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Enter Stage Gabbing

Not much of an advantage

The Professor

By Steven Martinovich

(March 18, 2002) - It's been a rough couple of months for Canadian Prime Minister Jean Chrétien's inner circle. First, newly installed Foreign Affairs Minister Bill Graham announces that the United States isn't as tolerant and enlightened as Canada. He is then followed by Defence Minister Art Eggleton who may, or may not, have failed to inform his boss whether Canadian soldiers were turning over prisoners to American soldiers in Afghanistan. The latest embarrassing gaffe came courtesy of Deputy Prime Minister John Manley while in New York.

Speaking to Bloomberg News on March 13, Manley stated that Canadian exporters needed a weak dollar if they were to remain in business. It's a message that Canadian leaders don't usually bring to the world's largest market.

"I worry that too many Canadian firms are profiting mightily from a 62-cent dollar and would be hard pressed to compete at an 80-cent dollar," said Manley. "If they don't make the investments in research and development and technology and innovation, when the dollar gets to that level they'll be out of business."

Whether it's proof that the Bank of Canada and the federal government have conspired to keep the dollar weak, as many currency traders have alleged, is irrelevant. What Manley's statement does show is a government that is so bereft of direction and leadership that a pummeled currency is a badge of honour, not shame.

Of course, according to Manley, the government isn't the problem. The Deputy PM stated that Ottawa has done its part by improving its finances and now it's time for private businesses to invest if productivity is to improve, conveniently forgetting that the dollar's conditions makes it difficult for investment.

It wasn't so long ago -- the mid-1970s -- that the Canadian dollar actually traded slightly higher versus the American dollar. Over the past two decades, however, the dollar's value has eroded to the point that it hit US61.75-cents in January. Throwing up its hands, the federal government continually advances the argument that the nation's economy is fundamentally sound and that will soon be reflected in the dollar's value.

Unfortunately for Manley and the rest of the Chrétien government, the fall of the dollar can be directly traced to successive governments who have fallen in love with increasing taxes and introducing a constant stream of new regulations. While the decline in the Canadian dollar does limit growth in productivity, it makes imported machinery and equipment more expensive thereby reducing capital investment, our excessive taxes and regulations have done far more to harm Canadians.

Another Chrétien cabinet minister all but admitted that in February. Industry Minister Allan Rock acknowledged, after years of hedging by federal politicians, that our standard of living compared to that of Americans has fallen for 20 straight years. Although he didn't speculate why - he was busy rolling out yet another government initiative to address the problem - it's no secret that our debt, taxes and government spending promotes little confidence around the world in our economy.

It is time that the federal government undertook a vast review of policy and the effect its policies have on the economy and not announce new nebulous ten-year innovation strategies which smack of the same central planning the value of which is partly reflected in our dollar's current state. Our high level of taxation and regulation, combined with the half trillion-dollar debt, has neatly combined to make us less competitive with the United States. The so-called competitive advantage conferred by the dollar Manley referred to won't be what will hold back Canadian business the far off day when the currency bounces back to the US80-cent level, it will be the business as usual policies of a federal government.

Thanks for reading,

Steven Martinovich

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