Thomas Mulcair has taken a deserved media beating over his "Dutch disease" remarks. He's been criticized for bad economics and divisive politics. He's been compelled to travel out West and meet the angry premiers. Not a good month for a new party leader.
But as bad as it's been for Mulcair, he hasn't yet been beaten enough. Because here's the bottom-line ironic joke: The more correct Mulcair is about the Canadian dollar, the more appropriate the Harper government's policies look.
Suppose it's all true about the Dutch disease: Suppose that it's because of the oil sands that the Canadian dollar has soared so high. Suppose that it's because of the high dollar that central Canadian manufacturing is stressed. What should be done about it?
Mulcair's answer: tax carbon. A carbon tax may be a good way to respond to greenhouse-gas emissions. It would do nothing to help Central Canadian manufacturers. Manufacturers use energy, too -- lots of it. A carbon tax will raise the price of their energy inputs and thus the cost of their products.
Ah, you say, but Canada can remit the carbon tax if products are exported; and impose a carbon tax on imports, thus enhancing the competitiveness of Canadian products at home and abroad. Okay. But if Canada remits carbon taxes at the border, then the carbon tax will not raise the price of Canadian oil and gas sold to U.S. buyers. Which means the oil and gas will continue to flow south, and will continue to raise the value of the loonie, Mulcair's main complaint. Mission pathetically unaccomplished.
What's a better response to a currency pushed higher by resource prices?
In a perfectly functioning market, a high currency should not lead to increased unemployment. Instead, it should lead to an employment shift, from traded goods to non-traded services. A factory worker who loses her job in Quebec should be able to find work as, say, a nurse's aide in Alberta.
Unless, say, the Alberta nurse's aides are unionized to exclude competitors. Or unless there exist inter-provincial barriers that refuse to recognize out-of-province credentials. Which side is Mulcair on in those debates?
A currency pushed higher by resource prices also creates opportunities to increase national savings, both public and private. How to do that? Start by reducing the dis-saving of budget deficits, as the Harper government proposes to do -- and as the NDP does not. Follow by creating incentives for more private saving, by reducing business and investment taxes, as the Harper government also proposes to do -- and as the NDP opposes.
New investment will create new employment opportunities in expanding sectors -- many of them better-paid than manufacturing ever was -- if federal and provincial governments don't get in the way. And again: Which side of this debate is Mulcair on?
When fretting about "Dutch disease," it's worth remembering that even now, through the Great Recession and the Euro crisis, the Netherlands remains one of the world's most successful economies. Ranked by GDP per capita, the Netherlands stands about 10th in the world, depending on whose numbers you use. (The International Monetary Fund says 9th.) Before the recession, according to the Netherlands central statistical agency, household income averaged 50,000 Euros, including government transfers -- a handsome standard of living by any definition. About 57% of Dutch families own their own home. And despite "Dutch Disease," manufacturing remains about 14% of GDP in the Netherlands, not dramatically lower than Canada's 16%. Quality of life is high. The country is not exactly a sob story.
The bottom line: Canada's oil and gas are products hugely in demand. Those valuable resources will be developed, and they will be sold. The economic consequences -- both the positive and the negative -- must be dealt with. Canada's record in dealing with those challenges has to date been highly successful. All Canadians benefit from a thriving energy sector, if only because the liveliness of that sector has cushioned Canada from the global recession. The Mulcair alternative to present policy is economically empty-headed, even on its Quebec-first terms.
Nor is Canada the first country in history to encounter the challenges presented by high resource prices. There are good examples to learn from, if learning is your goal. On the other hand, if the goal is enacting inter-regional envy and discord, Mulcair need not waste any time learning from others. He's a natural, all on his own.
This column originally appeared in the National Post.Suggest a correction