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The Progressive Economics Forum

Stephen Harper’s Uniquely Bad Productivity Record

We all know the Conservatives are the “rational economic managers,” right?  After all, their tax cuts, free trade agreements, and tough-love social policy are all motivated by the need to free the entrepreneurial beast within us, and allow us to pursue our natural proclivity to truck and trade with wild abandon.  The productivity of the free market is the common intellectual (or should that be ideological?) thread that unites all the disparate, carefully calculated Conservative policy proposals.

How odd, then, that the record of Canadian productivity growth since the Stephen Harper government came to power is so uniquely awful.  StatsCan released their second-quarter productivity numbers on Sept. 10 (  Productivity declined by 0.2%, the third quarterly decline in a row.

(This was pretty easy to predict: after all, real GDP went nowhere in the second quarter while employment grew slightly.  You don’t need a PhD to figger out that means lower productivity.  That made it all the curioser that Consensus Economics projected a 0.3% gain in productivity — see the Report on Business for Sept. 10, which tried to call the result, and failed!)

More striking is the fact that these three conseuctive quarterly declines have now pushed the level of Canadian productivity (measured by real GDP per hour of work in the business sector) below the level that prevailed when Stephen Harper came to power at the beginning of 2006.  This makes his the first government in postwar Canadian history to oversee a cumulative decline in the level of productivity over its entire term of office.  (I suppose I may be thinking wishfully here, implying as I do that Harper’s term in office is about to end! But one must hope.)

This interesting result is detailed in the short study I wrote for the CCPA which was released last Wednesday (

The level of productivity has fallen by over half a percentage point since Harper came to power.  Contrast that with the net cumulative productivity growth that occurred under every other government since StatsCan began collecting this data in 1961.  Even Joe Clark did more for national productivity during his 9 slapstick months in power than Stephen Harper did with 30 months of hard-nosed market medicine.  Who was the best?  Go figger: it was Pierre Elliot Trudeau, during his first term in office (1968 through 1979) — a time in which Canada’s productivity improved by 30%, despite his various “lefty” initiatives (such as raising taxes, expanding UI, and going to Cuba and hugging Fidel Castro).

Productivity growth rates rise and fall each quarter, and occasionally become negative.  But for the level of productivity to fall over a sustained period of time is unprecedented.  I identify three main factors behind the outright productivity decline over the last couple of years, all of them related to the commodities and energy boom which Harper and his friends from Alberta have so enthusiastically endorsed:

1. Productivity is falling rapidly in the minerals sector (including energy) as sky-high prices encourage companies to exploit ever-more marginal resource deposits.  And the helter-skelter nature of boom-time development in northern Alberta is hardly good for productivity, either.

2. The meltdown of Canadian manufacturing during the commodities boom (400,000 jobs, with average productivity much higher than the Canadian average, have been lost since 2002) has, needless to say, dragged down our national productivity average considerably.

3. Dutch-disease mechanisms (chiefly, the petro-fueled surge in the Canadian dollar — which now seems to be abating, thankfully) have squeezed out employment growth in all sectors OTHER than non-traded sectors.  These are the only parts of our economy which are insulated from the overvalued exchange rate (largely private services such as retail, hospitality, and other low-productivity job ghettoes).  This disproportionat ereliance on low-productivity sectors for job creation also drags down the national average.

Canadian economists have been wringing their hands for years over Canada’s sub-par productivity growth.  But now a hard-right pro-business government allegedly committed to rational productivism has oversee an unprecedented cumulative medium-term decline in productivity.  Let’s see if this miserable record sticks to Mr. Harper at all.  And let’s see if the general failure of neoliberalism to do anything good for our national productivity sticks to it.

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Comment from Leigh Thomson
Time: September 16, 2008, 9:04 am

Yes, Jim, your article at the CCPA was good, but your posting at rabble, and here, contain a bit of rant.

An understandable rant, mind you, given the attack on you by your erstwhile Calgary professor. And your tongue-in-cheek humour is appreciated.

However, we are in an election, with 1 out of every 8 Canadians whose parents or grandparents were displaced by self-described ‘Bolsheviks’ (such as Stalin), and whose survicing family members in Eastern Europe have only recently been able to emerge from the Soviet cellar.

Ukraine, for example, has only had its independence since 1991, and continues to struggle with the effects of genocide, displacement, and Russification of much the country from the tsarist and Stalinist periods, and from the current economic occupation by inheriting oligarchs.

