Judging Harpernomics

Judging Harpernomics

We asked three economists to judge Stephen Harper on his handling of the economy

Conservative leader Stephen Harper a rally  Monday, September 21, 2015  in Peterborough ON. Ryan Remiorz/CP

Conservative leader Stephen Harper a rally Monday, September 21, 2015 in Peterborough ON. Ryan Remiorz/CP


Economist at Unifor

Conservatives traditionally claim they are the best economic managers, and they are playing that card again in the current federal campaign. This time, however, it is proving less effective. Opinion polls now indicate no clear difference between the Conservatives and their opponents on key questions like who is best capable of managing the economy and creating jobs. This suggests the traditional Conservative advantage on economic issues has disappeared.

There’s an obvious reason for slipping Conservative economic credibility: they’ve been in power for almost a decade, and it’s been the worst decade for Canada’s economy in postwar history. That painful statistical reality, verified by the personal hardship of millions of Canadians, constitutes an enormous hill for Conservative campaigners to climb.

With my colleague Jordan Brennan, we developed a comprehensive statistical review of Canada’s economic performance since the Second World War. We identified 16 core indicators: standard measures such as job-creation, unemployment, GDP growth, productivity, personal incomes, debt, and more. We assembled consistent historical data, in most cases stretching back to 1946, from official public sources. (Our published report reprints the entire database, for anyone who wants to double-check.) Then we ranked the postwar prime ministers (all who held office for at least one full year) according to each criterion.

For seven of the 16 indicators, the Harper Conservatives ranked or tied last among all postwar prime ministers; it ranked or tied second-last in another six cases. Across all 16 indicators, the government’s average ranking was the worst of any postwar administration—not even close to the second-worst (another Conservative, Brian Mulroney). Our analysis was based on annual data to 2014, so it doesn’t even reflect the effects of this year’s recession.

Of course, the global financial crisis of 2008-09 has been part of the Conservatives’ problems. But Canada experienced 11 official recessions since 1946 (including this year’s), and the 2008-09 downturn was neither the longest nor the deepest. Previous prime ministers also confronted daunting global problems: the Korean and Vietnam wars, oil price shocks, stagflation, 9/11, and other financial panics.

Compared to other industrial countries, too, Canada’s once-vaunted reputation has slipped. For example, measured by job creation relative to population growth in the prime working-age cohort (15-64 years), Canada ranks just 20th of 34 OECD countries under this government’s Conservative tenure. Mediocre, not exceptional, is the adjective that springs to mind.


So the self-congratulation that typifies Conservative economic rhetoric is misplaced. In reality, Canada’s economy has endured a decade of sustained disappointment, the roots of which run far deeper than falling oil prices. Our historical analysis highlighted some key factors behind this subpar performance, reinforcing the conclusion that Conservative policies have harmed Canada more than they helped.

First-year macroeconomics students learn there are four major components of aggregate demand: four “engines,” if you like, that power growth forward. Consumer spending is the biggest (accounting for about half of GDP), but in some ways the least strategic—since it tends to follow the economy’s trajectory, rather than leading it. This is because consumers need work and income before they can sustainably spend, so consumer spending generally follows other trends.

In the private sector, the most important potential engines are business capital spending and exports. Both can provide initial bursts of demand, which then multiply through the economy via new jobs, new incomes, and even more spending. Conservatives believe the best way to nurture either is to roll out a red carpet, create as favourable a business environment as possible, and then wait for the market to take off. This is the rationale for policies like corporate tax cuts, deregulation, and free trade deals.

The only problem is that this “trickle-down” approach hasn’t worked. Despite repeated favours, business capital spending has been sluggish (under Harper, growing the second-slowest of any postwar administration). Tax cuts just reinforced corporate cash hoarding, not capital spending. Meanwhile, Canada’s exports performed abysmally: growing just 0.3 per cent per year since 2006, by far the slowest in postwar history, and the worst of any major industrial country. We need to do much more than cut taxes, sign trade deals, and slash red tape to truly nurture the industries and companies we need to invest, innovate, and sell to world markets.

