By Goldy Hyder
For too long, too many countries have behaved irresponsibly, trying to be all things to all people, producing societies dependent on government programs. Such policies have brought their economies to the brink of bankruptcy. Sadly, in today’s interconnected global society, the mistakes of some countries will necessarily impact us all.
Currently, Canada is threatened by the debt crises in both the United States and the European Union. These governments, rather than confront their unsustainable spending habits, are trying to stimulate their ways back to economic health — as if borrowing more money will somehow solve their debt crises. And don’t be fooled by the relatively strong position of the Canadian economy either, for it is just that — relative. As a speaker at a recent policy conference in Ottawa cautioned, Canada should be careful not to thump its chest too much: We are no more than “a tall midget.”
As the global economy worsens and Canadian policymakers become fearful of a slide back into recession, there will be pressure to begin directly stimulating our economy again with government spending, financed with borrowed money.
The last round of stimulus engaged all levels of government to identify infrastructure projects across Canada. The “top 28,000” priorities across the land received taxpayer money. A second round of stimulus would thus begin with the 28,001st priority of Canadians. Is that really worth adding to the debt burden future generations will have to pay off?
A second round of stimulus should only come about as an absolute last resort. There are many policy measures that governments can implement that not only do not cost money but actually help generate wealth and opportunity. Consider some of the other, deeper challenges for Canada’s economy:
- Our lagging productivity growth is arguably our biggest problem, as it continues to decline and now sits at less than 1%. There is a 20% rate of slowdown in income growth.
- We underutilize the skills of our immigrants. There are large employment gaps for First Nations who, in fact, have a better demographic makeup than the rest of Canada thanks to a younger population.
- Our economy is at best in transition to the reality of a strong Canadian dollar, near or over parity. Many parts of our economy have long counted upon a weak Canadian dollar to furnish profits when selling into the U.S. market.
- The federal government has sent mixed signals to markets on foreign investment, thanks to blocking the sale of Potash Corp. and the satellite division of MacDonald Dettwiler and Associates Ltd., likely turning away those who want to create wealth and jobs in Canada.
- Our consolidated provincial-federal debt is as bad as that of France, which may be the next European country to experience significant economic strife. The success of the federal governments of Jean Chrétien and Paul Martin at reducing their deficit has not been matched by the provincial governments, but it has somewhat obscured the problem of Canada’s debt-wracked provinces.
Meanwhile, we have a private sector that has proved reluctant to begin rehiring jobs lost during the recession. Most companies are keeping their staffing levels as lean as possible, both to maximize profits and as a buffer against future economic shocks.
There is no question that we are in a spiral of a crisis of confidence in the markets. We need governments to contain spending and businesses to start spending so consumers can eventually join in. Every option to streamline and improve Canada’s economy should be exhausted before one more penny of borrowed money is spent on counter-productive stimulus. Adding additional debt to Canada’s already overleveraged governments will not lead to a stronger economy, but may guarantee that the next generation of Canadians will be poorer than the one before them.
Goldy Hyder is general manager and senior vice-president of Hill and Knowlton Ottawa, and previously served as chief of staff to former prime minister Joe Clark.