Justin Trudeau’s reluctance to equalize with Canadians by releasing the government’s death forecast has naturally created nervousness. Are the forecasts so bleak that the Prime Minister is concerned that we cannot handle the truth?
However, the main decision-makers suggest that the main cause of apprehension in Ottawa is not related to the immediate health crisis, or even to the huge levels of debt accumulated as a result of the 200 billion COVID-19 intervention plan. dollars.
What keeps policymakers from staying awake at night is how they will restart the economy once everything is done.
On the health side, senior politicians and officials are concerned about the spread of the virus by returning snowbirds and those on March leave – these results have not yet made their way into the updates provincial agencies daily.
But the belief is that the health care system will last. Canada is unlikely to experience an Italian-style failure because we intervened earlier and the containment strategy was more robust, said a senior government official. Testing and contact tracing has been slow, but will be intensified across the country, he said.
The public service is concerned about massive spending, especially if some of it turns out to be “suboptimal” in terms of results. In plain English, bureaucrats fear that the government will be ripped off by bad actors, that it will pay too much for purchases or that it will distribute wage subsidies without proper scrutiny. But the public policy approach at this point is that perfection is the enemy of good – the belief is that mistakes will be forgiven in the circumstances.
Business groups complain about the $ 71 billion emergency wage subsidy eligibility rules, and in particular the problem in the application process which means that payment can be delayed for six weeks.
But it’s lightning speed for a government spending program.
As Samuel Johnson noted about a dog walking on its hind legs, when it is not done well, the wonder is that it is done at all.
What keeps policymakers from sleeping at night is how they will restart the economy once everything is done
The system was not designed to meet the massive demands currently placed on it, and while speed is not optimal for a company that assesses whether to keep workers, billions of dollars will soon be paid to workers. and those who have been laid off. .
The Liberal government has often seemed to be a step forward, reluctant to be bold, as in the case of death predictions. But he finally arrived at his destination.
However, if panic does not set in during health or tax crises, there is real concern about the type of Canadian economy that will emerge from the storm.
In a typical recession, the architecture of the economy remains intact and growth resumes with the recovery of demand.
But small business confidence is at an all-time low, according to a survey by the Canadian Federation of Independent Business. Many of these companies do not return.
It is also likely that there are seismic shifts among global players as they try to ease the supply chain shock that has held the global economy in its grip.
In a recent Globe and Mail article, Kevin Lynch, former Clerk of the Privy Council who is now Vice-President of BMO, and Paul Deegan, former Deputy Executive Director of the National House National Economic Council, spoke of “decoupling global ”Who will see supply chains become less centralized around hubs like China.
Far from resisting this decision, governments are likely to encourage and accelerate it to create what Lynch and Deegan have called “national critical supply capacity”.
The federal government already sponsors domestic production of ventilators and personal protective equipment.
It is probably only the beginning of a new industrial policy that will see the government intervene in areas of the economy from which it has been absent for decades. Senior politicians say they have encouraged domestic food production as an insurance against import drying up, for example, by checking with food producers to see if the greenhouse capacity is fully exploited.
A senior federal official said he did not expect widespread demondialization – “Too much value has been created by global supply chains” – but on the fringes, downsizing may prompt government to close the gap empty.
Supply management may soon extend from the dairy and poultry sectors to other sectors of the economy
Conversations at the highest levels of government revolve around lessons learned from the crisis – for example, caregivers in nursing homes and grocery store clerks are front-line workers, although are not paid at a level compatible with personal data. risk.
Does this suggest some kind of risk premium for frontline workers? Perhaps. What is evident is that discussions are taking place around the Cabinet table on an expansion of government engagement in the economy unprecedented in the post-war period.
The extent of this expansion will depend on whether we see the resumption of politics as usual in the aftermath of the crisis. A recent article for the Public Policy Forum by Sean Speer, former adviser to the Harper Conservative government, and Robert Asselin, former senior staff member of the Trudeau Liberal government, suggested that the political ideology of the role of government should be buried then. let the country return to economic growth. “Long-held assumptions about production economics are no longer valid,” they wrote.
They emphasized that Canada cannot rely on traditional market forces while everyone else is pursuing active industrial strategies.
The authors called on the government to create a new industrial plan that builds national capacity. “This strategy should not be temporary,” they wrote.
The most recent estimate of the deficit this year is $ 170 billion and
We are at a time when the old orthodoxies are being tested – just as in 2009, when the Conservatives were forced to admit that deficit spending was necessary to support the economy.
Only blind volunteers would deny that international trade has increased competition and brought prices down. But it is uncomfortable that China is the source of most of Canada’s antibiotics and raw materials for our drug supply. It is also true that China effectively blocked exports of face masks during the crisis and could do the same for the supply of medicines in the event of a future emergency.
Supply management may soon extend from the dairy and poultry sectors to other sectors of the economy as the government tries to secure stocks.
This would raise prices for everyone, worsen deficits and raise the level of debt.
The most recent estimate of the deficit this year is $ 170 billion and is increasing. It could end up exceeding $ 200 billion, or 10% of the economy.
Higher debt levels, de-globalization and the rise of economic nationalism will be the hallmarks of the new reality. It promises to be a brave, albeit alarming, new world into which we will enter.
Trudeau is expected to share government extrapolations on the likely evolution of the virus. As former Health Minister Jane Philpott noted, “Now is not the time to hide bad news … we would like radical transparency.”
But if the public is preparing to impact the spread of the virus, there may be too much information to think about the fate of the post-COVID economy.
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