Canada’s ‘Today, Not Tomorrow’ Economy

Businessman looking out window | BCBusiness
According to Tony, we have a real problem looking to and thinking about the future in this country.

The war of words about the Canadian economy masks a much bigger problem. We’re all about yesterday or today, and seem to be incapable of looking ahead to the future.

It’s been interesting to watch the current Canadian economic debate between the East and the West. Interesting because it’s very close to déjà vu all over again. We had a similar debate 30 years ago, and it was only “resolved” by a Pierre Trudeau government’s National Energy Policy.

Nothing has been done since to develop an economy for the future.

This “debate” – although war of words might be a better description – has been cranking up again recently. Ontario Premier Dalton McGuinty has complained about how the high dollar is impacting that province’s manufacturing economy, and new federal NDP leader Thomas Mulcair has brought up the possibility that Canada is suffering from “Dutch Disease” (when a country’s currency rises so much due to a resource boom that it hampers other economic sectors).

In this debate, the West is resource rich, primarily in oil, and resents any obstacles to resource development as typical Eastern arrogance. The East’s richest economic resource – manufacturing – is dwindling in the face of a higher dollar caused by those Western resources, such as oil.

Both are right in some ways. Both are also wrong.

The West is involved in a Klondike-style gold rush – only this time it’s oil. We’ve got a lot of it, and the world is hungry for it and willing to pay high prices for it.

That means the Canadian dollar is essentially a petro currency, and so, is overvalued. By how much is up for debate because the dollar isn’t purely connected to what we in the West can pump out of the ground or cut down and (maybe) ship overseas like in so many other petro-states. More specifically, it’s risen because so much investment, most of it foreign, has poured into the West’s oil sands development.

Meanwhile in the East, overall manufacturing has been in a long-term decline, more than likely because the entire world’s manufacturing has moved the Far East. Canada isn’t alone in its manufacturing woes. Most of the developed world, especially the U.S., has seen manufacturing economies dwindle.

Only Germany seems to have beaten this trend. It saw it coming some time ago, and converted its economy to the manufacture of higher-value engineered products. As a result, its economy is the strongest in Europe and is looked to as a saviour for much of the current European currency woes.

So forget all this red-herring, politicking, talk about “Dutch Disease” and whether it exists in Canada or not. These are much larger issues at play here.

Probably the biggest – that there is no economic policy – is being ignored completely. We seem to have a real problem thinking about the future in this country. It’s all about manufacturing at lower prices, à la Asia, or scouring for resources we can ship out in the raw.

In other words, not much different than the economy of 50 or 100 years ago.

In Canada, weren’t we supposed to be developing a future economy based on innovation, knowledge and application of that knowledge?

I don’t see much of that.