Harper’s reputation as a brilliant economic manager rests on luck and bravado
TheStar.com – opinion/editorialopinion
January 10, 2013.
It’s hard to be a hero when the economy goes soft.
Dalton McGuinty couldn’t make the transition from Premier Dad to fiscal disciplinarian. Alison Redford’s popularity is drooping, thanks to weakening demand for Alberta’s oil. Christie Clark is struggling to avoid defeat in British Columbia’s coming election. Rodney MacDonald, Nova Scotia’s fiddle-playing premier, went down to defeat in 2009.
Only one politician has benefited from the downturn: Prime Minister Stephen Harper. His public support has increased. His economic stature has grown. He has even convinced Canadians to swallow a five-year dose of austerity.
Other heads of government want to know his formula. What Harper tells them is that it’s a simple matter of cutting government spending, requiring banks to maintain reserves capable of insulating them from bad debts and seeking low-cost ways to boost growth such as striking trade deals and forging investment pacts.
It is a rational answer, but it bears little resemblance to what he did. His approach was so convoluted — riddled with contradictions, about-turns and lucky breaks — that it would be impossible to replicate.
No fair-minded observer could gainsay the prime minister’s political prowess. But his economic mastery is overblown.
Consider the evidence:
He assured voters in October 2008 Canada would escape the devastatingrecession spreading through United States, Europe and Japan. A month later, his contrite finance minister admitted economic conditions weredeteriorating so fast that Canada faced its “severest test in a generation.” Two months after that, he unveiled a massive economic stimulus package that ran counter to everything the prime minister had publicly espoused: $52 billion in tax cuts, infrastructure improvements, spending incentives, support for banks and subsidies for business. The notion that Harper followed a clear, principled path is laughable.
By the time his government actually delivered the infrastructure funds, the recovery was underway. Some municipalities waited so long for their allocation they couldn’t spend the money before Ottawa’s deadline. Timely, it was not.
As Harper and Flaherty implemented their hit-and-miss fiscal plan, Mark Carney, governor of the Bank of Canada, moved sure-footedly, slashing interest rates more aggressively than any other central banker in the world. After watching with a mixture of awe and doubt, his counterparts in Washington, London and the European Union eventually followed his lead.
It was Carney’s swift action more than anything else that blunted the impact of the recession. Low borrowing costs kept consumers spending and triggered a surprisingly robust and long-lasting real estate boom. That, combined with China’s growing appetite for oil, the prudence of Canada’s chartered banks and the surplus Harper inherited all allowed the prime minister to claim credit for developments over which he had little control.
But heading into 2013, Canada’s two pillars of economic strength — residential construction housing and oil and gas exports — look wobbly. Condo prices are falling, the U.S. is becoming self-sufficient in natural gas and the Chinese economy is slowing, reducing its demand for oil.
In addition, the structural problems that existed before the recession — low productivity, high personal debt, overdependence on the U.S. market — still hamper the nation’s prospects now. Forecasters expect the U.S. to outperform Canada in the coming year.
Will Harper’s reputation be intact by year-end? Don’t underestimate the prime minister. He is a remarkably agile politician.
But major challenges loom: Getting Alberta’s oil out of the country; reversing the buildup of household debt; persuading businesses to invest the profits they are hoarding; creating opportunities for the highly trained young people languishing on the sidelines; and continuing to suppress public expectations. All he can offer is slow growth, modest hiring and more belt-tightening.
Heroes are normally made of grander stuff. But in a world of floundering leaders, Harper has credibility, experience and more bravado than anyone else.
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