These are sensitive histories and current politics, which are being used and abused by Canadian and US politicians to further their own agenda, which would see the ‘market’ destroy livelihoods and persons as effectively as any ‘Bolshevik’ mechanisms.

Perhaps the PEF would open up a separate tag category for these dialogues, so that we could disabuse ourselves and the public of the effects of name-calling and long-standing misunderstandings.

It would help progressive economists to articulate alternatives, to slice through rather than react, and to force the ‘market’ oligarchs to reveal their dripping teeth.

thanks again to you and all PEF folks for your good work,
Leigh (nee Fesenko- Melinyshyn)

Comment from Trasvis Fast
Time: September 16, 2008, 9:52 am

Jim you expect from a guy who said this yesterday:

“My own belief is if we were going to have some kind of big crash or recession, we probably would have had it by now.”

The guy does not get it, nor does he want to. Why the other parties are not hammering on this I just do not know. Fact is the Cons could not make hay in good times so the proposition that they are uniquely qualified to steer the economy in bad times is silly.

If they could not steer the economy when the river was filled with liquid gold how are they going to do it any better when the river is filled with liquid manure?

Comment from Leigh Thomson
Time: September 16, 2008, 10:04 am

Best line of the day,

after describing the wake-up call provided Monday by impoverished Nigerians seeing resources and revenues flowing away;

“When you start to see the market not paying attention to what’s going on around it, the fundamentals are not being closely looked at,” said Jonathan Kornafel, Asia director for market maker Hudson Capital Energy in Singapore.

Fundamentals are the level of pain which residents will tolerate before they dump their leaders, and otherwise change economic relationships.

Comment from Jim Stanford
Time: September 16, 2008, 10:09 am

Travis, that is by far the best one-liner of the campaign: “If they could not steer the economy when the river was filled with liquid gold how are they going to do it any better when the river is filled with liquid manure?” I will use it as often as possible, with full credit to you!!!

Leigh: I am sorry if my sarcastic use of the term “Bolshevik” was offensive — I guess you have to be careful throwing around terms like that. I have adjusted my terminology (if not my tone!) accordingly. Thanks for that feedback.

Comment from Sullum Voe
Time: September 16, 2008, 11:19 am

I would add in one more to the fold.

Investment in R&D is operating in the red !? (not sure how that works or how one measures it but something to do with the destruction of high value adding assets and the sucking sound of the harper economic policies on the economic fabric of our economy)

This is a combination of the increased foreign ownership of our already branch plant economy and a hands off approach by our federal govt.

What is needed is a comprehensive industrial strategy that promotes R&D goals within an innovation strategy towards the environment and high waged industries.

As pointed out we are heading in the exact opposite direction.
These are not small changes that one can tinker away with. It takes leadership, vision and action.


Comment from rick downes
Time: September 26, 2008, 5:21 pm

Overall the Conservatives have the right idea and they will get what they want, don’t you feel that we should assist them and allow them to win the majority so that our Canada can succeed through these tough times?

Comment from erik andersen
Time: October 1, 2008, 9:55 am

The subject of declining Canadian productivity has been around for at least ten years. In my opinion it has its roots in the loss of Canadian head office presence. The progressive foreign takeover of Canadian industry, combined with the transformation of many enterprises into income trusts, have created financial conditions that do not result in capital re-investment and research and development. The all important retained earnings accounts have gone out of style as corporate managers have focused instead on financially engineering ever more cash flow to shareholders.
The current, most dramatic example of this kind of handiwork can be seen if one has a look at the affairs of the Australian conglomerate, Babbcock & Brown. While not a Canadian example this group illustrates the consequences of a decade of over- gearing that has left its satalite companies, such as B&B Wind Partners and B&B Power Partners, in financial distress and even insolvency.
An industrial strategy that allows or encourages consumption over savings (as in retained earnings accounts and R&D) will with certainty produce diminishing productivity. On numerous occasions this dynamic has been shared with our Federal Governments but so far to no avail. Mr. Harper is just one in a line of others starting with Mr. Mulroney.

Comment from Randy
Time: October 3, 2008, 12:23 pm

Did you miss this bit?

“Annual Canadian productivity growth similar to the United States since 2004”

I would assume that if you measured global productivity you would find that the growth of China is a large factor in reduced productivity.

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