For six years now Prime Minister Stephen Harper has been referring to Canada as “an emerging energy superpower.” It is a very ambitious goal that comes with significant geopolitical clout, the likes of which this country has not enjoyed in decades, if ever. And it will not be achieved without considerable public policy action, especially from the federal government
While the idea of a “national energy strategy” has been rejected by the Harper government, this government has, nonetheless, taken two steps over the past year to facilitate achieving its energy superpower objective.
The first step has been to open the door to more foreign investment into the oil and gas sector so that this capital-intensive resource can be developed. This was symbolized by agreeing to a Foreign Investment Protection Agreement with oil-thirsty China. Enter the Chinese National Offshore Oil Company (CNOOC), which promptly walked right through that door with a takeover bid for Nexen. If this transaction is approved by the feds, we can expect much more investment from China in Canada’s oil and gas sector in future
Ottawa’s second step has been to take an unambiguously supportive position on the building of pipelines to get Canada’s oil and gas into global markets. Earlier this year, Mr. Harper said: “Our government is committed to ensuring that Canada has the infrastructure necessary to move our energy resources to those diversified markets.”
These are the first two steps of the government’s energy superpower plan: attracting capital investment into the oil and gas sector from abroad and building pipelines to deliver product to market.
Both are important but turn out to be rather academic because the third step – ensuring we have the skilled labour pool to execute on these projects – has yet to be taken.
Put bluntly, we simply have nowhere near the skilled trades labour force to satisfy even today’s demands, let alone to fulfill our lofty aspiration to become an energy superpower.
The Construction Sector Council estimates a skilled trades deficit of nearly 160,000 people over the next seven years (which, according to the Canadian Energy Research Institute, is still five years before projected peak oil sands capital investment). Labour force growth is slowing to a crawl, as the country ages, while demand for skilled labour is skyrocketing. This is particularly true in the energy sector (including electricity generation and distribution) where a capital investment spree is under way, the likes of which has not been seen since the 1950s.
It is naive to think Canada can become an energy superpower given the labour market constraints we face and lack of public policy action to address this.
So what might a labour market fix look like?
First, Ottawa should play a greater role in co-ordinating the efforts of provincial governments, industry and educational institutions. It should place a particular focus on apprenticeship training needs. According to Statistics Canada, the graduation rate from skilled trades apprentice programs has been stagnant since the early 1990s, when skilled trades demand was vastly lower than it is today. Apprenticeship systems need to be reformed to meet today’s demands. Ottawa can play a direct role in this through tax incentives to encourage employers to hire apprentices and by doubling the Apprenticeship Incentive Grant. The federal government could also consider providing assistance to employers who train and certify the work force of the future.
Second, the federal government should hold provinces more accountable for the billions of dollars transferred in Labour Market Development Agreements to ensure we get the outcomes industry needs.
Canadians deserve value for money in Labour Market Development Agreements.
Third, it is time to assist Canada’s regional work forces to get to where the work is. A tax credit or an Employment Insurance grant that covers travel to seek employment will improve labour market efficiency. The existing provision in the Income Tax Act that offsets costs of permanent relocations does not apply – this would be to assist shorter-term labour mobility as is required in construction.
Fourth, skilled trades workers from the United States, most of whom are already trained to our standards, should be granted special status to enable them to work on large energy projects in Canada.
The idea of becoming an “energy superpower” is bold and ambitious, characteristics not normally associated with Canadian governments. But let us be clear: You do not become a superpower in anything – in military prowess, in economic might, even in Olympic achievement – without significant public policy action. The federal government seems to realize this, and has taken two important steps by attracting investment, and delivering product to market. But all of it – all of it – hinges on whether or not Canada’s labour market is prepared. On this, the federal government can and must show leadership.
Two steps are good; it is time to take the third.
Year: 2012
The carbon conversation we’re ready to have
Last Friday, I attended the Economic Club of Canada’s ‘first annual’ Energy Summit – a gathering of government and industry leaders for an all-day session at Calgary’s swanky Petroleum Club.
(That’s 2 layers of club-hood, for those counting.)
The purpose of the event was to have an insightful, forward-looking discussion about the state of Canada’s energy resources, with a particular focus on implications for Canada–U.S. relations (read: pipelines). Approximately 200 industry leaders and observers gathered to hear what government officials – MPs, Ministers, MLAs, regulators and even Ambassadors – had to say about the future of Canadian energy.
