Deen
A New Employment Option for Canada

The employment policies of the federal Liberal government have
become a national disaster that has created a national tragedy.

The Canadian government has decided to
follow the American administration on its
wild economic roller coaster.

The economic hardline monetarists are
now in power in the United States. When the
U.S. economy gathers steam soon as is
expected, the U.S. Federal Reserve Board
will likely clamp down on any expansion in
the money supply by once again sending
interest rates up to 20 per cent. When that
happens, the Liberal government, if it stays
on its present disastrous course, will follow
suit by jacking our rates up to the levels that
triggered the deep recession we are now
experiencing.

With the monetarist thinking of the
present government, we can be assured of a
recession a year with periods of recovery that
will be measured in months instead of years.

The Liberal government has allowed the
Canadian economy to decline into its present
structural ruin over the past 15 years. Today
we are paying the heavy price for that
historic policy.

The heavy price
of Liberal policy

Just what has been at the heart of Liberal
economic policy since Pierre Trudeau took
office in 1968?

Pierre Trudeau’s economic strategy,
despite all the tortuous twists and turns it has
taken, has always been based on resource
exports. Over the years, he has continually
assured Canadians that Canada’s strength
lies in its oil and gas and its metal minerals.
Exports of resources have always been Pierre
Trudeau’s idea of how to provide the good
life for Canadians.

There have been warning signs right from
the start of the Trudeau era that the course on
which we had embarked was a perilous one.

Our-trade deficit in manufactured products
in 1970 was $2.5 billion. But the Trudeau
government allowed that deficit to grow
while it relied on resource exports. The
Prime Minister and his colleagues believed
the oil companies when they told us we had

reserves of petroleum that would last well
into the next century, making oil our largest
future earner of foreign exchange.

strategy. As a result Canada’s balance of
payments deficit trebled in one year, from
$1.4 billion in 1974 to $4.7 billion in 1975.

Not only had Pierre Trudeau trusted the oil
companies on the subject of Canada’s
petroleum reserves, he had treated foreign
investors'as though they were
philanthropists. His government continually
sought foreign investment, forgetting that
such investors do not come here for free.
They expect a return on their investment.
That return, in dividends and interest
payments, has now become a disaster for our
balance of payments. In 1980 the net outflow
in dividends and interest payments to foreign
investors totalled $5.5 billion.

Sinking further
into a crisis

So now we are on an economic treadmill in
Canada. No matter how fast we run to sell
resources, we are sinking ever further into a
balance of payments crisis. That trade deficit
in manufacturing that stood at $2.5 billion in
1970 last year reached $21 billion for the
single year of 1981. Overall the balance of

payments deficit reached a record $9.1
billion last year.

Why does that matter? It is worth peering
inside the economic jargon to see what the
consequences of the balance of payments
crisis are for Canadians.

Having a huge balance of payments deficit
is the single most important factor in causing
the Liberal government to ape every move
the Reagan administration makes.

What does the deficit do? It makes it very
difficult to stimulate economic growth in the
country without creating even greater
problems. Saddled with this kind of deficit,
Canada cannot make use of its productive
capacities, cannot put its manpower to work,
without draining the country of its foreign
exchange reserves.

In November 1981, the Industrial Policies
Committee of the Science Council of Canada
stated in a report:

“Tt has become difficult for us to expand our
economic activity and hence reduce
unemployment without so enlarging our
deficit as to make it necessary to throttle
economic growth.’”

Here is the syndrome that Liberal
mismanagement has allowed to develop: If
we expand our economy and put our citizens
to work, then consumer demand will
increase. If consumer demand increases,
then Canada will step up its imports
dramatically. This will not be offset by any
increase in our exports. The result: Canada’s
balance of payments deficit will surge even
higher, leading to speculation against the
Canadian dollar and consequently to
pressure on the Bank of Canada to raise
interest rates. :

Make no mistake about it. The Liberal
mismanagement of the Canadian economy
for the past decade is directly responsible for
creating a structure that opens us up to the
full effects of the American recession.

The Liberals got us into this mess in the
first place by placing our hopes on resource
exports and by opening up the country to
foreign investors. How do they propose to
get out of the mess?

Liberals don’t change

In 1974, following the world oil price
revolution, the petroleum companies
drastically revised their reserve estimates
downward. Instead of oil surpluses we
would have deficits. The rug had been pulled
out from under Pierre Trudeau’s economic

6/Lumber Worker/April, 1982

They have such short memories in the Liberal
Party. Their brief moment of contrition in the
1980 campaign when they talked about a
new industrial strategy is behind them. Herb
Gray has been benched and Senator Olson,
the new czar of Economic Development, is