Canada’s 150th year could be as pivotal as 1867 and 1967

TheGlobeandMail.com – News/National
Mar. 17, 2017.   WILLIAM A. MACDONALD

2017 is not 2015. Sunny ways need real sunshine. It felt sunny in Canada in late 2015: equal numbers of women in the cabinet, a country with broadly good politics at federal and provincial levels, and a Canadian voting public that rejected Islamophobia. The identity and existential crises, from the Quiet Revolution to the challenge of Islamophobia, were behind us. The problems elsewhere – in the United States, Britain and Europe – have since then become bigger. In 2015 no one foresaw Brexit or the election of Donald Trump. In 1910 no one foresaw two world wars started in Europe, a global depression, a Holocaust, huge human losses in the Second World War (60 million killed) and a Europe that almost committed suicide. The year 2017 is not a normal moment, but we should not panic.

Canada’s special opportunity

Canada could be the first country to get on the right political/policy track forward into the emerging new world. Will Canada seize, or miss again, this second great opportunity of the 21st century? Five years ago Canada emerged from the post-Lehman Brothers crises with the best economy among the G7 countries – an opportunity lost for two main reasons. First, the prices for its two big exports – oil and commodities – dropped. Politicians tend most of the time to be lagging indicators. None saw this coming; economic foresight is a political rarity.

Second, the Harper government made two basic economic policy mistakes. It left all the post-recovery expansion effort to monetary policy, and withdrew fiscal stimulus prematurely. It moved into fiscal surplus, not to build the economy but for personal tax cuts for a country already spending more than it was earning and for a household sector that was already piling up debt at a fast clip. This left too much of the economic expansion burden on the Bank of Canada. One result was a half-trillion added debt to the rest of the world. The new Trudeau government inherited a poisoned economic chalice and incipient housing bubble. Both have worsened. Dangerous instabilities are already here. More could come. By 2020, the U.S. economy could be in recession; another divisive U.S. election could be under way; Russian President Vladimir Putin could be running out of domestic political runway; and Chinese President Xi Jinping could be close to the end of his time in office – a potentially uncertain mix. The Trudeau government must ready itself for more economic self-reliance and the hard political steps that may require. If Stephen Harper had seized Canada’s post-Lehman advantage, Canada would be better placed and he might still be prime minister. Justin Trudeau faces a similar need to prepare.

The federal budget

Canada has not had a federal government with an intuitive sense of what drives the private sector since the Mulroney/Chrétien era – nor has Ontario had such a government since the end of the Frost/Robarts/Davis era. This is needed urgently in both Ottawa and Ontario. The jolts to the Canadian economy so far from Mr. Trudeau’s fiscal stimulus, and as proposed by the government’s economic growth council led by Dominic Barton, is mostly fine as far as it goes, but something more transformational will be needed. If not done voluntarily, an abyss moment will force it. Canadian business needs to get behind something transformational now. This is the economic test the Liberals must pass in 2017. Everything else they want to do depends on a transformed economy.

New politics for a new world

New politics and policies are needed. Philip Stephens, from his British/European perch at the Financial Times, has asked how best to confront the destructive side of populism. He sees parties of the left and right consigned to history, and a party of the “hard centre” as the way forward. Thomas Friedman, from his American perch at the New York Times, also sees new political parties ahead, but doesn’t say what kind will emerge.

Rather, we need a balanced policy of radical entrepreneurialism and a strong safety net. This will leave lots to fight over. But ideology, left or right, will not do the job.

This will be hard for Americans. It requires a capacity for compromise. The idea that public purpose can be achieved through government is deeply divisive in today’s United States. Populism is better at recognizing who and what has been overlooked than at remedying the problems. The blend of politics and policy that both Mr. Stephens and Mr. Friedman propose is a “what it takes to get there” way of thinking. It is hard to see any other practical political or policy way forward. Canada seems a fit candidate to give it a try. This country could be back as head-of-the-class, where it was after the post-Lehman crises. Political risk and hard work will be required.

Back up against the wall

Canada is usually at its best when its back is against the wall. It could be there again before 2020. It has just been through one of its at-its-best periods on the existential and identity fronts. Canada could also take its back off the wall and become complacent. Right now, Canadians feel they have a much better politics and society than Americans – perhaps neither is as good as they think.

Our backs are really always up against the wall, no matter how well we have done or how good things appear. Canadians need to understand they are not doing nearly as well as the Americans on the economy, and why Canada lost its comparative economic advantage under Mr. Harper from 2011 to 2015. The new Trudeau government has had both stumbles and real successes. Mr. Trudeau shuffled his cabinet to prepare for the Trump world and needs to rebuild the public service.

If it is well-paced and scaled, the Trump infrastructure spending and fiscal stimulus could extend the current U.S. expansion – good for Canada. But personal and corporate tax cuts could also make the U.S. more competitive. If too much, too fast is added to an already strong U.S. economy, it could cut short the U.S. expansion. The post-Trump U.S. economic way ahead remains uncertain.