The remaining potential engine of growth is government itself: through both its own investments (in infrastructure) and current programs. Here, too, the Conservative government has been part of the problem, not the solution: deeply cutting real per capita program spending since 2011, and thus helping set the stage for this year’s recession.

In light of these numbers, it is not surprising that the once-impressive Conservative economic reputation has faded, with big implications for Oct. 19. The big outstanding question for voters, is which other party offers the more convincing plan for finally getting our economic engines back in gear.


Sprott School of Business, Carleton University

As someone who has taught in countries around the world for the past 25 years, it has become increasingly clear from these experiences, supported by comparative empirical research on OECD and developing countries, that Canada and Canadians have an abundance, affluence and security (of energy, food and safety) that most people in the world can only dream about. This partly explains why Canada is seen as the “promised land” for millions and millions around the world. And why so many people from around the world desperately want to emigrate to Canada.

Yet critics, like Jim Stanford and others, claim that Canada’s economy under Stephen Harper has the worst record in the past 70 years going back to William Lyon Mackenzie King in 1946 (before Jim Stanford and I were even born—and that was a very long time ago).

I must admit I used to indulge in these comparison games in my younger days. Indeed, I used to tell my father that my used 1994 Toyota Camry was vastly superior to his 1963 American Motors Rambler Classic because my car had power steering, power brakes, air conditioning, air bags, seat belts and power windows. My father used to gently remind me that in 1963 none of those inventions or safety regulations or consumer expectations existed, so it was not even possible to compare the two vehicles.

This is why the OECD, IMF and statistical agencies such as Statistics Canada do not compare a country in one era with one set of norms, values, expectations, laws, regulations, interest rates and growth rates to a country in a different era. Comparing postwar Germany in 1955 with the Deutschmark to post-modern Germany of 2015 with the euro, is, in the words of statisticians, “incommensurate” or not comparable. In plain English, we are comparing apples to computers to elephants.

But we can compare countries to similar developed countries—in the same era. We can compare Canada to the United States, Germany, France or Italy in the period from, say, 2006-14, during Harper’s time in office, as each country has dealt with similar macroeconomic, trade and technological environments.

When we examine the job creation record—in the current era—of Canada compared to its peer group, the G7, we discover that Canada has outperformed them all (on an indexed or relative scale), with 1.3 million jobs created since the Great Recession.

This is a remarkable accomplishment when we consider the G7 peer group includes the United States, Germany, Japan, U.K., France and Italy—among the largest (excepting China) and most advanced economies in the world.

We then turn to the second major issue, which concerns incomes. Some critics and opposition parties allege the Canadian middle class is stagnating or declining or disappearing (or possibly all three).

Yet in 2014, a major 35-year study by the Luxemburg Income Study group and the New York Times of the largest economies in the OECD, found that Canada’s middle class was more prosperous than any other large economy, including the United States and Germany.


Now consider wealth. The most recent analysis by Statistics Canada concerning the 10-year change in household assets found that between 1999 and 2012, the average net worth of Canadian families jumped 73 per cent (from $319,800 to $554,100) even after adjusting for inflation.

Finally, let’s turn to GDP per capita (measured in U.S. dollars). According to the OECD, Canada’s GDP per capita, at US$44,000, is significantly above the EU-28 average of US$36,237. We’re significantly above the eurozone countries (US$38,619) as well as the overall OECD average of US$38,914. It must be noted that the EU countries are classed as high-income countries by the World Bank.

Given all this, Canadians should challenge critics to explain the following:

How could Canada have created more jobs relative to the size of our economy since 2008 than any of the other G7 nation, if the employment picture is so terrible?

How can we have the wealthiest middle class of large OECD economies, if the middle class is supposedly collapsing?

How can the net worth of households have increased so much over the last 10 years, if our standard of living has declined?

How can Canada’s economic output be so much higher than the averages of the OECD, EU and the eurozone, if the economy is in such bad shape?

Finally, Canadians should challenge the critics to explain this all-important question: If Canada is doing so poorly, why do people from around the world want so desperately to move here?

