The prepared text of Brian Topp’s speech to the Economic Club of Canada today.
The prepared text of Brian Topp’s speech to the Economic Club of Canada today.
Thank you very much. It’s wonderful to be here. I hope everyone had a good holiday break. I got a few moments sleep and a little time with my family. And that’s good, because now the sprint begins to the finish line.
The NDP leadership race is just over half way complete. And I must say it’s been very good for our party. We have an excellent team of candidates. All of whom bring huge assets to the race. But as I said last week in the press, the race will start to get just a little “boring” if we don’t start talking about where we stand on the issues. The time for introductions is over – the time for real debate about the future of our party and our country is now. And, perhaps no issue is more central to Canadian politics than the state of our economy. A question where there may be some interesting differences among the candidates for leadership.
There is much to say on this topic. But in the interests of getting you out of this lunch in reasonable time, I’m going to speak about three aspects of economic policy today.
First, I would like to review a little history, to make the case that New Democrats are the people Canadians should trust to responsibly manage the public finance.
Second, I am going to suggest that Canada is inviting a great deal of economic trouble by ignoring its international responsibilities to address climate change – and is also missing an important economic opportunity.
And third, I’d like to touch on a fundamental question about what kind of economy we’re going to build: whether Canada should continue with the present Conservative government’s view that raw resource exports should be the focus of our economy; or whether we should get on a better road.
The future of our energy economy is a good example of what I mean, so I’ll refer to that sector to illustrate my case. I’ll also offer you a few brief thoughts on how we can return to growth in our real economy, in part, by addressing access to capital – a topic I intend to return to at another event later this week.
So to begin, a little history.
I worked for much of the 1990s as a senior official in the Government of Saskatchewan. A government that was very competently led by Premier Roy Romanow and then equally competently by Premier Lorne Calvert. When our government came to office, we were presented with a notably grim inheritance from our Conservative predecessors. The Conservatives had been elected to govern a province with a balanced budget and zero net public debt.
To summarize much misgovernment, they implemented a familiar playbook. They cut taxes, they increased spending, and they argued that this would balance the budget. After nine years in office, they handed us back a $14.865 billion public debt, having run deficits every year they were in office.
Things were set to get worse. The province was running a billion-dollar annual deficit, on a little more than $4 billion in annual revenue. Investors and savers had lent an enormous sum of money to the province of Saskatchewan on the strength of its reputation for fiscal good management under a long string of NDP governments. By 1991, that reputation had been thrown away, as measured the province’s bond rating. Which was just about to slip from investment grade to BBB – a level at which most of the province’s pension funds would no longer invest in the province’s own bonds.
When you reach that point in public finance, you learn what it means to be in office but not in power. The Conservatives had destroyed the government’s fiscal capacity and thus the sovereignty of its legislature. Bond raters had, arguably, a bigger say over the future of the public interest of citizens than their elected representatives – an intolerable destruction of responsible government. In those circumstances, newly elected to office, we knew we had to act. We asked high-income individuals to help address this true fiscal crisis by contributing more, through a high-income surtax. We called on all citizens to help save the province through a series of other tax measures. And, not without tears, we addressed public spending. And it worked.
Over the course of our first term in office, we engineered a billion-dollar fiscal turnaround, taking the province from an absolutely unsustainable deficit to balanced budgets. The NDP government restored the province’s credit and its financial reputation. We could now look to the future with confidence.
And then, one practical step at a time, we got back to work on broader priorities, rooted in the principles and values of our party – priorities like addressing poverty; investing in education; better, more efficient health care; and renewing the province’s infrastructure and its competitiveness on many fronts. We didn’t get everything right during our four terms in office under Premiers Romanow and Calvert. But we did demonstrate a fundamental fact about the New Democratic Party in office –which is that our party begins from the premise that strong public finances are a first principle of good government. Even if that means taking on populist myths.
Like the populist myth that broad-brush tax cuts are free, and that the resulting deficits will never be a problem. Prime Minister Harper has not yet done as much damage to Canada’s public finances as his provincial cousins did in Saskatchewan. But the underlying logic of his fiscal policies is the same.
