Want to know who is taking long-term economic growth seriously? (Hint: He doesn’t lead a national party)
Finally someone campaigning to become prime minister has proposed to do something that might actually change the trajectory of the economy.
Alas, that someone is Alberta Premier Jason Kenney, who only secured his current job five months ago, and won’t be pursuing the position that every pundit says he really wants until 2024 at the earliest.
Whatever his aspirations, Kenney is the only national political figure who has used the federal election campaign to show an interest in doing something about crippling productivity rates. His pledge on the weekend to drop some inter-provincial trade barriers in order to create momentum for talks on making Canada a proper single market could be a game changer. It also comes with a note of seriousness that so many previous commitments lacked.
Here’s the prize: The International Monetary Fund said earlier this year that freer internal trade would increase per capita gross domestic product by about four per cent. It was an astonishing finding, given several studies predict the new North American trade agreement will have essentially no effect on GDP. It makes you wonder what could happen if the country’s business, political and media elite united in excitement over a Royal Rumble within the federation the way they obsessed over last year’s confrontation between Team Trudeau and the Trump administration.
The IMF is aware of Canada’s regional jealousies, and the preference for north-south trade makes the creation of a common market a tough sell. Attempts in 1995 (the Agreement on Internal Trade) and 2017 (the Canadian Free Trade Agreement) produced unsatisfactory results. “Nothing short of a sustained and concerted collective effort” will move the needle, the fund said. If the prospect of stronger economic growth wasn’t enough to bring the federation together, the IMF said that a “coalition of the willing” would be better than the current inertia.
“The collection of these regulatory distortions can have important macro-economic effects, as (non-tariff trade barriers) hinder labour mobility, limit choice for consumers, fragment markets, stifle competition, and limit the effective scale of production thereby lowering productivity growth,” the IMF said in a paper by a couple of staff economists and the University of Calgary’s Trevor Tombe.
Earlier this year, Carolyn Wilkins, senior deputy governor of the Bank of Canada, identified productivity as the economic issue that concerned her most. In April, the central bank lowered the annual rate at which it thinks the economy can grow without stoking inflation to 1.8 per cent, mostly because the amount of goods and services generated by workers had declined. “You can’t have a healthy economy, you can’t have the labour market performance that you hope for, the financial stability that you hope for, unless you have vibrant firms who are investing and making productivity gains and are being competitive relative to our international peers,” Wilkins said in an interview in June.
You can’t have a healthy economy, the labour market performance you hope for, the financial stability you hope for, unless you have vibrant firms investing and making productivity gains
senior deputy governor, Bank of Canada
There’s not much the central bank can do about productivity, which is unfortunate, because the policymakers who are able to act have little to say on the subject. Conservatives and Liberals appear to be united in doing nothing to strengthen the economy for the long term, depending on how you rate their various promises to arrest climate change.
Based on what we’ve seen in the campaign to date, the choice in a month for an economy-first voter will be the party that would cut personal taxes by about $6 billion per year while pretending to be serious about pharmacare, or the party that would cut personal taxes by about $6 billion per year while pretending to be serious about balancing the budget, or a spoiled ballot.
Conservative Leader Andrew Scheer said he would appoint a minister in charge of cutting red tape, and that any new regulation would be accompanied by the elimination of two others. Deregulation could free some animal spirits, which is why Finance Minister Bill Morneau said a year ago that he would get serious about making business easier. Both of the leading parties have promised new housing sops that would hurt economic dynamism by steering capital towards real estate and construction, two of the most unproductive segments of the economy.
In some ways, Kenney is more anti-hero than hero. His campaign against carbon taxes will probably leave him on the wrong side of history, and he is testing national unity by continuing to threaten a referendum on the equalization program. But on internal trade, he is now the undisputed champion of a project for the common good.
“We did this (without) haggling or delay,” Kenney tweeted from the annual meeting of the Canadian Chamber of Commerce in Saint John, N.B., where he made the announcement.
“I call on the other provinces (and) territories to match Alberta’s ambition,” he added. “Let’s get ‘er done!”
Ambition is relative when it comes to removing trade barriers between the provinces. Among the restrictions Kenney dropped was a rule that limited hunting and guiding licences to Albertans; local outfitters will probably retain a comparative advantage over johnny-come-latelys from outside the province.
Still, it counts as initiative, which is scarce when it comes to economic policy that would make a difference. Anyone serious about long-term growth will put political considerations aside and join Kenney’s coalition of the willing. If that’s too much for you partisans, here’s another suggestion: Propose something better.