminals, they are heroes.
If Dickens were alive and visiting Toronto or St. John’s, he could pick up a newspaper this week and read comments by Canada’s top banker praising Canadian debtors.
According to The Canadian Press, Bank of Canada governor Stephen Poloz — the recent replacement for Mark Carney, who parlayed his rock-star banker status into a permanent gig in Dickens’ homeland — says Canada’s relatively good economic health is due to debtors.
As federal Tories often brag, Canada’s recession didn’t sink as low as Europe’s or the U.S.’s. But sound economic policies or all those new jobs building prisons don’t account for Canada’s good fortune.
According to Poloz, Canadians who were willing to take on more consumer debt are the ones who kept the economy churning.
“Given the circumstances, it was a good thing that households had the capacity to expand their spending — this provided the necessary cushion from the worst effects of the global contraction,” Poloz said in a speech to the Oakville Chamber of Commerce.
Dickens’ would rejoice.
The great scribe is vindicated after all these years. He always said debtors weren’t all that bad.
Poloz, like many economists, finance ministers and financial experts, has it utterly wrong.
He makes it sound as if the Canadian economy was spared ruination because people were willing and able to go deeper in debt.
“Honey, grab the credit cards, and let’s go to the mall and help save Canada.”
Poloz’s fundamental error is in assuming Canadians took on more personal debt by choice rather than by necessity.
For many Canadians, debt
has become unavoidable, simply because they don’t have enough money to meet household needs. The personal debt crisis can be explained by a straightforward equation: income minus living expenses equals debt.
Predictably, there are plenty of debt-deniers out there who claim rising debt to meet needs is a myth, and that it is people’s greed for bigger houses and more stuff that causes credit to overheat.
But debt-deniers’ evidence is merely anecdotal. Some people might take a beach vacation or buy a sailboat they can’t afford, but such actions cannot logically account for the millions of Canadians who are in debt.
Does everyone’s desire run uncontrolled?
Are people perpetual children, unable to limit their wants and habitually throwing a tantrum with their charge card?
No and no.
The economy shifted in the past generation or two. Consider two necessities of life — education and housing — and what it takes to acquire them.
In the 1970s, a baby boomer working for a minimum wage of $3.25 per hour had to work 154 hours to pay for university tuition, which was about $500.
Today, with a minimum wage job paying $10 per hour, and tuition at Memorial University at $3,060, a student has to work 306 hours to earn the money.
A generation or two ago, a house could be purchased for about two years’ worth of an average salary. In many cities today, including St. John’s, a house costs about seven years’ worth of average salary.
This economic shift is what needs explaining. Fix it, and you fix the debt crisis.
Brian Jones is a desk editor
at The Telegram. He can be reached