Trudeau’s Canada and keeping up with the neighbour
Trudeau’s parliament legalized assisted suicide, and cannabis for recreational use. His government has let people identify themselves as neither male nor female on their passport. It has moved efforts to fight global warming from the periphery of policy to the centre, compelling provinces to put a price on carbon emissions or submit to a federal scheme. It has continued Harper’s policy of liberalizing trade and redistributed income while tolerated budget deficits. In a general election in October, Canadians decide whether they want four more years of Trudeau’s liberal policies.
As in 2019 the figures show: Canada US
Population: 37 m 329 m
Life expectancy 82 years 72 years
GDP $2trn $21trn
Foreign born 22% 14%
Gun homicide(100,00 people) 0,7 12
Happiness rate (100 countries) 9 20
Even before Trump, Liberals in Canada were aware that voter disenchantment and populism were on the rise. Trudeau saw one of the important answers to this is economic, and his remedy has been to give the middle class a pay rise. The global recession that began in 2007, kindling populist fires elsewhere, was shorter and less severe in Canada than in other rich countries. Taxpayers did not bail out fat-cat bankers, health care is universal in Canada, the quality of public education is high and it does not vary wildly by postcode. The intergenerational rate of social mobility for people born in Canada is double that of America. Income inequality has been stable since 90s and median household income has risen sharply over the past 25 years.
Nevertheless, there is sign of stress caused by technological change and the volatility of economy largely linked to commodity prices. Incomes soared in commodity rich Alberta and Saskatchewan from 1992 to 2014 but barely grew in people rich Ontario where from 2007 to 2011 some 10,000 manufacturing firms stopped exporting.
The 40 % of the population with the lowest incomes now have a much smaller share of the total, while that of the top 10% has risen sharply. Trudeau has also had to worry about whether there will be growth to distribute. The recession in the oil industry began the year before he took office. Trump’s harassment from across the border is slowing the Canadian economy even more. His trade war on China threatens global growth impacting Canada. Anything that puts the global trade system at risk is a significant risk to us, says Stephen Poloz, the central back’s governor. Canada has avoided recession thanks to spending by consumers and by government. To stimulate growth Trudeau let a near balanced budget move into deficit of about 0.9% of GDP this year. He also promised to spend about 8% of this year GDP on infrastructure over 12 years. Most important, he has put money into the pockets of people on middle and low incomes. A means tested child benefit program gives families on the lowest income C$5,600-6,600 a year per child. More drastic was cutting the tax rate on the bottom income bracket and raising it for the richest 1% they did not like. The government expanded a tax credit for workers on low incomes. From 2015 to 2017 the number of people living below the official poverty line dropped by 825,000. Polling shows that the number of Canadians who say they are middle class has risen since 2017 by quarter. Growth in income per person has kept pace with America’s for 150 years despite all the upheavals of that period, Canadians at the bottom half of the income scale are much better off than Americans still, thanks to lower levels of inequality.
But Canada will find harder to keep up from now on. Since 1995 it has avoided falling behind America because its employment as a share of the population has grown faster. Canada’s labour force is now ageing and its employment ratio is unlikely to continue rising. That leaves productivity growth, which comes mainly from innovation, as the only source of economic growth.
Canada seems to be getting better at this. Outfits like the MaRS Discovery District, an innovation hub in Toronto, are helping to promote collaboration among 1,300 firms and other institutions such as regulators and banks. It was founded to commercialize medical technologies but has branched into other fields. One long standing problem has been that Canadian enterprises are slow to use the inventions of such companies. Vern Brownell, the boss of D-Wave which calls itself the world’s leading quantum computing firm, says that just 0.25 % of its revenue comes from Canadian customers. Vancouver’s digital technology super-cluster one of five set up by the Trudeau government that received C$153 m to invest over five years and raise at least that much privately seem to be working. In 2017 Toronto and Vancouver each created nearly 29,000 technology jobs more than Silicon Valley, Seattle, New York and Washington DC combined. Canada’s lower costs and liberal immigration regime help. American tech giants such as Uber and Microsoft have boosted their research and development activities in Canada too.
