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Dittmer: The interplay of politics and economic growth

Free Market Reflections with Steve Dittmer

Economic growth can come from many places and politics can shape it in different ways.

A recent article examined the ways immigration has contributed to economic growth in Canada, especially given that much of your immigration is screened to boost productivity. Another column examined how the uproar in Canada uncharacteristically has escaped the borders of a stable, under-control country.

It seems Canada’s labour force grew by about two per cent in 2019, most of that from population growth, and about 80 per cent of that from immigration. That stimulated consumer spending and home sales. Those positive factors helped overcome a global slowdown, export problems and trade disputes with China, and China’s economic slowdown, (“Immigration Drives Canada’s Growth,” Wall Street Journal, March 2, 2020). Those are national, overall figures, of course, not keying on the problems red meat had with China last year.

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Canada accepted about 340,000 new permanent residents last year, up from 270,000 in 2016. About 810,000 international students and temporary workers were admitted in 2019, almost double that of four years ago.

From 2010 through 2018, Canada’s GDP growth averaged 2.2 per cent, second only to the U.S. among the G7. Of course, those years include the Obama years in the U.S., when growth was weak and that administration told Americans that growth well under two per cent was the “new normal.”

On the tougher side for business, at my time of writing the Bank of Canada has kept the benchmark overnight interest rate at 1.75 per cent, higher than any other major advanced economy. That does leave the bank some room if it needs it later.

Of course, the big factor in Canada’s immigration — in contrast to the U.S. — is that Canada’s system gives preference to immigrants with the ability to find and keep a job, based on education, language skills and whether they have a job offer. About 60 per cent of Canada’s immigrants are admitted under those conditions. The rest come as refugees or to join family members already in the country.

By contrast, only a small portion of America’s immigrants are subject to what we refer to as merit-based criteria. Some 60-80,000 permits are issued annually in January and disappear in a matter of hours, quickly claimed by companies looking for skilled labour. Most of the rest of immigration here is based on relatives already in the country, a lottery or claims of asylum.

The Trump administration worked out rules here and an agreement with Mexico to return asylum seekers to Mexico while their claims took months or years to get through overcrowded courts. This reduced our problem with refugees overrunning the border and being set free in the U.S. while awaiting trial — seldom returning for their court date. A federal judge recently struck down that program.

A subject getting international notice is the blockage of trains and pipeline construction to stymie Western Canada from shipping oil and gas to either coast. Unfortunately for Canadians, you are getting a taste of what Americans have been experiencing for the last decade. The wants, needs and wishes of the majority of citizens count for little.

In our country, it is only the perceived rights of distinct tiny segments of the population, the “rights” of animals, insects and non-citizens and the convictions of some in unproven but firmly held beliefs that get attention. Critically, these folks have perfected the use of the courts to misinterpret and twist the law and force outcomes that are ridiculous on their face, bereft of common sense and certainly abuse the needs and the wishes of the majority.

A recent piece noted something I think North Americans take for granted. Certainly it bears upon Canada’s current controversy. George Friedman pointed out that the three North American countries have a key advantage over the other major advanced economies. The U.S., Canada and Mexico have access to both the Atlantic and the Pacific Ocean. Countries in Asia and Europe plus China have access only to one or the other. That has become critical with more trade and interlocking supply lines. Friedman refers to that advantage as a shifting of the “centre of gravity of the global system,” more so since the Soviet Union’s fall, (“The Canadian Geopolitical Dynamic,” Geopolitical Futures, February 25, 2020).

It is this important access to the two major oceans that the activists in Canada are trying to rob from Alberta and Saskatchewan, and most recently, B.C. Even though I know many Canadians are not fond of President Trump, it is lucky that he is the president now. He will continue pushing for pipeline construction down through the U.S. to give central Canada some access to ports. It is not as good as being able to ship to both oceans and the Gulf but it is at least something. Ottawa up to this point has not been able to broker some compromise to preserve the rights of Western Canadian companies and citizens to the pursuit of happiness and prosperity.

About the author

Contributor

Steve Dittmer is the CEO of Agribusiness Freedom Foundation, a non-profit group promoting free market principles throughout the food chain. He can be reached at [email protected]

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