Throughout the day, some universal truths coalesced:
- Canada and the United States are in this (whatever this is) together;
- North America will be energy independent by… sometime in the future;
- Growth in the oil sands can, should and will continue;
- Pipelines = good; and
- ‘Extreme environmentalists’ = bad.
Not entirely breaking news for those keeping even a cursory eye on our energy debate. I’m reasonably sure my mom could have rhymed each of those off over breakfast.
But what was interesting – and ultimately very sad and disappointing – was the carbon conversation that bubbled beneath the surface of each panel, flaring every so often only to be promptly extinguished by the artful dodge of government talking points.
We live, rather unfortunately, in an era of Canadian politics where there are a multitude of non-traditional ‘third rails’ – political no-fly zones that are non-starters for policy discussions. In some cases this can be for the best (e.g. no one is well served by reopening the abortion debate), but in others it is very much for the worst: nowhere is this problem more pronounced than with the carbon debate.
So thoroughly did the idea of a carbon price get eviscerated in 2006 that it has been portrayed as scorched earth ever since – a dead policy from a dead party leading to a dead end. Dead.
But it’s not, really. About half-way through the summit, two things clicked for me:
- Industry is ready to talk about carbon pricing – and has been for some time; and
- The federal government is not – and that’s a problem.
As a think tank, we simultaneously try and do two things: first, we advocate certain policy positions to decision-makers operating in the here and now, and second, we attempt to think beyond governments entirely. If I were to be a bit folksier about it: we try and skate to where the puck is going.
Harnessing market forces to reduce emissions is where we are headed. It is the inevitable solution to a long-standing, and increasingly pressing environmental catastrophe. The federal government may anecdotally rely on the perception that big business is against a pricing carbon, but this is simply not true. Many of Canada’s biggest energy producers already operate with an internal “shadow” price on carbon. Read that sentence again.
And what’s more, many are actively advocating one be put in place. The Canadian Chamber of Commerce’s Energy and Environment Committee has a standing policy ask on a market-base carbon pricing scheme. And, as linked above, the Canadian Council of Chief Executives has been calling for a ‘unified national policy’ on carbon pricing since 2009.
This does not sound like the cracked and barren wasteland of a dead debate.
Ultimately it boils down to this: last Friday, a series of government officials were placed on stage in front of a room full of oil and gas industry leaders, and each and every one of them told the crowd what they thought they wanted to hear: that this government will not move on a carbon price – or any market distortion – that hinders the growth of the oil sands.
It may very well come to pass that a carbon price is not the most efficient means by which Canada should reduce its GHG emissions. While generally acknowledged as one of the most economically efficient methods for doing so, we know other jurisdictions (see: Australia, British Columbia, pockets of the Eurozone, etc.) have experienced frustrating routes to implementation.
But these experiences should not preclude talking about a carbon price. We need to talk about it, consider the options and think about what will work best for Canada. It’s why we are convening a panel entitled ‘How to sell carbon pricing to Canadians’ and it’s why we believe closed doors have no place in a policy dialogue about a concern as grave as the very future of our planet.
A report from PwC UK released this week is pretty forthright in suggesting that, globally, we will not meet our emissions reduction targets and thus that we will be unable to stick to a 2 degree target for warming. The question is where we go from here.
During the last session of the day at the Economic Club meeting, Conservative MP and Parliamentary Secretary for the Environment Michelle Rempell said she hoped the environmental debate would become less political – that the terms ‘Big Oil’ and ‘Environmentalist’ would cease to be pejorative. I support this, I really do, and I so wish that her colleague, the Honorable Joe Oliver, had stuck around to hear it.
The New Clintonomics
Two weeks ago, two policy think tanks based in the U.S. and the UK — the Center for American Progress, founded by Bill Clinton’s former Chief of Staff John Podesta, and Policy Network, founded by former Labor Cabinet Minister Peter Mandelson and a group of former advisors to the government of Tony Blair — hosted a meeting of Europeans and North Americans in London. Canada 2020 was invited to attend this summit as the only non-European, non-American participant.
The meeting was framed as a trans-Atlantic dialogue on some of the major issues facing progressives today, in particular how to tackle the fiscal crises in Europe and the United States in the context of weak economic growth, and in a manner that doesn’t betray core progressive principles and values. The conference was also designed to bring together a new generation of progressive thinkers and politicians from Europe and North America, to regenerate the trans-Atlantic Third Way dialogue of the late 1990s that Tony Blair and Bill Clinton led.