I have learned in the past 25 years what many Canadians already know and what the mountain of statistics prove: Canada is recognized by ordinary people the world over as an oasis of stability, prosperity and freedom in an international ocean of uncertainty, chaos and danger. All of this has only improved over the last decade, as Canadians experienced measurable increases in our standard of living. For that, Harper deserves credit.


Ivey Business School, Western University

The Harper years are best summarized by the country’s export record. Despite the government’s best intentions to support the sector, our goods exports (including both manufactured goods and raw materials) as a percentage of GDP has fallen from 31 to 26 per cent since Stephen Harper first took office in 2006. The disconnect between intentions and outcomes tells a story about our country’s failures of diplomacy and failure to capitalize on a commodity boom.

On first glance, Canada’s export decline is puzzling, since there is a great deal to like about the government’s trade policies. Canada has signed a large number of free trade deals and foreign investment treaties. Border infrastructure was upgraded during the recession and tariffs were eliminated on manufacturing inputs, an important measure that has not received nearly enough attention.

Then why have our goods exports been so lackluster? Some of it is due to factors outside of the government’s control, such as the global finance crisis and slowing growth in China. But much of it has to do with two large themes from the Harper years: a failure to deliver and a lack of diplomacy.

While Canada has signed a record number of trade deals, most of them have been marginal in nature; Jordan and Honduras will never be among our largest export markets. The two biggest trade agreements, CETA (Europe) and the Trans-Pacific Partnership remain in limbo. The next largest deal negotiated by the Harper government, the Canada-Korea Free Trade Agreement has yet to deliver meaningful results, as Canada lacks an obvious strategy to increase the footprint of Canadian business into the country and Korea promptly banned Canadian beef exports after the deal was entered into force. Exports to Korea have actually fallen since the deal was signed.

A much larger concern for Canada is our deteriorating diplomatic relationships with our largest trading partners. Due to a combination of geographic proximity and market size, Canada has five major export markets: Japan, the European Union, China, Mexico and the United States; our relationship with the latter four have been strained over the last decade, harming our exporters.


European Union: While Canada has a (hopefully soon to be complete) trade deal with the EU, Canada’s brand has taken a reputational hit in the EU thanks to our inability to implement credible greenhouse gas emissions policies with respect to the oil sands.

China: David Mulroney, Stephen Harper’s former foreign policy adviser and former Canadian ambassador to China, has been highly critical of Canada’s “erratic approach” to China, where we have alternated from cool-to-warm-to-cool on the world’s largest economy, causing us, in Mulroney’s view, to no longer be taken seriously in the region.

Mexico: Canada’s ongoing visa dispute with Mexico has limited the ability of Canada to attract capital and talent from the rapidly growing country, and our approach risks shutting Canadian companies out of continent-wide supply chains.

United States: Canadian exporters to the United States still face significant border delays, “buy American” provisions, and a overpromised and underdelivered regulatory harmonization agenda. For example, our chemical exporters waited three years to have our chemical hazard communications regulations harmonized with the United States, to be given new rules that are significantly disharmonized with those of our southern neighbour (Full disclosure: I own a company that performs regulatory compliance consulting for the chemical industry). Keystone XL is looking like it will never get built.

A well-read 2014 Bank of Canada study showed that Canadian manufacturers are setting up operations south of the border to service the market, rather than exporting from Canada. It is not difficult to understand why. A company in Oshawa, Ont., that wishes to export to the United States faces a number of hurdles. First they need to get their product to the border, which traffic gridlock around the GTA makes difficult. Then they face long and variable delays at the border. It has become much cheaper and easier to simply set up shop in the United States rather than expand in Canada. Or, as one of my Canadian clients put it to me, “You can have all the tax incentives and research grants in the world; none of that matters if you can’t get product to market.”

