A Prorogation of Leadership

A new poll from Ekos Research shows that the Conservative Government is on the verge of seeing their once 10 point advantage over the Federal Liberals disappear. Given growing discontent over the prorogation of parliament, this latter move seems to have backfired on Harper. In fact, if, and this may be a big if, voters actually translate this discontent into action at the polls, then this could be fatal for the Conservative Party, or more likely, Harper’s leadership of the Conservative Party.

The decision to prorogue, no matter the historical (i.e. Liberal) precedents, is quite akin to John Tory’s disastrous campaign strategy in the 2006 Ontario Provincial elections re: religious schools – a bad decision made for political rather than meritocratic reasons. We all know what happened to Tory and I can only think that the Conservative base will think long and hard about what the backlash from Harper’s decision will mean for his leadership of the party.

But prorogation aside, perhaps now is the time for Canadians to think about the leadership of their country and we’re going in both the short and long-term. I write this not as an appeal for any other political party to take over, for we all know that at the present time none of the alternatives have shown themselves to provide any sort of tangible progress, but rather as a quick analysis of who leads us right now. You can make your own decisions afterwards.

The primary issue facing Canadians in the short and mid-term is the hangover we’ll suffer fiscally from the past 18 months of stimulus spending, bailouts and increased employment insurance payments. For 2010 this amounts to a $56 billion deficit. No small change. Though, if there’s a silver lining it’s that most of this is composed of cyclical, demand-boosting stimulus and nothing structural. Or so we thought.

The most recent estimate by Parliamentary Budget Officer Kevin Page is that we’ll face a $19 billion structural deficit well into 2014 thanks to an ageing population and overall decrease in economic growth. His forecast stops at 2014, but he foresees an even greater structural deficit beyond that date.

The Harper/Flaherty solution to this short and mid-term problem is to hope that economic growth carries our economy sufficiently to produce sufficient revenue to erase this shortfall. But increasingly most economists across the country are pointing to a prolonged recovery from recession, which when combined with labour market trends and the strength of the Canadian dollar, will fail to address the deficit.

So what’s a Government to do? Cutting expenditures is the easiest answer. When the Conservatives first came to power they cut $1 billion from the Federal cost sheet by cutting what they determined unproductive spending. Finding twenty times that amount in a budget of approximately $115 billion is quite another thing. Flaherty has noted that some of the savings will come by not replacing retiring civil servants though someone might want to remind him of our 8.5% nominal unemployment rate and the subsequent impact on tax revenue.

But perhaps such thinking shouldn’t surprise us. This is, afterall, a government that erased $12 billion in annual tax revenue by shrinking the GST from 7 to 5%. That put money back into people’s pocket’s you say? Yes, true, to the extent of approximately $250 per Canadian family, per year. However running a series of $20 billion deficits, and paying interest on each of those dollars, will take much more out of our pockets.

Moreover, at the time the tax cuts were proposed, most, if not all, economists across the country were against the move noting that while it would indeed be beneficial for those making large purchases, it failed to promote economic growth in any sustainable fashion. Much more effective would have been a decrease in personal income taxes. And perhaps more effective yet would have been the creation of a long-term cushion, one that would have provided the short-term cash stimulus needed over the past year, and one that cushions Canadian taxpayers from the ill-effects of a long-term deficit.

$12 billion in annual revenues would have gone a long way towards those aims, and in good times, could have played an essential role in updating Canada’s crumbling physical and economic infrastructure.  Research completed for the Federation of Canadian Municipalities estimates that we need to invest $123 billion into our bridges, roads and transit systems to maintain the status quo. Add another $31 billion to upgrade an aging system of water works and you can quickly see where we might spend a few extra billion.

Equally important is the significant need for increased funding for research and scientific development, where the competitive pressures of a global knowledge economy make government funding all the more important. While south of the border, Barack Obama recognized these needs and included $10 billion for medical research in his economic stimulus package, our government cut funding for basic research in its stimulus budget by $148 million, albeit while increasing funding for university infrastructures and equipment.