Fittingly, then, the keynote speaker was President Clinton. In a forty-minute address, Mr. Clinton provided a road map for how America should deal with the fiscal and economic issues it faces. His prescription could be seen as amounting to a macro economic policy doctrine for the U.S. — a new Clintonomics if you will.
The foundation for the new Clintonomics rests on the notion that governments need to pursue what some might regard as two contradictory courses of action at once, what the President called “walk and chew gum’ economics. For Mr. Clinton, it is imperative that Washington invest significantly now, when US government borrowing rates are historically low, in the many things America needs to make it a more productive and competitive economy, notably infrastructure and education, but also in new industrial policy initiatives aimed at developing innovative sectors of the future. This investment will also provide needed short-run stimulus to an economy that is still operating well below potential over three years after the recession.
This bold investment agenda must, however, be anchored by a serious, credible, fiscal consolidation effort that will be planned, and expected, to kick in once economic growth takes firm hold. This, in Mr. Clinton’s view, is necessary in part to anchor expectations to help prevent the inevitable interest rate increases from rising too far and too fast and crowding out needed private sector investment.
While this was a serious policy talk from the President, he remains ever the pragmatic, centrist politician, not for a minute under-estimating the difficulty selling his economic remedy to the American public. Mr. Clinton observed that most Americans are fiscal conservatives, even if they are Democrats. Regardless of the economic merits of deficit spending in some situations, many Americans see piling on debt as immoral. As a result, those that argue for austerity now — the American right and the business community — will, in Mr. Clinton’s view, have an easier political sell to the American electorate than those that push for some variation of his agenda.
Nevertheless, the President made a compelling case that the complexity and variety of America’s core problems today — a grave fiscal situation, growing productivity and competitiveness issues, serious income inequality, and weak, post-recession growth — call for an equally complex range of actions, which might even appear contradictory to many people.
In the domain of American political economy, it seems walking and chewing gum is a lot harder than it sounds.
Inequality – defining the defining issue of our time
Growing inequality is, according to President Barack Obama, “the defining issue of our time.” In the week following his re-election, the president has vowed not to abandon his resolve to raise taxes on those earning over $250,000.
This fascinates me. What is it that has propelled the issue of inequality to these dizzying heights? Which straw broke which camel’s back? And why do other, arguably more critical, issues such as climate change and our energy future seemingly fail to ignite the imagination of the public and the president?
Much has been written about the causes and effects of inequality in the U.S. I am going to focus my attention on Canada, where a good deal of ink also has been spilt, often without clear reference to the underlying facts and forces.
Globally, income inequality has never been higher. Certain countries are managing to keep it in check (Brazil, for example), but most middle- and high-income countries are more unequal now than they have been since at least the 1920s. This is certainly true of Canada, which sits near the middle of the OECD inequality rankings. But what do we learn if we dig a little deeper into the various measures of inequality?
The most common of these is the Gini coefficient, which measures the variance between actual income distribution and a theoretical, perfectly equal distribution. Thus, a Gini of zero tells us that there is no deviation and that everyone is perfectly equal. A Gini of 1 means that one individual has all the income, everyone else has nothing: winner takes all, writ large. Three categories of Gini are typically employed: the market income Gini, the total income Gini and the Gini after taxes and transfers (the ‘outcome Gini’ as I like to think of it: this overlays first-cut distributions with societal choices about taxation and supports).
To simplify, let’s take look at the market income and outcome Ginis for the past three decades. Between 1981 and 2010 the market Gini in Canada went up 19 per cent from .434 to .518. Over the same period the outcome Gini went up only 13.5 per cent from .348 to .395. So, overall inequality in Canada has risen — quite a bit, in fact — but taxes and transfers have, over time, offset an increasing portion of this rise (though not enough to smooth the outcome Gini completely).
Now, let’s look at when the big jumps in overall inequality took place. Judging by the recent prominence of the topic, one would imagine that the last few years had been particularly inequitable, but this is not borne out by the data. Pretty much all the increase in the Gini coefficients took place in the 1980s and 1990s. For each measure, the increase between 2000 and 2010 was less than 1 per cent.
This is unexpected. Most of us certainly feel that the world is becoming more unequal (which, in the end, is what matters). So what’s going on?
