Building a balanced 21st century economy

Speech by Tom Mulcair to the Canadian Club of Toronto

It is a pleasure for me to be here today to discuss how we can work together to build a strong, balanced, 21st century Canadian economy.

But first, I'd like to begin with an apology.

I see that Lloyd Blankfein from Goldman Sachs spoke here just last week. So I have to apologize to those of you who will have to sit through what is essentially the same speech twice.

Lloyd and I have been borrowing each other’s material for years.

Lloyd really is doing “God's work”.

In all seriousness, though, I actually read a brief media report about the speech Lloyd Blankfein gave here.

As some of you know, his remarks highlighted the need for a fairer distribution of wealth in our society. So, maybe our two speeches will not be as dissimilar as you might think.

I imagine that many here today—to one degree or another—feel that they have a pretty solid understanding of the NDP’s approach to the economy.

But the truth is, there’s a great deal about our party’s economic record that I think will surprise you.

For instance, according to Statistics Canada when you combined all budgets at the federal, provincial and territorial level, it's the NDP—not the Liberals, not the Conservatives—who have balanced budgets more often than any other party.

It was an NDP government in Manitoba that introduced the lowest small business tax rate in the country—zero percent.

And, by the way, today Manitoba has one of the lowest rates of unemployment in country.

Today I’d like to give you a broader view of the New Democratic vision for our economy than what you may have seen in the past.

Today our economy faces challenges unlike anything we've seen since the Great Depression.

In the last ten years, we've lost over 500,000 high-paying manufacturing jobs―jobs that had enough of a salary for a family to live on and came with a pension.

After over a decade of trade surpluses, Canada is now running a $50 billion a year current account trade deficit.

Household debt is at an all time high. Productivity growth is at a record low. And, of course, the global economy is in a state of unprecedented uncertainty.

But I'd like to begin with a subject closer to home.

I've spent a great deal of time travelling across Southern Ontario lately, visiting with Chambers of Commerce and business people, with labour and community leaders, with mayors and councillors in many of the region's largest cities.

It's been an opportunity to talk about our party's vision for the future, but especially to listen and to learn about the challenges facing these communities.

And I don't need to tell you that these communities are facing real challenges.

When we think of a city in South Western Ontario losing another factory, and the high-paid jobs that go with it, of course, we think of the families who no longer have a livelihood.

But we also we have to think about the municipality that's lost a key part of its tax base, and about local retailers who've lost a key part of their customer base.

Today in Hamilton, St. Catharines, Niagara, Brantford, London, Windsor, Oshawa and—yes—even here in Toronto, unemployment is above the national average.

The economic engine of Southern Ontario has been hit by a perfect storm: Increased competition from abroad, an artificially high Canadian dollar, and the worst global economic downturn in more than eight decades.

This is not a time to shy away from tough issues.

It would be naive to tell ourselves that this storm we face will pass with time, as others have in decades past.

The world has changed in the last 30 years. It's more competitive than ever, it's more interconnected than ever.

The challenges we face run deeper than ever.

And while these challenges may be driven by global forces, that doesn't mean we're powerless.

The greatest challenge we face is not a failure of ability, it's a failure of leadership.

But if we work together, if we're willing to face down the tough issues, and tackle them head on, then our fate―and our future―are still very much in our own hands.

About a year ago, former TD Bank Chief Economist Don Drummond published an article entitled "Confessions of a Serial Productivity Researcher."

Mr. Drummond's premise was two-fold. First, that productivity is key to our economic future, and second, that 20 years of costly public policy aimed at increasing productivity has been an unmitigated failure.

Of course, Mr. Drummond is right: We all know that productivity is fundamental to our economic prospects.

And we've all seen the data: in the last decade, Canadian productivity has grown by less than 1% a year. It is an absolutely dismal record.

It's easy for business leaders and politicians to lament Canada's lagging competitiveness and productivity, but let's get down to brass tacks: "What do we do about it?"

Don Drummond's prescription is for Canadian business to look inward for explanations―for business to critique their own decision-making process.

But I believe we also have to acknowledge that our economy is more than the sum of its parts―the product of more than a series of individual decisions made by either government or business.

