Over the past two years, Canadians have watched with growing alarm as the country’s economy deteriorated. Canada is now struggling to recover from one of the worst recessions since the Second World War. Although there have been a few signs of recovery in recent months, among them modestly rising corporate profits, many Canadians see no end to the gloom and are clamoring for government action. Last week, Maclean’s Senior Writer Patricia Chisholm asked economic experts, businesspeople and labor leaders what measures they would apply to the country’s ailing economy.
Douglas Peters, chief economist for the Toronto-Dominion Bank: I would be doing all the things that the Prime Minister has said he would never do. I do not regard inflation as a problem— it is now virtually zero, and wage settlements are running at about two per cent. So I think that interest rates should move sharply lower, in line with U.S. rates. The Canadian dollar would come down automatically, making our exports less expensive. That would give our export industries and our import-competing industries some clear breathing room. These changes would dramatically help unemployment in areas from steel to retailing. There would also be much less cross-border shopping. This is a time for good government management, not for government spending. It is a government that can manage its section of the economy that we need, not a government that devises new schemes for spending.
Judith Maxwell, chairman of the Economic Council of Canada: I don’t think that there is any magic wand that any government can wave over this situation. Interest rates are likely to come down further, and Canada, with its low rate of inflation, should be able to more than match what is going on in the rest of the world. In turn, lower rates will have a positive impact on the rest of the economy. I think that there is a lot that business and management can do in conjunction with unions and employees to help the process along. These hard times have forced people to recognize that there is no room for complacency in this country. So that means we have to rethink the way our plants are managed, the way our workers are trained and the products and processes that are used. But the federal government and provinces from coast to coast
are looking at record deficits, so governments don’t have any room to try to support the recovery with tax cuts. They are going to face some tough balancing between controlling expenditures and tax increases.
Donald Savoie, an economist and professor of public administration at the University of Moncton in New Brunswick: I think it is impor-
tant for the government to stop telling Canadians, as it has been doing over the last several months, that we are not competitive. I would also advise governments not to increase taxes in any way. We are already in the middle of a tax revolt, with the increase in cross-border shopping and attempts to circumvent the Goods and Services Tax. And I cannot stress enough that government should not increase its spending. But it should spend more wisely; there is an incredible amount of overlap and waste in government programs. The government should also lower the dollar by lowering interest rates, even if there is a risk of inflation.
You have to decide what you want to kill, the economy or inflation, and I think we are doing a good job of killing the economy.
Thomas Kierans, chief executive officer of the Toronto-based C. D. Howe Institute: The government is very badly boxed in. It has bartered away on past consumption any real room to stimulate in the future. And the government can’t tax any more—with the current level of taxes, there is not a lot of discretionary income left. But the government can’t cut taxes, either. All that you would be doing is adding to debt and debt-servicing charges. But the government should indicate to Canadians that tax freezes will be the order of the day. In the area of job training and skills, there is a large gap that has been left by market failure, especially small businesses which create the largest number of jobs in Canada. This is a breach where the government could step in, particularly to bring the education system and business together. We need to insert a reverence for blue-collar skilled trades back into the economy.
George Richardson, president of Winnipeg-based James Richardson & Sons Ltd., which owns securities broker Richardson Greenshields-. To push the dollar down unrealistically would be a short-term cure at the risk of a more permanent malaise: inflation. In the past, a low dollar camouflaged another problem: the lack of international competitiveness of Canadian business. We have the capability to be competitive internationally; we just haven’t really got at it. The government needs to help Canadians be more proud of being Canadian. There is no national spirit in this country, as there should be. But too much direct government support can lead to complacency. I think it is better for business to analyse the situation, realize what has to be done, and then do it.
Judy Darcy, national president of the Canadian Union of Public Employees, which represents 400,000 public-sector workers: The immediate focus needs to be on job creation. That means programs to stimulate private-
sector development and direct public-
sector investment. Capital projects could be undertaken to repair crumbling infrastructures like roads and subways. Those structures are essential for industrial development and significant job creation. It also makes sense to stimulate housing construction, including publicly subsidized housing. The move towards lower transfer payments to the provinces is also contributing to job loss, as well as undermining services, and there needs to be a real reversal of that trend. People not working means lower taxes and less spending. There needs to be an approach that recognizes the interaction between the public and private sectors. □
The story you want is part of the Maclean’s Archives. To access it, log in here or sign up for your free 30-day trial.
Experience anything and everything Maclean's has ever published — over 3,500 issues and 150,000 articles, images and advertisements — since 1905. Browse on your own, or explore our curated collections and timely recommendations.WATCH THIS VIDEO for highlights of everything the Maclean's Archives has to offer.