Report on the Manitoba Economy 2011
Economist Fletcher Baragar’s report on our economy explains how well Manitoba has weathered the current economic storm blowing across the globe. Although we’ve done well compared to other parts of Canada, we have to brace for more possible upheaval; the US and Europe have not regained their balance after been hit far harder than Manitoba was.
We do have fiscal tools we can employ to stay afloat: stimulus spending helped us through the first downturn and we have to be prepared to apply that strategy again if need be.
Main message: Reinvigoration of the economy and of democracy go hand in hand.
This Unspun analysis will bring you up to date on everything you need to know about our economy.
Report on the Manitoba Economy 2011
by Fletcher Baragar
Manitoba avoided the worst of the damaging effects from the 2007-2009 financial crisis and economic recession. Economic growth in the province slowed to zero in 2009, but 2010 saw growth rates rebound strongly to 2.5%. Even higher rates are forecast for 2011 and 2012, although new anxiety is churning over the European and US economies which could affect Canada and Manitoba.
Employment levels and labour force participation rates in the province remain high, and the unemployment rate is now the second lowest in the country. However, Manitoba did not emerge from the 2007-2009 period unscathed. At the height of the crisis, collapsing commodity prices hurt primary producers in the mining, agriculture and forestry sectors. But many of these producers had benefitted from high prices in the pre-crisis period, and by 2010 most of these prices were once again on the rise. The damage to manufacturing was later but still severe, as the effects of the crisis on the key export market, the United States, sapped demand for various Manitoba producers. However, the development of alternative markets, in Asia, Latin America and Europe, has acted to reduce the relative dependence on the US for Manitoba exporters. Over 35% of Manitoba’s exports from 2010 were destined for non-US markets, compared to only 21.5% ten years ago. By way of contrast, export markets for Canada as a whole are less diversified, with only 25.3% of exports going to non-US markets. The robust economies of many Asian and Latin American countries stand in sharp contrast to the US’s, and underline the advantages for Manitoba of the broadening of its exports.
The positive role played by discretionary economic policy began with aggressive monetary policy in late 2008, and the expansionary fiscal policy ushered in with the federal budget in January 2009. These measures benefitted all provinces and lessened the severity of the crisis. The Manitoba government also injected additional fiscal stimulus, and properly allowed for substantial fiscal deficits for fiscal 2009-10 and 2010-11. Public spending, including the spending by Manitoba Hydro, maintained high levels of economic activity in the construction industry, directly sustained employment, and channelled stimulus dollars into activities with high local and provincial expenditure and employment multipliers. Furthermore, the improvements to the economic infrastructure that will result from these initiatives will deliver economic benefits after the construction phases wind down.
Although economic forecasts for Manitoba were, as of mid-2011, quite positive, risks and challenges remain. Commodity prices are by nature volatile and, given the structure of international commodity markets, are likely to remain so. The longer term trend is likely to be a rising one, but movements around that trend, both up and down, will put pressure on producers and communities that produce and transport those commodities. Commodity traders can partially protect themselves against price changes through futures markets, and our economy garners some protection through diversification. For individual producers, workers and communities, however, additional supports are warranted, including income support programs, credit availability, and access to public services.
The Bank of Canada has pushed interest rates to historically low levels, and rate increases do not appear imminent. Core inflation remains well within the Bank of Canada’s target band, and the weak growth of the Canadian economy suggests that The Bank of Canada will stay the course.
Manitoba manufacturers, exporters, and numerous service sector producers continue to be squeezed by our dollar’s rapid appreciation. The adverse effects of a relatively weak US dollar for many Manitoba producers could be offset by a strong economic recovery in the US. As of mid- 2011, the strong US recovery has remained elusive, and the challenges have been exacerbated by the political difficulties that country has experienced over its fiscal arrangements.
These factors mentioned above – commodity prices, interest rates, exchange rates, US economic growth – are all important for the Manitoba economy, but they lie beyond Manitoba’s control. Public sector activity, including fiscal policy, is, by way of contrast, an important economic lever controlled by the province. It has served the province well in terms of stabilising the economy since the outbreak of the crisis. When growth rates rebounded, debate on the appropriateness of continued fiscal stimulus resurfaced. Both the federal and provincial governments had initially indicated a protracted, multi-year path to the re-establishment of fiscal surpluses. The federal government suggested in the 2011 election campaign that a return to fiscal surpluses could be accelerated. This would lessen the stimulus provided by the public sector, and places greater ex ante reliance on the private sector covering any shortfall. Manitoba needs to be concerned about where the fiscal retrenchment will occur especially given that economic growth is now faltering globally. Looking ahead, concerns will surface over federal transfer payments, the terms of which will be negotiated between Ottawa and the provinces after 2014. In light of the federal leaning towards less spending, continued stimulus at the provincial level over the medium term would be prudent. This stimulus can be adjusted downwards if a number of the above mentioned exogenous factors move improve, and/or if the private sector in the province initiates a sustained surge in investment. Too rapid a return to a position of fiscal surpluses risks the loss of some of the economic momentum we’re presently enjoying.
