Question, answer: Stéphane Dion, Dieppe, NB, today


Here’s what I asked the Liberal leader, and how he answered.


Question, answer: Stéphane Dion, Dieppe, NB, today

  1. Dion: “We need to create economic activity right now”

    Spoken like a true socialist.

  2. “We have to plan the work, and then work the plan…later”

    Joe Clark was often accused of being overly process oriented. Not sure if that is an apt analogy.

  3. It’s a good question Paul and I think he provided a sound response, but like Ti-guy, I haven’t actually seen anything or heard anyone suggest that his plan amounts only to process and not policy.

    Who outside the obvious critics, (opponents) have said that exactly?

  4. On va tourner tous les pierres! Apparently hanging out with Justin Trudeau has made Dion more comfortable with language-switching midstream.

  5. “we need to create economic activity right now” Stephane Dion circa yesterday.

    “we will spend our way out of this recession” Bob Rae circa 1990

    Proof that stupidity is timeless.

  6. Aw Peter,

    Don’t be so hard on yourself…

  7. knb: “like Ti-guy, I haven’t actually seen anything or heard anyone suggest that his plan amounts only to process and not policy.”

    Then you weren’t hanging around outside my bathroom door while I showered this morning: that was the principal theme of my speech (though I “borrowed” the best lines from my speech yesterday).

    Seriously, Dion’s “plan” is pure theatre: he’s just saying he would try and deal with economic challenges in a rational way. The main plank seems to be that he will try and fix the regulatory schmozzle that created our own home-grown meltdown in ABCP’s (which, last I heard, i.e. from the Supreme Court, had not yet hit the fan).

    Of course there’s very, very little he can do if we’re talking about a global recession. So, as Mr. Wells asked him, as I opined this morning beneath the showerhead, it’s process and not policy. Which is as it should be, right? God Save Us from a politician deciding what our monetary policy should be. But it doesn’t add up to much of a “plan,” except optically.

    Peter, I dunno if full-on Keynesian spending would work on a macroeconomic level, but it might well do something to keep small towns in Atlantic Canada afloat while the economy sputters.

  8. Well the Europeans financed a significant amount of the US sub prime mortgages. Their regulatory regimes also allowed their banks to operate in with lower capital ratios.

    So The Americans are in toruble because of bad loans, and high leverage as are the Europeans.

    Canadian Banks, apparently, didnt participate in high levels of MBS. From a systemic perspective Harper is correct. Now we are not an island and the drops in demand are likely to affect our export driven economy.

    So are we experiencing the meltdown that the US and Europe are, no evidence this is the case at all. No rumours of Canadian Banks, Insurance, Multual Funds having issues that I have heard.

    We will experience effects from demand drop and there is a general tightening of credit. The Bank of Canada’s response, in terms of providing liquidity, is the appropriate response. There is no need for a Canadian bailout package that has been indicated….we will see issues with regard to consumer spending slowdown and export slowdown.

    This is a party Canadian Finaincial Institutions didnt participate in. Whether that was due to good managmaent, good regulators or a combination is the story that needs to be written.

  9. BTW Dion’s plan sounds like the first 30 days of any new government, get briefed by the BoC and major regulators on the state of things.

    If Dion has evidence that we have a problem of the scale the Euro’s and US does he should lay it out.

    Now, debates about demand side effects are legitiamte, what do we do as our export markets slow down, for both commodities and finished goods.

  10. Sorry, FWIW, I posted in ignorance about the ABCP situation, which appears to have blown over. NB: do not entrust your portfolio to me!

  11. In further Dion developments today – I just heard a recap wherein he a) reminded Easterners of Harper’s “culture of defeat” statements from some years ago, b) countered that he believes the region to be a place of success, and then c) announced that he would extend unemployment benefits by four weeks. Er, thanks, Stephane.

  12. Sean S., if the status of EI policy in this country doesn’t count as Victory for Atlantic Canada, I don’t know what does. It’s like Marengo and Austerlitz and Jena and Friedland all rolled into one. It’s the most Victorious campaign since the the Fall of France. That’s why they’re handing out gold medals for it like candy. There should be a massive Triumphal Small Weeks Column in every outport’s piazza. Yessir, take a good look at that one before you Westerners start jabbering about a “culture of defeat.”

