Have Gordon Campbell’s economic politics been visionary or myopic? Unfortunately, we can’t rely on statistics to provide a clear answer to that billion dollar question.

Have Gordon Campbell’s economic policies been visionary or myopic? Unfortunately, we can’t rely on statistics to provide a clear answer to that question. Worse, pundits often use statistics to reach contradictory – and confusing – conclusions. Listeners to CKNW’s Money Talk found that out in a most spectacular fashion in April when economist and host Michael Levy interviewed provincial NDP leader Carole James. The fun began shortly after Levy welcomed James to the show. James remarked that the NDP “has grown with the times” and its most important objective if it defeats the Campbell Liberals next year will be to maintain a balanced budget. Levy was unconvinced: “But how will you freeze tuition for post-secondary institutions? How will you spend more on health care – all the things you want to do – and make cuts to pay for this if you’re not going to raise taxes?” James’s reply: “We’ll have to look at the budget when we get in, and if the Liberal numbers are accurate – and I don’t think the Liberals give us the straight goods on a lot of things in this province – but if the numbers are accurate we could be looking at a surplus when we take office.” Sensing he had cornered the New Democrat, Levy countered: “Doesn’t that herald well for some of the work the Liberals have done?” James shot back: “I give no credit to a government that’s taken us to where we were in the first place. To say they’ve achieved a balanced budget and a small surplus in four years when they began with a balanced budget is no measure of success.” Several weeks later in his White Rock office, Levy shakes his head. “I don’t get it. If the Liberals haven’t done a single positive thing in four years, how can there possibly be a surplus for the NDP to spend in 2005?” Although Levy claims his blood pressure no longer rises during heated debate, he becomes animated when recalling James’s mindset: “Carole wasn’t happy about anything. I mentioned how we’ve recently enjoyed a rise in jobs, and she said not enough of them are being created. I mentioned the tax cuts Campbell enacted when taking office, and she complained that he shifted the tax burden onto the lower and middle classes.” Levy’s blood pressure may not be rising, but his voice is. “I argued that the Liberals were wise to create user-pay taxes, and Carole said they were unfair.” He taps his desk top for emphasis. “The point is, this isn’t just Carole talking. These sentiments are widely shared by the public. The NDP is riding a tremendous wave of unhappiness over the state of our economy.” So how goes the economy? What proof is there in the old adage ‘Lies, damn lies and statistics’ and does it apply here in Lotusland? James’s distrust of the Liberals notwithstanding, the B.C. government openly admits that many sectors of the economy under-performed in 2003. The February 13, 2004 edition of the Management Services ministry’s Infoline reveals that exports of B.C. products fell (down 1.6 per cent) for the third straight year; this includes forest products, machinery and equipment as well as agriculture and fish. However, Canadian exports slumped even more in 2003, falling 3.2 per cent. Car sales dropped province-wide, and shipments of computers and electronics sunk to their lowest level since 1995 (down 9.9 per cent). The phenomena were blamed mainly on the strong Canadian dollar and rising fuel rates. On the plus side, Infoline numbers for 2003 report: the largest number of new business incorporations since 1995 (23,243); a modest increase in employment over 2002 (50,000, or 2.5 per cent); and sporadic increases in housing starts throughout the year (14.6 per cent in January 2003 compared to the rest of Canada, which suffered a 10.9-per-cent drop on average). Infoline concludes by noting that the Credit Union Central of BC has determined one thing from the data: real GDP growth of 2.4 per cent for 2004 or slightly better than 2003’s 2.2 per cent. Independent analysts such as M. Murenbeeld & Associates exhibit the same tenor and tone when citing statistics. In the March 2004 edition of BC Monitor, the firm reports modest gains in areas such as wages and coal and gas production, and declines in business bankruptcies and migration out of B.C. In other words, nothing disastrous, but nothing to write home about either. The real question: How bad is the bad news and how good is the good news? Levy for one is loath to take the perceived shortcomings of Gordon Campbell seriously. “British Columbians have an unrealistic set of expectations thanks partly to the influence of organizations like the NDP, and that’s why so many people think we’re in trouble,” explains Levy. “For example, we expect everyone should live within a five-minute drive of a hospital, so if you close a hospital and force someone to drive 20 minutes to the next facility, it’s a calamity. “The reality is we’re in great shape overall. We’ve spent a lot to try and become debt-free, we’ve cut a lot of government waste, and these initiatives have helped put an end