Book explores history of public debt in Canada

For a province preoccupied with so-called "debt hysteria," Alberta has an awfully short memory concerning its credit history, says Dr. Robert Ascah, author of Politics and Public Debt: The Dominion, the Banks and Alberta's Social Credit.

"It's what I call the collective amnesia of Albertans," says Ascah, referring to the province's forgotten failure to make good on mature government bonds in 1936. Perhaps the default is something we'd prefer not to remember, but even when Ascah runs information sessions for Alberta Treasury Branches employees, most of them draw a blank when asked about that unsettling moment in our province's history. "Virtually no one knows, so I find that quite fascinating," he says.

In simple terms, the 1936 default was the result of a power struggle between eastern banking interests and the newly elected Social Credit government of Alberta under Premier Bill Aberhart. "The banks worked with the newly created Bank of Canada to, in effect, isolate the province," says Ascah. "There was a great fear that the Social Credit contagion would go to Saskatchewan and Manitoba, who were also in desperate straits."

The federal government had agreed to lend Alberta the money to pay its maturing bonds. At the same time, however, it was putting pressure on the province to join a newly created Loan Council designed to "co-ordinate the borrowings of the federal and provincial governments."

The loan wasn't supposed to be conditional upon council membership, but when Alberta decided it would be foolhardy to "filch away" financial sovereignty, the federal government reneged on its loan promise. On April 1, 1936, Alberta became "the first, and only, provincial government in Canada's history to default on the principal of a maturing obligation," writes Ascah.

Politics and Public Debt, published by U of A Press, takes a hard look at the story of government debt in Canada long before the crisis of the past decade, particularly during the Depression through the post-war era. Ascah traces the history of the country's fiscal policy to a time when no one thought public debt mattered all that much.

Now in charge of policy and strategic planning for Alberta Treasury Branches, Ascah's own interest in public debt began when he was a junior auditor with the Auditor General in Ottawa in the early '70s. The debt was only beginning to accumulate then. "That really tweaked my interest," he says. "And the economists were basically saying, debts were not a problem."

Ascah was later responsible for drafting prospectuses for the Alberta government when oil prices fell to $10 per barrel and the province was borrowing "billions of dollars." So when he began researching his book in the '80s, originally as a doctoral dissertation in political science, he had no shortage of first-hand knowledge upon which to draw. From his front-row seat in the credit game, he saw a clear need to elucidate the relationship between debt and democracy.

"This is a story that cries out to be told," writes U of A economics professor Dr. Paul Boothe. "Robert Ascah has done us a great service in bringing alive this little-known but critical chapter of our history. His account of this period helps us to see how the economics and politics of government debt shaped the development of our country and brought us to where we are today."