First, some groups have been doing much worse than others. Median family income rose by about 38 per cent between 2000 and 2010, but if you look at single-earner male couple families, there was no rise — in fact, there was a 1 per cent drop.
So burdens are not equally shared. There are those who have ample cause to complain, though I don’t know if they’re actually the ones doing the complaining.
The ones truly burdened by income inequality typically hail from the very bottom of the income spectrum, and this is where the limitations of the Gini coefficient come into play. Ginis are best at measuring changes in the middle, where most people are clustered. They are less good at capturing change at the very top and the very bottom of the distribution — the tails. In Canada this is where a good deal of the action takes place. Although we sit in the middle of the overall OECD inequality ranking, we are third in the OECD (after the U.S. and the U.K.) in terms of share of pre-tax income going to the top 1 per cent.
Second, there is a markedly higher sense of overall economic insecurity today than in the recent past. Unemployment in Canada peaked at 8.5 per cent in late 2009, having fallen to below 6 per cent a few years earlier (it is now 7.4 per cent). Youth unemployment, though, is significantly higher at 14.7 per cent. So younger people are hurting, especially as they contemplate making their way onto the property ladder. The cost of new housing has gone up by 55 per cent since 2000 — significantly outstripping the increase in median wages which, as you will recall, has been only 37 per cent.
Third, we Canadians tend to see ourselves reflected in the experience of the U.S. — and things are a lot worse there. Especially during the election campaign we were inundated with tales of real woe from many of the formerly blue-collar regions of the United States.
By contrast, readers might be surprised to discover that the real hourly wages of Canadians in full time employment actually grew by 14 per cent between 1981 and 2011. Even more surprising is that fully 10 per cent of that 14 per cent growth took place between 1998 and 2011. Another interesting marker here is that all of the jobs lost in the recession in Canada have, according to the Bank of Canada, now been replaced. Ninety percent of the new jobs are in industries paying above average wages.
Again, though, not everyone had the same experience. Between 1981 to 2011 average (real) hourly wages increased by 17 per cent for men aged 45-54 but only 1 per cent for men aged 25-34 (youth gets nailed again). Another surprising fact is that, having risen sharply in the 1980s and the 1990s, the wage gap between those with bachelor’s degrees and those with high school diplomas or trade certificates has actually fallen since 2000. It is likely that this modest degree of wage convergence is attributable to Canada’s energy and resources boom: demand for skilled trades is at an all-time high, just as our tech sector — which employs more highly educated people — has contracted. Nonetheless, the “education gap” in income between those with post-secondary and those without remains significant: in 2011 it was about 37 per cent for men but a shocking 55 per cent for women.
Reflecting on these data points brings me to conclude that it may not be in the top-line numbers that the real story of inequality lies, at least in Canada. We have to dig a little deeper. I see three root causes of our concern with inequality in Canada (three seems to be the magic number).
First, there is a general lack of confidence in our economic future, as a country and as individuals. In March 2012, polling by Ekos found that 57 per cent of Canadians felt that they would be worse off in 25 years than they are today. This is a staggeringly large number of people in a country that has been an outlier (on the positive side) in terms of economic mobility — the decoupling of one’s own prospects from those of one’s parents.
Related to this is a lack of vision for the future at a political level. Even our supposed destiny as an energy superpower seems hard to grasp and if we fail in that regard it is not clear what the back-up plan is. Without an alternative vision, it is reasonable to expect that trends around income consolidation at the top of the spectrum will continue, to the detriment of the majority.
Second, the politics of division are coming home to roost. The grass is always greener on the other side and the Occupy movement has provided a voice to many unhappy people. The visibility and excess of the top 0.1 per cent — the group that has been almost solely responsible for shifts in Canada’s overall inequality rate since 2000 — play a part. (The share of income going to the top 0.1 per cent increased from 2 per cent in 1980 to 5.3 per cent immediately pre-recession in 2007: the share going to the top 1 per cent is up from about 7 per cent to 10 per cent over a similar period.) So does the bursting of the credit bubble that previously masked some of the inequality. Another big factor in Canada is regional inequality, but there is no space to go into details about that here.
Third, I perceive a fear that the institutions that underpin our country and the global system are either threatened, rotten or inadequate to face down the challenges of the future. The global financial system comes first to mind, but with so many recent scandals in the worlds of politics and business it’s no wonder people are nervous. In Canada this disquiet extends to our education and health systems, both of which have been key to our high levels of economic mobility and both of which face myriad challenges.
