Sunday, January 26, 2014

How Good Have the Conservatives Actually Been for Canadian Consumers?

While the Harper government's degradation of Canadian democracy has been scary, I find its economic policies to be by far the most disappointing aspect of its record. This fact was underscored for me last fall when I attended a conference of academics in Banff, Alberta. I happened to be seated at the same table as an economist from the University of  Calgary, and we got into a discussion of the so-called "Economic Action Plan". (The economist in question mentioned that Stephen Harper had been one of his students and that he had even been one of Harper's examiners for his Master's Thesis. While Harper succeeded in demonstrating the basic competence needed for the degree, it was plain that this was the work of a future politician, not a future economist. )  Even at the university with the reputation of being the most conservative in Canada, and Harper’s alma mater to boot, there was little to cheer about.

A major point of  conversation was the government’s belated discovery of “consumer interest” after some political polling revealed a warm voter response to  Communications Minister James Moore’s plan to have “more competition” in the telecom industry by allowing American corporate giant Verizon into Canada.  There are, it was pointed out to me, a couple of big problems with this. First, I was referred to a study by another economist  named Jeff Church at Calgary’s Institute of Public Policy, which indicated that lack of competition was not a problem , that three is the standard number of  local wireless providers  and the rate of return in the Canadian industry is actually fairly normal.  In fact, allowing Verizon in could conceivably threaten the competitiveness of the industry in the long run.  Second, if the government wished to have a genuine “Consumers First” orientation, it would have to not rush into trade policies that will have the effect of increasing the cost of clothing and sporting goods coming from 72 Less Developed Countries. It also would also have to not rush into the  Canada-EU trade deal, which will have the effect of raising drug prices by at least $1 billion per year. 

Of course, economists are also keenly aware that the biggest single source of  Canada’s relatively healthy performance during and after the financial crisis  was not any conservative policy since 2006, but rather our avoidance of conservative policies before 2006. In the first Conservative budget in May of that year, Jim Flaherty tipped his hand: "These changes [i.e. sub prime and 40-year mortgages] will result in greater choice and innovation in the market for mortgage insurance, benefiting consumers and promoting home ownership," Mr. Flaherty said. Luckily, he only got us ankle-deep in financial deregulation by the time the crisis hit, and the looser mortgage rules were subsequently reversed. But, we may well ask, how deeply in trouble would we have been if the Conservatives had been enjoying a majority government since, say, 2004? Canada's consumers should be grateful that we never had to learn the answer to that question.

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