Exports are vital to the Canadian economy, not only in that they are the price we must pay for imports. Canada is a relatively small market in the global scheme of things; the only way for our firms to build economies of scale is through exports. A closed Canadian economy is ultimately a less productive one, with a lower standing of living for all. A generation from now, I believe historians will view the Harper years as a lost opportunity, despite a number of smart, well-designed trade policies. The next government will need to work on improving our relationships with our largest trading partners if we are to see Canada re-emerge as a trading powerhouse.

Disclosure: Mike Moffatt has worked with Canadian politicians and policy-makers of all political stripes to craft more effective public policy, including his most recent role as an outside economic adviser to Liberal Leader Justin Trudeau.


Judging Harpernomics

  1. “How can the net worth of households have increased so much over the last 10 years, if our standard of living has declined?”

    Simple, inflation in the housing market. A rundown shack in Vancouver that once cost 500K now costs 1million. If you can show me data that proves Canadian wealth increases have anything significant to do with anything other than real estate please do share. It’s a false argument to say increases in housing prices have increased our standard of living.

    And why didn’t you discuss the change in our relative position against other OECD countries? I’m not saying Canada is doing terrible, but the Conservative line that we’re the best is also untrue.

    • IF you read the quarterly publication by Stats Canada, National Balance Sheet for Households, you will find that real estate is simply another asset class. Assets can be bought and sold for money. When the owner sells his/her principal residence, they are paid the money. And the primary residence is the only major asset class that is tax free.
      Your argument is really with Stats Canada and the US Bureau of Economic Analysis and Eurostats – each of which record real estate as one of many asset classes, that comprise the balance sheet of individuals. The national statistical agencies do not “cherry pick” assets to decide which assets to record and which to ignore. If they did, the aggregate balance sheet for the country would not add up.
      And yes indeed, real estate is the largest single asset of most Canadians.
      Finally, I did provide comparative income data (GDP per capita) with OECD, EU, and Eurozone to show that the average Canadian earns approximately 20% more. As someone who travels to European countries regularly, it is apparent to the casual intuitive eye.

      • I would have thought the net job growth was the wrong stat for your argument; the employment rate would account for changes in population growth across the G7.

  2. I think we have a major problem with attitudes now that expectations of many is that they are entitled to a lifestyle of what would be termed a few years ago”The rich and Famous”
    Certain segments of Canada have so much in terms of material.privilege.educational,parental advantages that they are disconnected from the real world of others that can only even imagine it.
    I see daily huge caravans of Motor homes .RVs on our highways,expensive vacations every year to exotic tropical destinations,,huge pickup trucks speeding down the road etc
    I’m sure .others can add to this list.
    I go to franchise places ,and there’s hardly a employed euro canadian teenager but people (known as foreign workers program)coerced to work for minimum wages and try to support their families back home
    Dependent on the Oil resource sector for the type of lifestyle that is fantasy for most is shortsighted at best .
    I have a small business that has to import from USA and my costs have skyrocketed , no one seems to notice this side of equation.I will survive
    We are basically helms-less when it comes to spiritual and moral values ,the elders have sold the store and gone off to drink wine and play golf,they tell the young we can keep taking from this beautiful planet and it will be fine
    When the true economy takes into consideration all these elements then we can say it is real and healthy
    There are some tough choices coming

    • Your post is spot on. The middle class has an entirely unrealistic expectation of what type of lifestyle they should be enjoying. Resort vacations were something the rich used to do. Now every middle income schmuck heads south for the winter. Two winters ago I was getting my hair cut (and I don’t have much hair, so I go to a bargain-basement barber) and the girl giving me my $11 buzzcut asked me, “So have you gotten away this winter yet?” She was tanned, naturally, and had just gotten back from the Dominican. Other barbers in the background were also chatting about recent or pending beach holidays. And I had this thought: “These folks give $11 haircuts for a living, and they talk about annual resort vacations as though they are an expected thing? I probably make 4 times what they do!” I went south for the winter once – to Orlando.

      That is but one example. Take vehicles. New cars are the norm. When I was a kid in the 80s, a “new car” meant a recently-purchased used car. An actual new car was a “brand new” car, and it was a big deal amongst middle income earners. And I don’t even need to mention housing.