How, then, should we address these three root causes? It seems to me that the common thread between them is their relationship to equality of opportunity. People feel that this is slipping from their grasp. The good news — as esteemed economist and recent Canada 2020 guest Larry Summers suggested recently — is that this may be a policy area around which progressives and conservatives can come together. Bolstering this may end up being the single most important thing that we can do for our economies in the near future.
The promotion — using a wide array of policy tools — of equality of opportunity should help not only to encourage entrepreneurism and boost productivity (which we badly need) but also to remedy the dangerous social fragmentation that goes hand-in-hand with a perception of deepening inequality. If you are in any doubt about the nature of such fragmentation, I strongly advise reading the book The Spirit Level, which correlates almost every societal ill with inequality, and the lack of hope and aspiration that such a condition engenders.
So, let’s embrace inequality as the defining issue of our time and confront it head-on by promoting greater opportunities for all. Then, my hope is that the climate agenda – which I perceive as far more intractable – will steal the spotlight and forcefully demand serious policy action.
How to talk about a carbon price – without panicking
Today, Canada 2020 will host a public panel event in Ottawa on carbon pricing. It is called ‘How to sell carbon pricing to Canadians’ and we planned it last fall. As it turns out, our timing could not have been better. In the wake of Alberta Minister McQueen’s statement on a possible 40/40 carbon emissions reduction plan for that province, new energy has been injected into the climate debate in this country.
We hope that the conversation is constructive, open, and reasonable: all things currently missing from our dialogue on carbon and climate in Canada. Our intention is to capture and reinforce that energy and enthusiasm to help build towards actual solutions.
Our goal in convening the panel is to open a dialogue that is respectful of all positions, so that we can begin to take steps towards identifying shared interest in the climate debate. This, in turn, could provide the basis for actions that will make the necessary cuts in our emissions.
A good first step would be to support our governments in finding ways to meet our Copenhagen commitments. But we can and should strive for more. Blame for inaction lies at the feet of all federal parties: quite simply, now is the time to move on.
Countries that have progressed in this area in recent years – such as Ireland and Australia – have benefited from a societal consensus that has transcended short-term political thinking. What is preventing Canada from following their lead?
Above and beyond the Alberta climate proposal, there are some indications that now might be the right time for action. A recent report by Sustainable Prosperity has detailed how companies across Canada, including in the oil and gas sector, are making use of shadow carbon pricing in their day to day operations – planning for a day when carbon pricing is introduced. The Canadian Council of Chief Executives has a standing call for a nationally consistent carbon price, and the Canadian Association of Petroleum Producers has apparently responded to the Alberta 40/40 proposal with a 20/20 proposal of its own, tacitly acknowledging that more needs to be done.
A more active dialogue is developing around Canada’s future as a large-scale energy exporter – with much of the open, constructive debate happening beyond our borders and not at home where it is most needed. President Barack Obama’s forthright statements on climate change – even if they are not yet matched by action – seem to be leading people to question why our government is avoiding engaging the Canadian public on these issues.
It is worth noting that upon advertising our event, it sold out in a few short hours. Over 450 people are signed up to be part of the conversation. They hail from all walks of professional life: the business community, the NGO sector, academics and public servants. The public is clearly ready.
If any country has the incentive to make progress, Canada does. The Arctic is warming at twice the global average rate. And if any country has the information available to inform that debate, Canada does. The province of British Columbia has had a ‘pure’ carbon tax in place since 2009. This is a revenue-neutral tax: all proceeds are returned in the form of business and personal tax cuts. It has not destroyed the economy as many predicted. In fact some businesses have benefitted significantly: the wood pellet and carbon-neutral bio fuel opportunities may have provided a lifeline to the forest industry. And carbon emissions and fossil fuel usage have gone down absolutely and relative to the Canadian average.
Meanwhile Alberta has a hybrid system of intensity reduction targets coupled with penalties (paid to a green technology fund) for failure to achieve these. Companies also have the opportunity to purchase offsets from others that are meeting their targets. And as of January 1 2013 Quebec also has a cap and trade system in place that links the province with California. With such a wealth of experience, Canada should be teaching courses on carbon pricing, not hiding in the back room.
Through our session on April 17 we are aiming to understand a number of the key dynamics at play in our carbon debate: how is carbon pricing best linked in people’s minds to beneficial economic outcomes? Can intergenerational responsibility (i.e. the fact that people care what happens to their children and grandchildren) translate into climate action? And can we build political momentum across party lines to use all policy tools available to meet our international commitments?
