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Canada vs. The G-7

Keystone Liberals

Yesterday, Andrew Coyne lambasted a Liberal Party “Reality Check” from Thursday that looks eerily similar to the table that I had posted on Monday.

Like my table, the Liberals use the words “Growth”, “Decline”, and “Britain.” By contrast, the OECD’s tables use a negative sign (instead of words) to denote declines and refer to the “United Kingdom.”

The e-mail version posted by Coyne presents the same quarterly figures as my table, but cites the September 3 OECD report that provides only annualized figures. The (corrected) version on the Liberal website cites the August 19 OECD report from which I had gotten the quarterly figures.

So, I guess the Liberal war room deserves some credit for fixing its initial error. But it could have saved itself the trouble by simply citing this blog in the first place.

Coyne’s Critique

Coyne argues that Canada’s weak second-quarter performance does not directly contradict Harper’s statement that Canada’s economy has been better than others, which may be a valid criticism of the Liberal “Reality Check.” However, in defence of this blog, my point was that Canada’s weak second quarter contradicts Harper’s earlier statement that we would recover faster than others.

Coyne also objects to focusing on just a single quarter of data. Again, this point may be a valid criticism of the Liberals. I had originally posted the table in a commentary on Statistics Canada’s release of second-quarter GDP numbers, so I make no apology for focusing on the second quarter.

The Long View

It is certainly true that we should take a longer view in judging how Canada has weathered the recession. But adding a couple more quarters can paint an unduly rosy picture: “Canada stayed above water in the second and third quarters of 2008, a period during which the rest of the G7 countries recorded at least one quarterly contraction.”

This assessment omits the first quarter of 2008, when the Canadian economy contracted as Europe and Japan enjoyed solid growth. Indeed, our slight reduction in the first quarter exactly offset our slight increase in the second and third quarters.

To his credit, Coyne’s graph includes all of 2008. Canada ends up being in the middle of the G-7 pack. While this record does not support claims that Canada has performed worse than everyone else, it does disprove Harper’s repeated assertions than Canada would inevitably perform better than everyone else.

Apples and Oranges

Although Canada is a member of the G-7, one might ask whether this organization is the best comparator. The G-7 consists of large economies on which it is very easy for me and other commentators to find data.

However, Australia is probably more similar to Canada in size and economic structure. As Jim pointed out in yesterday’s Globe, Australia does not seem to have fallen into recession at all.

Enjoy and share:


Comment from Travis Fast
Time: September 5, 2009, 4:35 pm

Ok to continue with my seemingly contrarian questioning. If Australia is exceptional than could it not be because Australia of all the G-7 and in particularly the anglo-saxon countries pursued liberalism without abandoned for the last 10 years? Or put in a less leading manner, what accounts for Australia’s success at dodging the recession ball?

Comment from Erin Weir
Time: September 5, 2009, 5:13 pm

I have no explanations for Australia’s apparent success beyond those in Jim’s column. I raised the matter because I think that it deserves further investigation.

Comment from Travis Fast
Time: September 6, 2009, 3:39 am

Steve Keen has been arguing (at his blog Debt Watch) that Australia is in for a substantial correction given that its macroeconomic fundamentals are just as precarious as the US and other G-7 countries were. And while I am not as glum as Keen is on the future prospects of the Australian economy it might be a little too early to hang too much on the ‘success’ of the Australian case.

Comment from Paul Tulloch
Time: September 6, 2009, 8:35 am

Potentially Australia did not go into an official recession, however I would say it flew on similar trajectories as we did.

15 months of decline in the manufacturing sector, and the employment index falling for the 20th successive month.

There is also a somewhat of a unique manufacturing de-industrialization effort to asia that the Aussies were suffering from, a lot more pronounced than most developed countries. I can’t find that paper, but it compares manufacturing across the developed countries and it shows a significant dip in the Aussie case, versus the rest of the economies of a developed nature. It was becoming a Canada on steriods, declining manufacturing with a further shift to resource extraction.

As we know resource extraction the commodities have not been hit as hard as manufacturing and finance, so potentially this has helped the Aussies weather the storm a little better. However, contrary to Jim, I think they suffered quite a bit as well. Maybe not quite as deep, but my question is to what degree of meaningfulness does this difference make. Is there enough of a difference in the Aussie case that we should he heralding them as some kind of model.

I think it was the Aussie’s that put in place some quite questionable industrial relations legislation that strip its unions of some fundamental traditional rights.

If the issue lingers I will look into it more.


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