National Suicide

By: Darrell Stonehouse, Editor
Published: Oilweek - JWNENERGY

     
      The election of Donald Trump as the U.S. president has a lot of Canadians smugly looking down on our neighbours to the south, believing they have made a grave error in judgment.

      But rather than wallowing in arrogant condescension, Canadians should be taking a sober look at what Trump's election means for Canada's economy because if the new president carries through on his stated plans, we could be in big trouble.
      The Canadian economy is already uncompetitive versus the U.S. Labour productivity statistics bear this out. For every hour of work in 2012, the U.S. produced $52 of value, compared with $42 of value for Canada.
      Trump, if he walks the walk and isn't just another politician, is set to further roll back the regulatory state and taxation rates that act as a brake on productivity growth. He is set to cut federal corporate tax rates from 35 per cent to 15 per cent, freeing up capital to be invested in  productivity-growing technologies. He has also pledged to cut the regulations that hamper growth, including environmental and land-use regulations.
      There has been a lot of focus on whether a Trump government will walk back the current government's pledge to bring in a tax to limit carbon emissions. It is almost a certainty he will. But he is also going to open up more land to resource development and reduce the red tape that slows development. He is going to invest an expected trillion dollars in real physical infrastructure that could increase productivity.
      Meanwhile, here in Canada, we are headed in the opposite direction.
      Taxes are going up, taking potential capital investment to improve productivity out of circulation. The carbon tax is one example. In 2014, Canada produced 732 million tonnes of CO2. When the proposed federal carbon tax reaches its peak of $50/ tonne in 2022, it will siphon $36.6 billion annually out of the private sector that could have been invested in productivity growth.
      And we continue to add more and more regulations that add costs and slow economic growth that can pay for productivity gains. First Nations, who represent around four percent of Canada's population, basically have a veto on resource development. When development is finally green-lighted, there are usually hundreds of conditions put on it that eat up investment capital.
      These are some of the reasons the Canadian economy is already 18-20 per cent less efficient than the U.S. economy. If Trump carries through on his plans to get government out of the way of investment, this productivity gap will likely grow. The value of the Canadian dollar to the greenback generally tracks productivity. Right now it is at 75 cents.
      Any anti-Trumpers want to wager where it will be four years from now?


Comments

Popular posts from this blog

Self-Promotion for Independents and Young Professionals: Lessons from Business and Retail Politics

Intelligently Evolved to Create AI, eh?

The Exploration Directive