15 June 2012

Even the OECD supports Mulcair

The Organization for Economic Co-operation and Development (OECD) has issued a report saying that increasing commodity prices is creating an uneven economy in Canada. This, of course, is what Thomas Mulcair has been saying and for which he has been subjected to hysterical attacks by Stephen Harper and assorted provincial premiers.

Not that he needs support from foreign sources. A report commissioned by Industry Canada, i.e. the federal government, found that between 33 and 39 per cent of employment losses in the Canadian manufacturing sector related to exchange rate appreciation between 2002 and 2007 were due to Dutch disease. This report, suppressed by Industry Canada but about to be published in a prestigious journal, is the most rigorous and technically sophisticated of the spate of studies now emerging on the subject, and the only one that actually quantifies employment loss linked specifically to Dutch disease. A report issued by the Institute for Research on Public Policy agreed that the effect occurred but suggested the results were less severe.

Dutch disease is not just a clever phrase, it is a real and potentially serious problem that deserves serious debate. It certainly deserves better than sticking our heads in the sand out of political correctness, afraid we might offend a sister province, and pretending it doesn't exist. When the effect occurred in Holland, where it earned its name, it was occurring in a single jurisdiction and could be dealt with in an objective fashion. In Canada, we have a variety of jurisdictions, some which receive most of their revenues from manufacturing, others from commodities, consequently what is good for one may not be good for another, so tensions arise and make solutions more challenging. But the challenge is there nonetheless—better to deal with it than politely ignore it.

Some of his critics had reason to attack Mulcair other than political correctness of course. PM Harper and Premiers Wall and Clark face NDP oppositions, so any excuse to attack an NDP leader is instinctively seized upon. Premier Clark has particular cause to worry with the NDP breathing closely down her neck as an election year approaches. Premier Redford's criticism was more measured, as we might expect from a more sophisticated politician, nonetheless a staunch defence of the tar sands is obligatory for an Alberta politician.

I doubt the issue will go away quickly when even outside organizations such as the OECD are pointing to it as a problem for the future of the Canadian economy. What we can hope for is a more rational debate focused on long-term, sustainable solutions, federally and provincially.

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