Economic illiteracy and the policies of harm
JEFFREY SIMPSON
From Saturday's Globe and Mail
October 10, 2008 at 7:10 PM EDT
Do no harm is hardly exciting policy, but sometimes it's very wise advice. It's too bad political parties in this depressing and negative election campaign were tempted to produce policies that would do considerable harm.
Think about the Green Party Leader's opening remarks in the English-language leaders debate. The government should intervene to bring the dollar down to 80ish cents, Elizabeth May said. Then it should stop foreign takeovers of Canadian business.
This is economic illiteracy of a high order. There's a reason countries have central banks. They exist precisely to keep political hands off the currency, and to do what the Bank of Canada is now doing, and quite intelligently, to steer through the economic catastrophe unfolding daily. Similarly, the stopping of foreign takeovers would or could be met, of course, by reciprocal measures against Canadian companies overseas.
Not content with stopping takeovers, Ms. May and the leaders of the NDP and Bloc Québécois pronounced themselves in favour of a Buy Canada policy, which, if employed by every other country, would crucify the G8 country most dependent on foreign trade - namely Canada.
In NDP land, the party's proposed spending splurge is supposed to be paid for by raising corporate taxes by $50-billion. It was hard to imagine a sillier policy before the economic meltdown, given that capital is mobile and we live in a globalized economy. Now, of course, profits are tanking everywhere. So a policy that would have killed jobs by making companies less competitive before the downdraft would now kill even more - especially in manufacturing, the very sector the NDP purports to worry so much about.
It's a recipe for capital flight, lower profits, job losses.
Put matters another way: The economic downdraft of historic proportions, post-Depression, makes a mockery of the economic assumptions of the NDP's platform - and of the platforms of all the parties. The economy will now enter an extended period of slowdown.
Large companies, including nameplate North American car manufacturers, might just go bankrupt. Even the wealthy oil industry is going to get hammered. Bank stocks have slid sickeningly. So much for the NDP's favourite whipping boys: banks and oil companies. Both are hurting badly, as are those who own their shares, including individuals with mutual funds, union pension funds and the mythical "ordinary Canadians" with their RRSPs.
Government revenues are going to fall as the economy heads toward zero growth, and government expenditures will rise for such things as unemployment insurance (notwithstanding yesterday's excellent job-creation numbers).
The Liberals' grand "plan" was always more eyewash than substance. It, too, was based on excessively optimistic growth assumptions, and these have now gone bye-bye. The notion of speeding up infrastructure projects to inject fast money into the economy mostly can't be done, since projects take a long time to be planned - but if done will almost certainly lead to cost overruns and mistakes made in haste.
The Conservatives brag about being good stewards of the economy, but they haven't been. They inherited a big surplus, and spent most of it on two of the least useful things a federal government could do to improve productivity and competitiveness: They gave billions to the provinces, for which they got no thanks, and sliced the GST by two points.
They also ran down the cushion of the contingency fund, so as the effects of the downdraft become apparent, the government will be heading for a deficit, something the Conservatives are pledged to avoid.
But one supposes 'twas often, if not always, thus, in that campaigns bring out some of the worst in political actors who do not level with people, who engage in systematic exaggerations, and who play on emotions rather than reason.
The same dynamics have gripped the U.S. campaign, where John McCain and his airhead running mate, Sarah Palin, are actually telling a country with a $500-billion deficit that is about to balloon, an almost $10-trillion foreign indebtedness, astronomical levels of personal indebtedness and a staggering oil deficit that the answers lie in cutting taxes for everyone and "drill, baby, drill."
And the apparent new president, Barack Obama, is only slightly better, promising to cut taxes on "only" 95 per cent of Americans, while driving up spending on all sorts of new and old programs. Americans can only hope that Mr. Obama will do a Franklin Roosevelt right after his inauguration: Ditch at least some of what he promised during the campaign, level with Americans, and deal with reality rather than rhetoric. (Asked in two televised debates what adjustments to his promises he would make because of the downdraft, Mr. Obama barely hinted at changes before repeating his standard promises.)
Canada, fortunately, is in better shape than the United States - the epicentre of bad government, greed and hubris for the past eight years. On both sides of the border, the economic downdraft mocks much of what campaigning politicians have said, even if they refuse to acknowledge it.
