This column has focused recently on the role of public policy in Canada, the United States and China, and the effect that policy has on our respective economies. Also relevant to this discussion is an understanding of what we as voters (as opposed to those we vote for) can and should do in the current financial environment.
In generating such priorities it is important to manage expectations, expectations for Canadians, for Canada and the economic conditions in which we live today, and crucially what they might look like for the next several years. Many folks continue to believe we can and will return to the period of heady growth experienced in the period from 2003 to 2007. There are several reasons why that scenario is unrealistic.
Governments in the developed world are having to deal with huge deficits and to look at raising revenues and reducing expenditures, thereby ensuring there will be no more fiscal stimulus upon which we can rely. Access to credit, particularly in the United States and Europe is going to be restricted as banks respond to new regulations requiring them to strengthen their balance sheets. This situation is exacerbated by the sluggish real estate market and the inventory hanging over the market. The geo-political situation continues to be very challenging, the war in Afghanistan and against extremists everywhere , instability in Pakistan, a leadership change in North Korea, nuclear ambitions in Iran, a more assertive China (witness the recent reaction to the arrest by the Japanese of a Chinese fishing vessel), all conspire not only to ensure defense budgets will continue to be disproportionate consumers of fiscal budgets but that a blow-up in any of these areas or a successful terrorist raid in a western city could negatively impact the economy in much the same fashion as did 9/11.
Some will argue the Canadian economic scene is far brighter than that of the United States. Whilst this is true, the U.S. remains our most important customer for all our natural resources, services and manufactured products. Rebuilding that customer base so we are much more engaged with those parts of the world which are growing quickly, like the Asian tigers, Latin America and Russia is the right thing to do but that will take time and has it’s own set of challenges.
So my point is this, be prepared for sluggish growth, a much more stable (i.e. not growing quickly, if at all) real estate market, a more difficult environment in which to find good opportunities for those entering the work force, and a stock market which will reflect those factors. And be prepared for worse.
Keep your politics and your politicians focused on big picture issues and forget the small stuff. By that I mean the risks described above will require close and effective international co-operation. Our political masters need to be worried about the threats to free trade, the consequences of allowing the so-called currency wars to escalate and the integrity of the global financial system. The solution to high unemployment rates and anemic real estate markets is not resident in blaming China or anyone else, nor in allowing such rhetoric to compromise the relationships needed to maintain world peace, manage hot spots and build the confidence and stability necessary to ensure private sector investment. Local, regional and domestic politics can not be allowed to dominate the scene. There is too much else at stake. We in Atlantic Canada are particularly guilty of ignoring what is happening around the world. We have in a way been lucky – the effects of the financial crisis left us relatively speaking largely unscathed. The danger now is one of complacency. This region, like the rest of the country, needs a prosperous and growing global economy with which it can trade.
Make sure those for whom you vote get this message. Your future depends on it.