Conservative attack ads on newly elected Liberal leaders Stephane “Not a Leader” Dion and Michael “Just Visiting” Ignatieff were very successful. So everyone has been wondering why they haven’t started carpet bombing new NDP supremo Thomas Mulcair. Is the Tory war room losing its edge?
Pundits say it is important for a leader to define himself before opponents do. First impressions stick. So Mulcair was quick to get his own ads out portraying himself as a nice guy who cares about ordinary Canadians. He also tried to reassure us that he is experienced, mentioning his time in cabinet (but somehow forgetting to mention it was a Liberal cabinet).
Unfortunately the ads were so bland it’s unlikely anyone remembers them. I had to go watch one again on the Internet to remember how they went.
So it is probably Mulcair’s recent and controversial “Dutch disease” campaign that is really the first thing that is going to stick in our minds about him. Strangely, “Dutch disease” may end up doing the Tory war room’s work for it, by positioning Mulcair as divisive, argumentative, unworried by facts and against economic growth in the West.
Let’s leave aside the political atmospherics, and the startling way he dismissed the three Western premiers as “Harper’s messengers,” and look at the economics.
The phrase “Dutch disease” comes from what happened to that country’s economy after big natural gas fields were discovered in the late 1950s. It’s a small country, and such a big find required lots of capital and labour to develop.
The Dutch guilder went up sharply. The result was painful times for Dutch manufacturers.
In the world of fuzzy economic myths and forgotten Economics 101 courses where most of our politicians live, this is a “bad thing.” It’s bad because it violates lots of economic myths.
For example, that a currency has a “natural” value and if resource revenues make it go up, that must be bad. Or that manufacturing is more “advanced” than resource production.
Most profoundly, people suffer from recency bias, which means that they think that the way things have been for the last 20 years are the way they are always supposed to be.
TV newscasters often try to add some drama to their shows by portraying currency ups and downs as good or bad news. In fact, it depends.
If you are a buyer of imported goods, which is everyone, a strong currency is good. Ditto if you travel abroad or pay taxes to a government that issued foreign currency bonds. Is Thomas Mulcair upset that low-income Canadians are paying less for foreign clothing and food? Of course, if you export commodities or goods, or own assets abroad, then a high dollar is bad.
The myth that manufacturing is “advanced” and therefore better than other kinds of economic activity is persistent. Economic history courses contribute to this, by portraying economic development as a path from hunting and gathering to farming to manufacturing to services.
But if the global economy wants to pay a high price for your oil and a low price for your widgets, you’d be a fool to focus on widgets. And in terms of well-paying jobs, the large number of engineers, scientists and bankers involved in the oil and gas industry makes me think it isn’t as primitive as Ottawa dinner party chit-chat suggests.
If I offered you $12 per hour to assemble lawn chairs in Mississauga or $100 per hour to be a petro-engineer in Calgary, which would you choose?
Then there’s recency. In the last few decades, manufacturing has been dominant in Canada. But take a longer view. In the early 20th century, farmers protested how manufacturing was ruining the economy by driving up prices for labour and land. Before that, fur traders complained about how agriculture was disrupting the economy.
When you combine these three myths, you get lines of argument like Mulcair’s; i.e., booming oil and gas in the West has driven the dollar up to “unnaturally” high levels, resulting in the regression of Canada’s economy back to “resources.”
One troubling thing about the Dutch-disease debate is how Mulcair and his team seem immune to facts and the opinions of others. Fort Smith boy turned Bank of Canada governor Mark Carney said this when asked if Canada was suffering from Dutch disease: “I don’t subscribe to that.”
Statistics Canada reported in March that manufacturing shipments were up by 1.9 per cent, more than most economists expected. New orders also rose and unfilled orders rose to a three-year high.
Then a gaggle of economists turned up also doubting the Dutch-disease thesis, including a team at the Institute for Research on Public Policy.
Making the situation even stranger is how people are claiming the ills of Ontario and Quebec manufacturing are the fault of Western economic success. The real story is more nuanced, with some sectors suffering due to the high dollar but others booming as they produce equipment for the oilsands.
And anyway, all you have to do is look at Michigan’s manufacturing sector. It doesn’t share a currency with the oilsands, but is nonetheless in terrible shape. It’s not easy to compete with Chinese, South Korean and German factories.
Mulcair tries to dress up his arguments in policy by saying that all he wants to do is make the oilsands pay for the carbon emissions they cause. But notice how he doesn’t call for the automotive sector, or voters who own cars, to pay. Transportation is, of course, an even bigger emitter of carbon dioxide than the oilsands.
As for the Yukon, Mulcair hasn’t opined, to my knowledge, on the mining sector. But one presumes he would put it in the same category as the oilsands. It uses a lot of energy and produces a commodity.
In this line of thinking, every Yukoner with a well-paid resource job who produces gold or copper, and helps drive up the value of the Loonie, is hurting the real Canadians back east.
We’ll see how this plays out. The Tories will eventually get around to making attack ads about Mulcair, but it’s too late. We’ve already had our first impression.
Keith Halliday is a Yukon economist and author of the Aurore of the Yukon series of historical children’s adventure novels.