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Brent H. Cameron: Handouts without hope won’t help Canada’s poor escape poverty

Commentary

The Trudeau government frequently touts its record on reducing Canada’s poverty rates due mainly to the Canada Child Benefit. Its claims mostly stand up to scrutiny. Targeted public spending has measurably reduced poverty according to an arithmetic conception of poverty as a solely materialistic state of being.

Yet many of the academics, pundits and politicians who talk about poverty lack a textured understanding of the individuals and families who experience poverty in materialistic and non-materialistic terms. Canadians in poverty have reason to be a bit skeptical of the second and third-generation Laurentians who have cast themselves as tribunes of the less fortunate, gesticulating their anger over the plight of the poor whilst brandishing $5,000 wristwatches.

There’s a verse in the Christian Bible that quotes Jesus as saying “It is easier for a camel to go through the eye of a needle than for a rich man to enter into the kingdom of God.” This is a rather harsh rebuke that I cannot comment on, but I’ll say that an equally onerous challenge is for a rich person to understand the experience of being poor—with the noted exception of those rare individuals who manages to pull off a Horatio Alger-worthy rise from rags to riches.

A richer, more textured understanding of poverty that saw struggling Canadians as individuals with complex sets of needs, interests and aspirations rather than mere statistics would cause the government to place as much attention on creating the conditions for hope as it does on the clever design of income-support programs.

I grew up what in hindsight would be considered a lower-middle-class environment. Our lives were marked by precious little money and moments when the creditors might be a step away, but a stable home with two consistently working parents who employed every effort to improve our prospects. Staying on one side of the ledger book was as much a stroke of luck as it was a feat of indefatigable effort.

I paid for university by selling a car that I restored and took side jobs like driving cab. Even with that, I couldn’t afford textbooks for the first two years, so the reserve reading room—where assigned readings for every course could be had for a period of three hours—became my friend. But my parents gave every spare penny they could, gladly and cheerfully. I graduated and became the first member of my family to get a degree, beating a cousin by one year. But I also readily admit my luck. 

My father, on the other hand, knew what real poverty was. He left a troubled home, quit school, and hitchhiked to Toronto where he got a job with a moving company. Until he had earned enough to pay for a room in a boarding house, he banked most of his meal allowances and slept in either one of the trucks or on a couch in the company’s storage warehouse. He was 12 years old at the time.

It is because of these things that I feel emboldened to comment on the nature of poverty. Yes, it is the lack of money, of food, of lodging, and of opportunity. But those are the things you see: the outward symptoms of the syndrome. What you don’t see—and what our white knight wannabes do not appreciate—is the lack of something we call “hope.”

Hope is subtle and nuanced. The transmission mechanism for public policy is complex. At some level, it requires that policymakers distinguish between “transitory poverty” and persistent poverty” and recognize that the messages and policies to make progress on both will necessary differ. It also demands that they recognize that while policy must confront systemic factors, it needs to inculcate a sense of agency and the possibility of a different and better future. A “hand up” rather than merely a “handout” may sound a bit cliched but it actually expresses a deep insight about empowering people rather than merely solving for their basic needs.

Want to address systemic poverty? Then policymakers have to think beyond materialism. They need to create the conditions for hope. They must seek to enable people like my dad to envision a future better than a couch in a warehouse. My dad would have eagerly taken the quarterly cheque for $250 set out in this year’s federal budget. But it was the hope of a better tomorrow that he really desired. 

Ottawa’s latest budget actually had plenty of money for Canadians in poverty. The government’s poverty reduction strategy isn’t suffering from a lack of dollars. But it is ultimately lacking a vision of how to help people take control of their lives and climb the ladder from poverty to the middle class.

Our prime minister once commented on Canada becoming the world’s first “post-national” country. I do not know whether this is true, but it is becoming clear that we are heading toward becoming a post-hope one.

