Oh Canada, a great place but not easy street any longer

Canadians get ready for five years of a lowered standard of living

Stephen Pate, NJN Network, Charlottetown, Prince Edward Island, Canada, July 3, 2009 with story from Canadian Press in the Guardian

Canada’s and the Western World’s believe in a high growth economy hit the wall last year and mainstream economists are just starting to admit it. CP quotes economist consultant Dale Orr of Global Insight saying we should expect five years of lowered standard of living.

“The downturn’s scars will still be noticeable five years after growth resumes later this year, in terms of productive capacity, unemployment and living standards.”

Canada’s recovery is directly tied to the United States, the country which consumes 80% of our exports and drives our economy. From PEI lobsters, BC lumber, Quebec dairy and wood products to Ontario’s automobiles, everything in Canada is based on US consumption. Take away a part of any US market demand and Canadians lose their jobs.

One of the great ironies of our age is that marijuana has replaced mining and lumber as the biggest export from British Columbia to the United States, despite the fact the US spends billions trying to stop it. The Canadian government does not tax marijuana exports and the country is losing money over out-dated morality.

We have been chasing rainbows for over twenty years and are discovering that there is no pot of gold. The last two economic booms – the dot.com boom and the housing boom – were built on US Fed inflation in the money supply. Go back to Ronald Reagan and we see funny money fiscal policies that created debt but not wealth.

Greed multi-national companies, mainly located in the US, EU and Japan, have sold the world on Globalization – free trade and world class businesses. Most Canadians and American scoffed at protesters in Seattle and Quebec who said those policies would ruin our countries. What has happened?

The US exported millions of jobs to foreign countries hoping that high tech, finance and knowledge industries would replace them. While that happened in the short run, the collapse of those industries, first the high-tech sector and last year the world banking sector, has proved the strategies wrong. Real wealth comes from the well-being of people and building economies that last.

US Banks have gone bankrupt in record numbers. The stalwart of the Canadian high-tech sector Northern Telecom finally sunk into the sea with an ignominious sale to a foreign company. High tech salaries are falling this year and investment banking is not a career anymore.

While the official unemployment rate is just reaching 10% in the US, the actual rate including those who cannot go back to work or have lost hope is somewhere between 16% and 20%. Global Insight reported the US lost 467,000 jobs in June, worse than the 322,000 in May. The US department of labour says the US has lost 7 million jobs since the recession started in December 2007. Note that the real date for the recession just got moved back into 2007.

Recessions as long as this one will last create downward spirals for any country but especially Canada which doesn’t have enough consumption within its population to support its own economy. With fewer Americans working and more expected to lose their jobs, they buy fewer Canadian goods and services. They travel to Canada less. Expect all Canadian sectors except government to take an initial hit. Government services and employment will eventually have to fall if this keeps up.

The Canadian and US response has been to over-spend government money. Deficit spending to stimulate the economy cannot continue year after year, as Japan found out. A ten year economic decline cannot be forestalled by ten years of government deficits. Soon the Federal government will have to stop lining the pockets of patronage friends with our future debts. Those debts will make us all worse off except the very rich.

There is no easy solution other than live within our means. Try to create real wealth and value the people for they are our best resource.

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