Economic Politics: The Billion Dollar Question

Robin Brunet

| July 1, 2004

Have Gordon Campbell’s economic politics been visionary or myopic? Unfortunately, we can’t rely on statistics to provide a clear answer to that billion dollar question.

Have Gordon Campbell’s economic policies been visionary or myopic? Unfortunately, we can’t rely on statistics to provide a clear answer to that question. Worse, pundits often use statistics to reach contradictory – and confusing – conclusions. Listeners to CKNW’s Money Talk found that out in a most spectacular fashion in April when economist and host Michael Levy interviewed provincial NDP leader Carole James.

The fun began shortly after Levy welcomed James to the show. James remarked that the NDP “has grown with the times” and its most important objective if it defeats the Campbell Liberals next year will be to maintain a balanced budget. Levy was unconvinced: “But how will you freeze tuition for post-secondary institutions? How will you spend more on health care – all the things you want to do – and make cuts to pay for this if you’re not going to raise taxes?” James’s reply: “We’ll have to look at the budget when we get in, and if the Liberal numbers are accurate – and I don’t think the Liberals give us the straight goods on a lot of things in this province – but if the numbers are accurate we could be looking at a surplus when we take office.”

Sensing he had cornered the New Democrat, Levy countered: “Doesn’t that herald well for some of the work the Liberals have done?” James shot back: “I give no credit to a government that’s taken us to where we were in the first place. To say they’ve achieved a balanced budget and a small surplus in four years when they began with a balanced budget is no measure of success.”

Several weeks later in his White Rock office, Levy shakes his head. “I don’t get it. If the Liberals haven’t done a single positive thing in four years, how can there possibly be a surplus for the NDP to spend in 2005?” Although Levy claims his blood pressure no longer rises during heated debate, he becomes animated when recalling James’s mindset: “Carole wasn’t happy about anything. I mentioned how we’ve recently enjoyed a rise in jobs, and she said not enough of them are being created. I mentioned the tax cuts Campbell enacted when taking office, and she complained that he shifted the tax burden onto the lower and middle classes.”

Levy’s blood pressure may not be rising, but his voice is. “I argued that the Liberals were wise to create user-pay taxes, and Carole said they were unfair.” He taps his desk top for emphasis. “The point is, this isn’t just Carole talking. These sentiments are widely shared by the public. The NDP is riding a tremendous wave of unhappiness over the state of our economy.”

So how goes the economy? What proof is there in the old adage ‘Lies, damn lies and statistics’ and does it apply here in Lotusland?

James’s distrust of the Liberals notwithstanding, the B.C. government openly admits that many sectors of the economy under-performed in 2003. The February 13, 2004 edition of the Management Services ministry’s Infoline reveals that exports of B.C. products fell (down 1.6 per cent) for the third straight year; this includes forest products, machinery and equipment as well as agriculture and fish. However, Canadian exports slumped even more in 2003, falling 3.2 per cent. Car sales dropped province-wide, and shipments of computers and electronics sunk to their lowest level since 1995 (down 9.9 per cent). The phenomena were blamed mainly on the strong Canadian dollar and rising fuel rates.

On the plus side, Infoline numbers for 2003 report: the largest number of new business incorporations since 1995 (23,243); a modest increase in employment over 2002 (50,000, or 2.5 per cent); and sporadic increases in housing starts throughout the year (14.6 per cent in January 2003 compared to the rest of Canada, which suffered a 10.9-per-cent drop on average). Infoline concludes by noting that the Credit Union Central of BC has determined one thing from the data: real GDP growth of 2.4 per cent for 2004 or slightly better than 2003’s 2.2 per cent.

Independent analysts such as M. Murenbeeld & Associates exhibit the same tenor and tone when citing statistics. In the March 2004 edition of BC Monitor, the firm reports modest gains in areas such as wages and coal and gas production, and declines in business bankruptcies and migration out of B.C. In other words, nothing disastrous, but nothing to write home about either.

The real question: How bad is the bad news and how good is the good news? Levy for one is loath to take the perceived shortcomings of Gordon Campbell seriously.

“British Columbians have an unrealistic set of expectations thanks partly to the influence of organizations like the NDP, and that’s why so many people think we’re in trouble,” explains Levy. “For example, we expect everyone should live within a five-minute drive of a hospital, so if you close a hospital and force someone to drive 20 minutes to the next facility, it’s a calamity.

“The reality is we’re in great shape overall. We’ve spent a lot to try and become debt-free, we’ve cut a lot of government waste, and these initiatives have helped put an end to the out-migration of rich people and businesses that was triggered by the anti-business policies of the NDP when they were in power.” Levy raises his hands in exasperation. “For God’s sake, this is good news, is it not?”

Maybe so. But if an ‘unbiased’ conclusion can be drawn from the data published by Infoline and BC Monitor, it is that our province is falling well short of its potential. That is the stance taken by Jock Finlayson, executive vice-president of the Business Council of British Columbia, an organization one would expect to be sympathetic to many of Campbell’s fiscal policies. Last year, Finlayson was optimistic about 2003 and predicted in these pages: “Our real GDP will probably increase by a respectable 2.7 per cent, and although growth seems to have been sub-par for the first half of this year, we think it will accelerate in the second half.”

As if to underscore Finlayson’s mood today, the rain is pelting against the windows of his Vancouver headquarters. “My prediction for GDP growth turned out to be overly optimistic, didn’t it?” he notes without much humor, then listens to an account of Levy’s sparring match with James. Finlayson may be an ideological bedfellow of Levy’s, but his mood isn’t improved when told how the broadcaster manoeuvered James into admitting that the Liberals’ economic policies have created a surplus. He snorts: “That surplus is only several hundred million bucks. It wouldn’t even pay for paper clips in a $2-billion health budget.”

Finlayson settles down to do what he does best: assess B.C.’s health, sector by sector. “Last year was mediocre for our economy, no question. Why? The reasons were external: investment uncertainty because of Iraq, widespread geopolitical unease, SARS and mad cow disease. Even the B.C. forest fires had a negative effect. For one thing, tourism numbers plummeted. I’ve never seen such a huge drop. Depending on the country they came from, guests to B.C. declined by as much as 70 per cent, which is a disaster because tourism was sucking wind to begin with.”

But according to Finlayson, the biggest external reason for our mediocre performance was the strong Canadian dollar. “We experienced a 21.7-per-cent increase relative to U.S. currency within just 12 months. Nobody had factored a 77-cent dollar into their business plans, and it grew so quickly that nobody had time to adjust. So the export industry suffered.”

Did 2003’s good news offset the bad? Finlayson replies by assessing issues from a short- and long-term perspective: “Housing starts and the resale market were healthy in 2003, but that was due to our low interest rates and interest [rates are] expected to climb, so these sectors will be in the doldrums sooner rather than later.”