to the out-migration of rich people and businesses that was triggered by the anti-business policies of the NDP when they were in power.” Levy raises his hands in exasperation. “For God’s sake, this is good news, is it not?” Maybe so. But if an ‘unbiased’ conclusion can be drawn from the data published by Infoline and BC Monitor, it is that our province is falling well short of its potential. That is the stance taken by Jock Finlayson, executive vice-president of the Business Council of British Columbia, an organization one would expect to be sympathetic to many of Campbell’s fiscal policies. Last year, Finlayson was optimistic about 2003 and predicted in these pages: “Our real GDP will probably increase by a respectable 2.7 per cent, and although growth seems to have been sub-par for the first half of this year, we think it will accelerate in the second half.” As if to underscore Finlayson’s mood today, the rain is pelting against the windows of his Vancouver headquarters. “My prediction for GDP growth turned out to be overly optimistic, didn’t it?” he notes without much humor, then listens to an account of Levy’s sparring match with James. Finlayson may be an ideological bedfellow of Levy’s, but his mood isn’t improved when told how the broadcaster manoeuvered James into admitting that the Liberals’ economic policies have created a surplus. He snorts: “That surplus is only several hundred million bucks. It wouldn’t even pay for paper clips in a $2-billion health budget.” Finlayson settles down to do what he does best: assess B.C.’s health, sector by sector. “Last year was mediocre for our economy, no question. Why? The reasons were external: investment uncertainty because of Iraq, widespread geopolitical unease, SARS and mad cow disease. Even the B.C. forest fires had a negative effect. For one thing, tourism numbers plummeted. I’ve never seen such a huge drop. Depending on the country they came from, guests to B.C. declined by as much as 70 per cent, which is a disaster because tourism was sucking wind to begin with.” But according to Finlayson, the biggest external reason for our mediocre performance was the strong Canadian dollar. “We experienced a 21.7-per-cent increase relative to U.S. currency within just 12 months. Nobody had factored a 77-cent dollar into their business plans, and it grew so quickly that nobody had time to adjust. So the export industry suffered.” Did 2003’s good news offset the bad? Finlayson replies by assessing issues from a short- and long-term perspective: “Housing starts and the resale market were healthy in 2003, but that was due to our low interest rates and interest [rates are] expected to climb, so these sectors will be in the doldrums sooner rather than later.” [pagebreak] Far more significant for Finlayson is the continued growth in the energy sector, which he sub-divides into three segments: oil and gas production; hydro-electric generation; and coal bed methane exploration. “The energy sector is one of our main keys to economic recovery, and 2003 saw 1,100 wells drilled in northeast B.C. compared to 800 in 2002,” he notes. “That created $2.2 billion in direct revenue last year, or nine per cent of total provincial revenues. And there’s every indication oil and gas production can expand appreciably.” Why is energy such an important facet of long-term prosperity compared to, say, tourism or even the forest industry? “Because there’s a huge gap between production cost and market price,” replies Finlayson. “This creates a huge profit for producers that the government can siphon in a way they can’t do with other industries. That’s why Alberta, with its lousy winters, no seaport and its physical unattractiveness, is by far the most prosperous province in Canada.” Finlayson credits the Campbell government for fostering growth in the energy sector by creating an incentive-based royalty system encouraging companies to tap deep-well gas and other marginal reserves that would otherwise be minimally profitable, by streamlining the regulatory approval required to drill on Crown land and by promoting mechanisms that allow companies to work year-round instead of just during winter. (For example, oil firms now cover their drilling sites with large wooden ‘mats’ so staff and equipment will not be bogged down in slushy spring terrain.) Although the provincial Liberals have also worked hard to kick start offshore oil and gas exploration, Finlayson says Ottawa has yet to get on the same page and lift longstanding moratoriums: “Offshore activity will be extremely valuable to us, but it’s still years in the future. More salient is the 90 trillion cubic metres of coal bed methane trapped beneath the province. The technology to tap this methane is becoming more affordable every day, and the Liberals are looking for ways to develop this sector, which represents seven per cent of all energy production in the U.S. and is growing rapidly.” All of this looks good on paper, and it certainly puts into question James’s blanket condemnation of the Liberals. But how does Finlayson reconcile the notion of Gordon Campbell doing the ‘right’ things to revitalize B.C. with the conflicting notion that we