Parliament's opportunity to rebuild a strong Canadian economy: Don Pittis

Even doubling infrastructure spending cannot replace the value lost to the Canadian economy by the oil and commodities crash. Instead, the Liberal government must think of ways to nurture growth without putting our grandchildren into debt. Don Pittis has some suggestions.

New government must think up ways to grow new economy without breaking the bank

Making a lot out of a little. Canada's Finance Minister Bill Morneau and the new government must think of catalysts to rebuild a Canadian economy damaged by falling resource prices, says Don Pittis. (Reuters)

Sorry, folks. Nice as it sounded as an election promise, even a multi-billion-dollar infrastructure spending plan is like a snowball tossed into Lake Superior compared to what Canada has lost because of the 70 per cent plunge in the price of exported oil.

There are many ways of calculating that loss, but as Bank of Canada governor Stephen Poloz mentioned last week, one way of measuring it is by the fact that every Canadian has "less spending power" because of the falling loonie. And that has led to sharp inflation in the price of imported goods, including a year-on-year increase of 3.7 per cent in the cost of food.

As Parliament gets back to work, it has a one-time chance to rebuild the non-resource economy from the devastation caused by an overpriced Canadian dollar. Infrastructure spending is only a single weapon in its arsenal.

According to most economists, there is nothing wrong with government investment in infrastructure as a strategy for making the economy stronger. It creates fiscal stimulus, effectively borrowing from the future to make the economy stronger now.

Borrow and spend

Many economists say that with government interest rates so low, Canada can afford to borrow a bit more.

Infrastructure spending on things like bridges and transit is a key economic policy of the Liberal government in the coming session. But there is no way government spending alone can replace the huge losses to the economy caused by declines in the resource sector. (Reuters)

Those who have lived through a period of reckless overspending by Liberal (and Conservative) governments that had to be reined in with cuts and downloading onto other levels of government may want to listen with at least one ear to the warnings of fiscal conservatives.

Even fiscal conservatives often see value in moderate infrastructure investment. Wisely spent, infrastructure can act as a catalyst, straightening kinks and widening bottlenecks, stimulating more economic benefit than just fiscal expansion.

But a vigorous new government must also use new thinking to create other types of catalysts to rebuild the economy without bankrupting our children. Here are a few suggestions to get them going.

Drones and worker bees

The first is to reinvigorate the public service. Battered and demoralized by an ideology that saw public servants as useless drones feeding off the worker bees of the private sector, Canada's civil service elite needs to be returned to its former greatness, recognized as smart people whose primary interest is the welfare of Canada and Canadians.  

A strong pluralistic democracy requires a vigorous civil service, respected and hired on merit from among the brightest young people in the country, led by a wise and tested big-thinking reformer. Hello, Central Casting? Get me someone like Mark Carney.

After a long Christmas break, parliamentarians must get to work to rebuild Canada's economy on Monday. (Reuters)

The new government must use and celebrate the private sector but not necessarily trust it to be in charge. The former government proved that giving business too much of what it wants does not guarantee a good outcome, as the recent commodities crash shows. A strong Canada cannot be in thrall to the interests of multinationals, which are not always the same as our interests.

The new government must realize that universally low taxes are not a panacea. Lowering taxes has a temporary effect similar to government stimulus as businesses and people spend the windfall. Despite loud complaining from business and the wealthy, tax money sent abroad, used to bid up unproductive assets or for stock buybacks would be better spent to grow the economy and make a better Canada.

The government must use and celebrate the power of organized labour but not assume it always acts in the public interest. Until the mid-1970s, strong unions backed by government legislation helped to prevent wage inequality. But unions are often more interested in the welfare of their existing members rather than the good of the entire country. 

Reject the Luddites

Using legislation to encourage unionization in sectors where people are not paid a living wage could benefit all of Canada. If fast food workers cannot afford to support their families, it is merely a sign we need fewer and better-paid fast food workers. Businesses who complain should be sent to observe the industrial success of countries like Germany.

One group that should not be listened to are those who follow the Luddite objections to robotics and labour-saving innovation. China is already supplementing its enormous workforce with robots. Every effort should be made by the government to encourage companies willing to invest in plant and labour-saving machinery. There is no way we can compete in a global economy with cheap labour. 

The new government must celebrate science. Whether techniques for fighting climate change or efficient ways to extract energy from the oilsands, Canada must be seen as a country on the same side as scientists, even if the government cannot promise bottomless funding. One proven way to encourage science and innovation at relatively low cost is to offer prizes for targeted goals.

Parliamentarians must also celebrate Canadian arts and culture in all its diversity. Culture makes us rich, figuratively and literally. 

About the Author

Don Pittis

Business columnist

Don Pittis was a forest firefighter, and a ranger in Canada's High Arctic islands. After moving into journalism, he was principal business reporter for Radio Television Hong Kong before the handover to China. He has produced and reported for the CBC in Saskatchewan and Toronto and the BBC in London. He is currently senior producer at CBC's business unit.


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