Andrew Evans: Giving Volkswagen billions in subsidies was a short-sighted, unsustainable mistake

Commentary

Last week we learned more about the magnitude of the joint federalprovincial subsidies ($13 billion in total) to secure a major new Volkswagen plant in St. Thomas dedicated to electric vehicle production. While a big political win for Prime Minister Trudeau and Ontario Premier Doug Ford, the experience demonstrates the futility of competing for electric vehicle investments and the need for Canada to pursue a different economic path. Canada and Ontario have other industries with greater advantages and more long-run upside that policymakers ought to prioritize.

Let’s start with the crucial context of the Inflation Reduction Act in the United States. The IRA contains as much as $370 billion in new spending and tax breaks to boost clean energy and advance the goal of decarbonization. The enormity of these public dollars is hard to overstate: it’s more than Ottawa’s total annual budget. When one accounts for other U.S. advantages, including lower wages, right-to-work laws, and the size of its domestic market, it will be difficult (and enormously costly) for Canada to compete for electric vehicle investments. It may make for good one-off press conferences but it’s not a sustainable economic strategy. 

It’s also not obvious that the economic upsides are worth the costs. Electric vehicle manufacturing isn’t the same as traditional automobile production. Electric vehicles require less than half of the workforce to build as traditional internal combustion engine autos, need much fewer parts (reducing employment by downstream suppliers like Magna) and assembly is required to be physically located close to battery plants which reduces incentives for trade across long distances. According to the U.S.-based Economic Policy Institute, barring massive investment in onshoring battery plants, there are likely to be massive job losses in the auto sector, even if traditional production is fully replaced by EV manufacturing plants. 

This is exactly what the U.S. government aims to do with the Inflation Reduction Act. The early signs appear successful with as much as $210B in new electric vehicle investment announced as of Q3 2022. 

Canadian policymakers must therefore proceed with caution. We cannot match the U.S. public subsidies and even if we could the gains are probably not worth it. Consider, for instance, that Statistics Canada data show that even before the electric vehicle transition, there has been a significant decline in the number of jobs in Canada’s auto manufacturing sector. Between September 2001 and September 2022, the number of workers in the sector declined by one-third. The electric vehicle transition may be good for the environment but it’s unlikely to be a major source of national employment. 

There are also outstanding questions about the practicality of meeting the policy goals that the Canadian and the U.S. governments have set for electric vehicle production. The U.S. Environmental Protection Agency recently proposed regulations that would likely mean 67 percent of new cars sold by 2032 would have to be zero-emissions. The Canadian government has gone even further and mandated 100 percent of new car sales have to be electric by 2035. 

These aggressive targets assume a massive increase in electric vehicle supply and demand that isn’t necessarily obvious at the moment. That the U.S. target is more flexible in that it’s based on tailpipe emissions rather than a specific preference for electric vehicles means that American car companies may aim to meet it by investing in scrubbing technologies and other means to improve the emissions output of internal combustion engines rather than fully transitioning to electric vehicles. 

The key point here is that we would be wise to hedge and continue to invest in keeping existing internal combustion engine auto plants running. Not only will this protect continued (albeit declining) employment, but even under a scenario where 67 percent of new cars in the U.S. are electric, there will remain some level of demand for internal combustion engines—particularly in a world in which elevated costs, sourcing issues, or electricity supply problems undermine progress on the electric vehicle transition.  

There’s a strong case therefore that we should unilaterally surrender on the subsidy race for electric vehicle production and instead focus our policymaking attention on other parts of the economy where we have more of a comparative advantage, including agriculture and agri-food, responsible critical mineral mining, sustainable forestry, and low-carbon oil and gas. These sectors are regionally diversified, provide for employment across the skills distribution, and have significant export upsides. They represent the future of an “economic compact” that can effectively play the role that automobile manufacturing did in the second half of the 20th century. 

It will require political and policymaking discipline to walk away from the electric vehicle race. But it is the right decision for Canada. By prioritizing the parts of the economy where we have real comparative advantages, we can avoid capital destruction and distortions that would result from a wasteful and unproductive competition with the U.S., while boosting value and employment in less flashy yet more promising industries.