Big challenges and strong assets

Canada confronts five big economic challenges:

· to live within its means; · to achieve stronger productivity improvement; · to expand the globally competitive supply side of its economy; · to make itself more competitive globally in terms of risk/reward opportunity for the best people; and · to do something bold and strong on the longer-term, private-sector growth side – such as a lifetime capital pool approach to capital gains taxation (a potentially unique-to-Canada game changer) to help better match greater private-sector strength with better public-sector infrastructure.

Canada will need to meet all five challenges to survive the emerging destabilized and more dangerous post-Brexit, post-Trump world – a world whose fundamental dynamics have changed and where the outcomes remain unclear.

Canada’s new vision and branding aim should be to become the best place in the world to build solid and desirable personal lives in a country that combines dynamism with calm and common sense. This needs to be Canada’s vision for itself and its brand to the outside world. It will need all Canadians, not just governments, onside. It could be a long time, if ever, before the world is as supportive for Canadian aspirations as it was from 1945 to 2000. Canada will be more on its own and have to count on itself more than ever before.

World’s best overall assets

Canada today has the best overall range of assets in the world.

It has, arguably, the best perch to look out on the world’s two biggest players – the United States and China – and figure them out, with the least baggage and best positive relationship potential. It has ample space, water, food, energy, metals and minerals, and it borders three oceans. It has, also arguably, the West’s best politics and a steadily stronger mutual-accommodation capacity. It is still in the best neighbourhood in the world, despite a United States in political turmoil. And it benefits from a growing diaspora of Canadians around the world, especially in the U.S. but also at the very top in Britain, with Mark Carney at the Bank of England, Dominic Barton as the global head of McKinsey and Stephen Toope as the new head of Cambridge University. Finally, it is one of the few countries that might benefit economically from the effects of climate change on its agriculture and living space.

A hard-centre government

What would a hard-centre party in Canada look like, the kind favoured by Philip Stephens? Could it work to keep destructive populism at bay? It would not be old-style right or left, but more like a 21st-century version of pragmatic Progressive Conservatives or conservative Liberals. The Liberals are not yet there on the private-sector side. The Conservatives have not decided where they need to be on several key fronts. The NDP is not in the game.

Political success would require use of Canada’s full range of assets on the hard side of centre. Canada as a country, and its household sector, is already spending much more than it earns for current consumption. Not enough is used for building the country’s future economic health. The politics and economics of getting the right blend of federal borrowing and paying-as-we-go will not be easy. The Prime Minister and his Minister of Finance must explain where we are, what the correct balance will require and what we will all get if we do the right things.

What the middle class needs

A strong, growing middle class is the best antidote to destructive populism. Mr. Trudeau faces challenges on the economy and U.S. relations that could undermine his middle-class ambitions. The middle class is a lot about electoral politics, but even more about managing today’s centrifugal forces within the West. Hierarchies and charismatic leaders are no substitutes for stronger and larger middle classes in every country. They are the ultimate source of stability in a world that distrusts institutions and hierarchies and has never been simultaneously more connected and disconnected.

Canada’s politics suit that environment. It has the assets it needs, except for enough of the best people and a more diversified and entrepreneurially driven economy. Every political leader, government official and business leader needs to support that goal. Canada needs a fairness balance that is easier to achieve when both the economy and the politics are doing well. The post-Brexit, post-Trump right-track-opportunity world is there (more clearly than anywhere else, including the United States). It now depends almost entirely on Canada’s political and business leadership and public followership.

Standing on shoulders

Doug Saunders’s brilliant New Year’s Globe and Mail op-ed suggests we should be celebrating the last 50 years. If so, the first two 50-year periods should also be celebrated. Each stood on the shoulders of the previous 50. This 150th year could prove as pivotal as both Sir John A. Macdonald’s 1867 and Doug Saunders’s 1967. The last 50 years have consolidated a new kind of great country on the shoulders of the first 100 years. The next 50 can perhaps be Canada’s second Macdonald moment as it adapts to the different kind of world now emerging.

The world does not so much need more Canada, but needs more of Canada’s mutual-accommodation capacity. Today’s powerful centrifugal forces within the West can be contained by spreading that capacity.

Canada’s politics have been getting lots of outside praise. Regrettably, not so its economy. Canadian public opinion often needs a negative outside economic story to wake it up and make possible the necessary.

Canada must always maintain its economic and social-inclusiveness strengths. It can strengthen its compassionate and mutual-accommodation sides to help rebalance the driving forces of freedom and science that are making the West harder to govern. It can help Europe and the United States re-anchor the Atlantic West. All four better ways of going about things are inexhaustible – freedom and science explore possibilities; mutual accommodation and compassion offer needed limits. No individual or country can be equally strong on all four – so each must make room for those who are strong where they are not.

To read or view:

Dark Continent: Europe’s Twentieth Century– Mark Mazower; Pilgrimage: My Search for the Real Pope Francis – Mark Shriver; A Christmas Carol, with Alastair Sim (1951 film) DVD – Charles Dickens

William A. Macdonald is a Toronto writer who, to spark discussion of the nation’s future, has created, with associate William R.K. Innes, The Canadian Narrative Project at canadiandifference.ca.

http://www.theglobeandmail.com/news/national/canadas-150th-year-could-be-as-pivotal-as-1867-and-1967/article34337358/

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