While the country’s economy has been growing at around 2 % information technology services have been expanding at triple that rate since 2016. Canada remains less keen to use competition as a way of boosting that productivity. It is their way. Canada came through the global financial crisis better than America did, in part because its banks are prudent, well-regulated and untroubled by excessive competition. It hopes to match American smarts and scale while remaining Canadian in character.
Burnaby Mountain in a suburb of Vancouver offers a spectacular view of the North Shore mountains but at the foot of this mountain is one terminus of the Trans Mountain pipeline that carries 300,000 barrels of oil a day from Alberta. Tankers deliver the oil to America’s west coast and to Asia. The pipeline is at capacity forcing Alberta’s producers to shop oil by rail to the US that cost them C$20bn in revenue in 2013-17. So Alberta wants to treble capacity by adding another pipeline alongside the existing one. But the project has provoked opposition from British Columbia, environmentalists and local indigenous groups that asked the same question: “If the planet is to avoid catastrophic climate change, why are we expanding oil production that is slowing down and banks do not want finance anymore by building a pipeline with a lifetime of 50 years?”
Trudeau has been caught in the middle of Canada’s fiercest political battle, which pits environmentalists against the oil industry. A large part of his pitch to voters is that he can reconcile protection of the environment with the need for economic growth. The federal government bought the pipeline for C$4.5 bn and the expansion has begun on June this year.
Canada’s oil reserves are the world’s third largest. Oil and gas extraction, and industries related to it, account for about 7 % of GDP and fifth of export. Trudeau can not disregard hat industry but he also wants by 2010 to meet Canada’s commitment, made by Harper and reaffirmed under the Paris climate agreement to cut emissions of greenhouse gases by 30% from the levels of 2005. Canadians are currently among the world’s biggest emitters per person, each of them belching out nearly three times more greenhouse gases than the average person in G20 countries. To square green goals with economic ones, Trudeau has set a national standard for pricing carbon emissions, which seeks to cut pollution by raising its price by tax. New Alberta’s Conservative premier has scrapped carbon tax as nonsense. Andrew Scheer, the opposition leader says if he becomes next prime minister he will scrap the tax and forget the climate. The rights and wrongs of oil extraction are the main wedge issue in Canada. Nowhere it is wedgier than in Alberta, which thanks to oil, is Canada’s richest province or has been. The plunge in global oil prices that began in 2014 and recent worldwide environmental upheaval is turning boom to bust. By 2016 Alberta’s oil industry had shed 100,000 jobs. Office vacancies in downtown Calgarry, Alberta’s business capital, have jumped from zero in 2007 to 25%. International oil companies such as Exxon, Total and Royal Dutch Shell have either delayed projects or pulling out. Oil from the province’s oil sands requires more energy to extract than does crude from more conventional sources. Producers therefore emit more greenhouse gas per barrel that is seen as extraordinarily dirty these days.
By scrapping the carbon tax brought in by his predecessor, Alberta’s new Conservative premier has made it harder to claim that Canadians truly care about their environment. He has hitched Alberta to a national campaign against Trudeau’s climate policy waged in the name of affordability.
The government’s scheme was designed to resist such attacks. Provinces with their own carbon pricing schemes can keep them. British Columbia which began taxing emission in 2008 and Quebec which ahs a cap and trade system have done so. The national scheme is only imposed on provinces that reject carbon pricing or whose schemes fall short of federal standards. It sets a price floor of C$20 a tonne this year, rising to C$50 by 2022. All the money goes back to the province where it is raised, 90 % goes to taxpayers. In Ontario a family of four will get back C$307 this year. When people say, we can’t have a carbon price that high, you should ask, why can’t we have income taxes that low?
Although Trudeau has lost recent battles, he could yet win the war. Canada is warming twice as fast as the rest of the world. Voters are starting to notice. The country is already getting rainier, and thus more vulnerable to flooding. The new Alberta Conservative premier cancelled few rallies against the carbon tax and claim that climate is changing because wildfire were raging near Edmonton followed by floods very unusual for that time of year, he admitted finally.
Nearly 80 % of Canadians think pollution pricing should be among the tools their government employs to fight climate change. In the election, it may be that climate alarm will count more than affordability anxiety.