Thursday, June 14, 2012

Dutch disease symptoms include denial, irresponsibility

Paul Martin had Bono. Tommy Mulcair now has the OECD.

The Conservative network has been apoplectic over Mr. Mulcair naming dutch disease as a problem that must be addressed. They've denied, insulted , and denounced - every tool that's become part of the Conservative network trade in disposing of inconvenient issues.

The only thing they haven't done is answered the damned question.

I'm not going to discuss Mr. Mulcair's policy suggestions., largely focused on environmental legislation. I'm interested to hear his position on Canada's monetary policy as well.

Rather, in light of the OECD's acknowledgement of mild Dutch disease conditions, and similar acknowledgement by Canada's IRPP, lets look at how harmful the Conservative network's response is to our economy.

Studies and facts aside, logic dictates that the investment in Canada's energy sector raises the value of our currency. As an investor, I'd look to Canada's oil wealth as a guarantee of prosperity and returns amidst a shaky world outlook. If your dollar is high, it makes your product more expensive to buy relative to states with lower currency values. There's no way this hasn't negatively affected manufacturing. Even if it's a small effect, a progressive and responsible economy seeks to correct the problem somehow. Government can have a role in a response. So to hear political leaders respond emotionally, as if naming a problem is an automatic assault on their castles, demonstrates a decided lack of maturity and pragmatism.

It feels like me willfully ignoring my bank account balance lest I feel bad about frivolous purchases. It's a practice I try to avoid because I know it doesn't matter what I think about my account balance - ignoring debt doesn't make money. This is part of what I call personal responsibility.

But I'm not surprised in the least that prominent conservatives in this country are failing to act responsibly. For years, their leader Stephen Harper has refused to act in line with his stated values. He denounces big government, but oversaw massive growth in spending and public service employment. Mr. Harper trumpets fiscal responsibility, but cut the GST only to be faced by a deficit that one could argue is now structural thanks in part to that decision.

No one should believe a word Stephen Harper says, but that shouldn't be news. What is news is that we have a batch of leaders who seem unwilling to even consider, let alone address structural problems in our economy. That news should worry all of us. Because leaders who don't watch the bank account won't know when the money runs dry.

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