It really pisses me off. In many ways I favour the Conservatives’ apparent pragmatism and restraint, but all of their statements have a peculiar, pungent aroma that I can’t quite identify, that makes me distrustful. The other parties are no better; in some ways they’re worse. Paul Wells expressed all this again yesterday in his characteristic way:
The immediate post-election period is Harper’s favourite time for little surprises, so he can show everybody what a super-genius 3D Vulcan chess master he is… in the most dangerous economic times Canada has faced in 20 years if not far longer, this prime minister can’t wipe the smirk off his face and grow up a little… Too much of our politics in recent years has been given over to warring camps who don’t care what their guy does as long as he’s their guy and he wins. A lot of the rest of us care less about the colour of the winning team so much as they desperately hope that whoever it is, he might take the job seriously.
Jay Bryan summed up the most recent folley sharply (via Wells):
And of course, it has badly undermined the credibility of a government whose nasty partisanship used to be balanced by an image of competence. Now it looks both partisan and inept.
Don Martin called it ‘gamesmanship of massive proportions at a time when the economy is crying out for parliamentary stability.’ First pointing out that, ’The Conservatives never once mentioned cutting political subsidies during last month’s election campaign; the Prime Minister never raised it during his consultations with rival party leaders three weeks ago; and it was conveniently omitted from a Throne Speech that passed late Thursday night in the Commons.’ His general evaluation:
At best, the Conservatives have ruined any prospect of a functional Parliament. At worst, they’ve given us — shudder — Prime Minister Stephane Dion or one of his replacements with an unwieldy gaggle of bi-party Cabinet ministers unprepared to govern in difficult times.
The opposition has managed to top the Conservatives in both partisanship and ineptitude with their most recent tactics. Their unfitness to govern [update: Andrew Coyne makes a forceful (and sarcastic) case against the suggested coalition] is revealed in the wording of their planned motion:
In light of the government’s failure to recognize the seriousness of Canada’s economic situation and its failure in particular to present any credible plan to stimulate the Canadian economy and to help workers and businesses in hard-pressed sectors such as manufacturing, the automotive industry and forestry, this House has lost confidence in this government and is of the opinion that a viable alternative government can be formed within the present House of Commons. [my emphasis]
It’s not at all clear whether this is the best time for economic stimulus; figuring out what kind of stimulus is most appropriate is going to take considerable diligence and care in our ongoing observations, thoughts, and discussions. None of the most recent events in Ottawa make a positive contribution to that — in fact, they are positively distracting and counterproductive.
If anything, this motion makes matters worse by scaring people away from spending money they otherwise might have — at precisely the moment Canadians are making decisions about how much to spend on Christmas and charitable giving.
As to stimulus, I’ll turn to the econobloggers at Worthwhile Canadian Initiative. Stephen Gordon and Nick Rowe both argued that stimulus might (or almost certainly will) eventually be necessary, but not yet. Any discussion of the Canadian economy must not lose sight of the fact, pointed out by Gordon, that,
Canada is not the United States, and the scary headlines emanating from the south do not represent our economic reality. The US has been in a recession for almost a year, the Federal Reserve is running out of ammunition, the housing market has collapsed, and massive public spending is pretty much the only policy instrument that is left to them. None of this is true for Canada. For one thing, we’re not even in recession. At least, not yet. As far as timing goes, there is no harm in waiting until a February budget for a fiscal stimulus package.
Rowe similarly pointed out,
The Bank of Canada still has room to cut the overnight rate, and to pursue quantitative easing more aggressively. I think we should first use monetary policy, because it is quicker to implement, quicker to reverse, has a wider impact on the economy, is less likely to be politically distorted, will not increase the national debt, is a more radical solution (in the original sense of the word), and because that’s been the rule of the game for the last 20 years.
Now the fact that ‘Canada is not the US’ goes both ways. On one hand we don’t have their problems; the stability of our banking sector is the envy of the world. On the other hand, we may very well have different sorts of problems. For example, pension funds are especially prominent in the Canadian economy — in ways that lack adequate precedents from history and other economies. An article in today’s National Post outlines some of the potential challenges we face in this area:
Pension plans play a key role in the Canadian economy. Not only do they provide retirement income for millions of Canadians, they are also the biggest providers of capital after the banks. And they have become the most aggressive players in capital markets.
Yet, unlike their competitors, who must open their books every three months, they are required to post financial results only once a year — often with only limited detail.
Critics say that’s a problem because it makes it difficult to determine if fund managers are taking on appropriate levels of risk. If they run into trouble, it will be the stakeholders — not just plan members but also taxpayers in many cases — who end up paying the price.
There are signs that Teachers, the Caisse, OMERS, CPP, etc, are suffering. This is an area we need to watch closely. Perhaps the main underlying ’cause’ of the global financial crisis can be summarized as ‘unseen risks hiding in inter-connections.’ It seems to me that pension funds are as interconnected as anything. The fact they are largely closed books is new to me — and frightening. I can’t imagine a greater threat to Canada’s economy than the potential failure of a $100+ billion pension fund that directly touches Bay Street and Main Street at the same time.
As to helping workers and businesses — which is wonderful on a sentimental level — we need to be mindful of the major problem that businesses that are most in need of being helped tend to be the least worthy of staying in business. Keeping a lot of failing businesses afloat may be the worst thing we can do for our economy over the long term. As Jack Mintz argued in the Globe and Mail today (via Gordon), ‘supporting inefficiently operated businesses will keep many poor-quality assets in the market, making it harder for strong businesses to borrow from financial institutions.’
Governments should instead put in place regulations and fiscal policies that make it harder for badly run companies to compete with better-run ones. In this light, bailouts to support weak companies should be avoided. Instead, governments should help finance the restructuring of viable businesses that are in bankruptcy protection. And fiscal programs designed to help workers retrain are more effective than keeping inefficient businesses operating.
Also in the Globe and Mail today, Richard Florida (via — highly recommended) honed in the issue of what kind of businesses and industries ought to receive the most attention:
The trouble is: We remain trapped in the mental models of the old industrial economy. The bursting of the tech bubble in 2001 held back the emergence of the new order. Scaring investors out of technology, the Internet and emerging economic sectors, it sent capital flowing out of the creative economy and back into the safety of housing and real estate – from “clicks to bricks,” so to speak. This is why attempts to prop up housing prices or to bail out Detroit are giant steps backward.
The kind of rhetorical gestures and tactics displayed by our politicians in recent days (not to mention over the course of recent months) aren’t quite ‘giant steps backwords,’ but they preliminaries to something much worse: they’re disorienting dance moves that turn us around, facing us in the wrong direction, removing the most important facts from our field of vision, setting us up to make not just backsteps but great enthusiastic strides the wrong way.
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