Wednesday Night #1210 Steve Poloz & Brian Mitchell

May 11, 2005

As so often happens, events (or the stars) are aligning to ensure an exciting Wednesday Night this week. With the Tories claiming the Liberal minority government could fall as early as Tuesday after the Speaker of the House ruled that a motion calling on the government to resign is in order, the visit of Westmount Ville-Marie’s acclaimed Conservative candidate, Brian Mitchell, is, to say the least, timely.
Stephen Poloz has conveniently arranged the Quebec portion of his semi-annual cross-country tour for this week and provided we do not lose him to the fleshpots of Drummondville where he is speaking at lunchtime, we should have him as a welcome commentator on export-related matters. He will also be the speaker at the Board of Trade luncheon on May 12. For those with an interest in the global textile market, please read his column of May 5 on the MoneySense Website.
Congratulations to The National Post for the series on The New India. As Wednesday Night has long recognized, India and China are in a race to lead major world economies in growth in the next half-century as their populations of more than one billion people each evolve into middle-class consumers. China is in the lead, with production this year increasing at a faster-than-forecast 9.5% a year, compared with India’s 6.6%. But there are demographic trends at play that may give India the advantage over time. Meanwhile, the International Herald Tribune’s Kristy Houghs focuses on India’s poor, writing that Indian officials must find new and creative ways to fight poverty if the country’s economic success is to be sustainable, and argues that programs focusing on entrepreneurial development and private-public partnerships offer the most promise as India rises on the world stage.
Wednesday Night’s own Cleo Paskal has recently returned from some two months in India, where we had visions of her languishing in back-packing establishments, but lo! we find that she has been sampling India’s unique take on the luxury hotel.
During the 60th anniversary celebration of VE-Day, we have noted with dismay the Prime Minister’s inept handling of what should have been a major tribute to the Canadian liberators of The Netherlands. “Mr. Dithers” out-dithered himself and managed to arrive as the party was winding down, thus disappointing some 1500 veterans who had their act together, making himself, the Canadian government and the country look foolish. In addition, in our opinion, he behaved like a badly brought-up and cranky child, confining the other leaders to the back of the plane and barely recognizing their presence.
Thanks to Lyda Letacq, Wednesday Night will pay its own, more dignified tribute with three new guests: Christiane Haxaire, Barbara Trottier and Suzanne Trudel who will share their memories of VE-Day respectively in Paris, London and Québec.
If you are VERY good, we might be able to skip the latest from the Gomery Commission!

The Report

Introduction
This was an unusually crowded Wednesday Night gathering, attracted by the possibility of meeting a real-life Westmount Conservative, and at the same time, the opportunity to hear EDC’s economic guru, Stephen Poloz on the state of the nation. The varied interests and professional backgrounds of the participants ensured a particularly lively discussion which focused on those two topics.