But most of all, our goal is to reignite a positive debate on carbon pricing and, in so doing, begin building towards a plan with which the majority of Canadians identify – and of which they can be proud.
Australia’s Asian Century – Canada’s too?
I am British by birth and Canadian by choice. While I have a healthy respect for the Commonwealth, I have never aspired to go beyond my two nationalities – until this week. Now I want to be an Australian.
This admiration for Oz is precipitated by a new White Paper presented by the Australian government last week, Australia in the Asian Century.
The nearly 300-page paper is ambitious, strategic, well-written and comprehensive. One Australian commentator called it ‘lofty and inspirational’. That is what is at the root of my Australia-envy. It has been a long time since I have been inspired by a white paper. But then it is also a long time since I have seen a white paper in Canada. The Parliament of Canada website shows that the two most recent white papers were produced in 2010: one on cyber security and the other on the Arctic. There were two produced in 2009, none in 2008 and one in 2007.
One inspiring thing about Australia in the Asian Century is that it connects the challenges Australia faces in penetrating Asian markets with domestic objectives, including building up the five pillars of productivity: skills and education, innovation, infrastructure, tax reform and regulatory reform. It also underscores the need for Australia to learn from, not just sell into, Asia, now a ‘world centre of innovation and technological development’ (p.43).
The daunting thing is that Canada has to compete with Australia in developing relationships in Asia. We are clearly starting behind the pack. The Australian White Paper opens with the statement that:
“Our nation … has the strength that comes from a long history of engagement with countries in Asia. Australia’s relationships in our region are strong and robust, including with Asian nations like China, Japan, India, Indonesia and the Republic of Korea (South Korea).” (p.1)
Contrast this with the opening paragraphs written by Dominic Barton, Global Managing Director of McKinsey in Canada 2020’s 2011 anthology The Canada We Want in 2020.
“Asia….feels geographically and culturally distant, despite the fact that Canada is a Pacific nation. Links are sparse and Canadian businesses lag their rivals from other OECD countries in terms of Asian penetration”(p.35)
It is true that the Harper Government has “pivoted” towards Asia over the past two years. In addressing the recent Canadian Council of Chief Executives conference on Canada in the Pacific Century, Foreign Minister Baird noted that “We have made 77 cabinet-level or Prime Ministerial visits to the Asia-Pacific in the past three years alone”: tomorrow the PM will add to that total when he leads Ministers Fast, Ritz and Oliver to India.
Minister Baird went on to emphasize the steps the government has taken in the trade area (while acknowledging that there has yet to be a trade agreement signed with an Asian nation), its goals in regional security and governance and the important increase in Canada’s diplomatic presence in Asia. Lastly, Minister Baird noted the importance of promoting Canadian values in the region, citing Canadian support to Burma.
But this Australian manifesto underlines how far we have to go and how widely we need to participate in the effort. Skepticism and fear of Asia, and China in particular, is rife in Canadian society, government and business, as evidenced by the debate over the CNOOC/Nexen deal and the China-Canada FIPA. The government position on both these issues has done nothing to reassure Canadians that their interests will be served by deepening relationships with the globe’s most – perhaps only – economically vibrant region.
What the Australian White Paper does so well is to project a rallying cry to the whole of Australian society. What is required is concrete measures such as the proposal that one-third of board members of Australia’s top 200 publicly listed companies and Commonwealth bodies (including companies, authorities, agencies and commissions) will have deep experience in and knowledge of Asia, as will one-third of the senior leadership of the Australian public service.
Concrete measures yield concrete rewards. If Australia meets it objectives in Asia, it is projected that per capita real annual income will rise by A$3,000 per annum by 2025 (up from the ‘business as usual’ projection for 2025 of A$70,000 to A$73,000: the 2012 figure is A$62,000). This will put Australian in the top 10 globally for per capita income (it is already ahead of Canada, according to World Bank figures).
Rana Sarkar from the Canada-India Business Council provided much-needed inspiration when he wrote in his contribution to The Canada We Want in 2020 of our need to double down on existing policy, but also to be opportunistic, creative, bold and strategic in our approach to Asia.
