Unwise to place our economic trust in what could be a fools paradise

Canada’s economy is just about the strongest of any nation.

That does not mean, however, that we are immune to the world’s economic troubles. Our business cycles consistently have lagged behind other countries’ up and down movements. Except in 1938.

Then, global rearmament entailed strong demand for products from our agricultural and mining sectors and for manufactured goods. Next, we preceded an upturn in nearly all other countries.

The Canadian economy enjoyed a prolonged growth boom in the many years after the Second World War. Our participation in that boom was largely based on the development and exploitation of Canadian resources for the growing United States market. The prosperity of our staple export industries supported our industrial expansion.

The more rapid growth of Canada (compared to the United States), together with the increase of Canadian secondary manufacturing, fostered the hope that Canada was able to continue to prosper, almost regardless of economic problems that existed elsewhere.

Yet in the early part of the 20th century we followed the course of economic events, sometimes with more severity than in other lands.

Over the past two decades Canada has been far more prudent than the United States or Europe.

We did not engage in the hysterical boom in housing, and consumer indebtedness never reached the absurd levels of the United States. Banks were far more careful and our budget deficits were relatively restrained.

That explains in part our belief or hope that we could weather the current economic storm.

Nevertheless, Canada’s trade deficit now is soaring.

Approximately 45 per cent of our gross domestic product is based on exports to the U.S. market, so the slowdown there inevitably will have repercussions here – and elsewhere too.

Foreigners continue their love affair with Canada, because of past performance.

Yet, all but ignored are forthcoming trends.

It is surprising, then, that the Bank of Canada almost alone of the major nations, has raised interest rates twice.

That pushes up the external value of the Canadian dollar as people reach for higher yields here. Also, that in turn increases the prices of our exports, further worsening our export trade.

Once again, Canada’s economy will follow, with the usual lags, global trends.

To believe otherwise means that we are living in a fool’s paradise.  Let us hope that our political leaders become aware of this and act to counteract events as much as possible.


Bruce Whitestone