In the short space of the next four weeks, the Trudeau government will design not just a proposed economic recovery plan for Canada, but a lasting economic renaissance only a notch or two shy of Sir John A. Macdonald’s National Policy in its impact.
The government will present highlights of its plans for pandemic economic recovery in the Throne Speech that soon follows the return of Parliament Sept. 24. More details will come with an economic statement later in the fall, and we’ll see the plan in full in a budget next year.
You can be sure that this vision of a new Canadian economy will be bold.
Having promised a thoroughly overhauled post-pandemic economy, especially in strengthening the social safety net, the Liberals have gone all in. They can’t back down from it.
Given the minority status of the government, and a confidence vote it faces after the Throne Speech that they could lose, the country might find itself voting on the Liberals’ proposed economic renaissance in an election sooner than later.
An early sign of the government’s resolve is the $37-billion package of new income supports it unveiled Aug. 20. Those measures extend pandemic-related emergency payments far beyond those of a U.S. counterpart program, which ran dry weeks ago and show no sign of resumption, though millions of Americans remain out of work.
In that same announcement, made jointly by newly appointed Finance Minister Chrystia Freeland and Employment Minister Carla Qualtrough, Ottawa also introduced increased sick-leave, caregiver, and maternity benefits.
The backdrop for those enhanced protections is a Liberal plan, signalled by the government for several weeks, to effectively replace the antiquated Employment Insurance program with the more streamlined and user-friendly Canada Emergency Response Benefit, which will still go under the name EI.
How much further the party intends to take its planned reinvention of the economy will be determined by intense cabinet, caucus and bureaucratic negotiations over the next few weeks.
That will be a high-stakes exercise, bearing resemblance to the lead-up to Medicare’s rollout in 1965 and the advent of the Charter of Rights and Freedoms in 1982.
The prospect of a snap election will influence those deliberations, of course.
But the Liberals seem intent on asking Canadians to consent to a sweeping economic renewal that tackles income inequality, climate crisis, immigration, economic sovereignty, industrial self-sufficiency, the gender-pay gap, Canada’s undernourished R&D sector and considerably more.
“The restart of our economy needs to be green,” Freeland said Aug. 20. “It also needs to be equitable, it needs to be inclusive, and we need to focus very much on jobs and growth.”
The Grits, in other words, are giving themselves an open-ended mandate for change, the ambition of which the country has seldom seen.
It’s fair to ask why they have embarked on this high-risk mission. It could see them reduced to opposition status in Parliament by this time next year if Canadians reject it.
- The Liberals are not proposing radical change. Every advance they will propose is an expansion or acceleration of existing Canadian priorities and practices.
On climate change, for instance, the Trudeau government wants to lay the groundwork for a Canada able to exploit the lucrative environmental industries that will help define the 21st century — a public- and private-sector project already underway but still in its infancy.
And for the Grits, economic sovereignty largely takes the form of self-sufficiency in essentials like medical supplies that were long ago outsourced abroad.
Ottawa is also worried that Canada will suffer competitive disadvantage if it doesn’t match the heavy investments that Europe is making — during the pandemic, no less — in upgrading its social-safety nets, its tech-oriented intellectual property development, and environmental industries rich in export and job-creation potential.
- The timing is right. Interest rates are at a historic low. The government’s cost of borrowing to pay for pandemic relief, a permanently stronger social safety net, and seed capital for tech-oriented startups with export potential is therefore manageable.
And so far, the pandemic ballooning of the deficit, to an admittedly staggering $343 billion in the current fiscal year, hasn’t caused a spike in inflation.
Canada has not entered uncharted territory with its current, greatly enlarged 49.1 per cent net-debt-to-GDP ratio. That ratio peaked at 66.6 per cent in 1996. It took just 13 years to get that ratio down to 28.2 per cent by 2009, ahead of the Great Recession.
And in the more recent four years of deficit-financed investment in Canada for which the Trudeau government won an electoral mandate in 2015, the average debt-to-GDP ratio has been just 31.6 per cent.
