Leader’s economic debate: missing the forest for the trees
In last night’s debate on the economy on issues of job creation, energy, infrastructure, immigration, housing, fiscal policy and taxation, all three party leaders wandered about essentially missing the forest for the trees. While all three leaders tried to assure us that they are best able to guide us through an uncertain economic world, all missed the fundamental point that Canada is a small open economy. We are highly dependent on international trade for our economic welfare.
Indeed, despite the fact that 30 per cent of our GDP is rooted in the export sector, it is surprising how little was said about what Canada should do to secure its competitive position in the world. All the talk about budget deficits, infrastructure, and taxation failed to draw any coherent vision linking government policy to steps that could help boost productivity and trade and hence our long-term standard of living.
Canadian governments cannot affect the world price of oil or the terms of trade for our products. We are a price taking rather than a price making economy. The best thing government can do is assist Canadian capital and labour in becoming resilient and adaptable to opportunities as they emerge. Good government contributes to an economic policy framework that improves incentives—work, savings, investment, and entrepreneurship—for a productive economy, and allows business and workers to take advantage of changing world markets. The best remedy for an ailing middle class, rising housing prices and poverty is robust economic growth via rising productivity and trade.
What can Canada do to continue to make its way in the world as a competitive market economy exporting value added products? With energy and commodities entering a bust period, what other opportunities can we take advantage of in the short term and what do we need to do to position our resource and commodity sector for the next upturn in the price cycle? What new markets can we open for our products and what can government do to help? Moreover, help does not always mean that government has to do something. Good government should know when to do something and when to leave things well enough alone.
If increased infrastructure spending is indeed the key to our future, what are the most strategic areas we can make investments in? Is it municipalities? Is it transportation? Or is it human and social infrastructure? Simply intoning the need for infrastructure and then plopping down government spending on construction projects like so many toadstools after a summer’s rain does not automatically generate long-term productivity.
If we need to be more competitive, what can government do to make firms and workers more competitive in the global economy? Is it export assistance? Skills training? How can immigration contribute to our economic productivity and our trade relationships in the world? What tax reforms can boost the productivity of Canadian firms and workers?
In the end, everything we do must address our future economic prosperity in terms of growing our economic productivity and international trade. Sadly, our leaders, in their single-minded partisan bullet-point appeals to the electorate via finely targeted platform initiatives, have demonstrated that they do not understand the fundamentals of Canada’s economic prosperity. We are a trading nation and failing to grow our trade means a future national pay cut.
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