This Australian White Paper puts flesh and clear targets on the strategies that Sarkar referenced. It talks of the need for government to lead a broad coalition of “business, unions, community groups and educational and cultural institutions” to improve people-to-people links to unlock large economic and social gains (p. 3) and while it pinpoints key growth opportunities for Australia (including mining, tourism, agriculture, education, environmentally sustainable development), it also highlights the contribution of culture and the arts.
“The arts, culture and creativity can broaden and strengthen Australia’s relationships in Asia, both formally and informally. Australia’s cultural strengths—as home to the world’s oldest living culture, and as a country that welcomes diversity—underpin values of respect, understanding and inclusion that help to connect people, business, institutions and governments.“ (p.8)
Australian commentators have criticized the document on two main grounds: the first is that it is not all new. A number of the targets and programs it apparently ‘announces’ are already in existence (cited here are the 12,000 Australia educational Awards (over 5 years) for study in Asia or for Asians to study in Australia). The second is that there are not enough specifics or resource commitments behind the lofty policies.
From a Canadian perspective we have to hope that that is the case. Australia starts ahead of us in Asia. It has a similarly stable economy to ours. But it also has greater ambition, it seems, and a stronger track record in solving the type of problems that Asian countries face (for example, it already has experience with carbon pricing and can point to successes in water and soil management, while Canada has no binding national laws on drinking water quality, river basin management or agricultural waste: all pressing problems in Asia).
If we are to ‘leapfrog’ others in our quest to get ahead in Asia we clearly have to jump very high: it would help if our competitors could crouch, but that does not appear to be happening.
Omnibus budget legislation hits a new low
‘What does this have to do with the ways and means of the government?”
It was a question asked in the mid 1990s by government House leader Herb Gray in the early days of the Chrétien government, during a briefing he was having with finance department officials on the Budget Implementation Act (BIA). Gray, then a 35-year veteran of the Commons, had spotted a provision in the legislation that was non-budgetary, that had nothing to do with “the ways and means of the government.” To parliamentary purists like Gray, that is what budget bills were supposed to be restricted to.
The finance officials were caught flat-footed and had no answer to the veteran minister’s question. Nevertheless, despite Gray’s protestations, the bill remained as was and was introduced into the House of Commons.
Thus began a new era in Canadian politics — the era of the abuse of budgets and their implementing legislation. A period characterized by the increasing dominance of the finance minister and his department. An era in which the role of parliamentary committees in scrutinizing and amending legislation was disappearing before our eyes.
After 10 years in office, the Chrétien government’s budgets had grown from a slim 63 pages in length in 1994 to a bloated 380 pages in 2003. Not to be outdone, the final budget of Paul Martin’s minority Liberal government in 2005 was 450 pages long.
Budgets had morphed into governing agendas for the year rather than fiscal and economic statements that were restricted largely to taxation measures and the ways and means of the government. If a policy or program wasn’t in the budget, it either wasn’t happening that year or it was too trivial to worry about.
But the real abuse hasn’t been so much with the budget per se, but rather its implementing legislation. The 1994 Budget Implementation Act, or BIA, was 10 pages long. By the early 2000s, the BIA, then known euphemistically as “the omnibus budget bill,” had increased 12 fold. The advent of the omnibus budget bill did not come about due to an increase in the size of government. Rather, it happened as a function of the concentration of power — in a sense the shrinking of government — especially within the finance department.
The abuse of budgets and their implementing legislation has reached eye-watering level under Finance Minister Jim Flaherty. Flaherty recently introduced his second BIA of this year, Bill C-45. It’s a staggering bill, 443 pages long, amending some 60 statutes. Together with C-38, the government’s first BIA of this year, we have nearly 900 pages of legislation to implement a 500-page budget. A new measure of efficiency in government is thus born.
C-45 is controversial due to the degree of non-budgetary measures it contains, such as amendments to the Fisheries Act, amendments to the Hazardous Materials Information Review Act, changes to the Canada Grain Act, etc. So much so that the minister of finance has now decided to allow various parliamentary committees to study some components of the Bill. This is window dressing of course, because ultimately C-45 will likely be voted on as one gigantic legislative tome.
This year’s budget bills follow on the heels of the 2009 BIA, Bill C-2, which amended more than 40 statutes, many of which had nothing to do with the ways and means of the government. C-2 changed, for example, the Access to Information Act, the Navigable Waters Protection Act, the Canada Council for the Arts Act and the Canadian Race Relations Foundation Act. What are the financial implications of these legislative reforms? There are none. Canadians can be forgiven if they weren’t aware of any of the legislative changes resulting from C-2 because hardly any of them were ever debated in Parliament. C-2 was dealt with as one big omnibus bill, by one little committee of the House — the finance committee — over a few short days.