A vote of confidence?
What has happened to our country and to our province? Every four to five years or so, we entrust a good part of our future, our earned income and our collective well-being to men and women who claim to have selflessly offered themselves as a sacrifice in order to look after our interest with intelligence and integrity. As for integrity, while Mr. Martin may very well claim that the allegations of blatant misuse of the money entrusted to the government by the electorate have been opened to public investigation and scrutiny, one is led to question whether the timing of the twenty-one billion dollar projected expenditures on social programs [“Federal government spending announcements have hit $22,349,642,360 since Paul Martin went on television on April 21 to apologize for the Liberal sponsorship scandal”, reports the National Post] might be considered more a measure to use the public purse to fund a re-election campaign than part of a coordinated planned effort to further the common weal. In contrast the $103 million cut from student bursaries in Quebec seems a mere pittance and one wonders why it took such prolonged action by the students to have it restored.
As for the Conservative Party, the continuous roadblocks to the functioning of Parliament appear to public to be more opportunistic than in the best interest of that portion of the electorate that it represents. Certainly they have the duty to highlight the flaws of the party in power, but the ongoing obstruction to the work of the Commons does not appear to have enhanced their image as a party of integrity. The highlights of the Conservative platform, hammered out at the recent policy convention in Montreal, have been stated as inclusiveness, accountable government, fiscal responsibility and addressing the problem of fiscal imbalance. Certainly, no one can argue with inclusiveness, accountable government or fiscal responsibility, which fit nicely into the category of motherhood and apple pie, but the fiscal imbalance issue, while laudable, causes some uneasiness among some federalist Québec voters who are reminded of the close relationship between the Conservative and Bloc caucuses in their haste to topple the government.
Sadly, the only reasoned player who, by his actions and words, offers real contrast to the elected members of the other three parties, is taking a leave of absence due to the illness of his wife. Only Ed Broadbent has appealed for civility, decorum, and reason in the House.
[Editor’s note: We would further point out that Jack Layton appears to be following in Ed Broadbent’s footsteps. As Maisonneuve Magazine‘s Jonathan Montpetit said on Wednesday morning in his commentary on the CTV/Globe and Mail poll:
61 percent of Canadians feel Prime Minister Paul Martin is likely to lie, only a small percentage feel NDP Leader Jack Layton is either hypocritical or likely to lie… Out of the four leaders, Layton is the one most people would want to have supper with. What this all means in terms of electoral fortunes, however, is anybody’s guess … Unfortunately for Layton, voters don’t usually put one’s potential as a dinner guest at the top of their mind when they head to the ballot box.
… In the war for personality, Layton is the runaway winner. Come election time, that could go a long way in a campaign that is shaping up to be a choice between lesser evils for many Canadians…. taking the high road these days is bound to pay dividends. Witness Layton’s comments to the media on Monday, when Canada’s political leaders showed up a day late for VE Day ceremonies in the Netherlands. The ceremony was barely finished before they all started blaming each other for giving veterans the shaft. Layton, meanwhile, decided to play the integrity card and accepted some of the blame himself. It’s a novel approach, … yet it’s an effective way for a leader to distinguish his party from the riff-raff.]
It appears to most observers that the Conservative Party has an ill-defined image. While some fear that the Conservatives are moving too close to the centre and thus offer little contrast to the Liberals, others express concerns that the Conservatives in their anxiety to differentiate themselves from the Liberals would jettison much that is good in the proposed Budget. The great challenge, however, will be to restore the finances of the country to the healthy state enjoyed when Paul Martin was Minister of Finance (fully supported in his actions by Jean Chrétien, be it remembered), while responding to the variety of (legitimate) demands of the citizenry. Among the most pressing needs is that of addressing the current punitive tax system that discourages wealth creation and productivity.
Whatever their views, the perception is that the Conservatives have failed so far to make clear what the Party IS, despite the platform that was agreed at the Policy Convention. In response, supporters of the Party urge the sceptics to refer to the Party Website where all will be revealed.
Current estimates place the post-election government across a wide spectrum from minority Liberal to majority Conservative. It is to be hoped that whatever the makeup of the Commons it will succeed in regaining the confidence of the electorate, especially in Québec, which faces a critical time in its political life regardless of the outcome.
In the last election Liberal voters in Quebec wanted to punish the Liberals; they still want to punish the Liberals for their flagrant misuse of public monies, but this time, they should have a viable alternative – the one offered by the new inclusive Conservative Party that reflects their interests and their communities
The Bloc is the Conservative Party in Québec … the NDP is the protest vote

The economy
Although there is the temptation to link the recent decline in the Canadian dollar to the political gamesmanship currently being played out on the floor of the House of Commons, objective observation contradicts that view. In fact, all world currencies have declined simultaneously and by about the same amount. Canada is now a petrocurrency and the fluctuations of the Canadian dollar are more likely to reflect fluctuations in the price of oil. Commodity prices are easing as the world is slowing down (as it should) and interest rates remain stable. The Canadian dollar can be expected to decline to between seventy-seven and seventy-nine cents U.S. over the next twelve months. The U.S. trade deficit is not considered to be as serious as it appears as, with ever-increasing globalization of U.S. industry, much of these deficits occur within U.S. companies.
With increasing petroleum prices, the Alberta Tar Sands have come into prominence. Oil reserves exceed those of Saudi Arabia, with estimates of up to a century of world supply of oil, but the exploitation of the full extent of the reserves will depend on the price of oil – the lower-grade oil, which is deeper, is more costly to bring up. With an expected drift downwards of the cost of oil (+/- $45 this year, $40 next year), Canada can expect a fairly major productivity upturn, and with a stronger oil industry, the dollar could well rise to 90 cents in the next cycle. The cost of extraction is currently between $16 and $14, although some quote it as low as eleven dollars a barrel, making this enormous petroleum source increasingly profitable. Other observers suggest that some energy cost models estimate that extraction costs for the tar sands will not go below $50 bbl.
Some economists express concern that the advent of the Tar Sands bonanza will lull Canada into a false sense of security and have an adverse effect on productivity. It might be added that there is wide variance in estimates of environmental costs associated with the exploitation of the Tar Sands and finally, there was no voice this evening to invoke the Hubbert’s Peak theory. What is undisputed is that the higher the price of oil, the more reserve is recoverable.
We see a risk on the horizon for Canada and it is the tar sands because it takes our minds off productivity growth
Predictions of Canadian economic growth for this year range from a high of 2.4% (lower than the Bank of Canada predictions) to 2.8%, with closer to 3% next year. The world economy is slowing down noticeably (Japan and Europe have been slow for 15 years) this year after a surprising increase of 5% last year. Predictions of inflation next year range from zero to 2%.
Canada is not a productivity-oriented country. There is still a lot of work to be done to strengthen the economy, and there are a lot of demands on the treasury. At the end of the day, there is no evidence that society wants to cut spending, especially on healthcare, cities, etc. There needs to be a real strategy for this economy, which is still in an uphill climb.