Debt not the answer to handle likely global economic slide
Troy Media – by Bruce Stewart
During summers Canadians have other things on their mind than politics and the economy. Unfortunately, the world’s economy doesn’t take a similar break.
Canada, a trading nation, gets more than 30 per cent of its GDP from exports. That means that it’s not enough for Canada to manage its own affairs well, because when the rest of the world makes a hash of theirs our exports fall.
And for all the good things that Canada’s done – federally, provincially, and municipally – it hasn’t done enough to prepare for when world trade to take a significant hit.
Make no mistake, that’s what’s in our future. China has slowed. India has stalled. There isn’t a week that goes by without another Euro crisis. Britain is going backward. The U.S. regional Federal Reserve reports show the American economy is experiencing a double-dip recession.
Canada can’t escape the turmoil, but it can make good choices about how to handle it.
The global problem is too much debt. So, like it or not, adding even greater chunks to ours by increasing our deficits even further isn’t the answer.
As the Spaniards, Italians, Portuguese and Greeks have already discovered, it doesn’t matter what the central bank says interest rates are. Deficits mean selling bonds, and it is the market that decides what interest rate you’re going to pay. Currently, these countries are paying 6.5 to 7.5 per cent, while the European Central Bank says interest rates are 0.75 per cent. Then times as much because they made bad choices is far too much – but when you’re out of options you pay up.
Can it happen here? Absolutely. Québec and Ontario are already close to the line these European countries have crossed.
Canadians are going to have to talk about taxes and spending, whether they like it or not.
They’re going to have to think ahead, too. For the past three years “Economic Action Plan” signs have sprouted across Canada. But such spending goes to “shovel-ready” projects, those that have their other funding (town/city and provincial) all arranged. If you’re wondering why one project was a go, while another was stillborn, that’s your answer: one was ready to go, and the other wasn’t.
Thinking about what’s actually needed to repair our infrastructure and meet our future needs would be a good thing to do, maybe while we sit around the BBQ and quaff a few cold ones.
At the same time, we can’t allow deficits to grow. So the money to support people through a world-wide recession is going to have to come from things we’re already doing.
That could mean some things have to be shut down to find the money to pay for the things we want.
The Premiers had the right idea during their meeting in Halifax this week: they decied to get their provincial drug and medical equipment buying coordinated to save money. Good for them. Here’s hoping they’ll move on to coordinating across provincial boundaries in other ways.
So what can individual Canadians do?
Think about your community and work your way up. What’s the pressing need? What could we do less of, or even give up if we had to, to pay for it?
Are there other ways to get done what needs doing? Maybe we don’t need smart boards, more computers, or television systems in the school as much as we need a new heating, ventilating and air conditioning system that will cost much less to run year after year. Maybe funding for keeping people in their own homes with doctors visiting them would be a better use of health care money in your community than another piece of million-dollar equipment at the hospital that duplicates one 20 kilometres away.
Since it’s summer, there’s no reason not to make these conversations social: fire up that BBQ, open a few, make it fun while you strategize with your neighbours.
If we get our ideas sorted out this summer, we can take them to our politicians in the early fall. Prime the pump before they start dealing with the coming woes.
Who knows? This time, you might actually get outcomes you want from the powers that be.
Troy Media columnist Bruce A Stewart is a Toronto-based management consultant. You can reach him at http://about.me/bastewart.