Don’t Believe The Economic Hype
How very sad. It seems Canada’s brief period of economic glory has ended.
“Canadian economic growth stalled in the second quarter,” the Bank of Canada noted on Wednesday. It was one raindrop in a downpour of bad news. “Canada falls out of the top 10 in 2011 global competitiveness rankings,” concluded a Conference Board of Canada study released the same day. “Small business optimism down in August,” the Canadian Federation of Independent Business reported.
Thursday, the Organization for Economic Cooperation and Development (OECD) released its latest economic update. The Canadian economy is wheezing, according to the OECD. Among G7 countries, Canada had the worst secondquarter economic performance, after Japan, and we’re expected to do worse than Germany, Japan, and the United States in the third quarter.
“Now I long for yesterday,” sang Paul McCartney. The prime minister is a Beatles fan. I’m sure he knows the feeling.
It seems like only yesterday that Stephen Harper told Canadians we were the economic envy of the world. It was the central theme of the Conservative campaign.
Remember those ads showing the prime minister working late into the night? Thanks to Stephen Harper, Canada had come through the recession better than any other country. And we continued to lead the world. “A sea of troubles is lapping at our shores,” Harper said over and over in his stump speech. “Disaster in the Pacific, chaos in the Middle East, debt problems in Europe, and, of course, some very serious challenges south of the border. Canada is the closest thing the world has to an island of security and stability.”
The Conservatives didn’t cite much data to support this stuff, but that didn’t matter. Everyone knew it was true. You would hear it on talk radio and read it in newspaper editorials and blog posts. It must be true. And it was such a pleasant thought, it made one’s toes warm and tingly. Even those who didn’t particularly like the Conservatives were inclined to agree that Stephen Harper had displayed masterful economic stewardship.
The Conservatives won the election, you may recall.
But now that happy time has gone. What went wrong? Did our masterful economic steward lose his touch?
Of course not. The downturn is due to external factors. The economies of a long list of OECD countries are stagnating so it’s no surprise that the Canadian economy, which is so dependent on exports, is stagnating along with them. That’s not a Conservative excuse. It’s reality.
But here’s a thought: If external factors are the cause of the current slump, might external factors also have been responsible for our earlier good fortune?
One such factor is the unprecedented boom in commodity prices, driven mostly by rapid growth in China and elsewhere. Canada has lots of commodities. We sell them to others. The Conservatives didn’t mention that during the campaign but maybe – just possibly – that had more to do with the condition of our economy than the Great Helmsman in the PMO.
If one were inclined to follow that thought, one might look at Australia. It has lots of commodities. And it has been doing very well. In fact, Australia managed to escape the recession altogether. And its unemployment rate is 2.5 percentage points lower than ours. Is Stephen Harper’s masterful economic stewardship responsible for that, too? That seems doubtful. Which suggests the story told by Conservatives during the election isn’t entirely accurate.
And Australia isn’t the only country whose performance raises doubts.
Using data from the OECD’s May economic update (the latest available), I put together a list of OECD countries whose GDP performance was equal to or better than Canada’s in 2008, 2009, or both: Australia, Austria, Belgium, Chile, Czech Republic, Finland, Germany, Greece, Hungary, Iceland, Israel, South Korea, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Switzerland, and Turkey.
That doesn’t make Canada look like the economic envy of the world, does it?
But Canada did do better in 2010 so I put together another list of countries whose GDP performance equalled or surpassed Canada’s that year: Chile, Estonia, Finland, Germany, Israel, Japan, South Korea, Luxembourg, Mexico, Poland, Slovak Republic, Sweden, and Turkey.
And 2011? The OECD projections show Canada’s GDP growth being equalled or surpassed by: Chile, Estonia, Finland, Germany, Israel, Korea, Luxembourg, Mexico, Poland, Slovak Republic, Sweden, and Turkey. In fact, during the first and second quarters of this year, while the Prime Minister was boasting, the Canadian economy grew less than that of the “euro 3” (Germany, France and Italy).
Now consider the jobless data.
Here’s a list of OECD countries whose unemployment rate is currently equal to Canada’s or lower: Australia, Austria, Chile, Czech Republic, Denmark, Iceland, Israel, Japan, South Korea, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Sweden, and Switzerland. In fact, Canada’s unemployment rate is only a hair below the OECD average.
Then there’s the small matter of the deficit. Here’s a list of OECD countries whose 2011 deficits are smaller (as a percentage of GDP) than Canada’s: Australia, Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, Germany, Hungary, Iceland, Israel, Italy, Korea, Luxembourg, Netherlands, Norway, Sweden, Switzerland, and Turkey.
I don’t want to overstate things. We have been doing fairly well, particularly relative to the United States. But the government grossly exaggerated how well the economy was doing. And by making it seem as if Canada was uniquely prosperous, the Conservatives led Canadians to believe the cause must be uniquely Canadian – as in, the masterful economic stewardship of Prime Minister Stephen Harper.
Not that I blame the government for hoodwinking Canadians. That’s politics. Prime ministers exaggerate the good stuff and take credit for it, while blaming everything that goes wrong on forces beyond our borders. Always have. Always will.
The fault lies with the media. Even a quick look at basic numbers would have revealed that the Conservatives were telling a whopper. But far too many journalists didn’t bother to look at the numbers.
They were too busy applauding.