Britain’s Nature Magazine recently penned an editorial on the Canadian government science policy, noting that while, “Canada is in many ways a powerhouse of academic science: its university researchers are prolific publishers and strong contributors to the national research and development enterprise. Canadian government policy does far too little to support and utilize this strength.” It concludes its critique with this: “Some critics say Canada has no science policy at all. Others say it has unwritten laws that seem to let it muddle along. But muddling along isn’t good enough in today’s tough economic climate. Canada needs a bigger vision of where its science is going: a vision informed by organized scientists, and voiced by a strong position in government.”

There’s no doubt that the job of balancing a budget is difficult but doing so cannot continuously sacrifice the long-term. Our policies and investments in science, research and technology must be a priority. And if we don’t have the tax revenue to properly fund a competitive knowledge and research intensive economy, we certainly shouldn’t be cutting taxes at their expense. But instead the Harper’s government tax cut has seen a large source of potential funding for the sciences disappear.

And while the subsequent cuts to research funding may be unrelated, that move has seen world class Canadian researchers in health care move south of the border to take advantage of more generous research grants, a move which many in the science community fear will become commonplace. Once again, $12 billion in annual tax revenue would have gone a long way in ensuring the basic needs of a competitive knowledge economy.

Our science policy is not the only area of legislation and funding whose muddled and meek strategy may cost Canada well into the future. A similarly confused situation is found in Canada’s regulation of foreign ownership of Canadian companies.  Evidently this issue receives less attention than perhaps it should as a result of the fact that, on aggregate, Canadians still invest and own more assets abroad than do foreign interests in Canada. However with the growth of powerful, and usually State-backed, investment funds, shopping for resources and companies with a purse of more than $2 trillion, there’s no reason to believe the balance of investment may quickly shift.

In fact, since 2006 Canada has seen its three largest mining companies (Inco, Falconbridge and Alcan), employing 91,000 Canadians, be purchased by foreign interests.  As then head of Manulife Dominic D’Alessandro told Manulife shareholders in 2007, “I sometimes worry that we may all wake up one day and find that as a nation, we have lost control of our affairs.”

And such fears aren’t necessarily far-fetched. Since 2006, over 600 Canadian companies have been purchased by foreign interests. It’s not the number however that is of most concern. It’s the purchaser. In many cases, in particular when the purchase has involved resource companies, those purchasing the Canadian company have been State-backed organizations. So was the case when Prime Energy Trust was purchased by Abu Dhabi’s national oil company, Harvest Energy by South Korea’s national oil company, Athabasca Oil Sands by China’s state controlled Petro China and Inco by Brazilian mining giant Vale CVRD. Increasingly the natural resources that fuel our economy are controlled by foreign government interests.

In a world shaped by globalization and interdependent flows of capital and investment, such moves are to be expected. But our government must be willing to set limits on what assets are strategic to our competitive and sustainable futures. The Conservative government has judged our natural resources to be available to the highest bidder, so too our intellectual resources such as the thousands of patents owned by Nortel. Yet surprisingly they blocked a proposed takeover of McDonald Dettwiler (maker of the famed Canadarm) by US technology firm Alliant technologies on just those grounds – a strategic asset should not be owned by foreign interest.

Where then is the line that defines what is and what is not strategic to the future of the Canadian economy?  The Harper government has yet to tell us, and has instead employed a reactive strategy to evaluate purchases. And while it must be said that Harper’s strong stance on the Arctic and its Canadian ownership has been welcome, his diametrically opposed stance on the slew of takeovers affecting Canadian companies has been disappointing. If there’s a plan in place, do be kind enough to tell us. And if not, let’s start a discussion about it.

