COLUMN: Canada ill-prepared for dollar drop

A friend posted a photo to social media the other day taken at a local grocery store with the price of a head of cauliflower, $6.99. Yes, it is off season and the item was imported from the United States. Yes, the grocery store is one of the more premium brands. Still, this is not Northern Canada where the prices of bread or milk run $20, it’s Eastern Ontario.

The drop in value of the Canadian dollar has been forecast for a few years, but this country has not been prepared to deal with it, nor to take advantage of it. Those who celebrate the dollars’ downfall need to have a reality check to what the consequences of the drop is and how it affects Canadians.

There is plenty of blame to go around. A decade of moving Canada from a diversified economic path to a resource-based path by the Stephen Harper government erased two decades of progress. Policies by the Mulroney and Chretien governments attempted and were  successful at having many industries that were not connected. When all were doing well, great. If one sector of the economy was starting to slump, another would be coming out of one. The move to more resource development, at the expense of other industry, has caused the country as a whole to feel the effects of a slump more pronounced.

But it was not just the federal government’s fault. Thirteen years of Liberal rule in Ontario has sent the province into a tail spin that is near impossible to pull up from. Regressive energy policies and inept leadership has left Ontario unable to take advantage of the effects of a weak dollar — exports. Ontario enjoyed a high rate of manufacturing employment in the post-World War Two boom. According to a report from the Mowat Centre, an Ontario-based non-partisan public policy think tank, Ontario lost a net 300,000 manufacturing jobs between 2003 and 2013. Not only the jobs, but the capacity to make things. Plants were torn down, brown fields were cleaned, and retail sprouted up. Now with the dollar drop, it would take years to build new plants and train new workers to build things. Except that won’t happen, not to the extent that would help the economy.

Technology has advanced so much in the last decade, that building a new plant to build a widget ten years ago may have employed 50 people then. Now it would use 10 people, with new technology doing the bulk of the work. Ontario is disqualified from much investment from the foreign market not because of trade deals or globalization as some tin-foil hat wearers would preach, but due to high costs. Electricity rates are up 78 per cent in the last seven years. With non-competitive rates and a lack of infrastructure to support manufacturing, states like Alabama and Virginia thrive, while provinces like Ontario wallow.

There is no single easy answer, but there are some things that can be done to help start to turn things around in Ontario at least.

First, lower the price of electricity. What is the point of having a utility owned by the public, which is supposed to have a public benefit, gouge the people they are to be a benefit for? Cut the “global adjustment prices” and use cheap electricity as a resource to bring growth here. The Seaway Valley was flooded in 1958 for this reason, yet what benefit is there now?

Second is to freeze government spending and have it live within its means. Corporate tax rates in Ontario are low and the people cannot afford more taxation from the province. The government has to make some hard choices. Start with eliminating the nanny-state handouts. Government is not the be-all and end-all of everything for people. By doing this, they show some stability which increases investor confidence.

Third, if you are spending on infrastructure, be smart with it. Increasing GO-Train service to Guelph for commuters is great. But does it create the job that is needed so a person has to commute? No. Make smart investments in the electrical grid, roads, pipelines and rail that will encourage companies to move, or move back, to Ontario.

The governments are not responsible for anything in the global economy outside of our boundaries, but they have done a lousy job in preparing the country to weather ups and downs. A ten-year regression after 20 years of progress may only be two steps forward, one step back. But there needs to be some clear leadership at the federal and provincial levels to make sure the country does not continue to regress.

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