Mr. Harper is another new-model “conservative” who believes you can cut taxes, increase spending, and balance the budget. And in pursuit of this policy – which has worked so well all around the world, as we can see in Greece, in Ireland, in the United States and in many other countries – he is spending a prodigious amount of money every year on tax expenditures.
In my view, much of this spending represents misplaced priorities – a waste of public funds that should be promptly ended, so that these funds can be more efficiently and productively invested in more important priorities.
If I can crib a line from Mr. Harper’s good friend His Worship Rob Ford, the current mayor of the City of Toronto, I believe it’s time to end the gravy train – the gravy train of unproductive tax giveaways to the wealthiest and most fortunate among us, people like His Worship Rob Ford. If we are to be good stewards of the public finance and therefore of the public interest, then we need to have the courage to say to special interests – in this case, to the wealthiest and more powerful in our society – that the time has come for respect for taxpayers. And that means investing tax dollars where they can do the most good, and not where they are least needed. And there are indeed more important priorities — like climate change, my second topic today.
We are in the Economic Club of Canada, and so I’m hopeful that I don’t need to persuade you that sooner or later — in an orderly manner, soon, or in a disorderly crisis, later — we and the rest of the world are going to have to address climate change. Galileo was right – the world is round and circles around the sun. Darwin was right too – the world was created more than 6,000 years ago, and God’s creatures evolved over a very long period of time. And substantially all of the world’s credible climate scientists are right as well – carbon emissions are changing the world’s climate, and will do so increasingly disastrously, unless we act to slow it.
But instead of acting, we have already wasted more than 10 years talking. We need to do a lot less talking and a lot more acting. Because if we put off the inevitable – if we continue to procrastinate – we’ll end up having to take abrupt, last minute and drastic steps – just as we had do in Saskatchewan to deal with fiscal recklessness and irresponsibility.
It’s like the college student who waits until the night before to write her term paper. It has to get done, she just chose the hard way, and got a bad mark to boot.
We can’t let that happen.
Look at Canada’s record today.
- Canada produces 75% more waste than in 1980.
- On a per person basis, Canadians use eight times more water than people living in Denmark.
- And Canada ranks 15th out of 17 OECD countries in greenhouse gas emissions.
These are environmental issues than need to be addressed for environmental reasons. But here’s the economic rub: in failing to act, we are also missing an opportunity to retrofit our economy – to rebuild and renew it, to make it more efficient and competitive, and to create thousands of good jobs in the process.
In other words, our failure to act – when we are going to have to act at some point – represents an enormous opportunity cost for our economy. To choose to be energy inefficient is economically foolish as well as environmentally reckless. Competing economies, like Germany’s, are leaving us behind by becoming more efficient and productive – and much less carbon intense.
So what needs to be done?
- I believe we need to establish a hard cap on carbon emissions, and mean it.
- I believe the real economic and environmental price of carbon should be paid by carbon emitters – through a national cap and trade program.
- In my view the Government of Canada should step up as a partner to help provinces and energy companies get out of coal-fired electricity production, and to transition to future fuels – like natural gas (for a time), and then to sustainable sources like wind, solar, tidal and thermal.
- In my view the Government of Canada should help invest seriously in domestic and industrial energy retrofits, to help both families and industry cut their energy bills and their energy use. In both the short and long term, it is a far more efficient use of capital in our economy to invest in modern insulation, windows and roofs, and more energy-efficient equipment, than to spend the same money burning coal, so that we can waste electricity in poorly-constructed homes and outmoded plants.
- I believe the Government of Canada should join every other major industrialized country in the world, and implement a 21st century national transportation strategy. And as is the case in much of the rest of the world, the centerpiece of that strategy should be a serious, determined, long-term commitment to help fund public transportation in cities, where 80% of our population live. Light rail should be a principal focus of this work, so that progress can be made efficiently, effectively and within a reasonable time.
- And then, as improved public transportation comes online, municipalities should be encouraged to pedestrianize their urban cores, in order to get cars out of them, and in order to get passengers into convenient, widely-available, energy-efficient and carbon-efficient public transportation.
