Hostname: page-component-848d4c4894-2xdlg Total loading time: 0 Render date: 2024-06-28T07:45:46.859Z Has data issue: false hasContentIssue false
  • English
  • Français

Growing Household Indebtedness and the Plummeting Saving Rate in Canada: An Explanatory Note

Published online by Cambridge University Press:  01 January 2023

Mario Seccareccia
Mario Seccareccia*
Affiliation:
University of Ottawa, Ottawa, Ontario, Canada
Get access Rights & Permissions [Opens in a new window]

Abstract

Much as it has occurred in the United States, over the last two decades the household saving rate in Canada has fallen sharply to unprecedented levels, as it now hovers essentially about the zero rate. Accompanying this fall, we have witnessed a parallel rise in household debt ratios — a phenomenon that some have dubbed a state of “affluenza”. The object of this article is to provide an explanation of this phenomenon by pointing especially to the role played by fiscal policy in shifting the burden of debt from the government to the household sector. Moreover, the article raises serious concern about the sustainability of this particular growth process.

Type
Current Issues
Information
The Economic and Labour Relations Review , Volume 16 , Issue 1 , July 2005 , pp. 133 - 151
Copyright
Copyright © The Author(s) 2005

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

*

While absolving them of all responsibilities, the author wishes to thank Ron Bodkin, Leo DeBever, Peter Kriesler, Marc Lavoie, Warren Mosler, Alain Parguez, Pierre Piégay, Henri Sader, Andrew Sharpe, and two anonymous referees for their helpful comments on previous drafts of this paper.

References

Barro, R.J. (1997), “The Ricardian Approach to Budget Deficits”, in Snowdon, B. and Vane, H.R. (Eds.), A Macroeconomics Reader, London/New York: Routledge, pp. 314–33.Google Scholar
Block, F. and Heilbroner, R. (1992), “The Myth of a Savings Shortage”, American Prospect, No. 9 (Spring), pp. 101–6.Google Scholar
Bodkin, R.G. (1993),“La théorie du revenu permanent et de la consommation de Milton Friedman”, in Lavoie, M. and Seccareccia, M. (Eds), Milton Friedman et son oeuvre, (Montréal: Presses de l'Université de Montréal), pp. 101–10.Google Scholar
Bougrine, H. and Seccareccia, M. (2002), AMoney, Taxes, Public Spending and the State within a Circuitist Perspective@, International Journal of Political Economy, Vol.32, No. 3 (Fall), pp. 58–80.CrossRefGoogle Scholar
Brenner, R., Dagenais, M.G. and Monmarquette, C. (1994), “An Overlooked Explanation of the Declining Saving Rate”, Empirical Economics, Vol.19, No. 4, pp. 629–37.CrossRefGoogle Scholar
Brown, C. (1997), “Consumer Credit and the Propensity to Consume: Evidence from 1930”, Journal of Post Keynesian Economics, Vol.19, No. 4 (Summer), pp. 617–38.CrossRefGoogle Scholar
De Graaf, J., Wann, D. and Naylor, T.H. (2001), Affluenza: The All-Consuming Epidemic, San Francisco: Barrett-Khoeler.Google Scholar
Dutt, A.K. (2005), “Conspicuous Consumption, Consumer Debt and Economic Growth”, in Setterfield, M. (Ed.), Interactions in Analytical Political Economy: Theory, Policy and Applications, Armonk, N.Y.: M.E. Sharpe Inc. (forthcoming).Google Scholar
Gale, W.G. and Sabelhaus, J. (1999), “Perspectives on the Household Saving Rate”, Brookings Papers on Economic Activity, 1, pp. 181–214.CrossRefGoogle Scholar
Godley, W. (1999), “Seven Unsustainable Processes: Medium-Term Prospects and Policies for the United States and the World”, Special Report, (Jerome Levy Economics Institute).Google Scholar
Godley, W. (2000), “Drowning in Debt”, Policy Notes 2000/6, (Jerome Levy Economics Institute).Google Scholar
Godley, W. (2003), “The U.S. Economy: A Changing Strategic Predicament”, Strategic Analysis, (Jerome Levy Economics Institute), (March).Google Scholar
Godley, W. and Cripps, F. (1983), Macroeconomics, Oxford: Oxford University Press.Google Scholar
Godley, W. and Martin, B. (1999), “How Negative Can U.S. Saving Get?”, Policy Notes 1999/1, (Jerome Levy Economics Institute).Google Scholar
Godley, W. and Wray, L.R. (1999), “Can Goldilocks Survive?”, Policy Notes 1999/4, (Jerome Levy Economics Institute).Google Scholar
Gokhale, J., Kotlikoff, L.J. and Sabelhaus, J. (1996), “Understanding the Postwar Decline in U.S. Saving: A Cohort Analysis”, Brookings Papers on Economic Activity, No.1, pp. 315–90.CrossRefGoogle Scholar
Green, F. (1991), “Institutional and Other Unconventional Theories of Saving”, Journal of Economic Issues, Vol.25, No. 1 (March), pp. 93–114.CrossRefGoogle Scholar
Larkins, D. (1999), “Note on the Personal Saving Rate”, Survey of Current Business, Vol.79, No. 2 (February), pp. 8–9.Google Scholar
Parguez, A., and Seccareccia, M. (2000), “The Credit Theory of Money: the Monetary Circuit Approach”, in Smithin, J. (Ed.), What is Money?, (London: Routledge), pp. 101–23.Google Scholar
Rippe, R.D. (1999), “No Saving Crisis in the United States: Measures Other than the Personal Saving Rate Put the Saving ‘Crisis’ in Perspective”, Business Economics, Vol.34, No. 3 (July), pp. 47–55.Google Scholar
Schor, J.B. (1998), The Overspent American: Upscaling, Downshifting, and the New Consumer, New York: Basic Books.Google Scholar
Seccareccia, M. and Sharpe, A. (1994), “Canada's Competitiveness: Beyond the Budget Deficit”, Économies et sociétés, Vol.28, nos. 1–2 (janvierfévrier), pp. 275–300.Google Scholar
Slemrod, J. (1990), “Fear of Nuclear War and Intercountry Differences in the Rate of Saving”, Economic Inquiry, Vol.28, No. 4 (October), pp. 647–57.CrossRefGoogle Scholar
Steindl, J. (1982), “The Role of Household Saving in the Modern Economy”, Banca Nazionale del Lavoro Quarterly Review, Vol.35, No. 140 (March), pp. 69–88.Google Scholar
Tobin, J. (1957), “Consumer Debt and Spending: Some Evidence from Analysis of a Survey”, in Tobin, J., Essays in Economics, Vol.2, (Amsterdam: North Holland), 1975, pp. 217–45.Google Scholar
Viard, A.D. (1993), “The Productivity Slowdown and the Savings Shortfall: A Challenge to the Permanent Income Hypothesis”, Economic Inquiry, Vol.31, No. 4, (October), pp. 549–63.CrossRefGoogle Scholar
Wray, L.R. (1989), “Government Deficits, Investment, Saving and Growth”, Journal of Economic Issues, Vol.23, No. 4 (December), pp. 977–1002.CrossRefGoogle Scholar
Wray, L.R. (2000), “Can the Expansion Be Sustained? A Minskian View”, Policy Notes 2000/5, (Jerome Levy Economics Institute).Google Scholar