As I pointed out in my post about Bertha, the orthodox response to an economic crash or recession is for the government to cut spending. Though this policy plainly makes no economic sense (even to the woman or man on the street), it is the leading economic doctrine in the world. Go to Greece, go to Ireland, or just stay here in Seattle, and you will find that this bizarre logic—austerity—is pretty much the law of the land.

One of the justifications for austerity is that tight state spending will eventually be rewarded with a show of confidence from the business community. This kind of reasoning is not scientific. How does one measure confidence? Is it like quorum sensing in bacteria? But this microbial decision-making process has the virtue of being testable and quantifiable. Business confidence does not. it's just a feeling.

One possible thing this confidence might mean is that when the state cuts its budget, it shows it is determined to place the needs of the business community over those of the public. This is indeed what the leftist theorist Wolfgang Streeck proposes in his book Buying Time. Austerity is nothing more than a political project that, at the cost of the economy, keeps the state under the thumb of the rich, who prefer obedience more than recovery.

If Streeck's idea seems like a bit of a stretch, and even has the whiff of a conspiracy theory, then please try to find another way to make sense of austerity policies and what is known as the "confidence fairy." For the business community to open its purse, which has shut because of a bust (meaning, shut because of bad investments made not by the state but by private enterprises), the state must first tank its economy, send a large chunk of its population out of work, and thereby suffocate demand for products made by private enterprises. A conspiracy theory involving even Martians seems more rational than this kind of logic.

Despite all of this and much more, austerity is the order of the day. Indeed, those who propose anything that's too far from this doctrine are considered to be politically inviable. They are outside of the mainstream. To be electable, you must either be on the planet of austerity (the entire right), or on one of its moons (center left). But you cannot be in another solar system.

This is why the recent federal elections in Canada are such a big deal. A center-right Conservative Party that pushed the orthodox principles of austerity was tossed out, and a center-left Liberal Party running on a heretical pro-fiscal spending platform convincingly took power. For the Liberal Party, fiscal responsibility does not mean cuts on social welfare (which is all that is meant by budget cuts) but instead investment in social goods: transportation infrastructure, research and development (R&D), and so on. In the words of the Liberal Party:

Interest rates are at historic lows, our current infrastructure is aging rapidly, and our economy is stuck in neutral. Now is the time to invest.

It may surprise you to learn that this is not the language of orthodox economics. It is what you'd expect to hear from economists who are not in the mainstream or hold posts at the major universities. This is how heterodox economists talk. And so it is not surprising that the Liberal Party is also openly referencing thinkers like Mariana Mazzucato, whose book Entrepreneurial State argues that the most important innovations in technology are not generated by the private sector but the public sector. (Weirdly enough, the richest man on earth, Bill Gates, has recently reached the same conclusion: Private enterprise is not that good at R&D; that is really the job of the state, and the job of the business community is to simply customize and distribute new products and technologies to the public.) And so when governments cut spending in education and research, they are effectively cutting their society's main source of innovations.

The orthodox economists argue deep cuts and wage flexibility make the labor force more competitive (cheaper) in the global market; heterodox economists (who, by the way, used be called Keynesians) think that increased spending in research and development makes your society more competitive. But even if both claims are true, you can see why the latter path to competitiveness is more desirable for citizens. In the former, you just get a job; in the latter, you get a job and an education.

This victory of Keynesian policies in Canada is a world event because Canada has a huge economy (a GDP of nearly $2 trillion). It's not weak like Greece (GDP $240 billion), and the Liberal Party is not cornered like Syriza. Greece can not borrow cheap, and Canada can and has control of its currency. Indeed, our neighbor might be the first advanced country in the world to enter the alternative future of capitalism.