Productivity is itself the result of complex interactions between a variety of economic actors.

Economists use terms like spillovers, network effects and cluster effects to describe these complexities, but any autoworker in Southern Ontario can explain them to you just as well.

Thirty years ago, when a young man or woman got a job sweeping the floors at a local auto parts plant in Windsor or Cambridge, they knew―and that company knew―that that young person would probably be working in that same shop 30 years later.

The loyalty companies had to their workers in those days―and the loyalty workers paid-back―gave companies a clear economic incentive to invest in their workforce.

A young person could go from sweeping the floors, to working on the assembly line, to learning a skilled trade. Some would even move on to positions in management.

Today, that same young person will probably have a dozen different jobs in their lifetime.

Their boss—who once likely took pride in the size of the company’s workforce as a sign of success—is now more likely see downsizing as a necessary part of doing business.

And what business is going to invest in a worker they know may be working for their competition a few years from now?

We have to ask ourselves this question: Why is our government giving multi-million dollar handouts to companies to create jobs that may not even exist in a few years instead of working with companies that invest in our workforce?

Politicians may prefer those multi-million dollar handouts for the photo-ops they provide, but a photo-op is cold comfort when a plant is closed and a community is devastated.

We all remember Prime Minister Harper at Electro-Motive Diesel in London during the last election.

Within months of handing Electro-Motive a $5 million cheque, in the middle of an election campaign, the company told its workers, many who'd been there for thirty years, that they'd have to take a 50% pay cut, or they’d move their operations to the United States.

They did. Electro-Motive in London is closed.

What experience shows us is that we can tailor the incentives created by government to better serve both individual businesses and our economy as a whole.

Right here in Toronto, you have a film and television industry that's growing at a rate of 25% a year―more than double the economic growth rate of China.

Now you may say, this is only one industry. There are always some industries that grow faster than others.

Fair enough.

But what makes film and television such an interesting example is that the industry has been around for generations.

There's no obvious reason for such sudden and explosive growth, and this growth can't be explained by increased demand either.

Growth here in Toronto is vastly outpacing the industry as a whole even with the Canadian dollar trading at parity or higher.

So what explains why an industry that's as old as the automobile would undergo such a dramatic and positive shift?

The answer is a partnership between industry, labour and government―a partnership that has delivered results.

For decades, Hollywood and New York had a near monopoly on film and television production.

They were the only cities in North America with the critical mass of cast, crew and management to produce world class products, but not anymore.

After years of private investment, professional development and incentives in the form of government tax credits, the Canadian film and television industry has developed into a thriving success.

An industry that has the size, the experience, and the talent to compete with the best in the world, that contributes over $5 billion a year to the Canadian economy.

Those investments, made years ago, are now set to pay dividends for decades to come.

And this story is not unique. We can see the same pattern in many of the success stories of our past.

From the investments in education that gave rise to a resilient Canadian high-tech industry, to the investments in infrastructure that made Southern Ontario a central player in the North American automotive industry.

Each and every one of these successes had one thing in common: A long-term vision―a commitment by our leaders to invest in our economic future in ways that made sense for both business and the public at large.

Sadly, today, where vision is needed, we find only short-sightedness.

Rather than partner with business and labour, rather than step up to the plate and lead, our current government, unfortunately, has a penchant for lecturing and finger-wagging.

They lecture Europe to get its act together, but try to block international efforts to resolve the European debt crisis.

They lecture Premiers, but refuse to even attend the First Ministers economic summit being held this fall. And now they're lecturing Bay Street as well.

Conservative Finance Minister Jim Flaherty has been blaming Bay Street for the half a trillion dollars in dead money held by Canadian businesses.

He told reporters in Toronto, and I quote: "At a certain point, it’s not up to the government to stimulate the economy, it’s up to the private sector, and they have lots of capital."

I share Mr. Flaherty's concern about large Canadian corporations hoarding cash and cash-like assets, but unlike Mr. Flaherty I have no interest in lecturing business.

We are here to support businesses.

I have an interest in using the economic levers at our disposal to jumpstart our economic recovery, to create the economic conditions that encourage Canadian industry to invest.

The Harper government's lack of vision leads not only to missed opportunities, but to economic uncertainty as well.

