Saturday, October 24, 2009

Ontario’s long rudderless slide to nowhere

The news in the past couple of days about the state of Ontario’s economy had been dismal. And there is no silver lining, at least, none in the next 24 to 36 months. Apparently the province’s economy is in freefall, and we can’t blame it all on the worldwide financial crisis and resulting recession.

While things started going sour for most Western economies about 15 months ago, Ontario’s problems started much earlier. For example, Ontario was headed for “have-not” provincial status for, at least, three years, finally achieving that unenviable distinction about a year ago.

“The challenge of sustaining public services while returning to a firmer fiscal footing is one that we cannot ignore. To be able to continue investing in key priorities while managing down the deficit, we must focus our priorities and make strategic and, yes, sometimes difficult choices.”

- Dwight Duncan

Ontario, which has long been considered Canada’s economic engine, is now considered a “have-not province.” And what is Dalton McGuinty doing about it? Well, nothing actually, except of course to spend and waste more taxpayer money on social programs and to save a few union jobs in the auto sector.

The high Canadian dollar is being blamed by the Grits for the province’s dismal performance. But how much is it really to blame?

The Canadian dollar has a history of being relatively high during good economic times. When I first came to live in Canada in the mid-1950s, the Canadian dollar was about $1.02 to $1 U.S. and reached about $1.06 two years later, yet the Ontario economy was healthy and thriving. And our dollar was worth more than the U.S. dollar for part of the 1970s—not exactly a loosing decade for Ontario. There were also times during the Mulroney years when a high dollar coincided with economic growth in Ontario.

For many years before German reunification, West Germany had both a strong economy—one of the strongest in the world—and a high exchange rate on the Deutsche Mark (DM). The DM rose steadily (against the US$) throughout the pronominal era of growth experienced by West Germany during the last half of the twentieth century.

Of course the higher dollar will somewhat depress Ontario exports, but it cheapens many of the inputs into some of those exports. It also reduces inflation on billions of dollars worth of things we consume that have been imported from elsewhere. And remember that Ontario’s economy is a lot more than just manufacturing. 

What Ontario needs is not a government to manage us out of the mess we are in—as McGuinty and Dwight Duncan will try to do—but a government that will create an environment that will attract investment in Ontario and encourage businesses to create jobs here. We need our government to stop scooping up so much of our income and spending it wastefully.

Think of the billions McGuinty has spent to save a relatively few auto sector jobs. Think of the billion-dollar mess that is eHealth. Think of the mess that must also be in other government agencies—surely eHealth is not unique. Think of the increases Finance Minister Dwight Duncan says he plans in health and education, including a new full-day early-learning program (free/subsidized babysitting), despite our dire financial straights.

Why not stop all increases in spending? We simply cannot afford more at this time.

Why not slash wage rates of civil servants and employees and contractors of crown owned agencies? The “pay premium” for federal employees compared to similar jobs in the private sector is over 50% (wages and all benefits)—I doubt the “pay premium” for Ontario civil servants and crown agencies is less.

Sell off the gambling casinos. Our government-owned casinos lost $94 million last year. Incredible!

Let’s get out of the retail sales of alcohol. Sell off the LCBO. Alcohol will still be taxed. Why are we in the retail business anyway? Old fashioned narrow-mindedness and greed, I guess. Politicians can feel like big-time business men. 

Get out of green energy subsidies. Government-subsidized green energy projects are not needed in the immediate future—next 10 years, if ever.

And, for heavens sake, stop this madness of subsidizing babysitting. Reduce kindergarten to one year only and stop subsidizing child care except for those who can prove they cannot afford it and must go to work to support their families—not to pay for vacations and other non-essentials.

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© 2009 Russell G. Campbell
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  1. Yup.
    How do you lose money on a casino?, it's theft, how can you lose at theft?
    Good grief.

  2. Problem in Ontario is that for years the rest of the country treated this province as the golden goose. But we Ontarians also blew it, instead of planning for this day of judgement by voting conservative and biting the bullet, we ran to the liberals who promised to kiss our scars and make it feel better. Well now the real hangover begins. (real conservative)