COLUMN

A look beyond the federal budget

Dian Cohen March 10 1986
COLUMN

A look beyond the federal budget

Dian Cohen March 10 1986

A look beyond the federal budget

COLUMN

Dian Cohen

The attention focused on last week’s budget, including the seemingly endless comment and criticism by the media and the opposition that followed Finance Minister Michael Wilson’s address to Parliament, will likely continue for weeks. But when the concern surrounding Wilson’s budget has subsided we will be left with fundamental issues in the economy that extend far beyond the day-to-day ones dealt with in Wilson’s document.

Granted, the budget is an important document. It sets out the government’s “fiscal framework” for the year, giving form to Ottawa’s interpretation of prevailing economic conditions. It signals the direction the government will take and the actions it will initiate. Nobody in his or her right mind would suggest that the budget exercise isn’t important.

But we can go overboard in devoting the weighty, reverential attention that has been lavished upon it. Budgetmaking in Canada absorbs an enormous amount of energy for what is essentially a whimsical affair. The fiscal framework is, after all, not made of steel. It shifts with the economic breezes. Take, for example, what I believe is a prevailing depression in Canada’s petroleum capital, Calgary. If the current economic downturn there— created by sagging oil prices—were to spread beyond Alberta’s frontiers, then Ottawa would have to revise its prescription for the economy. Economic stimulation in the form of heavy government spending—regardless of the size of the elephantine federal budget—would become the order of the day.

I suggest that budgets provide little insight into the subtle but fundamental changes now taking place in the economy—independent of government guidance or shaping. These seminal changes vastly outweigh the influence of Wilson’s document last week. There is a need, from time to time, to lift our eyes and our aspirations beyond this year’s budget and recognize these profound changes.

First, with or without a stumbling dollar or the continuing plunge in oil prices, it is clear that the long-standing trend toward more government intervention in the economy is grinding to a halt. It really doesn’t matter whether politicians say that the trend stems from a newfound belief that doing it privately is better than

doing it publicly. The fact is that there simply isn’t enough money being collected by governments to fund their pervasive role in Canadians’ lives. This would have been—and will continue to be —true no matter whether Liberals, Conservatives or New Democrats are elected to power. That is why the government will likely sell off its Crown corporations to the private sector.

At present, Canada is also losing ground to competitors in the international market. This situation is changing even as you read about it. It is commonly agreed that technological innovation is the key to improved productivity for our outmoded industrial base. It is not just a matter of encouraging companies to dedicate themselves to producing new technologies. Canada has a few “leading edge” technology industries such as telecommunications. What is less dramatic—

Budgets provide little insight into the subtle but fundamental changes now taking place in the Canadian economy

and, paradoxically, more exciting—is that almost all industries in the country understand that new technology is critical to long-term growth. This trend is gathering momentum, driven not just by international competition but by a new understanding at home of how important industrial regulation is to our future.

These two developments are changing the workplace and the nature of work itself. The rapid adoption of advanced technology is not only changing the skills required of Canadian workers, it is sharply reducing the need for labor. The managerial level is shrinking visibly and dramatically. The combination of slow economic growth and increased productivity—that is, greater output from fewer workers—necessarily means that the workweek will grow shorter and benefits for parttime workers will improve. The economic restructuring that is already taking place has reduced the number of person-hours needed to produce goods and services. Once people get that message, they will stop fighting the inevitable. This prediction should

be the key justification for a program of government incentives for specific industries that perform well rather than Ottawa’s present program of propping up the losers.

The nation’s new attitude toward work and our economic future has extended to organized labor. Private sector unions have already recognized that job security and worker retraining programs are the issues that concern their members more than inflation protection or ever greater wage demands. And the revolution in attitudes extends even to the executive suite. Corporations have increasingly begun linking executive compensation to levels of performance. Clearly, all workers—whiteand blue-collar—tacitly understand the need for this, and will likely raise it during negotiations in this year’s rounds of bargaining. On the other hand, public sector unrest will likely remain the norm for the next several years, and Canadians will themselves become more vocal about public servants’ need to perform.

This “need to perform” attitude pervades many facets of Canadian life today. It is the reason so many Canadians are making their own work rather than waiting in line for a job. That is the nature of the small business explosion.

The overall effect of all these changes is that Canadians are becoming more self-reliant. They are doing this either by becoming more entrepreneurial or by being more conservative in their spending habits. They are increasingly suspicious of big bureaucracies, whether in the public or private sector. They already understand the need to restructure the safety net made up of our vast—and expensivesocial welfare programs so that they are targeted primarily at those who have need of them. They already acknowledge that much of what is being deducted from their paycheques is for social benefits they will never receive.

These developments in our economy are good because they are realistic. They might not point to quite the kind of future that many middle-aged Canadians saw for themselves when they were young. But it is a future whose outlines we can already see if we lift our heads high enough. It is a future that is sustainable. And it is a future whose momentum will survive Budget Days.

Dian Cohen is a Montreal-based economics writer