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Trudeau’s using our moment of crisis to reinvent our economy

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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.

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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.

Source:- TheRecord.com

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Economy

Britain's economy went into recession last year, official figures confirm – The Globe and Mail

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Open this photo in gallery:

People walk over London Bridge, in London, on Oct. 25, 2023.SUSANNAH IRELAND/Reuters

Britain’s economy entered a shallow recession last year, official figures confirmed on Thursday, leaving Prime Minister Rishi Sunak with a challenge to reassure voters that the economy is safe with him before an election expected later this year.

Gross domestic product shrank by 0.1 per cent in the third quarter and by 0.3 per cent in the fourth, unchanged from preliminary estimates, the Office for National Statistics (ONS) said on Thursday.

The figures will be disappointing for Mr. Sunak, who has been accused by the opposition Labour Party – far ahead in opinion polls – of overseeing “Rishi’s recession.”

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“The weak starting point for GDP this year means calendar-year growth in 2024 is likely to be limited to less than 1 per cent,” said Martin Beck, chief economic adviser at EY ITEM Club.

“However, an acceleration in momentum this year remains on the cards.”

Britain’s economy has shown signs of starting 2024 on a stronger footing, with monthly GDP growth of 0.2 per cent in January, and unofficial surveys suggesting growth continued in February and March.

Tax cuts announced by finance minister Jeremy Hunt and expectations of interest-rate cuts are likely to help the economy in 2024.

However, Britain remains one of the slowest countries to recover from the effects of the COVID-19 pandemic. At the end of last year, its economy was just 1 per cent bigger than in late 2019, with only Germany faring worse among Group of Seven nations.

The economy grew just 0.1 per cent in all of 2023, its weakest performance since 2009, excluding the peak-pandemic year of 2020.

GDP per person, which has not grown since early 2022, fell by 0.6 per cent in the fourth quarter and 0.7 per cent across 2023.

Sterling was little changed against the dollar and the euro after the data release.

The Bank of England (BOE) has said inflation is moving toward the point where it can start cutting rates. It expects the economy to grow by just 0.25 per cent this year, although official budget forecasters expect a 0.8-per-cent expansion.

BOE policy maker Jonathan Haskel said in an interview reported in Thursday’s Financial Times that rate cuts were “a long way off,” despite dropping his advocacy of a rise at last week’s meeting.

Thursday’s figures from the ONS also showed 0.7 per cent growth in households’ real disposable income, flat in the previous quarter.

Thomas Pugh, an economist at consulting firm RSM, said the increase could prompt consumers to increase their spending and support the economy.

“Consumer confidence has been improving gradually over the last year … as the impact of rising real wages filters through into people’s pockets, even though consumers remain cautious overall,” Mr. Pugh said.

Britain’s current account deficit totalled £21.18-billion ($36.21-billion) in the fourth quarter, slightly narrower than a forecast of £21.4-billion ($36.6-billion) shortfall in a Reuters poll of economists, and equivalent to 3.1 per cent of GDP, up from 2.7 per cent in the third quarter.

The underlying current account deficit, which strips out volatile trade in precious metals, expanded to 3.9 per cent of GDP.

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How will a shrinking population affect the global economy? – Al Jazeera English

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Falling fertility rates could bring about a transformational demographic shift over the next 25 years.

It has been described as a demographic catastrophe.

The Lancet medical journal warns that a majority of countries do not have a high enough fertility rate to sustain their population size by the end of the century.

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The rate of the decline is uneven, with some developing nations seeing a baby boom.

The shift could have far-reaching social and economic impacts.

Enormous population growth since the industrial revolution has put enormous pressure on the planet’s limited resources.

So, how does the drop in births affect the economy?

And regulators in the United States and the European Union crack down on tech monopolies.

The gender gap in tech narrows.

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John Ivison: Canada's economy desperately needs shock treatment after this Liberal government – National Post

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Lack of business investment is the main culprit. Canadians are digging holes with shovels while our competitors are buying excavators

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It speaks to the seriousness of the situation that the Bank of Canada is not so much taking the gloves off as slipping lead into them.

Senior deputy governor, Carolyn Rogers, came as close to wading into the political arena as any senior deputy governor of the central bank probably should in her speech in Halifax this week.

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But she was right to sound the alarm about a subject — Canada’s waning productivity — on which the federal government’s performance has been lacklustre at best.

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Productivity has fallen in six consecutive quarters and is now on a par with where it was seven years ago.

Lack of business investment is the main culprit.

In essence, Canadians are digging holes with shovels while many of our competitors are buying excavators.

“You’ve seen those signs that say, ‘in emergency, break glass.’ Well, it’s time to break the glass,” Rogers said.

She was explicit that government policy is partly to blame, pointing out that businesses need more certainty to invest with confidence. Government incentives and regulatory approaches that change year to year do not inspire confidence, she said.

