Canada didn't forget anything. We have a diverse economy with common sense measures like reducing our net debt to GDP, while keeping a fully funded retirement pension fund (CPP, unlike SS, actually invests in the public market).
Even the way we do provincial transfer payments is sane. While one industry is booming (Oil, manufacturing, tech) other "have not" provinces get payments through the federal government. This brings a measure of stability to the system.
No rational economist can look at the situation in Canada and say that "Canada forgot to plan for its future by leaning on oil and the loonie" it's a ridiculous statement.
Criticizing Canada's action on climate change is warranted, but our federal economic policy has been quite level headed.
I'd argue Canada made concerted efforts to support natural resource industries at the cost of all other industries. Eg. expending massive political capital with the US to push for Keystone XL. We've hurt our image abroad by fighting climate change action, Canada even refused to consider asbestos a hazardous material because there's a single asbestos mine in the country. As soon as that mine closed we switched to considering it hazardous. These are short termed, unprincipled policy decisions that help the resource industry at the expense of the Canadian brand.
Canada has been doing that since it's inception... the first industry in this country was natural resources and since that time it has remained our strongest.
Even the way we do provincial transfer payments is sane. While one
industry is booming (Oil, manufacturing, tech) other "have not"
provinces get payments through the federal government. This brings
a measure of stability to the system.
Yes and no, the resource-heavy provinces have been working hard for natural-resource carve-outs and natural resource revenues get a 50% haircut going in anyway.
Any rational economist can say that Canada went all-in on oil because that is exactly what it did. A prolonged stretch of an inflated loonie has resulted in a long-term reduction in manufacturing capacity which means that the country is not poised to take proper advantage of the decline in the dollar that has now occurred. Instead there will be a ramping-up period where productivity is lost.
"Canada went all-in on oil" implies Canada had a choice. When the global price of a commodity you have massive reserves of spikes, what else do you do besides sell as much of it as you can?
Plan for the future by not leaning into the upswing of a boom and bust cycle. Governments encouraged more development, accentuating the cycle.
Governments could also have established rainy day funds. Alberta has one, but they haven't added anything to it since 1987. Canada as a whole has none (this is somewhat reasonable, as the federal government doesn't have jurisdiction over natural resources)
>Plan for the future by not leaning into the upswing of a boom and bust cycle.
I disagree. The upswing of the commodity cycle is precisely when you sell. Who knows, maybe oil is obsolete in 10 years. Then we're sitting on a pile of worthless gunk. Get your money when the gettin' is good.
I would agree with you, if the country had been saving any of it. As we currently ran things, the oil sales crowded out other sectors via currency appreciation for no long run gain.
That's environmental concerns aside. There are pretty good global and domestic reasons for leaving the most marginal bits of the gunk in the ground. And leaning into the cycle develops precisely those marginal sources that were most polluting or least profitable.
You can choose to sell less of the asset but you can also quite simply buy up massive amounts of reserves in a different currency. The CAD's value relative to the USD was motivated by the need to buy CAD in order to purchase the oil. This can be offset by using the royalties, and more, to buy up USD-denominated assets to balance the demand and lower the relative value of the CAD.
As an example, there is a reason that the Chinese government his such a prolific purchaser of US treasuries, and it is not because they are particularly bullish on the US.
Look at the allocation of value on the stock market. Overwhelmingly oil and gas despite that being a rather small part of the economy.
Look at the allocation of most mutual funds that a Canadian owns as part of their retirement portfolio.
Look at the nature of the previous gov'ts budgetary and economic planning (in as much as they did that kind of thing). Overwhelmingly in favour of the resource sector.
That's because all of our non-resource companies are either:
1. American / international subsidiaries.
2. Mid-sized CCPCs.
3. Owned by private equity firms.
I agree that Canadians do not allocate their retirement savings correctly and that our stock market is not a reflection of our economy, but our government has common sense measures to support a variety of industries.
The gov't was giving preferential tax treatment to resource extraction and deliberately dismantling the regulatory environment around them. Basically extending what the Alberta provincial gov't has done for decades out to the rest of the country.
A high dollar also favoured those industries against all others. Not sure if the feds could have done anything about the high dollar, but it certainly choked everywhere outside of the resource sector.
