Wednesday, August 05, 2009

Navigating Canada's Way Out of Recession (And Beyond)

Brad Wall calls for post-recession plan

Speaking in advance of the First Ministers' Conference, Saskatchewan Premier Brad Wall has called upon his counterparts to help establish a coordinated post-recession plan.

“We need to talk about the future. How does Canada emerge from this recession?” Wall asked. “Are we going to focus on the knowledge economy, on an innovation agenda that can create jobs for the longer term?”

Speaking about each Province's and each jurisdiction's "innovation strengths", Wall suggested that, “Maybe we identify what those strengths [in each province] are so there can be a co-ordinated approach."

Wall certainly isn't in a hurry to declare the recession to be over. Not only is it not true, but it would certainly come with demonstrable political consequences.

“I think everybody is really hesitant to say, ‘Hey, the recession is over,’" Wall admitted. "As long as somebody is not working today, because they’ve lost their job in the recession, how would they feel [about that statement].”

“There’s positive signs ... but I think all the premiers and the government of Canada needs to be vigilant about getting us firmly on that road to recovery,” he added.

Of course, despite the unsurprising enthusiasm of certain individuals for central planning, Wall's proposed coordinated post-recession plan shouldn't be mistaken for central planning.

While such individuals may want to condescend their way out of admitting it, the most fundamental weakness of central planning is that it ignores the specific and individual needs of specific and individual regions and industries.

While certain individuals are almost certain to not understand this, Brad Wall clearly does, as do his fellow Premiers.

"I’ve heard the premiers of Central Canada say pretty clearly that they understand that each province has a different challenge and each province has a different approach,” Wall explained.

To expect a central plan to be able to adequately balance the needs of Alberta's oil-based economy, Saskatchewan's burgeoning oilpatch or Ontario's manufacturing-based economy would be foolish. Thankfully, Canada's Premiers understand this, even if others do not.

Another measure to emerge out of the First Ministers' Conference could be Harmonized Sales Taxes in Saskatchewan, Manitoba and Prince Edward Island.

Federal Finance Minister Jim Flaherty has offered federal funds to help facilitate the harmonization of the three provinces' Provincial Sales Tax with the GST -- a deal Ontario and British Columbia have already taken advantage of.

"We'll see what their governments decide to do," Flaherty said. "But the same proposal -- in terms of transition funding -- that we made with the province of Ontario followed by the province of British Columbia is available to those provinces as well."

"This is solid economic policy in the long run for Canadian businesses and therefore for Canadian jobs and for growth of the Canadian economy," he added.

Whatever the results of the First Ministers' Conference may be, one thing is certain: if each Province's Premier returns from the conference with a better idea of how Canada can move forward out of the recession, and beyond, the value of this will far outstrip their efforts.


  1. Because, as anyone who has failed Econ 101 knows, regional governments cannot possibly engage in central planning and strategic investment, and central planning and strategic investment can't possibly be aimed at addressing the needs of specific regions or industries.

    Someone call Lorne Calvert and let the former NDP leader know he wasn't actually engaging in central planning and strategic investment all those years because he was a regional representative and he was acting in the interests of a specific region and specific industries!

    Do you even stop to think before you post, Pat?

  2. As a matter of fact, Audrey, I do. Anyone who actually read the recent drivel you wrote about John Bolton must be asking the same thing about yourself.

    For example, during this post, I stopped to think about how revelatory it would be to draw you into a debate on centrally planned economies.

    Now, anyone who had ever actually passed Economics 101 would know what economics has to say about centrally-planned economies -- notably, that they are counter-productive and vastly inefficient -- that they impede the production of necessities and transform them into de facto luxury items while introducing artificial elasticities into economic systems.

    Anyone who has ever studied the long and not-so-proud history of centrally planned economies has also noticed that, by and large, centrally planned economies have also tended to be command economies, wherein a centrally-determined plan is enforced upon the citizenry by way of political and social coercion.

    We've also witnessed, over a 70 year period in the Soviet Union, and over a 40-year (and ongoing) period in Africa, the failure of central planning to deliver the goods, so to speak.

    Of course, Audrey, I think we both know that the idea that ordinary people could decide the direction of their economies through market forces is rather anathema to somebody like yourself, wouldn't we?

  3. Ah, yes... the economic version of "Godwin's Law". If you've taken an economics class that dismisses central planning simply because of Soviet failures, then I suggest you inquire about a refund. Most economics profs that I'm familiar with aren't that ignorant of history, nor that ideologically committed to an a priori worshipping of doing nothing (Chicago School of Economics and the CATO Institute notwithstanding).

    Wall (despite his populist rhetoric) seems to understand at at least some level what you don't: Saskatchewan's centrally planned economy and strategic investment has left it sitting in a pretty good economic position in the midst of a downturn. Diversified economies don't magically happen through the efforts of free-market fairies, despite whatever bedtime stories you might have heard. They require effort, planning, and strategy.