  13. Providing liquidity, yes, but to the tune of $20 billion ?! For our economy?

    That is just nuts.

    Unless there is something more onerous on the horizon.


  14. ““we will spend our way out of this recession” Bob Rae circa 1990
    Proof that stupidity is timeless.”

    Peter- Ya! Just like that Roosavelt guy whose “New Deal” completely ruined the United States during the Great Depression!

    sf- Dion is a Socialist?! For God’s sake, even Layton can barely be called a socialist! Wanting government to have a role in the eocnomy, especially in bad times, doesn’t make someone a socialist. That being said Tommy Douglas was a socialist of sorts and, as I recall, he was the guy who championed a little thing called Universal Healthcare…people seem pretty attatched to that “typically socialist” idea…

  15. Good question, Paul, but he didn’t exactly answer it. Stephen has it exactly right, the U.S. and Europe are nationalizing their banks, and other financial institutions, while their unemployment numbers are growing and some economists expect stagflation in Europe anytime now.

    None of this happening in Canada so Harper is correct in saying we are doing pretty well when compared to what’s happening in the world and Dion is scare mongering trying to create economic panic for electoral gain. Dion should be ashamed of himself.

  16. RyanD

    To steal from the great Mark Steyn, FDR put the Great in Great Depression. Economies around the world started to recover well before the U.S.’ did. Read Amity Shlaes’ Forgotten Man for details on why FDR’s policies prolonged and worsened the effects of recession.

  17. So is it panic, or is it what everyone always does? Or does everyone always just panic?

    I’m confused. Some critics say.

  18. Mark Steyn does write nice obituaries.

  19. The key number in all these polls in Ontario because Quebec will probably see the same result as 2006. I guess the question is: does anybody seriously believe that the NDP+Green vote will be 30% or more on election day?

  20. 20 billion is 2% of Canada’s GDP. A large number to be sure but its not like its money that is put out and gone….it is available to be drawn on in the form of short term securities and then I believe it comes back, unless rolled over.

    Increasing/decreasing liquidity in the system is a normal thing….large amounts like this happen rarely but they are not the same as the buyout package, which is being used to BUY ASSETS and inject capital.

    Totally different issues. There may be a freight train coming down the track, but as far as I can tell it will be a reduced demand type and a moderate credit tightening…see reports on Condo developers etc.

    This is not pleasant, but it is normal. The US and Euro stuff is far from normal that they are correct to be full blown panic. You are talking about clearing and banking systems in total lock up….banks dont lend to each other. In Canada, I would like to see some evidence first that there is a relucatance of royal Bank to lend to Bank of Montreal or TD before I would say there is a problem.

    None of this says there isnt, only that there is no evidence that there is a problem of the same scale in Canada.

    If there was then likely the Royal would buy CIBC and Manulife would be buying Sun Life etc etc. Or the government would be buying those institutions.

    The conservatives killed the Liberal plan for $0 down mortgages.. once again the story to be written by someone like a Macleans is what the differences are in Canada, how much of it is legislative environment, how much of it is conservative management how much of it is strictness of oversight. And even if all three are better, does it ultimately make a difference.

    BTW, irony, Canada’s banking system looks a lot like Australia’s and I dont think they are having a banking crisi either…..crikey, John Howard strikes again.

  21. I go back to fundamentals. The Liberal’s Green Shift will save the planet from cataclysmic climate change. The Cons will reduce your diesel two cents a liter. We will probably survive a recession (it is only paper with funny things printed on it, at best). A cataclysmic environmental shift will reduce human civilization to something unrecognizable. You still can’t eat, breathe or drink money. Granted, this is only the youngins we’re talking about here, but still, let’s get our priorities straight. I’m willing to give Dion the benefit of the doubt on the little details. Carbon Tax is the simplest and most effective start to shifting our economy. The Cons are the fear mongers saying it’s no time to try out new, experimental taxes. I haven’t seen nor heard anything over the past week to suggest this election isn’t a clear cut choice between black and white.

  22. “Here are some assumptions that underly [sic] all current activities related to the global financial crises:

    * Optimistic long term outcomes. Things are going to get better. Pollyanna mindsets.
    * The system, as it is currently configured, is the best possible or the only possible system. Faith in ideology.
    * Nation-states, singularly or collectively, are bigger and stronger than the financial/market system. The US is the guardian of this system. 20th Century legacy thinking.

