Op-Ed: Toronto's ice storm shows failure of Keynesian economics

Posted Dec 31, 2013 by Andrew Moran
During the Christmas holiday, tens of thousands of Canadians and Americans, predominantly Torontonians, were out of power because of the devastating ice storm that took place Dec. 21 and Dec. 22.
Toronto s ice storm that left more than 250 000 households without power.
Toronto's ice storm that left more than 250,000 households without power.
For a week, residents and commercial establishments were left to thaw out as icy tree branches fell, provided immense damage. The unbearable weather didn't stop hydro workers to perform their duties admirably.
It is unclear as to what the total price-tag will be for everyone in the city. According to Toronto Mayor Rob Ford, the post-storm clean up is expected to have cost $1 million a day for a total of $10 million. This is indeed no small change. On a governmental level, the city will cope; on a personal level, many will suffer the short- and long-term consequences of the damage.
For the past week, many homes have purchased generators, while hungry consumers bought fast-food they wouldn’t have else purchased because they had fridges filled with food for Christmas. For the past week – and for the next few months – residents have had to acquire the services of electricians, plumbers, cable repairmen and other professionals to fix certain areas of the home.
Now, to a Keynesian economist, such as Paul Krugman, this would be considered a dream come true because the economy is being stimulated. Sure, 27 people have died so far, many houses and buildings have been damaged and tons of food have been thrown in the garbage, but the economy has been stimulated, dang nab it!
This is fallacious. In fact, this is akin to what Keynesians were saying following Hurricane Sandy. The argument in favor of that particular storm essentially was since the people needed construction, contractors and the government then the region’s economy would be stimulated, despite the death toll.
Heck, many economists from both the left and right promote wars arguing that they stimulate the economy, never mind the long-term effects of war that is inflicted upon the people themselves, and not so much the elites of course.
Let’s look at Frederic Bastiat’s Broken Window Fallacy: a businessman’s window was broken by a petty thief. The entrepreneur is disappointed that instead of spending the fruits of his labor on new clothes, a trip to a restaurant or investing in his own business, he will now have to spend the money on a window repairman.
In Toronto’s devastating storm, Tim Hortons, McDonald’s, shopping malls and movie theatres experienced tremendous business, but what about everyone else, including other small businesses, who had to witness and share the misery? What about children who became ill because there wasn’t electricity for heating? What about the lives of chickens and turkeys wasted?
For the next few months, households will have to spend thousands and thousands of dollars, a sum of money that certainly isn’t easy to attain these days, especially with the city and province’s high tax rates, to repair their homes and vehicles. Instead of giving tax breaks, balancing the budget or fixing roads, the municipal and provincial governments will have to allocate money from other programs to pay for gift cards and money for groceries that were tossed into the garbage.
As I was surveying the damage in Leaside, I couldn’t help but think about the Keynesians and how much glee they would have at such sites. Since this is the worst damage that I have personally ever seen in Toronto, it was right then and there that I hung my head in shame to the likes of Keynesians everywhere.