Nowhere is this clearer than in this government's complete failure to apply the basic rules of sustainable development.

Industry the world over understands that pressing issues like climate change can't be ignored forever.

Eventually business―as they always have in the past―will have to adapt to meet sustainable environmental targets.

What industry needs today are clear targets to meet and a level playing field.

You’ve probably heard me talk about the principle of "polluter pay."

It's something an overwhelming majority of Canadians agree on from coast-to-coast-to-coast.

But today Stephen Harper’s Conservatives are allowing a few well-connected industries to use our air, our soil and our water as an unlimited free dumping ground.

In many cases, they are simply failing to enforce the environmental laws already on the books—the Navigable Waters Protection Act, the Migratory Birds Act and the Fisheries Act.

Imagine, for a moment, a factory owner beaming over his business projections for the coming year.

He shows you the numbers, and everything looks sound. Until you see the factory yourself.

You see that the owner is dumping all of waste from his factory into the river out back—instead of paying $90 a tonne, like everyone else, to dispose of it in a sanitary landfill.

Very quickly you would realize that his books don't reflect his real profit—because his production doesn’t reflect his true costs.

Any profit made on a business model like that is artificial.

But that’s what Mr. Harper is allowing to happen in Canada, on a massive scale.

That's not just bad environmental policy. That's bad economic policy as well.

At the same time, Prime Minister Stephen Harper’s government has poured billions of dollars in direct and indirect subsidies into some of our worst polluting industries.

Those subsidies, in combination with rising commodity prices, have led to an artificial rise in the value of Canadian dollar—and that's hobbling our export industries.

And not just manufacturing, but all of our export industries.

As a share of the Canadian economy, manufacturing, forestry and fisheries have nosedived by roughly 40 per cent in the past decade.

On the other hand, extractive industries—led by oil and gas—have jumped nearly 70 per cent in the same period.

What we are seeing here is the destabilization of the balanced economy Canada built up since the Second World War.

In June, the OECD agreed that an artificially inflated Canadian dollar is hurting our economy and hindering our ability to create value-added jobs.

There is simply no reason we should have to choose between prosperity for only certain sectors or certain regions.

Today Canadian oil sands companies are paid Western Canada Select prices for the heavy synthetic crude oil produced in Alberta, while Eastern Canada imports oil at Brent crude prices—at least $40 a barrel higher.

Let me be clear, New Democrats support recent proposals to increase West-East pipeline capacity.

This is an initiative, led by industry that will pay economic dividends for every region of our country: New markets for producers in the West, high-paying value-added jobs and lower energy prices in the East.

That’s the type of pro-business, commonsense solution that not only creates jobs, it strengthens Canada’s energy security and will leave more to future generations than just debt.

And in the coming months, you'll see New Democrats begin to focus on the need to invest in the future—in particular to invest in our youth.

Right now, young Canadians hit an employment wall after they graduate.

They are the most educated and skilled generation we’ve ever had—yet too many of them are simply unable to reach their full potential.

Youth unemployment in this country continues to hover around 15 per cent.

A recent study from the University of Toronto and Statistics Canada shows that graduating from college or university during a recession has a devastating effect on a young person's future prospects.

Graduating during a recession creates an initial wage gap of 9% compared to those who graduate under normal economic conditions.

And the effect of that wage gap can last up to a decade―long after the economy has recovered.

An economic downturn that at first seems like nothing more than a short-term hardship, may ultimately squander the potential of a generation.

And the truth is, this government's failure to lead doesn't end at our own borders.

In 2009, I had the honour to be invited to participate in the “New World, New capitalism” conference, hosted by then French President Nicolas Sarkozy.

Leaders from around the world were gathered together, seized with crafting a coordinated response to the greatest financial panic since the
Great Depression.

In Canada, the Prime Minister declared then that there would be no recession here... and that no action was needed to stave off economic uncertainty.

It was only when his minority government was nearly defeated that the Prime Minister was forced to take action.

Now the United States is once again at the edge of a recession—facing a $5 trillion “fiscal cliff” this January and another messy fight over its debt ceiling.

