ONE VIEW OF OTTAWA

THE LIBERAL ART OF KEEPING CANADA'S ECONOMY AILING

ABRAHAM ROTSTEIN May 1 1972

ONE VIEW OF OTTAWA

THE LIBERAL ART OF KEEPING CANADA'S ECONOMY AILING

ABRAHAM ROTSTEIN May 1 1972

ONE VIEW OF OTTAWA

THE LIBERAL ART OF KEEPING CANADA'S ECONOMY AILING

ABRAHAM ROTSTEIN

The record of the Trudeau administration in running Canada’s economy is a strange assortment of failures, misjudgments and the odd success. As much as any other administration before it, the Trudeau government is devoted to the overall approach of “muddling through.” They have failed to look beyond their noses and consequently have had no real plans made for many of the problems that have hit us. For example, Nixon’s surcharge of August 15 and his later program to stimulate production in the U.S. rather than abroad revealed that our government had, in effect, regarded any such developments as beyond the realm of possibility. Everyone in Ottawa scrambled to produce instant “plans” because they had nothing else. In coping with inflation, fear, added to a sense of helplessness, made us overreact in damping down the economy and seriously aggravated our unemployment problem. For a year Edgar Benson stonewalled on unemployment while he was putting heavy brakes on the economy. Meanwhile, Pierre Trudeau improvised gloriously in telling us that the only alternative to the present unemployment was worse unemployment if we dared to question the government’s priority of fighting inflation first.

It’s water under the bridge now, but no sensible person can avoid the conclusion that fighting inflation with unemployment was a costly blunder. Besides the lack of jobs and the ensuing human misery, we’ve lost about three to five billion dollars annually in goods and services that would have been produced by a full-employment economy. But more important, an analysis of the issue underlying our ailing economy is still being ignored by the government. If we continue on our present path, the Science Council of Canada warns: Canadas economy in this decade will increasingly become dependent on the resource and service industries. Resource industries offer limited opportunities for employment; furthermore, much of their profit does not remain in Canada. The funneling of funds out of the country is likely to stunt the growth of our service industries, which are unlikely in any case to use the very people in whom our most substantial educational investments have been made. Our participation in international trade will become less and less significant and we will become — once again — mainly suppliers of raw materials to the North American continent.

A significant reorientation of the economy is required if we are to expand our secondary manufacturing — the sector where the jobs are to be found. A billion dollars of exports of manufactured goods, for example, contains about $230 million in salaries and wages, while a billion dollars of exports of resources pays only $68 million in salaries and wages. In other words, as Eric Kierans has pointed out, we can create about four times as much employment in switching our emphasis to manufacturing rather than natural resources for the same value of production. Recalling as well that the oil, gas and mining companies have great depletion allowances which reduce their taxes to trivial sums, it’s hard to see why we persist in the old patterns. But the government remains stubborn. Meanwhile, unemployment rates have fluctuated from about 5.8% to 7.7% and the outlook is for an overall rate of 5.5% to 6% in 1972. Our record is the worst of any major industrialized country and is not excused by talk of high “participation rates” of young people in the work force. They didn’t suddenly materialize from nowhere and some forward planning would have given us a basis for a more substantial approach to the issue.

There are, however, a few pluses on the government side: the Opportunities For Youth program, for example, which led on to the Local Initiatives Program may be the most important. The government stumbled into OFY when other techniques of solving the unemployment problem gave out. This unconventional approach began to pay off, politically as well as in the number of jobs created — about 38,000 under the Local Initiatives Program, for example.

The record is peculiar on other major government initiatives. Nine years of the Carter Commission’s work on tax reform largely went down the drain mainly because the business lobby protested the prospect of taxing everybody’s dollar equally. The government caved in, tried to incorporate a lot of the business proposals for the new tax system, gave the oil and gas lobby a further reprieve on their never-ending tax holiday — and then produced a bill which was a maze of red tape. Business won hands down in stopping almost all the major planks of the new tax program, but nevertheless still felt hard done by. And the rest of us lost an excellent tax reform program.

Much the same story was repeated with Ron Basford’s Competition Bill. This was designed, among other things, to give the consumer some protection against false warranty claims, promotional “contests” and the fast footwork of door-to-door salesmen. The major provision of the bill was a Competitive Practices Tribunal to regulate mergers and intercompany agreements. Once more the government retreated before the business lobby and a watered-down version of the bill is in preparation.

The new Labor Code (C253) is enjoying a similar fate. The provision to give labor a voice in planning for technological change received the irate response of the business community that it was “tantamount to legalizing Luddite-like conduct and promoting featherbedding.” So, in spite of having caved in all the way, the government still has a bad image with business and nothing much to offer the rest of us for all its extensive efforts at important economic reform.

If you think that this is an exaggerated conclusion, then consider the fate of the foreign investment legislation. Ian Wahn’s report on foreign investment put out by the Committee on Defense and External Affairs in August 1970 was given short shrift by the cabinet and Herb Gray’s report on the problems of foreign ownership is likely to be substantially watered down from the original version.

The record of Trudeau’s Liberals is hardly inspiring and voters should be asking themselves whether they want more of the same. I don’t. ■