Seamanship Quotation

“In political activity, then, men sail a boundless and bottomless sea; there is neither harbour for shelter nor floor for anchorage, neither starting-place nor appointed destination.”
— from Michael Oakeshott's
Political Education” (1951)

Wednesday, February 29, 2012

A Goldilocks Dollar for a cheaper version of Canada

Leadership sometimes points backwards.

Dalton McGuinty would like to go back to the circumstances he inherited when he became Ontario premier in 2003: when Ontario dominated Canada politically, possessed first-rate infrastructure, and, most conveniently, could export its goods with a 30% export price advantage—thanks to a very cheap Canadian dollar.

Yesterday, McGuinty meticulously outlined Ontario’s worn-out case against Western Canada’s “petro-dollar”:

“That has knocked the wind out of Ontario exporters and manufacturing in particular,” Mr. McGuinty told reporters. “So if I had my preferences as to whether we had a rapidly growing oil and gas sector in the west or a lower dollar, I’ll tell you where I stand: with the lower dollar.”

This is divisive bravado and defeatist economics. The man should settle for bland.

McGuinty can’t even divide the country. The office of Premier of Ontario doesn’t have that kind of weight anymore. McGuinty’s resentment toward robust Western development can only help Alberta’s Premier Alison Redford win an election. Simply, the country’s leadership can’t take his advice.

No Canadian federal government could get elected with a mandate to slow the export of provincial energy and natural resources and would have a tricky time constitutionally if it tried. Furthermore, artificially lowering the Canadian dollar without a collapse in resource exports would likely—and legitimately—invite US retaliation.

As important, McGuinty is repeating a creepily reactionary idea about how Ontario should grow and be treated in Canada. Specifically: if the dollar isn’t nicely aligned to serving the interests of Ontario’s traditional manufacturers, it surely must be out of whack—off serving those philistines in the West.

In this equation, Ontario’s interests are boiled down to be the interests of Ontario’s export manufacturers and their old ways of doing business. Other Ontarians and other Canadians—and their purchasing power in the world—are of negligible account.

There is something deceitful and illiberal about trying to talk down the value of the Canadian dollar to make Canadians in Ontario manufacturing richer by making other Canadians poorer.

Can you imagine the Governor of Michigan or the Mayor of Chicago blaming their economic woes on the US dollar and strong export sectors elsewhere in the US?

Imagine ambitious American politicians asking Ohioans to sell less food to the world or asking Californians to cut back on the $billions they earn selling films and music internationally!

The United States has been holding its own—around 20% of the world market in manufacturing for the last 20 years—without the help of a US dollar that has been thoughtfully aligned to serve the interests of its manufacturing sector.

Dalton McGuinty should accept that Canada has no better alternative: accept the benefits, along with the demands, of a Canadian dollar effectively at par with the US dollar and get on with his job.

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