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Brent H. Cameron: Importing American culture wars won’t work for Liberal partisans this time around

Commentary

Back in the day, when the South African diamond mining conglomerate DeBeers held a near monopoly on the global trade in those gems, they conducted wholesale marketing through what was referred to as “sights”. Prominent diamond trading firms were given the status of “sightholders” and would be permitted to buy stones wholesale from DeBeers. A representative of the company would go to DeBeers offices in London and be directed to a special secure room. There, they would be presented with a cardboard box containing diamonds of different shapes, sizes, and degrees of quality.

The sightholder would examine the stones, do their calculations, and then make an offer on the whole. This is an important point because it was a package deal and you had to buy them all—both the high-quality gems and the lower-quality stones. It is said that one sightholder felt that the number of stones that were of subpar quality was an issue and they complained. The complaint was duly noted and the jeweller found himself subsequently disinvited from these sales as time went on. Losing access to the sights meant going out of business, so apologies were offered, access was restored, and no more complaints were made.

The message was sent. When you sign on the dotted line, you sign on for everything—the wheat and the chaff. This is the lesson that federal Liberals are quickly learning.

During the last federal election, I was gratified to have been able to comment in The Hub that the Liberal Party had, as in the previous vote, made a conscious effort to build a campaign in and around many of the themes adopted by the U.S. Democratic Party—issues related to gun violence, the spectre of laws on abortion, and political extremism that could veer into violence. Those running the Liberal War Room knew that a large segment of the Canadian population are frequent consumers of U.S. news and American cultural products, and correctly bet that by casting their opponents as Trumpian Republicans, they could hold onto seats in large urban centres and manage—at the very least—a minority mandate.

Like the DeBeers sightholders, the Liberal Party bought the cardboard box on offer from their U.S. Democrat cousins in toto and they have been able to snag some beautiful gems. But it is among the other contents that a new problem has arisen.

Yes, the U.S. Democratic playbook goes hard on the issues of guns, abortion, and extremism. It also went all in on the issue of election tampering by a hostile foreign actor. The Steele Dossier, Russiagate, the Mueller and Durham investigations—all of this dominated U.S. news and the K Street chatterati for years. Of course, there was no shortage of Liberal politicians and friendly commentators on this side of the border who gleefully gave likes and retweets to those comments.

The effect of all of this has been to make election tampering by hostile foreign actors an issue in the minds of Canadians. That is not a bad thing. Of course, we need to do all that we can to ensure the integrity of our vote.

The problem comes for politicians who spent six years telling Canadians that foreign interference in elections was a clear and present danger now having to tell those same people that it is all a “nothing burger.” 

Now, there is no shortage of Liberal backbenchers who have in the last week accused CSIS of having a “partisan bias” and both the Globe and Mail and Global News of peddling “fake news.” The problem is that if you swap China for Russia, CSIS for the FBI, and the Globe and Mail for the New York Times, you end up with tweets that could have come from people like firebrand U.S. Republicans Lauren Boebert and Marjorie Taylor Greene.

Partisan talking points are outpacing reality as this story grows. The dissonance is heightened in the face of Prime Minister Trudeau now promising to appoint an “eminent” and “independent” special rapporteur and announcing multiple investigations to look into the issue of foreign election interference.

What makes it stick even more are the visuals of a Chinese spy balloon floating across North America, seemingly rendering both Ottawa and Washington impotent for days and weeks, not to mention the prime minister announcing the banning of TikTok on Government of Canada electronic devices in the same press conferences where he declares that Chinese interference did not change the results of the 2019 and 2021 elections. Treating an issue as both “something” and “nothing” is a dangerous move, but to do so all in the body of a ten-minute press scrum is a high-wire act that no politician or strategist can manage.

When the issues were related to guns, Roe v. Wade, or Trumpism, the Democrat playbook very much worked for the Liberals. When the window shifts to China and election tampering, that strategy moved from being an asset to a liability.

Importing American culture wars and political fights has, to this point, presented the Liberals with a box full of shiny gems. Over time, though, you move past the baubles on the top and get to the cut-rate stones at the bottom of the box.