C-2, C-38 and C-45 are examples of budget legislation on anabolic steroids. This is the way Canada is governed today. It is the tyranny of the finance department. It is the subjugation of Parliament. It is the marginalization of the member of Parliament in the legislative process.
The logical extension of this 15-year path is to have Parliament sit for a week every year and pass with alacrity one big fat omnibus bill that deals with all the business of the federal government for that year. Then our legislators can retreat to their constituencies, we can save a few million tax dollars by turning the lights off early on Parliament Hill, and Canadians can sleep well at night secure in the knowledge that the finance minister and his department has everything in hand.
Falling off the ‘fiscal cliff’ will hurt Canada too
It has been said that when the U.S. sneezes Canada catches a cold. Today, America’s economy has a low grade fever that could develop into pneumonia in the next few months. This takes the economic form of relatively slow post-recession growth by US historical standards—an annualized rate of 2.0% according to the US Department of Commerce’s most recent estimate. The looming pneumonia is another American recession, a very real possibility.
The path the illness takes is dependent in the immediate term on whether Washington avoids the so-called “fiscal cliff”. If the politicians fail to avoid driving off this cliff, the American economy will suffer a major blow and will in all likelihood fall back into recession. This would be very bad news for Canada’s economy.
At the end of this year, the tax cuts put in place by President Obama’s predecessor, George W. Bush, which has been considered important stimuli during and after the recession, will expire. This will take purchasing power out of the hands of the debt laden American consumer. At the same time a “sequester,” part of the 2011 Budget Control Act, indiscriminately cuts $1.2 trillion over nine years from spending in Washington. According to the Congressional Budget Office, the combined effects of these two measures equal about 3.6% of GDP in 2013. Other analysts say it could be more like 5% of GDP, either of which is enough to end the fragile US recovery and tip the economy back into recession.
To avoid falling off the fiscal cliff the newly elected Congress and the Administration would have to agree before the end of the year on a budget that reduced Washington’s deficit by an amount at least equivalent to the sequester. In theory this is very easy. As TD CEO Ed Clark recently said, “If you put five economists in a room and say you each have half an hour to come up with a solution for the United States (fiscal problem), all five could say, ‘I don’t need half an hour.’” In practice, however, it seems an almost impossible task in the ideologically divided Washington of today, which reflects the deep divides within American society itself on the role and size of government—what The Economist calls “The 50-50 nation”.
What does all this mean for Canada? We are a trading nation. One third of our GDP, and one in five jobs in Canada, is export dependent. While Canadian exports to the US have declined in recent years – from a peak of over 80% of Canada’s total exports a decade ago—the US is still far and away our biggest market, accounting for nearly 74% of Canada’s exports in 2011. By contrast, Mexico, our other NAFTA partner, accounted for a paltry 1.2% of Canada’s exports last year, the UK 4.2% and China 3.8%.
Hence, if the US tips back into recession as a result of falling off the fiscal cliff, the negative economic effects in Canada will be real and significant, slowing what is already relatively slow growth in this country.
We also know that when the US economy struggles, protectionism south of the border rises. This came home to Canadians in spades during the 2008-09 recession with the Buy American provisions of the American Recovery and Investment Act of 2009, which excluded Canadian firms from supplying projects funded under Washington’s stimulus measures. Further protectionist measures emanating from Washington and negatively affecting Canada’s exports could rear their ugly heads if there is a second US recession in five years, in a country with a persistently high, and historically anomalous unemployment rate—nearly a percentage higher than that of Canada.
Put simply then, averting the fiscal cliff in Washington really matters in this country, as Canada’s Ambassador to Washington Gary Doer made clear Wednesday in a speech in Vancouver. So let’s hope our friends to the south can get beyond their 50-50 divide in the next sixty days and come to agreement on a new fiscal plan that will avoid plunging their economy into another recession and doing significant economic damage to their neighbour.
Healing Through Collaboration
This study looks at the Government of Nunavut’s Poverty Reduction process, a remarkable, year-long process that engaged some 800 of Nunavut’s 33,000 people, across the territory. The process resulted in recommendations in eight key areas, including the creation of a new kind of collaborative organization to lead community engagement on poverty reduction.
Download the Full Report