Moreover, while free trade and multilateral investment treaties dictate that such purchases should be supported, the lack of reciprocity between the Nations often involved in the purchase of such assets and the ability of Canadians to invest in those countries should make us weary of handing over assets in one-way trades. Seeking reciprocity and productive trade relations with foreign governments can’t however be accomplished by staying put in Ottawa. Hence the reprehensible strategy employed by Mr. Harper that included waiting five years to visit the world’s two increasingly most important economic giants, China and India. His rebuke to Chinese leader Wen Jiabao that the latter had neglected to visit Canada during those same five years ignores the power China’s growing economic clout wields. Canada will survive in the global sphere on shrewd diplomacy, not absolute power.

Canada’s survival, however, is more than just economic. It is strongly tied to the bond built by shared Canadian values across our 13 provinces and territories. The greatest threat to that unity has long been the movement for Quebec independence. And while the failed referendums of 1995 and 1980 have put these fears largely to rest, the current pandering employed by Stephen Harper to gain support in Quebec risks creating a slippery slope in the devolution of Canadian unity.

In 2006, twenty-four months before calling an NDP-Liberal-Bloc Quebecois parliamentary alliance “undemocratic” and a “deal with separatists,” Harper sought to placate the Bloc Quebecois and in turn improve his prospects in the Province by putting forth a motion to Parliament recognizing the Quebecois as a “nation within a united Canada.” While unequivocal in his belief that Quebec will never be an independent nation, the recognition of Quebecers as a distinct nation was a sharp departure for a man and a party that had long sung the potential risks of recognizing Quebecers as distinct from Canadians. Recognition in and of itself is understandable in some respects, but the semantic battle over the definition of nationhood, and the slippery slope it may open for other distinct cultural groups in Canada is far from clear.

Canada is a multi-cultural and multi-ethnic secular society. We celebrate that fact. However we cannot lose sight of the importance of shared belief in Canada. Multiculturalism, at least in my opinion, should not see personal beliefs on identity and culture supersede the whole, that is to say what Canada is. And while Canada is indeed the product of many nations, to begin to parse out power to each is a path I do not support. It is one that already begun, with the Quebecois, Aboriginals and soon perhaps Acadians or Western Canadians who see themselves as distinct in some recognizable manner. And should demographic trends continue, shall we anoint Sino-Canadians or Italian-Canadians nations in the same manner, and with the same delegated powers?

Acquiescence to individualistic desires for recognition may provide short-term political gains but they do little for what we’ve built as a union across linguistic and cultural divides since the 18th Century. To be sure, neither the NDP nor the rudderless Liberals provided much opposition to Harper motion regarding the Quebecois (only Stephane Dion, the architect of the Clarity Act and a staunch defender of Canadian unity, was opposed), but that does not excuse the single and short-minded nature of this decision. Instead of embarking upon a debate about Canada and Canadian identity, Harper aimed for populism and support in Quebec, as he has done across the country with his short-term economic decision making.

Leadership must go beyond the confines of short-term thinking. Yet as the preceeding notes have highlighted, our current Prime Minister seems incapable of doing so. Be it with regards to our economy or our constitution, and I’m well aware that I’ve omitted any mention of the environment or Afghanistan, Harper has shied away from debate and has chosen political expediency over the long-term. Proroguing Parliament is just one more move that does so and highlights some major gaps in what we currently need from our country’s leadership.

Perhaps the blame rests in the lack of clout held by a minority government, one that has sought to combat its insecurities by avoiding real discussion of the very serious predicament facing our economic and social structures. Or perhaps Harper truly does fear the “market instability” created by Parliament. But no matter the cause, the glaring lack of leadership and foresight coming from Ottawa related to our economy, our natural resources, and our political union, leaves me increasingly uncomfortable.

If we, that is to say both those who govern and those who are governed, are truly afraid of an open and honest debate about the future then we’re in trouble. For it is only through the conflict and debate caused by a jarring of opinions and ideas in Parliament and in our dining rooms that we’re going to find sustainable solutions to the issues that face Canada, and ultimately, are acceptable to Canadians.

Prime Minister Harper has failed us in this regard.

And while I don’t pretend to know who might do better, I’m prepared to find out. Perhaps the devil we don’t know will be more willing to talk.


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