Trevor Tombe: The pandemic’s lasting scars on Canada’s economy

Commentary

The COVID-19 pandemic, and the economic disruptions it caused, appear to have left deep and long-lasting scars on Canada’s economy. 

The latest data from Statistics Canada measuring the size of Canada’s economy through to the end of 2022 shows we have shifted down to a lower growth path—and one that might be felt for years to come or potentially even be permanent.

Specifically, new quarterly data on Canada’s economy shows a clear and sizable gap between where we are now and where we were previously headed. I plot this below. In the fourth quarter of 2022, the economy is roughly 6.5 percent smaller than its pre-COVID trend.

This is a very large gap. It is equivalent to $180 billion per year in lost output. That’s $4,500 per person in Canada per year. It’s larger than Canada’s entire energy sector

While this outcome was foreseeable, it wasn’t a foregone conclusion.

More than a year ago, writing for Maclean’s Charts to Watch in 2022, I raised a concern that “future growth may, unfortunately, be lower for longer.” Whether COVID permanently damages Canada’s economy or whether workplace innovations (like remote work) and policy responses (like childcare) could boost productivity above pre-COVID trends would be revealed by this data.

“Where our economy goes in 2022 will give early indications about which of these two possibilities may be likely,” I wrote. More than a year later, with the data now in, it appears the worse of the two occurred.

Understanding what factors led to this outcome is critical.

This is neither a novel development, to be clear, nor one unique to Canada.

Recent research suggests recessions in general can permanently shift an economy to a lower growth path. The United States experienced this following the financial crisis, for example. Canada was not spared then either. A broad investigation of nearly two dozen OECD economies found countries suffered a permanent ratchet down with only a few examples.

Even normal run-of-the-mill recessions—as opposed to large-scale ones or those following financial crises—may exhibit this pattern.

There are many potential causes. Losing a job may lead some, especially older workers, to permanently withdraw from the labour market. Lasting negative health effects of the pandemic may also be a factor. Investment could also fall, lowering the pace of capital accumulation like machinery and equipment. And productivity growth may slow.

To measure how important each of these factors might be for understanding Canada’s current situation, I use a technique known as “growth accounting”. The intuition is simple.

Labour and capital are critical inputs into the production of nearly all goods and services throughout the economy. Technology, skills, and knowledge each determine how much output we get for any given number of workers and machines—that’s our productivity. Each of these is (imperfectly) measurable, so we can estimate how much increases in employment tend to increase GDP, or how much decreases in capital investment affect GDP, and so on.

I do just that and find lagging productivity growth is the key.

Of the overall drop below pre-COVID trends, productivity accounts for roughly 4 percentage points of the total. That’s about 60 percent of the overall gap between where we are now and where we were previously headed. Productivity growth has been so poor recently it has actually been negative. I estimate it is roughly back to the same level it was at in early 2019.

Lagging investment levels and the country’s overall capital stock, interestingly, account for only a small fraction. Some have pointed to lagging business investment as a central challenge for Canada. And while this is certainly important, it doesn’t appear to account for much of why we remain so far below trend.

It’s therefore labour that accounts for the rest of the decline. I estimate total hours worked in Canada is about 4.4 percent below its pre-COVID trend and accounts for a third of the gap between Canada’s GDP and its prior trend. 

It’s not that we’re working fewer hours individually (though we are a little bit). It’s mainly that there are fewer workers overall due to Canada’s ageing population. 

By the end of 2022, 62 percent of the population was aged 18 to 64 years—that’s down from 64 percent five years earlier, and also below its pre-COVID trend. These small changes can have large effects, given how important labour is to produce almost everything.

Can we boost our longer-term growth rates?

There are options: we can increase our inputs or we can increase our productivity. Demographic challenges are hard to overcome, however. Immigration can partly compensate but comes with considerable challenges of its own

That leaves increasing business investment and productivity growth. The list of areas where we can turn to improve this is long. Increasing technology adoption, growing our internal and international trade flows, boosting the level of competition within several protected sectors, enhancing skills training, exploring and enacting tax reforms, easing regulatory burdens, improving transport infrastructure, and so much more, could all yield dividends. 

Each deserves a deeper dive than I can provide here. But one thing is clear: if we cannot reverse recent trends, Canada’s economy risks falling even further behind.