    The above assumptions lead to offensive (all we need to do is find the right leader) or reactive (whack a mole) mindset/policy. If you reverse them, you develop a defensive and opportunistic mindset/policy.

    – John Robb (http://globalguerrillas.typepad.com/globalguerrillas/)


    *Things are going to get worse.
    *The system as currently configured is the worst possible.
    *Nation states are weaker than the financial/market system.

  23. “Now, debates about demand side effects are legitiamte, what do we do as our export markets slow down, for both commodities and finished goods.”

    ? implement the Green Shift : “Carbon Tax is the simplest and most effective start to shifting our economy. (Europe: while their unemployment numbers are growing and some economists expect stagflation in Europe anytime now.)

    “Will Green vote will be 30% or more on election day?” I would say so. I mean, Ms.May practically called Harper (may Bush be with him) a fraud in two official languages. That should count for some votes.

    Isn’t democracy fun. A political debate in which a party leader with no seats in parliament can openly and most publically call PM Harper (may Bush be with him) of this country a fraud, without further explanation.

  24. Dion’s candidates still talk to him? I thought a coup was in the works… hmmm.

  25. JWL- I’ll add the recommended book to my pile “to read pile” (which unfortunately gets taller all the time…) and will certainly see if it adds anything new to my current understanding. That being said, most of the similar arguments I’ve heard about FDR prolonging the Depression appear to be more about Right wing revisionist history (not that the left never does the same). It was the hands off, invisible hand approach that led to the Depression (along with a healthy dose of disasterous luck) and it certainly did nothing to solve it. As for FDR, most of the numbers I’ve seen show that his biggest mistake was the period between the 1st and 2nd New Deal when he backed away from his policies and the tangible imrprovements that had begun almost immediately receeded. If nothing else, he almost single handedly built the modern infrastructure for the entire U.S. South. I think that counts for something, especially over the long term.

  26. Unless I’m missing the point of Wells’ post, the question was never answered. Dion just went tangentially off in all directions incoherently. So:

    1. Either he misunderstood the question (but it was a pretty simple and clearly worded); or

    2. He can’t think on his feet in English.

    Myself, I really can’t see any use having a PM who has to sit or lay down to think. Your mileage may vary, though.

  27. Dion: “We need to create economic activity right now!”

    MYL: Then get a job. To assume that: government can (a) correctly predict and/or recognize a problem, (b) fashion a cost-effective solution that offers a net benefit to society and (c) avoid making things worse… is an amazing triumph of hope over experience.

  28. One reason that our investment banks are not having the same problems as those south of the border is that our investment banks had their meltdown following the October 1987 crisis. That was when Wood Gundy, Nesbitt Burns, Dominion Securities, and others were folded under the umbrella of our chartered banks.

    We also have been saved from some of the excesses of the US mortgage crisis by the simple fact that Canada does not have interest deductability on home mortgages. This means that there is much less incentive for homeowners in Canada to carry a large mortagae on their principal residence.

    In other words, PM Harper is correct. Canada is not the same as the USA.

  29. I would just like to point out that Layton spoke about his concerns about this crisis when Lehman Bros failed:


    Layton wanted to have a meeting so that the leaders could be briefed on the crisis before the debates so that the leaders could address the economic situation with the most up-to-date information and analysis so that they could have a knowledgeable discussion at the debates. Dion did not back that request up and Harper was able to skate on this because of it.


    Harper and Dion would prefer to leave the Canadian public for the most part in the dark during this election about the real economic situation we may be facing. Layton treats Canadian voters like adults and wants us all to have the all the information we need to make the right choice on election day.

    That’s why I’m voting for Layton for PM.

    We Need to Unite for Change
    So Together We Will Defeat Stephen Harper.

  30. Good letter to the editor in today’s Globe on the Canada/US comparison, from the always (to my mind) astute Harry Koza.

  31. Canada obviously faces economic problems – because our largest trading partner faces problems. However, we don’t need something like a bailout because out markets do not face a liquidity problem. Our banks are secure, and frankly too large to fail.

