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Which prime minister managed the economy best?

Paul Boothe on how the economy fared under Harper, Martin and Chretien


 
Aaron Harris/Reuters; Simon Hayter/Getty Images; Chris Wattie/Reuters

Aaron Harris/Reuters; Simon Hayter/Getty Images; Chris Wattie/Reuters

In recent posts, we asked and answered the question: Who of the last three prime ministers was the best fiscal manager? Not surprisingly, the answer depended on which measure of fiscal performance you focused on. If you looked at spending discipline, Jean Chrétien was the winner. If your focus was on reducing debt and balancing budgets, Paul Martin was tops.

In this post, we turn our attention to which prime minister was the best economic manager. Truth be told, most economists don’t believe that politicians actually manage the economy, although their policies can certainly affect the level of activity in the short run and its rate of growth in the long run. However, given that they can’t seem to refrain from claiming the credit when the economy is growing well, we think it is interesting to look at what actually happened under their stewardship.

As with last week, we compare the tenures of three prime ministers: Jean Chrétien, 1994-2003; Paul Martin; 2004-05; and Stephen Harper, 2006-14. All the years refer to calendar years. We adjust the measures for their different tenures when appropriate and, given that Harper is still in office, we close off our comparison of his tenure in the last year for which annual data are available.

Of course, like beauty, economic performance is in the eye of the beholder. There are a number of ways to measure performance and, so, as we did with fiscal measures, we propose several indicators to allow the reader to chose the ones he or she thinks best captures the prime ministers’ performance. The indicators we have chosen to highlight are real GDP growth, the unemployment rate, and wages and salaries.

Chart 1 shows real GDP growth. For the 10 years of Chrétien’s mandate, real GDP grew strongly, at an average annual rate of 3.9 per cent. Martin’s two-year tenure is next at 3.2 per cent on average with Harper’s nine-year (to date) mandate achieving 1.9 per cent on average. Of course, one might say such comparisons are unfair, given that Prime Minister Harper’s tenure included a serious recession. In fact, periods of recession or slow growth are not uncommon occurrences for prime ministers. Indeed, in 1991, there was a decline of a similar magnitude (2.1 versus 2.7 per cent in 2009) and in Chrétien’s 10-year tenure, there were three years of growth of less than two per cent. We take this as a reminder of the dangers politicians face when claiming credit for periods of strong economic performance.

Turning to unemployment in Chart 2, we see that the unemployment rate declined during the Chrétien years, from 11.4 to 7.6 per cent or 3.8 percentage points. During the Martin years, unemployment declined by 0.8 percentage points from 7.6 to 6.8 per cent. Finally, in the Harper years, unemployment rose marginally from 6.8 to 6.9 per cent.

What about weekly wages and salaries? In Chart 3, we see that over the Chrétien years, real weekly wages declined at an average annual rate of -0.5 per cent. The Martin years were tops with average annual growth of 1.0 per cent. The Harper years are in the middle, with annual weekly wage growth of 0.8 per cent on average.

So which PM wins the prize? In terms of growing real GDP and reducing unemployment, Chrétien is the clear leader. In terms of wage growth, Martin is tops. Of course, these are just three possible measures of economic performance. Other measures might result in different rankings.

We don’t believe prime ministers actually manage the economy, despite what they might say. However, with a federal general election looming, politicians are sure to be making claims about their prowess as economic managers. Now you have some facts to help draw your own conclusions.

Paul Boothe is director and Sandra Octaviani is a research associate at the Lawrence National Centre for Policy and Management at Western University’s Ivey Business School.


 

Which prime minister managed the economy best?

  1. This article could have been less useless if it had compared the numbers to what was happening globally during the same timeframes. Harper had to deal with the worst global recession in our lifetimes, while Chretien was PM during one of the fastest times of growth in generations. Yet somehow, that’s completely ignored.

  2. Great article – I agree, when the election comes around, I’m sure this will come up. I’d love a full accounting audit of various PMs – environment, welfare, health, fiscal, etc. Too often there’s a fairly myopic view of what’s important.

  3. I am not sure which is more worthy of a raised eyebrow, the authors for writing this, or Macleans for publishing it. Leaving everything else aside, given his short reign, there is absolutely no statistical or comparative significance in Paul Martin’s performance metrics, either in this article or the one comparing fiscal performance, other than perhaps to consistently cast Stephen Harper as the third of three. Second, and as already alluded to by Bill Brasky, the absence of contextual information is amateurish, and again on the surface geared toward casting the current government in the worst possible light. Simply put, I would never hire a fund manager based on that manager’s performance without at least comparing it to the S&P, or other managers generally during the period in question. A 10% return today would really rock, but in 1999, no so much.Jean Chretien had the mighty wind of the booming US economy at his back for most of his term, and whatever quotidian recessionary setbacks he may have suffered, one cannot dismissively lump what many have called a virtual depression in 2008-2009 in with them. Pretty weak, Macleans.

  4. I was just going to post “cue the tribal zombie umbrage” and before I could even finish typing, it’s started. Ha. Love it.

    Let me save all you thoughtless conservative tribal zombies the time and capture all your outrage and rants with brevity: the single and glaringly obvious problem with this piece is that it does not take into account whatever factor it could have taken into account to arrive at a conclusion that would reinforce my preconceived entrenched mythology that Harper is best.

    Of course, had we looked at some other area of comparison, outside of economics, one where perhaps Harper came out on top, we would of course be cueing the thoughtless tribal Liberal zombies with the same, only reversed, outrage.

    Whatever the evidence, whatever the reality, nobody change your mind about anything political. Tribal loyalty above all else.

    Sigh.

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