The Grits or their successors stand a good chance of restoring that pre-pandemic ratio once the days of extraordinary pandemic spending have passed.
For purposes of comparison, a prosperous Japan’s debt-to-GDP ratio has exceeded 200 per cent for decades. Kevin Page, the former parliamentary budget officer, said recently that Canada’s public finances are in better shape than most advanced economies.
As for our emergency pandemic government spending, it’s worth noting that Canada is on a level playing field our biggest trading partners — they too have run up their deficits and debt to protect their people.
But perhaps what most influences the Grits’ thinking is that Canadians, in adjusting so quickly to pandemic realities, are geared to accepting sensible change on economic reinvention if a good case can be made for it.
Nor are Canadians fretful about deficits and debt, regarding this year’s pandemic spending as money well spent to limit permanent pandemic damage to individuals’ finances and to the economy.
Actually, Liberals are betting that most Canadians are impatient for change in a gap between rich and poor that has widened even more during the pandemic, especially for women; and about our stubbornly slow progress in the fight against climate crisis.
The Grits could bungle this once-in-a-lifetime chance to create a more successful economy, as they did with the National Energy Program (NEP). Or they can get it right, as they did with a Medicare system that Canadians cherish — a triumph that was achieved by a minority government.
The NEP was sprung on Alberta and the country with notoriously little genuine consultation.
By sharp contrast, for the economic renaissance they’re now planning, the Grits have been soliciting input all year from the premiers, leaders in industry and organized labour, environmental and poverty activists, and of necessity in a minority government, opposition leaders and backbenchers.
And because an election is on the near horizon, we will all have our say on this proposed latest nation-building project.
Tech lifts world stocks as economy back in focus – TheChronicleHerald.ca
By Danilo Masoni
MILAN (Reuters) – World shares stabilised and the dollar rose on Wednesday with overnight gains of stay-at-home Wall Street tech champions helped balance concerns that new restrictions to counter resurging coronavirus infections will hurt economic recovery.
First indications from global surveys about economic activity in September gave a gloomy picture for Europe with rising COVID-19 infections leading to a downturn in services.
MSCI world equity index .MIWD00000PUS>, which tracks shares in 49 countries, was 0.2% higher by 0821 GMT, while the pan-European STOXX 600 .STOXX> benchmark rose 1.1%.
Tech shares were the strongest gainers in Europe following a rally overnight in big U.S. tech stocks Amazon , Microsoft , and Apple .
“This strong performance on the part of U.S. stocks is likely to translate into a similarly positive open for European stocks,” said Michael Hewson, analyst at CMC Markets in London.
“However there is rising concern that in light of surging infection rates across Europe, and the beginnings of a rise in hospitalisations, that the economic rebound from the lockdown lows is set to finish the year with a whimper,” he added.
The PMI survey showed euro zone business growth ground to a halt this month as the service industry shifted into reverse, knocked by a resurgence in coronavirus cases that pushed governments to reintroduce restrictions.
French business activity slowed to a four-month low in September, while Germany’s private sector continued to recover from the coronavirus shock.
Earlier, MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS> rose 0.2% for its first gain this week, but the mood was hardly bullish. Japan’s Nikkei .N225> returned from a two-day holiday to slip 0.1%.
Nasdaq futures remained near Tuesday’s highs, up 0.1%. S&P 500 futures were 0.3% higher.
In foreign exchange markets, the standout mover was the gaining dollar, which was up 0.10% against a basket of six major currencies .DXY> at its highest level since July 27.
“Risk aversion on the back of new COVID-19 infections affecting Europe more directly remains an important factor this week,” UniCredit strategists said in a note. “This means that the USD is likely to remain firm in its role as preferred safe-haven currency.”
Meantime the euro hit a seven-week low and was last down 0.12% at $1.1693, on concerns about coronavirus infections and after the tepid European surveys.
Commodities were also weighed down by the robust dollar and worries linked to economic impact of a second wave of COVID-19.
