Mark Twain once famously sent a telegram saying “Rumours of my death are greatly exaggerated.” I get a sense that same sentiment needs to be conveyed about rumours of economic recovery are also greatly exaggerated – and confounding as well.
We have the technical talk from economists telling us the recession is over in Canada. The June Stats Canada report shows our GDP rose 0.1% that month after 10 months constant and precipitous declines. This “turnaround” is just so much decimal dust in the big scheme of things, but it has spawned headlines like “Canadian Economy Back in the Black” in the Sun newspapers. Yes indeed rumours of recovery are greatly exaggerated. Let’s look at some context to help us determine the truth of the times.
The Globe and Mail rightly says while June GDP tipped-toed into positive territory the last quarter (April to June) was down 3.4% annualized and that was worse than expected. They say, “It doesn’t mean things are necessarily better, it just means they aren’t as bad as the last time data was collected.” Cold, hard truth and a side-order of reality are in that comment.
The US Federal Reserve Chair, Ben Bernanke says the economy teetered in February and warned of the “destructive powers of the ‘adverse feedback loop, in which weakening economic and financial conditions mutually reinforce.’” That is simple know as a vicious cycle. The key to the US recover according to Bernanke is for consumer to start spending again. Temper that hope with the fact that the American consumer has personal debt piled up that is equal to the entire US annual GDP. Spending is not likely to be the main concern of the typical American for the next while.
In Alberta we have the Canada West Foundation saying in a recent report entitled “A Rough Patch” in the Alberta economic profile. While oil prices have started to recover, unemployment is still high, investment is down means “…that the news is more bad than good.” CFW notes Alberta is very dependent on the US recover which it predicts will not start to turn around until sometime in 2010. CWF says energy prices will start to turn around too but “…last year’s contraction, the first since 1986, came as a bit of a shock to them (Albertan.)” They predict Alberta in 2009 will do worse than the Canadian average.
The recession may be at the bottom of the cycle in the minds of the economists but the issue for the rest of us is the recovery. Will it be a “V”, a fast drop and a quick recovery? Will it be a “U” fast decline lingering at the bottom and then a rapid recovery? Will it be a “W” with a false sense of recovery sparked by the infrastructure spending but not sustainable so we return to recession after the public infrastructure project spending is done? Will it be an “L” like in Japan? That reality of the “lost decade” in Japan recently caused a wholesale change in their politics and the demise of its “natural governing party in the recent election.
Nobody knows so use a skeptical eye and ear to whatever you are reading or hear from the “experts” in the area. I think we need to use this recession for a thorough review and rethink about the infallibility of the market place. That does not mean government control of everything either. What I would like to see is the economy returned to its rightful place –and that is to serve the society, not the other way around. I would also like to see the economy as repositioned to be the wholly owned subsidiary of the environment.
The economy is a man-made concept so mankind can change the content and context of the concept. Growth is good but like anything else, too much of a good think is harmful. Like many Albertans, L am longing for a Lougheed kind of leadership who will warn us to take heed and to adapt to new realities as we come out of this recession.
Lougheed is on record saying we Albertans, as owners of our natural resources, need to be sure our government and industry exercise some restraint, especially in how we develop the oilsands. The past economic policy of unfettered growth has only enriched a few but, in the process; it has set up the destruction of our society and our environment.
When it comes to the oilsands we can do better, and we better do better...and it better be green going forward.