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The Recession: There is Still No Plan B

Officially we had a technical recession in the first half of 2015. How worried should we be?

The June report from Stats Can says that the economy grew in that month after 5 months of losses. This is encouraging, but one month is not a trend. We can be sure that there will be more projects cancelled in the oil sands. That means that business investment, which was down again in June will probably be down again in July. The declino-plan-bne in the dollar hasn’t had time to increase manufacturing or to allow agricultural producers to change their plans, so those industries are unlikely to provide much lift for the rest of the year. In any case, manufacturing is in general decline in North America, so any boost from that sector is likely to be small. Business investment in manufacturing productivity has been weak, so the manufacturing growth we see in the USA is likely to be weak. There is still lots to worry about.

There has been progress in the labour market, although it has been erratic. One month we have a big shift form part-time to full times. The next month there is a swing in the other direction. Overall the economy is paddling slowly forward. Don’t despair.

Since we have an election underway, though, we need to answer another question. Can the Harper government take credit the positive signs? Can it claim that it minimized the effects of external events and laid the groundwork for future growth? The answer is pretty clear. It can take credit for the weak signs of progress if it wants
to take credit for the very lackadaisical last six years. It can take credit for if it wants to wear two recessions.

It is true that there were external factors that hurt the Canadian Economy. Oil companies were going to over-invest in the tar sands. There would be a pull back eventually – although few thought it would come so early or be so sharp. The explosive growth of US shale oil could only hurt the tar sand’s producers. A decline in demand had to happen. The government’s commitment to energy exports meant it was taking a huge risk with the Canadian Economy. There should have been a Plan B. There wasn’t.

Is it fair to ask the government to have a Plan B under the circumstances? The answer is simple: that is what the government is supposed to do.

That is why Canada used to maintain one of the best, smartest and most independent public services in the world. The ability to forecast and to develop that Plan B depends on the quality of your government service. The Harper government hacked away at the public service, cut the planning functions, muzzled public servants and simply didn’t listen to its own advisers. The message of the Duffy trials is not that there was a lot of corruption in the PM’s office — it is much more serious. The PM surrounded himself with passionate loyalists and blinded himself to the advice of the government’s own experts. There was no plan B because Mr Harper had lobotomized his own government.

Were we in a recession? Yes. Was it fairly mild? Yes. Are there some signs that the powerhouse of the Canadian economy is coming out of it? Yes.

Was the recession necessary? THIS government could not have avoided it. Does it know what to do next? More of the same is all it can do. There is no “Plan B.”

A phrase that originated in the 1986 horror film, The Fly, might apply to a situation where an out-of touch government is just winging its economic policies: “Be afraid. Be very afraid.”

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