    Might we face a recession? Sure. But fiscal policy is a bad way to combat recession (see Rae, Bob), especially when you have the Bank of Canada. The Bank of Canada can just cut interest rates and at least ensure a comparatively mild recession. In the US Bernanke can’t fix everything because the US banking system is short of liquidity, and under-regulated (investors need to know that their money isn’t going towards say, mortgages for poor people).

    Dion’s sputtering incoherence on what his plan entails reflect that he knows there is no actual crisis. A recession sure, but not a crisis.

  32. RyanD: anyone who believes that governments create economic growth is a socialist. The more involvement from governments in the economy, the less growth. Central planning is a failure, regardless of the extent or the area, and this has been proved all over the world time and time again.

  33. sf: Utter tripe.

    I posit WWI, WWII as example. Governments created massive economic growth through their military projects. Now, did that growth actually meet the needs of the people? That’s certainly debatable, but you can’t debate that the growth occurred, specifically because of government involvement.

    As for central planning being a failure, I’d point you to the national railways and postal systems.

    The truth, as always, doesn’t like on one side or the other. Too much centralized control is certainly a bad thing. Too little centralized control, as we’re seeing down in the states right now, is also a bad thing, and the reason is two-fold:

    1. Resources pool.
    2. Not all people are nice.

    Put those two things together and any type of “pure” system you come up with will eventually run headlong into one of those two facts.

  34. T. Thwim,

    Those in glass houses… Wartime economic spending may create jobs and provide a demand stimulus to the economy, but are usually followed by a recession. Moreover, the war material built is not useful in peacetime – so the economic growth that does happen involves the production of tanks, etc, that are a poor indicator of public welfare.

    Giving the New Deal/WWII credit for the recovery from the Great Depression makes as little sense as giving Reagan credit for recovery from the 1980’s recession. Recoveries happen automatically, and the most important factor in a recession anyhow is monetary policy. Fiscal policy works to slowly to have any impact.

    In the Great Depression, most countries were on the Gold Standard (an international system of fixed exchange rates) which required that governments maintain relatively fixed interest rates – taking away the main tool by which they could combat recessions. The key decision that led economic recovery was moving off Gold, not “new deal” type spending. Indeed, Canada had a robust recovery under Prime Minister King, who put the kibosh on Bennett’s “new deal” type spending (yes, it was the Liberals that were the fiscal conservatives in the 1930’s).

    First I’ll address your war argument. All of my figures come from the Queen’s University Historical Canadian Macroeconomic dataset.

    Under Bennett and King’s relatively small government response to the Great Depression, real per capita economic growth from 1933 (the trough of the recession) -1939 was a robust 5%/year.

    Real GDP per capita in 1939 was $4,751. Wartime spending, as you correctly note, caused rapid growth, pushing GDP per capita up to $7,514 by 1944. Of course, this was financed mostly by debt, which has to be repaid. After 1944 GDP per capita crashed, with economic growth stagnant till 1950. At the same period, prices were up over 70%.

    That translates to a war and postwar growth rate of 3.8%/year. So growth was SLOWER if you account for the inevitable postwar recession that comes from debt-financed fiscal policy reactions to poor economic conditions.

    The First World War was even worse, because there was no real monetary response at any time. During the First World War itself, real per capita GDP grew at 2.7%/annum. However, there was a massive economic downturn after the war, in which troughed in 1922, with per capita GDP only slightly higher than it had been in 1914. So if you count the postwar recession, the 1914-1922 period saw growth of .07%/year – ridiculously anemic.

    Now, sf isn’t off the hook by any stretch himself. His central point is off-base itself – there are a number of instances where markets fail to provide optimal outcomes.

    1. With common pool resources like say, fish, you need government to sell out licences or quotas, otherwise private actors will overfish. If you are one of 40 fishermen, it serves your interest to over-fish, since the cost of the loss of fish is borne collectively, while your profits are borne individually.

    2. There are public goods that no private firm would provide on its own, because the social benefit outweighs the privately extractable benefit.

    3. Certain industries exhibit decreasing costs as production runs are enlarged – aerospace being a dramatic example. Subsidization and the provision of R&D for such firms is a clear public good. The EU and Brazilians have been able to challenge America and Canada precisely through subsidy wars.

