An Opportunity We Cannot Afford to Miss: Applying Hard-Won Lessons from Prior Crises to Post-Pandemic Economies

New from Rotman-UTP, Dangerous Opportunities: The Future of Financial Institutions, Housing Policy, and Governance examines the Home Capital crisis of 2017, a watershed moment that represented the shortcomings of a financial system challenged by distinct, siloed regulatory frameworks that fail to communicate with each other. The book’s editor, Stephanie Ben-Ishai, discusses how we can avoid repeating past mistakes in the nearing post-pandemic economic reality.


By Stephanie Ben-Ishai

Though COVID-19’s burden has not been borne equally by all, the pandemic has had a profound and reverberating impact on everyone. This effect extends beyond the virus’s immediate bearing on individuals’ and populations’ health outcomes into the economic realm. What has become apparent in the ensuing year and a half since the pandemic’s start is that a spoke has been thrust into the wheel of economies across the globe. Business closures and stay-at-home directives during the early days of the pandemic created widespread supply chain and market disruptions, many of which persist into the present. The reduction in consumer demand, most notably in the hospitality and tourism sectors, also placed countless firms and small business owners on a precarious financial footing and threatened to bring whole industries to their knees.

Perhaps most concerning were the cycles of workplace shutdowns, the need to take COVID-related leave, and increased childcare obligations due to the shift towards remote schooling; these factors have all contributed to the decrease in household wealth and left the most disadvantaged in the labour market (such as lower-income women and mothers of small children) in a worse financial position than they were previously. On the whole, we can observe that those who were economically vulnerable before the pandemic are among the most negatively affected by it and are the least likely to achieve a full financial recovery in the near term. The current pandemic has not only deepened structural socioeconomic gaps but has also exposed a myriad of vulnerabilities in our regulatory and crisis management systems.

Lasting Legacies & Recovery Efforts

COVID-19 stands apart as a strong contender for the worst economic shock in our lifetimes. While every crisis is unique, the present pandemic shares similarities with many economic crises that have preceded it. By teasing out the origins and consequences of past economic shocks, we can not only increase our understanding of the current state of affairs but also better anticipate how any given crisis is likely to unfold. Turning our attention toward prior economic crises can also remind us of long-overdue reforms from previous economic shocks and provide us with helpful insights on how to best structure recovery efforts moving forward. This approach allows us to build upon the talent, capacities, and infrastructure developed earlier and adapt it to our contemporary challenges. As governments continue to grapple with COVID-19 and confront the long shadow it has cast over their economies, the study of past crises becomes an increasingly urgent and useful undertaking.

The Home Capital crisis is a particularly instructive example of the threat that a cocktail of fragmented regulatory controls and lax enforcement mechanisms in the financial sector can pose. In the aftermath of COVID-19, a familiar spectre is looming just over the horizon: financial sector vulnerabilities may be amplified by highly leveraged businesses and households, depressed growth, and ineffective regulatory controls. These hazards could gather momentum in the coming months as payment holidays and public support schemes come to an end, making this critical lesson from the past even more salient today. Dangerous Opportunities also provides readers with some best practices in crisis management, advocating for a range of complementary financial market, tax, corporate governance, and securities regulatory interventions to help a disrupted economy gain its footing once again. Governments should take care not to squander the opportunity to capitalize on the hard-won lessons of past crises. Employing these lessons will help fashion a more inclusive recovery and a more resilient post-pandemic economy. Since failure comes at too high of a cost (often at the expense of those who are least able to pay it), this is an opportunity we cannot afford to miss.

My new book, Dangerous Opportunities: The Future of Financial Institutions, Housing Policy, and Governance, serves as an invaluable tool in the hands of any policymaker committed to doing things better this time around. The book explores the events surrounding the dramatic fall in alternative mortgage lender Home Capital’s share prices in 2017 following the announcement of an Ontario Securities Commission investigation into the company that same year. The contributors provide the reader with a comprehensive analysis of the crisis’s root causes, dig deeper into the effect that Home Capital’s near-death experience had on the Canadian financial sector, and reflect on the battery of policy interventions available to cushion Home Capital’s fall.


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