Talk to the (steady) hand

If you pay attention to economic issues you have probably heard that a recession is defined as two consecutive quarters of declining real (inflation-adjusted) GDP. It is pretty arbitrary, but on this basis, the most recent numbers had Canada missing the cut-off for recession by a hair.

Indeed, it was a downward revision to the first quarter GDP number (which was negative) that made second quarter growth positive. In the absence of that revision, we would have inked two consecutive quarters of declining GDP. These subtleties aside, an important take-away from the second quarter GDP numbers is that second quarter GDP was lower than the fourth quarter of 2007.

Yesterday’s productivity data release from Statscan shows an even uglier picture: “Canadian business labour productivity declined 0.2% in the second quarter of 2008, after declines of 0.6% in each of the previous two quarters. This is the longest series of consecutive quarterly declines since 1990.”

Productivity is typically reported as real GDP per hour worked. So if we adjust for hours of work, we’ve had not just two but three declining quarters. And as Jim Stanford pointed out in a short piece released yesterday by the CCPA, Canada’s productivity record during the Harper years is not just negative but the worst of any Canadian Prime Minister since the dawn of modern statistical record-keeping.

So why is the economy not a bigger issue in this election? Perhaps because private forecasters, as well as the federal government and the Bank of Canada, failed to see any economic downturn coming. The Bank of Canada, in its mid-July Monetary Policy Report, lowered its expectation to 1.0% growth for 2008, down from its projection of 2.5% a year earlier, and 1.8% as recently as January. Private sector forecasters have fared no better, and even though expectations have been revised downwards my sense is that they are still excessively optimistic given the actual fundamentals.

The real economic issue, however, is not Harper’s record but what he would do if things got really bad. We are looking at a government that will be cutting spending in order to balance its books. That’s not the news I want to hear if I am at risk of losing my job. Those income tax cuts only help if you have income (and the more income the better). So we are seeing a campaign framing the issues as short-term private monetary interest as being more important than sharing the risks that can emerge in bad economic times.

American writer Michael Yglesias calls this YOYO economics: you’re on your own. Or in Canadian electoral parlance: talk to the (steady) hand.

3 comments

  • It really goes back to what is it that actually defines a recession and what policies as you point out are put in place to fend off the recessionary winds. The key is when, your ideologically driven definition concept of recession kicks into gear and how proactively you enact polices in a proactive manner to minimize the effect of the adjustment.

    HArper and his band of libertarians, do not seem to acknowledge the concept of recession, as he stated prior to the GDP results a couple weeks back as it was merely technical in Harper’s words there is no cause for alarm. If is letting all the investment infrastructure in manufacturing be swept away in a matter of the last 2 years, due in most part to a high dollar, and your only response is to finally make investment in one ford engine plant, as a means of proactive policy respose, then we are in for some serious trouble. As you point out Mark, it is the policy, or should I say lack of them, that we will have when things get much worse. It seems as though the recession discourse is sweeping across the European continent. The business press across the ocean has been unrelenting in the recession speak.

    How is it that our little export oriented economy, given the recession now in swing south of the border and now apparently sweeping across Europe, can we not further be pushed into a full recession.

    How can a government stand up and paint the picture they have in this election. It is bold faced lies, and don’t get me going on the stats for it.

    Mums the word. (arrrggg) what a pathetic Statistical set of numbers we have had over the last couple of quarters, and did I mention the quality of them?

    Potentially Mr. Harper is a closet faith healer, maybe he will hold up his arms and we shall all be saved. I wouldn’t be surprised given his libertarian dementia he has with the economy.

    What school did he go to? They along with his economics professors should come with a warning label for working class people.

  • Hi Marc

    I guess Mr. Godge read your post yesterday,as he says that the BOC did know all this was coming. Read here-

    http://www.reportonbusiness.com/servlet/story/RTGAM.20080912.wrdodge12/BNStory/Business/home

    Funny how a guy gets out of the public office and lets his hair down. (uh sorry Mr. Dodge!, takes his hat off)

    Also though it was quite amusing reaing the FT today and seeing a marxian quote and a critique of capitalism. Gee I thought I was on the Monthly review website there for a moment.

    REad here

    http://www.ft.com/cms/s/0/b1e7adb2-801a-11dd-99a9-000077b07658.html

  • Look At The Steady Feet

    As usual, The political class is planning for a serious downturn in the economy and the plans don’t include helping out everybody. Well, That makes the work easier I guess, although I’m sure they have to be a bit creative in selling their plan to the majority. The ads won’t include mention of the fact that we have a crisis of representation.

    What (bloody) geniuses capitalists are! They create this monstrous system that devours all, including members of the elite. That’s what money does to minds and hearts, clearly. When the time comes, and the hungry monster is right on top of us, you’ll see the well off running way ahead of everyone else, because it costs money to run and they have it and their plan involves, as usual, taking ours as well.

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