Tuesday, July 12, 2011

Canada on Dangerous Seas

Before I begin to write this I have the feeling I will constantly be in deep danger of mixing my metaphors. Please be patient, and do your best to follow along my winding rhetorical trail.

During the spring 2011 federal election the Conservatives campaigned for re-election largely on the economy, or more specifically their management of it. The Canadian ship of state had weathered the storm of the 2008 recession and was/is pulling ahead of competing nations. Canada’s economy has done well, but I do not believe the Conservatives had much to do with it. First, our resource economy (principally oil) is fuelling a robust growth spike across the country. Second, effective budget balancing in the 1990s under Prime Minister Jean Chretien and Finance Minister Paul Martin put us on a path of success. It also left us a lot of options and a lot of freedom to respond to the recession.

Aside from what I listed above how is Canada doing so much better than European countries, Japan and the United States? Well, before we begin to pound our nationalist chests I would like to point out we are not ahead – the world is behind, dramatically behind.

Japan, a historic economic powerhouse, has been crippled in the wake of the tsunami of 2011 and subsequent, and on-going, nuclear disaster. Occasionally we hear on the news how some of Japan’s major businesses in electronics and automobiles have suffered because the country cannot export. If Japan can recover at all at pace with the world it will be a miracle of sort.

Europe is, in reality, in the midst of a slowly evolving crisis. You have likely seen on the news images of Greece, where the Greeks are rioting in the streets against government actions. Greece is undergoing a debt crisis. The Greek people have enjoyed considerable benefits for a nation of its wealth. With a staggering debt Greece is on the verge of defaulting. If it did default it could spell the end of the European Union.

However, Greece is the tip of a very frightening ice berg. Portugal and Ireland are not that far behind Greece on the crisis spectrum. And behind them are the much larger economies of Spain and Italy. These countries, in short, have spent too much, taxed too little, and have sluggish, inefficient economies.

For us in Canada we only need to cast our eyes southward to American inability to deal with their debts for problems in our future. America, much like Greece, spends far more than it collects in taxes. Its debt is about $14.5 trillion. In the United States at the moment the Democrats and Republicans are struggling to negotiate with each other before a deadline. On August 2nd the United States’ credit card reaches the limit. The Republican controlled Congress refuses to pass an increase on the limit without substantial cuts, and NO TAXES – of any kind. The Democrats are fighting to protect spending and want some taxes. Thus – impasse. A deal must be reached by mid-to-late July for it to take effect in time. This is not something that can wait for 11:59 PM August 1.

I am deeply concerned that American commonsense will not prevail. That the idea that someone will blink will blind them. Someone has to give in, it’s too important. If both sides think that and stick to their guns we will see a debt crisis in the world’s largest economy. An economy we do 70% of our trade with.

Returning to the ship metaphor, Canada is not the Bluenose racing in front of inferior peers. The ships we are racing against are taking on water, have holes in their sails, or are on fire. Canada could do everything right in the next few months and Harper and the Premiers could act responsibly, but the actions of other countries could wreck us. If the American behemoth goes off course and rams our ship it won’t much matter if we have sharp uniforms and fresh paint.

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