Don’t blame the Yukon government for the territory’s shrinking economy

At the best of times, managing an economy in today's globalized world is a lot like steering a ship in choppy seas with a small rudder. Government can try to set a course but is at the mercy of the winds, waves and current.

At the best of times, managing an economy in today’s globalized world is a lot like steering a ship in choppy seas with a small rudder. Government can try to set a course but is at the mercy of the winds, waves and current.

The smaller the player, the less ability to steer a government has. For the Yukon government it is almost like our leaders are trying to navigate using their hands as paddles.

Our territory – with a population smaller than many Vancouver neighbourhoods – is but a bit player in the international system. We don’t set commodity price and we don’t control investments on the world’s stock exchanges.

You would think that our small stature would lead to some humility on the parts of leaders, but you would be wrong. When times are good our territorial leaders never miss an opportunity to claim that it was their steady hand leading to prosperity.

That hubris backfired on the government last week when Statistics Canada confirmed that the economic malaise that set in for the Yukon in 2013 continued into 2014.

The Yukon Liberal Party seized on Statistic Canada’s report with a letter to the editor last week stating that “the Yukon Party was very good at taking credit during good times. However, they have been unwilling to accept any blame for the current economic slowdown we are in.”

The problem is that the government is more correct now. It is true that it was disingenuous when the Yukon Party took credit for the health of the territorial economy back when a confluence of increasing transfer payments and rising mineral prices conspired to create boom times here in the Yukon.

But it is equally disingenuous for the opposition to now blame the government for an economic contraction that is not only quite modest – contracting by 1.2 per cent – but well beyond its control.

Mineral development expenditures in the territory peaked between 2010 and 2012 at around $150 million per year. In the last few years they have fallen to less than a third of that. In a small $2.2 billion economy, a $100 million decline in spending – most of which comes from outside – is going to have a significant impact.

And it is not as if territorial policies drove that decline in spending. Statistics Canada’s numbers show that exploration dollars have dried up across the country in the last few years, not just here in the Yukon. Decisions about whether such spending will be strong or weak in a particular year are made on Toronto’s Bay Street, not Whitehorse’s Second Avenue.

We Yukoners should thank our lucky stars that federal transfers have increased during that time frame or the effects of that decrease in spending would have been palpable. GDP is only one measure of the health of an economy, and on some other measures we’re doing alright. Unemployment has been fairly steady and is actually down a little from 2013. So we’ve weathered that downturn fairly well.

The Yukon Party walked into Silver’s trap when it tried to take credit for the good times. It dug in deeper during the last few years when it made rosy economic projections that haven’t panned out.

But the Liberals should tread carefully and not walk into the same trap. There may come a time when they won’t want the territory’s voters to believe the myth that the policies of the territorial government have much of an impact on the state of the economy – whether that time is when the economy comes roaring back to life just in time for an election, or when it dies down during the reign of a hypothetical future Liberal Party government.

The argument could backfire for another reason – in the longer term the Yukon has done fairly well.

The Liberals noted in a separate letter that the economies of N.W.T., Nunavut and B.C. all fared better in 2014 than Yukon, and invited voters to “ask (a Yukon Party MLA) about the latest GDP numbers.” I’m not sure that they want voters to do that.

While it is true that all had a better 2014, a longer view paints a different picture. With annual growth averaging 2.8 per cent since 2009, the Yukon has outpaced B.C. (1.8 per cent) and N.W.T. (whose economy has actually contracted slightly over that period). Nunavut, which is at a very different stage of economic and political development, is not a reasonable comparison.

Even factoring in the downturn, GDP has grown a lot since 2005, all during the tenure of the Yukon Party, so I’m not sure that the economy is a winning argument even if we were to assume that the government can take credit for it.

Silver closes his letter by saying “the prospects for 2015 look no better with uncertainty hanging over our mining sector thanks to this government’s ongoing court battles with Yukon First Nations.”

Nonsense. If 2015 is a bad year, the closure of the Wolverine mine back in January – which wouldn’t have been factored into Statistics Canada’s most report – will probably play a significant role, as will the availability of dollars for mining exploration and any number of factors that are beyond our control. Court battles don’t help, but they are hardly the decisive factor as this statement implies.

Our politicians should refrain from taking credit when times are good but they shouldn’t point fingers when times are bad. You might end up being the one trying to steer this ship.

Kyle Carruthers is a born and raised Yukoner who lives and practises law in Whitehorse.