Despite some very significant improvements, poverty still is far too prevalent, with high concentrations found in Winnipeg’s inner city and in a number of remote communities. The task of achieving economic gains without ecological pains remains immense. There is also the challenge of fashioning the economy so that it supports and embodies fundamental human and political ideals, such as broadening participation and economic decision making by the people and communities directly affected. Here too there have been some notable successes, such as the recent agreements between Manitoba Hydro and selected First Nations Communities, but the scope for further progress is as vast as the economy itself. It has been shown that progress of this kind need not be dependent on preconditions such as an economy that has fully recovered from a slowdown or a crisis. Reinvigoration of the economy and a reinvigoration of the democratic process go hand in hand.
Fletcher Baragar is an economist at the University of Manitoba and a CCPA Mb. research associate.
by Shauna MacKinnon
There has been much talk about privatization in these days leading up to the October 4th election.
While nobody but Hugh McFadyen knows for sure what he will do if elected, the NDP have shown that his record certainly suggests an ideological bent toward privatization.
The NDP has focused on McFadyen’s role in the privatization of Manitoba’s telecommunications crown corporation (MTS), past comments McFadyen has made regarding Manitoba Hydro, as well as comments made by former city councilor and Seine River Conservative candidate, Gord Steeves regarding privatization of the Manitoba Public Insurance Corporation (MPIC). The NDP has pointed out that these are examples of what a Conservative government led by Hugh McFadyen can be expected to do.
Another example of the Conservative government’s experimentation with privatization in the 90’s was in the healthcare sector. In the paper titled “The Cost of Privatization: A Case Study of Home Care in Manitoba published by CCPA Manitoba, author Professor Evelyn Shapiro tells the story about the Filmon conservatives attempt at privatizing 25 percent of its personal care workforce in Winnipeg.
Many Manitobans have likely forgotten about the Filmon government’s attempt to privatize Home Care in the 1990s because it failed miserably. It’s an interesting piece of history worth reading.
Cynical Criticism of NDP Cancer Strategy A New Low for ‘Political Commentator’
by Errol Black
All political parties have made promises during this election campaign aimed at improving health care services in Manitoba. One set of promises that stand out in terms of their scope and potential impact is that of the NDP relating to cancer services.
Back on June 10, 2011 the NDP government announced a “$40 million, comprehensive, aggressive and first-in-Canada cancer strategy to streamline cancer services and dramatically reduce the wait time for patients between the time cancer is suspected and the start of effective treatment.”
CancerCare Manitoba lauded the new initiative because it was expected to reduce the time of “the cancer patient journey from initial diagnosis to treatment that [could run three to nine months] to two months or less.” Dr. Dhali, president and CEO, CancerCare Manitoba said the new strategy “is a life-changer, as it will help CancerCare Manitoba and all other parts the health-care system work together to wrap our services around the needs of patients and better co-ordinate and deliver faster quality care to patients across Manitoba.”
On September 12 the NDP announced that if they are elected, this strategy would be bolstered by additional resources to “cut wait times, cover all drug costs, and make life easier for rural cancer patients.” The additional initiatives included in the add-on are: the full coverage of cancer treatment and support drugs for all cancer patients; and making the 16 current rural chemotherapy locations full CancerCare hubs, staffed with new cancer patient advocates to speed up access to required services for rural residents; and faster cancer screening.
The combination of the June strategy announcement and the subsequent election promise on September 12 simultaneously promised: enhanced access to cancer care services for all Manitobans; improvements in the quality of life of cancer patients and their families by covering the costs of drugs and increasing their treatment options: and reducing the economic costs of cancer treatment through the decentralization of services, reduced wait times and faster patient recoveries. Moreover, the strategy may well become a model for addressing other forms of chronic conditions like heart disease, diabetes and mental health problems in Manitoba, and other provinces.
Unfortunately Manitoba’s mainstream print media chose to publish commentary that was cynical and disrespectful of the many individuals and families dealing with Cancer. On September 14 the Winnipeg Free Press printed a column by Deveryn Ross (characterized as a “political commentator based in Brandon”), titled, “Playing politics with Westman’s health.” Mr. Ross’ column was intended as a follow up to the September 12 announcement. Unfortunately, Mr. Ross didn’t seem to understand the content of the strategy or its implications for cancer patients.
His column was repeated in the Brandon Sun (which is owned by the Free Press) on September 18 with a different caption (“Columnist accuses Selinger of playing politics with cancer”) and some slight changes in content. Despite these cosmetic changes this version has the same defects as the one in the Free Press, namely, shortage of facts and analysis, and mean-spirited allegations about the motives of the NDP.
We anticipate that citizens concerned about how we deal with cancer, and the future of our health care system will have more appreciation of and respect for a proposal, applauded by CancerCare Manitoba, than does Mr. Ross, The Brandon Sun and The Winnipeg Free Press. As someone who lost both parents to lung cancer, two sisters-in-law to breast cancer, and many friends to various forms of this terrible disease, I certainly do.
