When politics dictate the economy

Commentary, Politics, Frontier Centre

Diane Francis, National Post, November 2, 2013


The united States is one of the most competitive and innovative countries in the world. Canada, on the other hand, is a laggard in both categories. In competitiveness, Canada did not even make this year’s World economic Forum list of the 10 most-competitive nations in the world. In terms of innovation, the Conference board gave Canada a “d” for remaining near the bottom of its peer group on innovation, ranking 13th among the 16 countries; the u.S. got an “A”.

Why the gap between the u.S. and Canada? There is a reason for this, but it has nothing to do with talent, effort or educational quality.

The problem is Canada is badly managed politically. In fact politicians run the show and have balkanized the economy to suit their agendas. By contrast, in 1887, Washington created and entrenched a nationwide economy by creating the Interstate Commerce Commission, an independent regulatory body (or fourth branch of government) that was the first public institution to regulate big business in the united States or anywhere.

The Commission’s mandate was to guarantee free and fair passage of goods and services across all state lines, whether local or federal politicians liked it. Autonomous, the Commission investigated wrongdoing, corrected misdeeds, imposed fines, raised or lowered rates and proposed legislation. Now called the Surface Transportation Commission, its jurisdiction involves anything that crosses state boundaries from rail to truck, car, canal, bus, cable, pipeline and telephone.

The significance is that this U.S. institution singlehandedly ushered in an era of prosperity because manufacturers and entrepreneurs had access to a giant market, could achieve economies of scale, mass market and spawn invention.

The U.S. blossomed while Canada remained a patchwork quilt of heavily regulated, politically controlled mini-economies whose businesses have been unable to scale their operations unless they could export to the united States.

Canada has been stunted economically because its politicians have been in control of an economy about which they know nothing. There is no national commercial referee to insure that goods, services and people can flow freely across provincial borders.

For instance, wine in british Columbia cannot be sold in Ontario without some kind of political “treaty.” Pipelines across provincial lines are impossible to build without political offsets even when they are needed in the economic interest of the public.

Despite the lack of free trade at home, Ottawa runs around signing free trade deals with lots of countries — the european union is the latest. yet it cannot create a mechanism to impose free trade at home.

Without an agency like the Americans created, Canadians will never be able to create a national economy that is scalable and innovative. Of course, companies such as Tim Hortons or Canadian Tire have become “national” chains, but only within the confines of a patchwork economy. each province has different regulations, rules, standards, labour laws, protocols, requirements and red tape nonsense.

All these little compliances, in all these little provincial economies, cost money and that money is reflected in lower profits or higher prices or both. Such overheads are reflected in the productivity figures that dog Canada and reduce its long-term outlook.

The only solutions in the past have been band-aids, involving political dealmaking. but the only solution is to decouple politics from commerce by creating an agency like the Americans did in the 19th century that operates above the political shenanigans.

Instead, the provinces run around signing regional free trade deals that are ignored or that cannot last more than one election cycle. And the feds haven’t the power to corral 13 squabbling mini-economies into doing the correct thing and giving up their power over commerce.

Instead it’s all politics. This summer british Columbia premier Christy Clark took a case of b.C. wine to the annual meeting of Canada’s provincial and territorial leaders to convince them to let her wine into their liquor stores. Currently, the wine can be exported internationally, but interprovincial trade barriers make its sale in Canada virtually impossible.

That was rich considering that b.C., Alberta and Saskatchewan signed a New West deal a few years ago to remove barriers only to have b.C. refuse to let Alberta expand oil pipelines to the Pacific to sell oil to Asia. This would not happen if there was an Interprovincial Commerce Commission unless there were compelling environmental reasons or some such.

Likewise, Quebec would never have been able to sue Newfoundland to block its power exports to the u.S. Nor would Quebec be able to block an oil pipeline to New brunswick that is undoubtedly in the cards unless Quebec can wrangle a political deal of some kind.

None of this should be legal, but politics dictates the economy. Worst of all is the cost involved in not having national labour standards. The West needs people but credential issues prevent many from moving to take up those jobs.

This must be fixed. Canada’s economy is one of the most politicized and least efficient among developing nations — a grim fact reflected in Canada’s dismal and deteriorating rankings.

The country has become a series of government-owned utilities, liquor monopolies and a tangle of shipping rules, licensing and accreditation rules and food-supply management boards, all governed by small-minded provincial politicians. Canada is like the european union before the union or the u.S. before 1887. This is not only embarrassing but is a guarantee of continuing economic decline.