    I don't fault Wall for the efforts he's made to duplicate his predecessor's central-planning successes. I fault him for his efforts that stray from it and his populist historically revisionist efforts to play to his base.

  4. Soviet failures are the key historical case for rejection of centralized planning. As are failures in East Germany, Yugoslavia and Czeckoslovakia -- actually, in pretty much the entirety of the Eastern Bloc.

    The effect that central planning has on the production of and demand for products are the key economic case for rejection of centralized planning.

    Not to mention the failure of centrally-planned aid programs in Africa to have any discernible effect in terms of alleviating poverty.

    As it regards central planning and "diversified economies", Audrey, you couldn't possibly have missed the mark much more than you have. Countless governments have attempted to artificially diversify their economies through central planning.

    The lesson that emerges out of these follies is actually rather simple: industries that lack a foundation of consumer demand fail when government doesn't continually intervene on their behalf. It's rather simple: industries that cannot sell their products fail.

    As for the "central-planning successes" of Brad Wall's predecessor, you seem to be out of touch with reality on this point as well.

    The economic successes Roy Romanow and Lorne Calvert enjoyed in Saskatchewan were merely another example of the Putin dilemma.

    How, for example, would Romanow and Calvert had made out if they had governed during a time of low oil and gas prices? Or during a time of low potash prices?

    If anything, provincial revenues, inflated by higher oil, gas and potash prices, increased faster than the Romanow/Calvert governments could plan to spend them.

    It isn't a fortune they enjoyed alone. Ralph Klein in Alberta was also criticized voraciously for not having a plan in place to manage the influx of oil-and-gas revenues into Alberta's economy.

  5. Economic central planning, as with any other action, can be done proficiently or poorly. Pointing at the handful of examples where it was done poorly as a means of poisoning the well ignores the long track record of successes that social-democratic leaning European countries and the role that central planning and strategic investment has played in the mixed-market economies of the west. It also ignores the now predictable boom-and-bust / bubble-and-burst cycle that's come to characterize the more laissez-faire economies where TPTB have put their faith in the religion of the free market.

    Ironically, you reject the historical example of Saskatchewan's successful implementation of central planning in favour of hypothetical conjecture about "what would have happened it...", but didn't. We know what happened as a result of decades of NDP central planning and strategic investment in Saskatchewan's economy without having to play a "but what if things had been different" game. Attempting to attribute Saskatchewan's strong economic position to the strength of one or two resources puts you at odds with the vast majority of economic analysis that's claimed that Saskatchewan's diversified economy has been mostly responsible.

    Of course, Friedmanite radicals like Kate McMillan do their best to ignore inconvenient truths that do not fit with their a priori ideological commitment. It's the only way that they can radically vilify the role central planning has in successful economies in the face of overwhelming contradictory historical evidence of its success.

  6. See, Audrey, you call pointing out the failures of central planning "poisoning the well".

    Anyone with a rational mind recognizes that as "setting the record".

    You need to learn very quickly, Audrey, that when you are debating people they are not obligated to deal exclusively with information that is favourable to your argument. The sooner you start trying to artificially invent logical fallacies in other people's arguments, the better off you'll be.

    The fact of the matter, Audrey, is that centrally-planned economies have, the world over, failed. Even during the rebuilding of West Germany after World War II, the "kinder, gentler" Keynesian form of central planning failed. It led to the under-production of necessary products and the proliferation of black markets.

    Furthermore, Audrey, you cannot honestly pretend that planned economies are not every bit as prone to "boom and bust" cycles as laissez faire economies.

    The post-war record of Keynesian economics is proof of this. Keynesian economies were briefly successful in the post-war western world until the 1960s when the countries operating under allegedly-recession-proof Keynesian principles experienced a sudden recession.

    Of course, attributing the successes of the post-war western world to Keynesian economics would also be a mistake. One of the phenomenae that characterized post-war economics was the existence of large pools of savings that people were unable to spend on consumer products during the war because they were not available.

    Interestingly, Keynesian economic policies have never been successful in the post-1960s world.

    You want to accuse me of rejecting Saskatchewan's "successful history of central planning". Yet what you seem to overlook is that, as with the alleged successes of post-war Keynesian economics, there are numerous other factors at play in the Saskatchewan economy that should reasonably lead us to question whether the economic successes of Saskatchewan was due to the central planning of NDP governments.

    But then, Audrey, you need to answer the question of why these successes took so long to accumulate, and only seemed to accumulate in an era of high oil, gas and potash prices.

    I suspect that your ideological commitment to the "wonders" of central planning will forbid you from addressing that particular dilemma. I doubt I'll be pleasantly surprised.


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