A low dollar combined with high investment in education makes Canada a good place to invest to get high skilled talent cheaper. Many American tech companies did this around 15 years ago, I worked for a couple -- marketing/sales HQ'd in the US, engineering talent in the GTA.
> Look at the nature of the previous gov'ts budgetary and economic planning (in as much as they did that kind of thing). Overwhelmingly in favour of the resource sector.
You seem quite married to this simplistic thesis that oil is Canada's downfall, but "just look" isn't an argument. I looked, and the non-oil economic output continued to grow through the oil boom, just not as fast as the oil and gas sector. Yes, oil was a temporary boost, but the country isn't any worse off than if it hadn't extracted that oil. By the way, the government does not enforce oil production quotas in Canada. The fact that the world oil price soared above $100USD causing massive production increases in Canada was not an economic policy of the Canadian government. That's the market economy functioning, not central planning as you imply. The government didn't peg the CAD to world oil prices, the international currency markets did. NOT producing oil in the highest price environment in the history of the world would have been an economic loss for Canada.
Furthermore, the last government, like the current one and every Canadian government in living memory, gave billions in handouts to every sector of the economy, especially manufacturing. The federal government spent billions balling out the US automakers in Canada. Yet manufacturing has been declining since the 1990s, long before the current oil boom. Have you seen a chart of labour productivity in Canada vs. the US and Mexico over the last 20 years? We're a high-cost low-productivity environment and not just because of a high dollar. Having actual social security programs and higher unionization rates places a big, structural role in failing to attract and retain manufacturing capacity within NAFTA.
It's puzzling that you think the oil production boom in Canada was caused by the Canadian government when production was booming in every petroleum producing country in the world because of high global demand. It's even more puzzling that you think the oil boom of the last 10 years and the supposed policies of the last federal government account for global macroeconomic trends that have existed for 20-30 years.
No I don't think the gov't caused the oil boom, or high oil prices or high oil production -- you have created a straw man to rail against.
But from their words -- openly lambasting Ontario and Quebec and their provincial gov'ts -- as well as actions they showed a disregard for diversification. Instead of investing money in infrastructure which would increase manufacturing sector effectiveness, they cut gov't revenue significantly, rolled out a variety of boutique tax cuts, and where they did spend money significantly it was in their own ridings. The disparity in the amount of highway construction in Alberta vs. Ontario for example is pretty staggering. And the only two places to see subway construction in Ontario were in Tory ridings -- Vaughan and Eglinton-Lawrence.
You're entitled to your opinion of the Harper government, but Canada isn't a centrally planned economy, and the Prime Minister's comments don't play a role in capital allocation in the economy. You're pointing at a handful of politically charged decisions that play a vanishingly small role in the performance of the overall economy today. Besides, your statements are inaccurate. The Harper government spent more on municipal public transit than every other federal government in history combined. The Eglinton subway you cite isn't even funded by the federal government, it's funded by the Ontario government you claim Harper hated. You missed the Scarborough subway which runs entirely through Liberal ridings. Public transportation is a provincial responsibility and the Harper government was the first federal government to invest in it substantially, doling out billions for subways in Vancouver and Toronto and the Toronto government's SmartTrack program. I hope you realize the entire existing Toronto subway system was built without federal funding.
I don't really want to defend the Harper government's track record on transportation, because I don't think they did enough, but trying to say that Canada lacks economic diversification because Harper didn't build enough subways is just ludicrous.
Government program spending both in real $ and as a percentage of GDP are higher today than when Harper took office, although they've declined from the peak of the 2008 recession and stimulus program. Direct program expenditure by the federal government was 12.8% of GDP in 2005-06 and 12.9% in 2014-15. Cutting taxes doesn't mean cutting spending, if the economy is growing. The biggest cuts to government spending occurred during the 1990s as part of Chretien's deficit elimination program. Spending has only now recovered to the level of the mid-90s. This is all shown in Finance Canada's fiscal tables. I suggest you examine the numbers yourself rather than relying on newspaper editorials that cherry-pick examples.
Even the way we do provincial transfer payments is sane. While one industry is booming (Oil, manufacturing, tech) other "have not" provinces get payments through the federal government. This brings a measure of stability to the system.
No rational economist can look at the situation in Canada and say that "Canada forgot to plan for its future by leaning on oil and the loonie" it's a ridiculous statement.
Criticizing Canada's action on climate change is warranted, but our federal economic policy has been quite level headed.