are still (compared to Alberta, at least) a have-not province? “If you look at states like North Carolina or countries like Ireland or Spain – places that were once in dire straits but are now big economic leaders – it’s taken anywhere from five to eight years to achieve a sustainable economic recovery,” he replies. “I know it’s frustrating to constantly say ‘We’re on the right track’, but the process of recovery is very slow.” The slow nature of recovery is also the reason Finlayson smiles benignly on the mining and forestry sectors, even though the latter’s gross revenues have grown by a paltry one per cent per year compared to the rest of Canada’s 2.6 per cent since 1997. “The Liberals overhauled onerous NDP policies like the Forest Practices code,” explains Finlayson, “and the softwood lumber dispute and the strong dollar forced companies to reduce operating costs drastically. That means they are now in a great position to attract capital. As for mining, the patient is finally off life-support and walking the hallways of the hospital on his own steam. There will be $100 million spent this year on exploration and if we can increase this to $175 million we’ll be in good shape.” If all this is starting to sound like official re-election campaign bumph for Gordon Campbell, along comes a think tank to argue that a basic flaw in the Campbell government may well prevent us from soaring high, no matter how much more efficient industries become. The think tank in question is The Fraser Institute. Long the butt of Attila the Hun-type jokes because of its right-wing views, The Fraser Institute is also prone to free-thinking concepts (anyone remember its support of drug decriminalization?) that prevents it from being easily pigeon-holed. Jason Clemens, the Institute’s director of fiscal studies, is the sort of sharp-eyed, clean-shaven professional one would assume would be the main cheerleader of any fiscally conservative politician. The problem, he says, is that Campbell is a sheep in wolf’s clothing. “Despite what the mainstream media would lead you to believe, we haven’t undergone a revolution the way Alberta, Ontario and Saskatchewan have in terms of decreased spending and government. Campbell is a centrist at best. For the first six months after assuming office he was on track, but then he decided to placate the nurses and doctors. Then he increased property and sales taxes. Then he increased gas taxes, and so on.” Clemens believes that unless we can close the gap on the 24.6 per cent and 20.1 per cent corporate tax enjoyed by Alberta and the U.S. respectively (ours is 30.1 per cent), an economic renaissance will never occur: “There’s your recipe for success in a nutshell. Sure, it’s good that we’ve streamlined regulatory policies and made some pro-business initiatives, but closing the tax gap is the fundamental problem we have to tackle. And we’re not.” Clemens has other brickbats for the Liberals. “Outstanding native land claims is still a major factor in preventing more investment to B.C. One thing Campbell could have done was simply provide indemnity against business risk. But he didn’t. Also, his attempts to privatize everything from liquor to BC Rail have been a complete farce. He didn’t learn anything from Ralph Klein, who got the ball rolling in his province by privatizing all licences and bringing them into one office. This made the public’s life a lot easier and smoothed the way for the resolution of more contentious privatization issues.” Clemens stresses that an NDP government would propel us even further into the mire and shudders to think what might happen next May when voters go to the polls. “The irony is people may very well vote the New Democrats back into power because they’re fed up with what they perceive to be right-wing governance. The fact is they haven’t experienced true conservatism at all.” So, what does Clemens think we should watch for while the Liberals are still in power? “The most important indicator of our economy for the next four years will be next year’s budget. If it contains more spending and minimal cuts, we won’t achieve the prosperity that’s within our grasp.” Finlayson is also mindful of next year’s election. “The view of the business and investment community is if the NDP gets in, it will revert to the ’90s style of more taxation, cumbersome land-use restrictions and other anti-business initiatives. Clearly, none of this would be greeted warmly.” With Finlayson staring balefully at the rain running down his boardroom window and Clemens feeling betrayed by Victoria, it falls upon the ever-optimistic Michael Levy to draw a curtain on the proceedings. “I would say to everyone: we may have our troubles, but in terms of lifestyle we’re still the envy of other countries.” Levy grins as he adds a final thought. “As for government, a wise man said: ‘The budget should be balanced; the treasury should be refilled; public debt should be reduced; and the arrogance of public officials should be controlled.’ ” Sounds contemporary, yes? But it was written by Cicero in 43 BC. “In short, what goes around comes around: there are no new problems under the sun, and we always prevail.”