    On the other hand, sf. you are correct in saying that politicians have little to do with short term economic growth (unless they are politicians that have appointed radical bank of Canada governors – Mulroney does deserve some blame for Crow, for instance). They do matter in the long-run, however, because they create the institutional apparatus that drives economic growth.

    The operative metric needs to be opportunity cost. Yes, you can spend money and benefit the economy in some tangible way – but does it benefit the economy more or less than if you spent that same money elsewhere, or on a tax cut or on deficit reduction, etc. I don’t see those kind of nuances in either of your arguments.

    However, I am an easy grader, so B- for both of you.

  35. The fact that Europe’s economy is slowing down isn’t necessarily related to the Carbon Tax. Germany is the largest exporting nation in the world, ahead of China. US is 3rd. Green Shift will make a lot of new technologies economical and bring in new jobs. And you can spend your way out of a recession – or even depression, as in Tommy Douglas’ case. It isn’t how much you spend, it’s what you spend it on. Infrastructure is squandering, it’s investment. And I don’t know what question I’m answering anyway since I don’t have fast enough internet to watch the vid. This is the blind leading the sighted. But I’m still right.

  36. sf- I’m so glad that we have you here to tell us what our own political ideologies are. Simply thinking that the government can create growth doesn’t even begin to make someone a socialist, indeed there are fascists who believe the same. Although socialists may share that belief they certainly aren’t the only people that see the world this way.
    Saying that central planning has been a failure time and time again doesn’t necessarily work as a criticism of socialism as we’ve never really had true socialism anywhere in the world. We have seen that trying to rig socialist economic ideals to work within a broader capitalist framework doesn’t work. That isn’t surprising. Perhaps the problem isn’t central planning but central planning within a capitalist framework that was never meant to opperate that way. We have a system that we know, for a certainty, will fail from time to time, often disasterously so. Arguing about the best way to fix this system when it breaks down the next time, and the time after that is fine and good. On the other hand maybe the system itself is the problem.
    Whether you are a socialist or not (and incidentally, I am not) that is a question that is, at the very least, worth asking.

  37. comment by Peter on Saturday, October 4, 2008 at 5:50 pm:
    “we need to create economic activity right now” Stephane Dion circa yesterday.

    “we will spend our way out of this recession” Bob Rae circa 1990

    Proof that stupidity is timeless.

    I guess the New Deal and FDR had nothing to do with ending the Great Depression.

  38. Hoser: Of course, you’re choosing timeframes that suit your argument. As you yourself admit, during the war period itself, economic growth was very high. Considering that all I was arguing was sf’s blanket statement that government activity has never caused economic growth, I think my point stands.

    However, I do agree that a war-based economy sucks for the after effects, because, as you point out, what they build isn’t anything that can be shown to significantly benefit the people, of course, I acknowledge that in my previous post, as I also acknoweldge that too much centralized control is a poor thing. So really, none of your arguments, at least against my own post, hold much water, as they are simply irrelevant, or already acknowledged.

    Now, while I’m not an easy grader, you’re not my student, so you don’t have to worry about your reading comprehension skills being called out.

  39. Dion says he will consult economists. What they say is his plan.

    If he thinks these guys are better than him, why does he want me to vote for him? I’ll vote for the economists instead.

    Oh, wait, Harper is an economist. I’ll cut the middle man and vote for him.

  40. Manny: Choose between a group of economists, or one economist who hasn’t published anything related to economics since his thesis. (A thesis, which, interestingly enough postulates that a government ramping up spending before an election skews and damages the economy.. so it seems he has either forgotten his own work, or concluded that it was wrong. Neither one of which speaks to his accomplishment as an economist)

  41. I understand the financial situation we find ourselves in stems from what is happening globally. I believe that the past election results indicate that a low %age of Canadians were willing to cast their vote while the majority were unsure of who would best lead the country.

    I prefer a coalition government until Canada has a better choice of leaders. Right now we need action to stimulate the economy and the coalition is who can be trusted to accomplish this. The reason for my choice is the action the opposition parties took to form a coalition government to collectively deal with the potential economic crisis that has arrived on our doorstep I felt confident when I saw the former leaders of the Liberal party and the NDP party available to assist during this crisis. The Liberal party and the NDP bring forth a group to the think tank. These parties empower their members to work as a government. That is democracy !

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