“A resurgence in cases could prove to be a stumbling block for the demand recovery, although any lockdowns moving forward are likely to be more targeted and localised,” said ING commodity strategists Warren Patterson.
Brent crude futures were last down 0.2% at $41.64 a barrel and U.S. crude futures slipped 0.3% to $39.69.
Gold prices touched a six-week low as the dollar strengthened. Spot gold fell 1.2% to $1,875.7 per ounce.
In bond markets, Italy’s 30-year bond yield fell to a record low as the country’s debt remained supported after local elections reduced the risk of a snap election.
U.S. bonds were steady, with the yield on benchmark 10-year U.S. debt US10YT=RR up less than one basis point at 0.6724%
(Additiona reporting by Tom Westbrook in SINGAPORE; Editing by Tomasz Janowski)
Italy’s Chance of a Lifetime for Economy Could Yet Be Squandered – Yahoo Canada Finance
(Bloomberg) — No Italian government has ever had so much cash at its disposal as Prime Minister Giuseppe Conte — enough possibly to transform the region’s laggard economy.
But if that fiscal hoard swelled by European Union rescue funds and central bank-backed cheap borrowing is spent unwisely, it could become the biggest missed opportunity of a generation.
Avoiding that outcome is the test confronting Conte and his finance minister, Roberto Gualtieri. While targeting a revamp of the economy, they face pressure to throw funds at protecting existing jobs rather than investing in new ones, expanding the role of the state despite a troubled history of such policies in the country.
“In Italy, too many people think that any kind of public expenditure can boost output,” said Riccardo Puglisi, economics professor at the University of Pavia. “This increases the risk that recovery-fund money is not used properly and efficiently.”
The fiscal windfall that Italy’s governing class is about to sink its teeth into is staggering. Gone are the days of haggling over 0.1% budget deviations with Brussels officials concerned about burgeoning borrowings that are now well on the way to exceed 150% of gross domestic product.
The country stands ready to receive as much as 209 billion euros ($248 billion) in EU aid funded by jointly issued debt to help its post-coronavirus reconstruction.
Further bolstering its public finances are European Central Bank efforts to keep borrowing costs low. That help allowed Conte to spend 100 billion euros in stimulus on a battered economy that analysts anticipate may contract as much as a 10th this year. The yield on Italian 10-year bonds has more than halved since the peak of the pandemic in mid-March.
“Italy will have billions in its pockets,” said Paolo Pizzoli, a senior economist at ING Bank. The government “needs to show it is not only able to access European Union funds, but also to focus spending effectively to ultimately boost growth.”
With strict strings attached to EU money, officials intend to use it to boost growth to at least 1.6% a year and increase employment by 10 percentage points from the 2019 tally of 63.5% to bridge the gap with regional peers, according to draft guidelines seen by Bloomberg.
The plan is to invest in digitalization, a unified ultra-broadband network, innovation, education, more efficient infrastructure, a green economy, and also reforms of the judicial system and state bureaucracy.
“It’s a once-in-a-lifetime opportunity to exit a long period of stagnation,” Gualtieri told lawmakers last week.
That ambitious growth agenda is pulling in one direction, while the government’s own spending plans for the rest of its budget are pulling in another. Conte’s coalition of the left-wing Democratic Party and the populist Five Star Movement — newly emboldened after holding its ground in local elections this week — is increasingly tending toward state aid and government intervention.
The premier has pushed for the creation of a single broadband network company, halting the sale by Telecom Italia SpA of a minority stake in its network. He has also pressured the Benetton family’s Atlantia holding company to sell its 88% stake in toll road operator Autostrade per l’Italia. Meanwhile Gualtieri has publicly favored a sale of the Italian Stock Exchange and its MTS bond market to a European company.
The government wants the state-backed lender, Cassa Depositi e Prestiti, to take stakes in all three enterprises, and it has also set up a new publicly controlled company to run failed airline Alitalia SpA. Italy has seen such measures before, but not for a while.
