Ottawa Citizen Highlights: Canadian and U.S. Productivity Difference, Harper's Green Isolation

By Keith Edmund White
Editor-in-Chief


Harper deals with the internal strife any governing party faces. For now, with a federal election 3-4 years away, Harper's position and Conservative governance are assured. But Harper's aggressive natural resource development push and resulting tone-deaf appearance to environmental concerns is bringing divides to the party. But is this green divide really just about the environment, or could be also be the economic trade-offs that have come with Harper's push to make Canada an increasingly resource-based economy? Whatever the cause, Harper's push for resource exploitation--while perhaps needed to buffer a fragile global economy--could come at a big political and economic costs down the line.

Two interesting articles, one new and one from last week, from the Ottawa Citizen.

First, while the U.S. and Canadian economies are inextricably linked, the Ottawa Citizen points out the interesting and profound productivity difference between the two neighboring economies. Before highlight sections from the article, why does this matter?

Well, because it shows the contradiction that is keep Canada's GDP--in the short-term--trucking (albeit slowly) along. Canada has pushed its economic growth through expanding its labor market (good for employment numbers!), but this has come at a cost: worker productivity. In the U.S. the opposite trend line occurred. The culprit (perhaps): the strong Canadian dollar, that allows its economy to be relatively inefficient owing to strong demand for its commodities. The interesting effect: this probably isn't a good long-term strategy: with a declining labor market (people are getting old!), labor market expansion can't push up the GDP. Also, Canada's manufacturing market may become increasingly unable to compete with other nations.

From the May 29, 2012 article by the Financial Post's Ian Martin:

“Canada should actually be celebrating this remarkable balancing act,” Mr. Lascelles said. “As much as we all would love the Canadian manufacturing and resource sectors to be firing on all cylinders at the same time, the reality is, it’s usually one or the other.”

Either way, prices have helped to ensure Canadian economic health.
But given demographic trends, Canada can’t just rely on shifting fortunes to level out growth prospects, Mr. Cross argued. 

“We’ve gotten away for 20 years in this country with not-great productivity because we’ve had offsetting developments in the price mechanism. Can you count on that forever? Probably not,” he said. “It’s hard to imagine how you’re going to get another break in the price mechanism that will help you offset the aging of the population.”

What makes this more interesting? Harper is doubling down on the natural resource-focused Canadian economy. Why? Well, this keeps the Canadian going in the right direction. And, arguably, dealing with other economic sectors weaknesses is easier to do with a raising GDP than a falling GDP. Furthermore, with Europe's economic woes, its probably best to push off dealing with Canada's delicate balancing after Europe gets his house in order. And, anyway, Harper has time (3-4 years) to revisit the issue, hopefully when the international economic picture looks a bit rosier.

But whether or no Harper's economy strategy may be tipping Canada's "remarkable balancing act" closer to its inevitable tipping point, one things for certain: the now-majority Conservative government lead by Harper , as is common with long-standing administrations, is facing internal dissent. The focus: environmental concerns over Harper's natural resource push.

Side-note: Though, again, note that the environmental murmurings find political strength in the Canadian Atlantic coast, which is also an area that relies on manufacturing--a sector that is not enjoying the natural resource-fueled high Canadian dollar.

From today's article (Harper's new enemy: conservatives, by Susan Riley) that highlights progressive Conservative unease with Harper's all-out push for natural resource expansion:

There is a new front opening, as opposition to Stephen Harper’s budget — and his broader agenda — gathers strength. Increasingly, criticism is coming from dismayed conservatives offended by Harper’s hostility, or indifference, to the environment. And to democratic tradition. 

The dissidents are mostly Progressive Conservatives, but not exclusively. This week, for instance, former Alberta Reform MP Bob Mills joined Green Party Leader Elizabeth May in decrying the elimination of the National Roundtable on the Environment and the Economy (a Mulroney-era initiative).
... 

There have even been rumblings in the mostly docile, Conservative-controlled Senate. Senators Nancy Ruth and Hugh Segal, a Red Tory stalwart, have both strongly objected to the government’s crackdown on environmental charities. 

Credible criticism of other aspects of the omnibus bill — notably the weakening of the fisheries act — has come from Tom Siddon and John Fraser, Mulroney-era cabinet ministers. Siddon, now 70, lambasted the government for undoing decades of environmental progress, returning Canada to the status of “hewers of wood,” and for ramming changes through Parliament. “This is unbecoming of the Conservative party I belonged to,” he said.

To some, this will sound like the grumbling of old warhorses, but, elsewhere, Progressive Conservatives are enjoying a moment. Former Alberta premier Peter Lougheed, now 83, was feted in Calgary this week. Lougheed — who serves as a role model, and influential cheerleader, for Redford — reminded his audience, pointedly, that he always put Canada first. 

Harper wasn’t feeling much love from Atlantic Canadian conservatives this week, either. New Brunswick’s David Alward and Kathy Dunderdale, of Newfoundland and Labrador, questioned federal EI reforms that, they argue, fundamentally misunderstand and devalue the Atlantic Canadian economy. 

Premiers will always put regional loyalties before party, but there is little evidence of kinship between Harper and Atlantic conservatives. They don’t even seem to belong to the same party.