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 (http://www.statcan.ca/Daily/English/080910/d080910a.htm). 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 (http://www.policyalternatives.ca/Reports/2008/09/ReportsStudies1957/index.cfm?pa=BB736455).
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.
- StatCan Debunks Small-Business Mythology (January 8th, 2014)
- Funding Cuts to Alberta’s PSE Sector: There Are Alternatives (August 7th, 2013)
- Gender Wage Gap hurts Economic Growth (December 18th, 2012)
- Selective Amnesia at the Bank of Canada (October 5th, 2012)
- Labour Losing to Capital (July 19th, 2012)