The European debt crisis has once again exposed the global economy to potentially catastrophic economic risk, and, once again, our government is asleep at the wheel―just as it was in 2008.

Rather than using Canada's experience and expertise to play a constructive role, this Prime Minister and Finance Minister denigrate our international institutions.

The Conservatives' approach of the global economic situation is not only dangerous, but dead wrong.

While it's true that Europe is facing a sovereign debt crisis, that reality shouldn’t obscure the fact that both the public and private sectors bear responsibility.

Both inside and outside the Euro Zone—in Iceland, Ireland, Portugal, Spain and the UK, in every country but Greece—this crisis was brought on—not primarily by public borrowing, but by out-of-control financial deregulation in the banking and real estate investment markets.

It may be convenient to blame “sumptuous European welfare states”—to quote one senior Conservative spokesman, but it does us a disservice to pretend that public spending was the root of this crisis, or that slashing public services will somehow provide the solution.

Today Canada is held up as an international model for financial regulation, but let’s remember, we were not immune to the calls for financial deregulation that swept across the rest of the developed world a decade ago.

In the 1990’s, Liberal and Reform party leaders alike joined the same chorus. It was only New Democrats who held the anchor against calls for further deregulation.

Today, Canadians are glad that we did, and that Canada did not go down the same path as Europe and the United States.

I won’t pretend that Europe and the United States don’t face fiscal challenges that need to be corrected, but that will be a long-term process.

The European monetary union must be accompanied by a fiscal union that integrates their economy along with their political system.

If this fiscal union is to be achieved, it must in turn be accompanied by guarantees of fiscal responsibility―guarantees that have not always been lived up to in the past. We all know that.

But―as important as long-term fiscal balance will be―immediate austerity cannot succeed if it undermines the very economic recovery needed to restore prosperity and government fiscal capacity along with it.

Just as we must take a balanced approach to building our economy, Europe must find the balance necessary to resolve this looming crisis.

A balance between fiscal responsibility and stimulating economic growth. A balance between fiscal union and national autonomy. A balance among the primary, secondary and tertiary sectors.

New Democrats will continue to support those efforts―and we will continue to promote our own economic goals here at home.

Our vision is rooted in one simple belief: that government should serve only one interest―the public interest.

Take a simple example.

The British think-tank The Tax Justice Network estimates that, today, as much as $32 trillion in wealth is being held in offshore tax havens worldwide.

The OECD figure is of a similar order of magnitude.

Those who benefit most from these tax havens also benefit most from the very institutions our tax dollars are meant to support.

Our economy is built on a foundation of basic government services that we often forget: police, courts, education, infrastructure.

But this is not only a question of economics.

It’s also a question of ethics.

When a dishonest few refuse to live up to their responsibilities, it is the rest of us who have to pay more to make up for it.

Governments can’t do everything, nor should they.

The road to prosperity in the 21st century will require a balanced approach.

A thriving private sector will, thankfully, always be at the heart of our national economy, and the engine of our economic growth.

But there's also a commonsense role for government to play in building the fairer, more prosperous Canada that we all want.

There's a commonsense role for government to play in creating the right environment of stability and predictability that business relies on to profit.

In ensuring sound economic policy that fosters productivity and competitiveness—without sacrificing long-term sustainability.

And investing in an economy better equipped to meet the demands of the 21st century: In knowledge, in research and development, in a more skilled workforce, in matching skills to jobs.

There is a pretty convincing argument for the role of government in science, education and innovation.

The best way to create wealth in a society is to increase knowledge.

The role of the NDP over the coming years—and my role as Opposition Leader—is to ensure that the vision I’ve described here today is achievable.

To prove that New Democrats are serious, competent public administrators.

In the past, Canadians have most often seen our party oppose. Now we have to demonstrate that we can also propose—that we can govern.

This is why New Democrats will continue to lay out our vision for a strong, balanced, 21st century economy.

One that ensures long-term growth, that’s sustainable growth. One that promotes robust trade as long as its reciprocal trade.

And one that creates highly skilled, value-added jobs right here in Canada.

In other words, New Democrats stand for a vision that will create wealth and prosperity right across Canada, not only today, but for generations to come.

Thank you.

[Check against delivery.]