Not the Solution
“The successful Italian economy of the 1950s, which was a mixed system — with strong government involvement in companies through a vehicle called IRI — worked for a time but degenerated quickly into cronyism and wasting public funds,” said Giovanni Orsina head of LUISS University’s School of Government in Rome. “Regenerating that system for all the wrong reasons is not the solution.”
The Institute for Industrial Reconstruction — known as IRI — was a state company established by the fascists in 1933. It helped rebuilding after the war, constructing roads and the phone network, and was once Italy’s biggest employer.
If Cassa Depositi becomes a revamped version of that, it would ultimately turn back the clock, reversing decades of economic policy since IRI was dissolved during a sell-off of assets in the 1990s.
“We hope the government will use the funds to boost competitiveness with a market approach rather than acting as a nanny state,” said Paolo Magni, parter at Alpha Group, a private equity fund with 2 billion euros of assets under management in Italy.
For Orsina, such an outcome would prolong Italy’s history of failing to deliver on economic reforms, hampered by special interests and a political cycle with frequent elections.
“Politicians gain very little from long-term planning and very much from spending on solutions that increase their power and popularity,” he said. “The country is condemned to short-termism.”
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GUEST OPINION: Trails can stimulate the economy in Atlantic Canada – SaltWire Network
There are many things that this pandemic will have taught us, however for many it has reinforced the value of trails and greenspaces.
As a trail professional of nearly 20 years I’ve always valued trails and greenspaces, however in this fast-paced world with ever-changing technologies, many people began to take the great outdoors for granted.
With limited activities to do during the pandemic and many people stuck in the house most of the day, the opportunity to get outside and breathe some fresh air is now becoming something that is vital for their well-being.
These days I’m inundated by Facebook posts, tweets or Instagram posts of people relishing in the outdoors and thankful to have access to trails and greenspaces. As we begin to become accustomed to a new normal, it’s time for us as a society to start thinking about getting back to some of the more simple things in life and how these things can act as both a social and economic catalyst for communities. Many of these things don’t need to be complicated, but can have a tremendous impact as we begin to come back from the ramifications of COVID-19.
One of these opportunities is to foster the development of a trail economy. Many countries have capitalized on the trail economy; however Canada and Atlantic Canada have not come close to realizing the potential it has in developing a strong economy based on greenway trails. The trail economy is the idea of generating both indirect and direct revenue through the development and promotion of trails as a product.
This however is not a “build it and they will come” scenario; it requires significant engagement between trail managers working hand in hand with outfitters, business owners and community leaders to ensure that there is a strong integration between all stakeholders. What it doesn’t require, however, is significant investment of funds to get these relationships developed.
Prince Edward Island is perfectly positioned to take advantage of the trail economy and is in a unique position as an established tourist destination. The Island is well known for their hospitality and many people consider P.E.I. as a premier vacation destination.
The Confederation Trail provides tourists and residents alike with a 450-km trail that spans the province and provides access to many of the most scenic coastal regions on the Island. A feature that the Confederation Trail has over many of its counterparts is the relative short distance between communities thus allowing trail tourists with good access to food and beverage, accommodation and other critical amenities to ensure that they have a memorable experience.
It’s now time for these communities and the provincial government to take advantage of this feature and ensure that they are properly equipped to take on the task of welcoming these tourists to their beautiful towns and villages. The development of programs such as Trail Towns, where the business community and other key stakeholders work together to assess their attributes and work together to fill in their service gaps in the next key step of the development of the Confederation Trail as a tourism product.
Trails and greenspaces connect us to the land, the people and histories of our communities. With many people staying close to home this year and perhaps in the years to come, let’s take this time to get better connected, learn more about the region, create a stronger and healthier population and a more vibrant economic outlook for Atlantic Canada.
Jane Murphy-McCulloch is a principal at Terminus Consulting and was national director of Trail with the Trans Canada Trail, developing 10,000km of land and water trail along with road cycling infrastructure to ensure the successful connection to the national trail system in 2017.
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