Social Policy in Ontario

Harper and the illusion of economic management

Posted on May 1, 2011 in Policy Context

Source: Toronto Star — Authors: John Peters

TheStar.com – opinion/editorialopinion
Published On Sun May 01 2011.   John Peters

Over the past four weeks, Stephen Harper has repeatedly told Canadians that the Conservatives are the “best economic managers” on offer, and that their “stewardship” is why Canada’s economy bounced back strongly from the global financial crisis.

There are good reasons for Canadians to be skeptical of these claims and even more reasons to be worried about what a continuation of Conservative economic policies will mean for Canada’s future.

The Conservatives cannot claim much credit for Canada’s economic success of the past decade. The surge in our natural exports has been due largely to the spike in commodity prices driven by rising natural resource demand and dwindling supplies.

Even before the latest round of corporate tax cuts, Canada’s oil, gas and natural resource exports nearly had doubled in value in recent years, and now more than 25 per cent of Canada’s economy is directly or indirectly tied to the mining and oil and gas industries, even more so in Alberta and Newfoundland and Labrador, where oil and gas account for nearly 40 per cent of provincial GDP.

It was also because of the Conservatives’ sheer luck — not economic management — that Canada did not suffer a financial crisis and end up like the United States or many countries in Western Europe.

Canada’s banks were better regulated than those in other countries. However, if not for parliamentary committees asking questions, Canadian banks were just as ready to engage in the risky financial activities that would later put the world economy on the brink of collapse. Even so, the Bank of Canada had to purchase more than $35 billion in bad mortgages from the banks, as well as “toxic” assets leveraged by corporate CEOs and worthless corporate debt.

Nor have Harper’s policies helped us much in getting through the global economic crisis. Over the last two years, all levels of government made commitments of approximately $13 billion in new capital investment to stabilize our economy. But the reality has been far more irresponsible.

As the office of the parliamentary budget officer reported in December, the federal government has in fact only allocated $4 billion so far. Less than 30 per cent of projects have been completed; more than a quarter have failed to report any progress.

Now the federal government has removed another $1 billion in stimulus investment spending, reducing the total to $10 billion or less than 0.4 per cent of annual GDP — far below the 2 per cent of GDP that other G20 countries committed to.

Joseph Stiglitz, the Nobel Prize winning economist at Columbia University, has recently claimed that the financial crisis of 2008-2009 should have been the Western world’s wake-up call.

Just as the collapse of the Berlin Wall in 1989 revealed the failures of communism, Stiglitz argues that the financial crisis has highlighted just as bluntly the failures of market fundamentalism — tax cuts that have wrecked economies, banking deregulation that has bankrupted companies, chronic financial collapses that have saddled countries with billions in debt.

Nevertheless, the Conservatives have continued to deny the magnitude of the problems facing Canada and the global economy. Once again, they are putting forward the same market fundamentalist policies that have taken countries time and again to the brink of economic disaster:

• Tax cuts that will benefit the wealthiest and boost corporations’ bottom lines, but do nothing to spur investment in manufacturing or increase the growth of full-time jobs.

• “Cost efficiency savings” that will mean the roughly 80,000 federal public sector workers retiring over the next four years will not be replaced and that cash-strapped provinces will have to cut 4 per cent or more of provincial budgets for the next four years — a total estimated by the OECD to exceed $50 billion.

• “Smaller government” that will mean fewer public services and that Canada will continue to have one of the worst records of rising inequality and poverty in North America and Western Europe.

• An “economic plan” that includes scant reference to jobs and provides no indication of a constructive approach to tackling the disappearance of manufacturing jobs in Canada. Meanwhile, more than 50 per cent of Canadians are now classified as “low wage” — a level that even the OECD considers “disturbing.”

Memories are indeed short. However, if Canadians are looking for sound economic management and growth based on solid foundations, then very different policies are needed than those on offer by the Harper Conservatives.

At a minimum, it will mean measures that ensure the vast majority of citizens share the fruits of growth, and new regulatory structures that keep finance in check and promote stability. With so much at stake, truly effective public policies will require a different government — one that is actually concerned with managing the economy with the future interests of all Canadians in mind.

John Peters is a professor in the department of political science at Laurentian University.

< http://www.thestar.com/opinion/editorialopinion/article/983284–harper-and-the-illusion-of-economic-management >

Tags: budget, economy, globalization, ideology, standard of living

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