      Any time I express such sentiments, someone responds with a smart-a$$ remark like, “Sure Gramps. We should live like the good old days cuz they were so much better. And you walked to school 6 miles in the snow with bare feet too, right?” Such responses miss the point entirely. The cold, hard fact is this: Real incomes have not risen that much since the 80s. They’ve risen somewhat, but not nearly enough to justify the massive increase in our living standards that we’ve seen. The numbers just aren’t there. How did this happen?

      My own understanding is this: Interest rates have been kept consistently too low since at least the late 1990s. These low rates, along with a corresponding reduction in lending standards, changed our relationship with debt. It is no longer something to be avoided, but a tool to get the things you want now, rather than waiting until you can afford them. Therefore, the lifestyle so many enjoy is in fact an unsustainable, debt-fueled fantasy existence.

      I fear there will be a very big price to be paid for our reckless consumption, unrealistic expectations, and inability to postpone gratification. Americans paid that price in the 2007-12 period. Europe a couple years later (and they’re still paying). Canadians have skated thus far. But a reckoning is coming. I hope I am wrong.

  3. Harper has an unenviable record.
    Steel workers & pensioners in Hamilton have first hand knowledge of his duplicity as do western grain farmers who found CWB scrapped without a vote from them and now the fed stock of hopper cars not going to be replaced. Just how much did this freedom of marketing cost them in lost revenues in 2014?
    Apparently he wants the same scene for auto workers as for steel workers….once the auto jobs move to third world countries, who exactly will have a stable pension?
    Beef & pork producers have gained what in the 8 years of COOL controversy? Now he wants to sign on to TPP in order to export what? ALL other countries want to import to Canada, we have the money and they want it. Who’s standards for food quality will prevail? NOT Canada’s.

  4. A few remarks to Professor Lee’s questions:

    “How could Canada have created more jobs relative to the size of our economy since 2008 than any of the other G7 nation, if the employment picture is so terrible?”

    Your data is apparently only from Q1 ’09 to Q4 ’14. What about Harper’s time before the financial crisis and since the current recession? I suspect you may be cherrypicking both start and end dates, as well as the countries you’re comparing to (both appear to be systemic faults throughout your piece). The G7, for example, is a woefully small set and includes economies quite different from Canada’s.

    One also wonders what kinds of jobs are being created. Are these well-paying, full-time jobs with benefits? Or are they part-time jobs, or ones subject to highly-volatile boom and bust cycles (conveniently, you’re not including the recent impact of plummeting oil prices on that sector).

    “How can we have the wealthiest middle class of large OECD economies, if the middle class is supposedly collapsing?”

    How are you defining “large OCED economies”? What years are you looking at? If this is the same data used in the 2014 NY Times article entitled “The American Middle Class Is No Longer the World’s Richest”, then the answer is through 2010 (in other words, old data). Just what is being compared here? This is vague and smacks of cherrypicking.

    “How can the net worth of households have increased so much over the last 10 years, if our standard of living has declined?”

    My suspicion: a housing bubble. How about breaking that data down? Or would it undermine your arguments?

    “How can Canada’s economic output be so much higher than the averages of the OECD, EU and the eurozone, if the economy is in such bad shape?”

    The OECD has 34 member countries, including Chile, Czech Republic, Estonia, Greece, Hungary, Ireland, Italy, Mexico, Portugal, Spain, Slovakia, Slovenia, and Turkey. The EU and Eurozone largely overlap. These are not economic powerhouses we want to compare to. Note the presence of the PIIGS, which have had incredible difficulty of late. To simply be better than average amongst this cohort isn’t exactly some fantastic accomplishment.

    Instead, how do we compare to the US, UK, Australia, Austria, Germany, Holland, Switzerland, and the Scandinavian countries? These are the wealthy, productive, safe, culturally similar, and desirable countries that Canada should compare itself to. A quick look at wikipedia suggests that Canadian per-capita GDP for 2014 is worse than all of the above, except Denmark and Finland. Moreover, I suspect with the massive depreciation of the Canadian dollar (which you completely neglect to mention), our standing will fall considerably in 2015.

