The need for a kinder, gentler government

This week's editorial discusses the Canadian economy and the need for a kinder government.

While there is a lot to talk about after a very interesting week –like (for lack of a better word) the stupidity of ordering government bureaucrats to prepare at least three statements on terrorism every week for foreign minister, or Canada, once a model for human rights observance, being targeted by the United Nations Human Rights Commission for failing to live up to acceptable standards by ignoring First Nations rights, adopting Bill C-51 and refusing to conduct a national inquiry on the issue of missing and murdered Aboriginal women, the state of the economy looks likely to remain the most important topic in the days and weeks ahead, and maybe even beyond the federal elections in October.

Last week, Parliamentary Budget Officer (PBO) shattered the rosy outlook sketched by Finance Minister Joe Oliver by announcing the exact opposite of what the minister had said just a day earlier: Oliver said the government was well on its way to a $1.4 billion surplus, PBO said there would be a minimum of $1 billion deficit in fiscal 2015. After that statement, the only thing Oliver could do was to dodge reporters’ questions.

Seriously, we, Canadians, are in a troublesome situation: After a decade of Stephen Harper, we have an economy overwhelmingly reliant on carbon-based resource revenues; the country has lost hundreds, if not thousands, of manufacturing jobs to Mexico and other low-cost labour countries, and that we are in a recession is a secret everybody knows.

Add to that a seasonal disaster that befell on western Canada this summer with massive forest fires and extreme weather conditions that severely damaged crops in many areas in the Prairies; you have a bleak picture to say the least.

Looking ahead, most analysts say the world will not see $100 per barrel oil price until at least 2020; all major economies, foremost among them our southern neighbour, have already admitted that they are condemned to a prolonged period of subdued growth; employment picture is hardly any more optimistic: with ongoing development of robotics, even less workers will be needed in a steadily declining manufacturing economy.

The combined effect of these circumstances leaves little room for optimism in the short and medium term for maintaining our current living standards, let alone improving them.

Whether we like it or not, we are bound to enter a period when more government intervention in economy and more regulation will be inevitable if we are to avoid increased levels of poverty in the society.

With declining commodity prices and little prospect of incoming investment in manufacturing industries, and agriculture remaining so dependent on climatic phenomena, there appears to be two avenues left only to achieve at least a cyclical growth: One is infrastructure development and the other is service sector expansion, both of which, inevitably, involve government funds.

Infrastructure investment is simple enough: A classic and proven Keynesian model for stimulating economy, government funding of infrastructure projects is bound to create new employment and fuel demand for an expansion in supply side economics.

When it comes to service sector growth, however, it is likely to require even more broad-based government involvement, not that the government should make the investment in that sector, but because there is another key element: In a declining economy, consumers already find it hard to allocate enough money to meet their basic needs like nutrition, accommodation, clothing etc.; and in such a state of affairs, the ability to afford the products of service sector, the government will need make sure that the national wealth is shared at a more equitable level.

That kind of a goal is not likely to be achieved through steps like the latest trick put into play by the Harper government to buy votes: Every $47 of the $60 child care assistance provided to families will be clawed back by the government within a year in the form of taxes.

What will be needed then is a government that is truly kinder and gentler than the current one.