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The government’s most recent contribution to the competitiveness file — Bill C-56, which made a number of competition-related changes — is a case in point. It was aimed at cracking down on “abusive practices” in the grocery industry that no one, including the bank in its own study, has been able to substantiate. Rather than encouraging investment, it added a political actor — the minister of industry — to the market review process. The Business Council of Canada called the move “capricious,” which was Rogers’s point.

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While blatant price-fixing is rare, the lack of investment is a product of the paucity of competition in many sectors, where Canadian companies protected from foreign competition are sitting on fat profit margins and don’t feel compelled to invest to make their operations more efficient. “Competition can make the whole economy more productive,” said Rogers.

The Conservatives now look set to make this an election issue. Ontario MP Ryan Williams has just released a slick 13-minute video that makes clear his party intends to act in this area.

Using the Monopoly board game as a prop, Williams, the party’s critic for pan-Canadian trade and competition, claims that in every sector, monopolies and oligopolies reign supreme, resulting in lower investment, lower productivity, higher prices, worse service, lower wages and more wealth inequality.

(As an aside, it was a marked improvement on last year’s “Justinflation” rap video.)

Williams said that Canadians pay among the highest cell phone prices in the world and that Rogers, Telus and Bell are the priciest carriers, bar none. The claim has some foundation: in a recent Cable.co.uk global league table that compared the average price of one gigabyte, Canada was ranked 216th of 237 countries at US$5.37 (noticeably, the U.S. was ranked even more expensive at US$6).

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Williams noted that two airlines control 80 per cent of the market, even though Air Canada was ranked dead last of all North American airlines for timeliness.

He pointed out that six banks control 87 per cent of Canada’s mortgage market, while five grocery stores — Sobeys, Metro, Loblaw, Walmart and Costco — command a similar dominance of the grocery market.

“Competition is dying in Canada,” Williams said. “The federal government has made things worse by over-regulating airlines, banks and telecoms to actually protect monopolies and keep new players out.”

So far, so good.

The Conservatives will “bring back home a capitalist economy” — a market that does not protect monopolies and creates more competition, in the form of Canadian companies that will provide new supply and better prices.

That sounds great. But at the same time, the Conservative formula for fixing things appears to involve more government intervention, not less.

Williams pointed out the Conservatives opposed RBC buying HSBC’s Canadian operations, WestJet buying Sunwing and Rogers buying Shaw. The party would oppose monopolies from buying up the competition, he said.

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The real solution is to let the market do its work to bring prices down. But that is a more complicated process than Williams lets on.

Back in 2007, when Research in Motion was Canada’s most valuable company, the Harper government appointed a panel of experts, led by former Nortel chair Lynton “Red” Wilson, to address concerns that the corporate sector was being “hollowed out” by foreign takeovers, following the sale of giants Alcan, Dofasco and Inco.

The “Compete to Win” report that came out in June 2008 found that the number of foreign-owned firms had remained relatively unchanged, but recommended 65 changes to make Canada more competitive.

The Harper government acted on the least-contentious suggestions: lowering corporate taxes, harmonizing sales taxes with a number of provinces and making immigration more responsive to labour markets.

But it did not end up liberalizing the banking, broadcasting, aviation or telecom markets, as the report suggested (ironically, it was a Liberal transport minister, Marc Garneau, who raised foreign ownership levels of air carriers to 49 per cent from 25 per cent in 2018).

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The point is, Canada has a competition problem but solving it requires taking on vested interests. Conservative Leader Pierre Poilievre has indicated he is willing to do that, calling corporate lobbyists “utterly useless” and saying he will focus on Canadian workers, not corporate interests.

“My daily obsession will be about what is good for the working-class people in this country,” he said in Vancouver earlier this month.

Even opening up sectors to foreign competition is no guarantee that investors will come. There are no foreign ownership restrictions in the grocery market (in addition to the five supermarkets listed above, there is Amazon-owned Whole Foods). When the Competition Bureau concluded last year that there was a “modest but meaningful” increase in food prices, it recommended Ottawa encourage a foreign-owned player to enter the Canadian market. It was a recommendation adopted by Industry Minister Francois-Philippe Champagne, to no avail thus far.

But it is clear from the Bank’s warning that the Canadian economy requires some shock treatment.

Robert Scrivener, the chairman of Bell and Northern Telecom in the 1970s, called Canada a nation of overprotected underachievers. That is even more true now than it was back then.

It’s time to break the glass.

jivison@criffel.ca

Get even more deep-dive National Post political coverage and analysis in your inbox with the Political Hack newsletter, where Ottawa bureau chief Stuart Thomson and political analyst Tasha Kheiriddin get at what’s really going on behind the scenes on Parliament Hill every Wednesday and Friday, exclusively for subscribers. Sign up here.

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