When it comes to the economy, what's a poor prime minister to do?

The good news is the Canadian economy is not tanking, but that may be the only good news in an "intractable pathology" that defies any easy solution by government, Neil Macdonald writes.

The good news is the economy is not tanking, but that may be the only good news

Justin Trudeau speaks with a group of junior codemakers during the unveiling of Google's new Canadian engineering headquarters in Kitchener-Waterloo last month. But what will he do for Alberta's oil workers? (Peter Power/Reuters)

Sitting across from a beaming Prime Minister Justin Trudeau the other night, a fellow named Danny Strilchuk asked a question packed with fear and steaming with belief in the remedial power of government.

"I'm scared and concerned about the future," said the oil worker from Edmonton, "and I just want to know what your plan is to save the oilfields."

Trudeau didn't — couldn't — give Strilchuk the real answer: that he, as prime minister, has about as much power to revive the oilfields as King Canute had to command the tides.

Instead, he offered the rather un-reassuring reassurance that "your country is going to be there for you … investing in the kinds of things that are going to make a difference."

Translated, that means the federal government will borrow some money and spend it on bridges, roads, sewers, arenas and parks in Alberta, and that should put some of you to work for a while, and we hope in the meantime that oil prices return to a profitable level.

Because if they don't, then we have to start talking about retraining and relocating, and nobody wants to hear that. 

Some of the nine other Canadians ushered into Trudeau's office by CBC producers had similar questions.

What will he do about people losing jobs in manufacturing? What will he do to help middle-class families? What will he do to improve job prospects for graduates, and, incidentally, what does he intend to do about their student debt?

Trudeau's answers, basically, were that he feels their pain: We need to be aware of these issues, we need to be competitive, we need to be educated, we need to be fair to everyone, etc., etc.

"Not a nugget of news," wrote a journalism professor at Carleton University.

Well, maybe so. Still, as much as Justin Trudeau likes to talk about diversification, and leading a fourth industrial revolution, and resourcefulness instead of resource extraction, his options are pretty limited in the here and now.

Economy not 'tanking'

The two principal stabilization tools at government's disposal, monetary policy and fiscal stimulus, are of limited use.

"Monetary policy is already pedal to the metal" with interest rates nearly at zero, says McGill University economist Christopher Ragan.

And while some stimulus spending would be nice, that will only "take the edge off, and it's slow to kick in," he adds.

"If you were me right now, what would you do? Would you stay in the oilfield or would you look for something else?” oil worker Danny Strilchuk asked Trudeau during the CBC News Special 'Face to Face with the Prime Minister.' (CBC)

In any event, the fact is that the Canadian economy is really not doing all that badly. This is not 2009. It is most certainly not "tanking," as some in the media have put it.

Growth is about 1.5 per cent; not great, but nothing like some of the disasters in Europe and Asia.

Yes, Canadians have taken on a lot of personal debt, and that is widely reported, and disquieting. But that's largely a "what if?" problem.

As in, what if inflation sets in and interest rates spike suddenly and debt servicing charges double?

Or, what if the housing bubble bursts and homeowners who stretched themselves thin in order to buy suddenly owe more on their homes than the homes are worth? (As, yes, is the case now in much of Alberta.)

All good questions, but, again, academic in the here and now. Most Canadians are paying their mortgages, and their credit card bills.

Oil tanks overflowing

There is no question that the provinces most dependent on energy extraction are in pain. In Alberta, especially, the attitude seems to be that Alberta subsidized the rest of Canada for years, and now it's time the rest of Canada comes to rescue Alberta.

But how, exactly?

Building pipelines to tidewater has become the emotive response for many.

But the world's oil storage facilities are overflowing. Supertankers float off the coast of Iran, which is out from under sanctions and eager to get back to exporting its massive energy reserves.

Fracking has dramatically increased America's ability to fuel itself. And Saudi Arabia keeps pumping its light, cheap-to-produce crude into the world's oversupplied market, driving the price of a barrel ever lower, and putting the screws to smaller producers.

Alberta is trapped in all this. It produces heavy, sticky bitumen that is costly to extract and difficult to get to market even when it is profitable.

But, as Ragan points out, oil only accounts for about six per cent of Canada's economy. And low energy prices are generally good for manufacturers.

McGill economist Christopher Ragan: "Human nature is remarkably protectionist." (CBC)

The plummeting Canadian dollar is shocking, but it has its benefits, too. Ask our lumber exporters.

Ragan argues that Canada "is not in a crisis, it is in a slow-growth recovery."

Human nature

In other words, we're talking a complex, intractable pathology that defies any one solution by government.

For what it's worth, though, here's something government can change, and which I'd have hounded the prime minister about had I been shown into his office for 10 minutes:

Given that Canada is a relatively small economy perched atop the largest and most dynamic economy in human history, why are we still so hellaciously intent on preventing the free movement of goods and services between our nations?

Twenty-seven years after the original free trade agreement, our border still far too often serves as one long non-tariff barrier. 

A famously inventive American bicycle builder I dealt with last year told me it's easier to ship their prized machines to London or Tokyo than go through the hassle of selling into Canada.

Try bringing in a car up from the U.S., and see what happens.

Canadians are effectively excluded from much of the massive emporium that is eBay, one of the greatest marketplace democratizations in modern history. Even our ability to watch American content on the internet is strictly controlled and rationed.

We need more trade, not less. And yet, in 2016, as our prime minister bangs on about leading the world, we still actually maintain trade barriers between our own provinces.

We are like the newspaper industry, which sat and refused to believe the internet would destroy it, refused to fundamentally change, until it was too late.

"Human nature," says Ragan, "is remarkably protectionist."

We want to keep things as they were, in other words, no matter what reality surrounds us.


Neil Macdonald is a former foreign correspondent and columnist for CBC News who has also worked in newspapers. He speaks English and French fluently, as well as some Arabic.


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