Our governments seem to think that export trade is vital to our prosperity these days. If we can only achieve trade agreements and sell our products to other countries, all will be well! And then there are resource projects that can make Canada an energy superpower. The oil coming out of Alberta’s sands needs to be exported, too. As we advance these projects, we are told, the whole country will become prosperous.

China has prospered by selling its products to the United States and other advanced industrial nations (or so we used to call them). Exports to Walmart and other large capitalist enterprises have brought prosperity to a country still controlled by its Communist Party. And yet Western commentators will advise the Chinese to develop their domestic market, to increase consumption at home.

That principle needs to be followed in Canada, too! We need policies that increase consumer demand, including fair taxation that reduces the burden for the middle class and provides the money to reduce poverty. Policies that shelter wealth rob us of the resources to achieve a prosperous country!

Understanding how this works requires recognition of the importance of aggregate demand. Businesses respond to the market demand of consumers and governments—and to the demand of other businesses as they produce the goods and services consumers and governments want to buy. This demand is described as aggregate demand.

It was clear in the Great Depression that economies could settle into an equilibrium that was far below full employment. John Maynard Keynes had already recognized the problem in England during the Twenties and advocated public investment in such things as housing and transportation to move the country back to full employment.

In the Thirties, Keynes developed his understanding of aggregate demand, and the need for governments to make up the shortfall when consumer and producer demand fell short. Then Finance Minister Jim Flaherty did this in Canada with a stimulus program during the years 2009-12!

Canadians need the federal government to focus on policies that will increase aggregate demand and move the country towards full employment. These policies need to include tax policies that tax the wealth of the country fairly and enable all of the governments to play their part in increasing aggregate demand!