There are bigger threats to our fragile recovery than the postal dispute
TheGlobeandMail.com – news/commentary/opinion
Published Monday, Jul. 04, 2011. Jim Stanford
Now that the mail is being delivered again, Canada’s economic prospects have brightened considerably. That is, if you believe the Harper government’s claims that the phony shutdown of Canada Post by its own management constituted a real and present danger to the national recovery.
Canada Post’s management wanted to cut wages for new hires and, ultimately, abolish the company’s defined benefit pension plan. The union, naturally, resisted. But fearing back-to-work legislation, it organized rotating job actions rather than an all-out strike. So management shut down the whole operation, precipitating the desired government intervention. The resulting legislation imposed a wage settlement lower than what Canada Post had already offered.
The government justified the drama with the need to protect the recovery. Never mind that management’s argument for cutting wages and restructuring pensions was precisely that the post office’s importance was in historic decline. It seems that management and government alike are allowed to argue that the post office is either really important or not very important at all. (The same double-speak applied to the Air Canada strike.)
I don’t know any economists who were losing sleep over the impact of either work stoppage on the national GDP. But many are increasingly preoccupied with several bigger threats that could undo the fragile recovery.
The government has indicated its willingness to interfere in normal contractual relationships between private parties, even dictating contractual outcomes, in the interests of preserving Canada’s economic momentum. That opens up a lot of terrain for shepherding our recovery. So let’s assign Ottawa’s control freaks to some truly important economic protection work.
Gasoline prices: Even at $1.25 a litre, gas prices will rip $40-billion from the pockets of Canadians this year. The soaring prices are a big reason why consumer spending has stopped in its tracks – an alarming development that could precipitate a recession. And you can’t invoke “market forces” to explain the prices. They’ve been driven up by speculation, fat oil industry profits and OPEC’s continuing power.
Interest rates: The Bank of Canada is holding its prime rate at a historically low level. But the gap between that rate (which chartered banks pay on their own borrowing) and what banks charge their own customers has widened substantially. Spreads on credit cards and small business loans are even wider. No wonder the Big Six banks made $20-billion in profit last year – but no wonder borrowing by consumers and businesses alike is stuck in its tracks.
The loonie: According to the OECD, the fair value of our dollar (based on purchasing power) is 81 cents (U.S.). Currency traders have pushed it 25 per cent higher, jeopardizing Canada’s ability to sell anything (other than oil) to world markets. Again, savings on imports aren’t passed on to consumers. But the pain to our export industries and the threat to our future growth are real.
All these issues reflect contractual dealings between private parties that are jeopardizing economic growth. All reflect the working of power and policy, not the “pure” forces of supply and demand. And all are amenable to myriad forms of government intervention to attain better prices in the interest of continued recovery.
Why is the government, so quick to intervene to suppress compensation for the humble folks who deliver our mail, standing on the sidelines while powerful people enrich themselves at the expense of our national prosperity? Perhaps it’s not the economy they’re concerned with after all.
Jim Stanford is an economist with the Canadian Auto Workers union.
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