    “If Canada is doing so poorly, why do people from around the world want so desperately to move here?”

    This is hardly a compelling argument. Sadly, the average human isn’t living in a very safe or prosperous country, so the bar isn’t set particularly high. Millions are desperate because they face existential threats on a daily basis (e.g., Syrians or Iraqis). Canada could be doing substantially worse and you could still legitimately pose the same question.

    • Great questions, I’m looking forward to Professor Lee’s response.

      I found the OECD data here: https://stats.oecd.org/Index.aspx?DataSetCode=PDB_LV

      You write: “Instead, how do we compare to the US, UK, Australia, Austria, Germany, Holland, Switzerland, and the Scandinavian countries? These are the wealthy, productive, safe, culturally similar, and desirable countries that Canada should compare itself to.”

      Great point. The answer is that we’re *behind* Luxembourg, Norway, Switzerland, the US, Ireland, The Netherlands, Austria, the G7 Average(!), Sweden, Germany, Denmark and Australia.

      I wondered why Prof. Lee didn’t compare Canada’s GDP per Capita to the rest of the G7, which would have been in line with the rest of his piece. It looks like more cherry-picking to me.

  5. Jim Stanford I wish you and the rest of the Unions who interfere in elections would butt out! All Unions have no problem backing the most Criminal Regime in Ontari-OWE with ram and scam bills and taxes (which I call Extortion) that have killed legit businesses in the Construction Industry across this Province. All Unions were allowed to speak but the LEGIT small businesses were not. Now many have closed up because of the UNIONS effort to bring us into your fold…not going to happen. Those, my Union thug are now un-employed LEGIT small businesses closures and employees let go! No more HST, Payroll taxes, No more WSIB extortion (where LEGIT business owners were covered 24/7, carried Liability and other insurances – that is called RESPONSIBLE business owners and gearing it to their business that UNIONS have no part of being in WE ARE NOT UNIONIZED, and NEVER WILL BE!

    Is there NO COMPANY OR BUSINESS you fools won’t try to latch onto! 100’s of thousands now unemployed because of UNIONS and more Businesses are going to flee this Country at their very first opportune time. I blame UNIONS!

    • Better back up your slurring of unions with some kind of facts if you want to be taken seriously.

  6. How can the net worth of households have increased so much over the last 10 years, if our standard of living has declined?

    Two words: housing bubble.

  7. I think I can guess who Ian Lee is voting for.

  8. Harper has been bad for Canada and cherry picking stats won’t change that. How can a person who doesn’t believe in climate change prepare Canada for the effects of it? How can a person who believes in tearing up our land to exploit non renewable resources that pollute and use up water be trusted to protect our land? How can a person who believes that women should stay home and care for kids ever raise labour participation rates? Time to get rid of this dinosaur, send him back to the fifties.

  9. Ugh… GDP… Jobs… The usual keywords. But have we discussed the purpose of these terms? Have we discussed the context of them? Jobs are great to have, but it is always better to have full time, well paid jobs with benefits. Would a McDonald’s part time job at a min salary with no benefits count the same as an office job somewhere, with average salary and some health benefits, under the column “jobs created.” Hey, maybe 1.3M jobs created are all awesome and well paid, but I would need some more data, and it is difficult to get more data as Mr. Harper’s government has been consistently silencing Canadian scientists and defunding StatsCan. At the end of the day, Mr. Harper and Ian Lee both subscribe to the same ideology of a neoliberal economy. Rather than economists, we can better call them “sooth sayers” as all they can do is say: “Now, now, everything is A-Okay, don’t you worry, little baby, we will take care of it. And if it is bad now, well it will surely get better! In fact, I guarantee things will get better! Eventually…” But in the long run, “we are all dead.”

  10. I created a concise visual summary of Unifor’s report “Rhetoric and Reality: Evaluating Canada’s Economic Record Under the Harper Government”. Could be useful for anyone looking to cast an educated vote in the upcoming Canadian elections. The numbers don’t lie. http://www.harpernomics.com/