There is more to be done. But these steps would be excellent places to start.
The environmental case for them is unanswerable. And, I would argue, so is the economic case.
Here is another economic case that I believe is unanswerable: Canada’s over-dependence on the export of raw resources is blighting our economy.
We don’t just have “oil disease”, as the Dutch did, Russia does, and many other oil-producing economies do. We also have “raw log disease”, “raw aluminum ingot disease”, and much other economic malady centered on the export of raw, unprocessed resources whose real economic value is also largely being exported. The Harper government is addicted to the fast-buck economy. And is working to make our raw resource dependence worse.
To illustrate, let’s stay with the energy industry and consider one of the principal economic initiatives taken by the Harper government in the past twelve months – its relentless determination to facilitate the construction of new pipelines to export much more raw bitumen to American and Asian markets.
To what end?
For the purpose of mining the maximum amount of raw bitumen at the lowest possible royalty rate, and to pound it down pipelines for export to the United States and to China, where our bitumen is then to be converted into finished products, which can then be resold to us or re-exported to other countries, to the benefit of other economies. Deepening our dependence on raw resource exports. Deepening the carbon intensity of our economy. Selling our resources for fractions of their real worth. We get the smoke, they get the jobs. What is the alternative?
- A much more orderly and considered pace of development of Canadian oil sands;
- A commitment to adding more value to our energy resources here in Canada – which we should pursue with as much determination as the current government is pursuing pipeline development;
- A review of royalty rates, so they reflect the real value of our energy resources;
- And, in lieu to our current practice of using one-time energy revenues to help us pretend we are a low-tax jurisdiction, the channelling of an increasing share of those revenues into transition funds, used to invest in a future Western Canadian economy that is not dependent on the export of raw bitumen.
There are a growing chorus of voices in the business community and in Western Canada calling for a new Canadian energy policy, so that we can address some of the obvious consequences of the overheated raw resource strategy Mr. Harper and his government promote.
I favour such a policy, built along the lines I’ve just outlined. This approach would make for a better future for the Western Canadian energy economy; for Western Canada in general; and for the overall Canadian economy.
And, critically, it is an approach that can be reconciled with a coherent and effective climate change strategy, of the kind I’ve outlined today.
A win-win for both the environment and the economy.
Addressing climate change effectively.
While helping to build a more prosperous, innovative, value-added economy.
There is much else to do, to get this economy to work better for the majority of our citizens.
Later this week I’ll be meeting with the Canadian Federation of Independent Business, and I’ll be sharing some ideas with them about how we can promote better access to capital in the real economy – in particular, in small and medium-sized firms, in many sectors.
Like, for example, the creative industries – film, television, books, magazines, interactive – some of the most efficient job creators in our economy.
Small and medium-sized companies account for 45% of our GDP; much of the economy’s growth; 60% of all jobs in the economy; and 75% of net employment growth. Find a way to help them, and you have taken an enormous step towards turning this economy around.
Today, I’ve spoken about fiscal responsibility. About a greener and more sustainable economy. About an economy less dependent on raw resource exports, and more focused on adding value. About an economy that partners effectively with the real job creators, and gives them the tools they need to get the job done.
Aiming for an economy that will share its benefits much more widely, reducing today’s gross and untenable income inequality.
In all of this, I’m taking a hopeful and optimistic view of some of the central economic issues facing our country.
We don’t have to be the world’s pariah on climate change.
We don’t have to endure an economy blighted by over-dependence on raw resource exports.
We don’t have to pay the steep and rising prices of economic and social inequality.
We can join the world in acting on climate change.
We can leverage that commitment to invest in a more efficient and competitive economy.
We can reconcile this with a responsible, value-added approach to developing our energy resources.
We can leverage all of this to help reverse our slide towards 1920s-style income inequality, and everything that inequality is doing to Canadian society.
We can do this through a fiscally responsible, economically literate, socially progressive NDP government.
The kind of government I worked for.
The kind of government I’ll lead.
Thank you again for inviting me today.