Errol Black is a Brandon resident and the Chair of CCPA Manitoba
Manitoba Employers Council and Manitoba Chambers of Commerce layout an agenda that is long on rhetoric but short on good ideas
by Errol Black
On August 29, 2011 the Manitoba Employers Council (MEC) released a report titled, Are we there yet? The Manitoba Prosperity Report. The purpose of the report is to review Manitoba’s economic performance since 2001, relative to Ontario and the provinces west of us.
The Chambers of Commerce immediately adopted the MEC’s recommendations dealing with tax reductions as part of an initiative called Manitoba Bold. This is not surprising since tax cuts have become the Chambers’ mantra during elections and budget reviews.
More interesting is what they don’t say. CCPA’s Errol Black gives us the highlights and slows the spin in his analysis of The Manitoba Prosperity Report.
by Ian L. Robson
I seem to be writing a lot about this issue these days. I wish I could be farming. The soil is still very wet and will not support big loads, but weirdly the hay and pasture-land is dried out and not producing—probably compacted and the moisture ran off.
I spoke with a woman following the Brandon Chamber of Commerce (or CJOB radio info-tainment talk show) leaders forum with McFadyen, Selinger, and Gerrard on Monday.She gave me her opinion of Hugh McFadyen’s response to farmers and Manitoban’s over the Federal Government meddling in the affairs of the elected Canadian Wheat Board Directors. She thought it unwise to vote for McFadyen because he would not question things that the federal government proposes.
Another woman I spoke with whose brother is a dairy farmer thought that changing the CWB would be okay if we saw the plan from Minister Ritz. She was surprised when I told her that farmers currently have the freedom to sell their grain through the CWB Producer Direct Sales program. Minister Ritz has been careful not to advertise this because it essentially kills his argument that the CWB is restrictive. The CWB is restrictive on the Producer Direct Sales program in this way: The farmer must find a buyer who will pay a large premium over the going market price—which happens sometimes. This allows farmers who want to increase the market value to do so while also benefitting from the extra profit.
At the leaders’ debate in Brandon, McFadyen said that the CWB decision is a done deal and farmers should prepare for life after the CWB. Both Selinger and Gerrard said listen to the majority of farmers who themselves paid for a democratic process to determine whether support for the Single Desk continues.
Manitoba and its farmers have a lot to lose. Farmers know it and this is why the majority voted in support of the Single Desk that CWB provides.
Without the Desk we are merely transferring wealth from the farmer to the grain trader and we already see these traders licking their chops—share price of multinational Viterra increased immediately after Ritz made his announcement. For more information about this issue and to get involved, go to the Canadian Wheat Board Alliance website.
Ian L. Robson is a cattle and grain farmer from Deleau, Manitoba
by Sarah Cooper
For most of the ’80s, at least 10 percent of the new housing built in Canada was affordable housing. After 1993, the number dropped to less than one percent. This means that very little housing that is affordable to lower income families is now being built in Canada.
Combined with increasing housing costs and the growing gap between upper income earners and lower and middle income earners, this is putting a serious crunch on housing.
It’s no wonder that over the last two decades, the number of homeless, hidden homeless, and precariously housed people in Canada has skyrocketed.
Thanks to Michael Shapcott (Wellesley Institute) for the original chart.
Why Does Down Look Like Up to the Conservatives?
by Lynne Fernandez
Coming into work today I was struck by two large billboards. One has a photo of Hugh McFayden with a promise to cut taxes. The other delivers a simple text message: Conservatives will cut taxes; NDP will raise taxes. That a Conservative party would promise to cut taxes is old hat, but can we say the same about this NDP government raising taxes?
Given that a government’s future behavior is best predicted by past behavior, let’s examine the NDP’s record on taxes since coming into office.
CCPA Mb. started reporting on the NDP’s tax record in our 2006 Alternative Provincial Budget: “As cited in Budget 2003, the period between 2000 and 2003 was witness to the ‘largest four-year cut in personal income taxes in Manitoba history.’ Between 2001 and 2003, the average Manitoban received an 11.5% personal tax cut.”
Want more detail? The corporate tax rate was 17% when the NDP took office in 1999. Today, the corporate tax rate is 12%. That would be a 5% decrease in the corporate tax rate.
Manitoba is the only province in Canada to have a 0% tax rate for small business.
Finally, last year CCPA Mb. noted that since it took office, the current government has removed $1 billion from revenues through tax cuts.
CCPA Mb. has spent the last 10 years criticizing the NDP government for cutting taxes too much, so this Conservative prediction is pretty hard to take seriously.
It would be helpful if the Conservatives would back up their predictions with credible evidence. Presented as it is, this one falls flat on its face.
So back to the question: why does “down” look like “up” to the Conservatives? Answer: Too much spin is disorienting.
Now you’re “unspun”.
Lynne Fernandez is a political economist with the CCPA Mb.
Education Funding Not “a Game of Chicken”
by Shauna MacKinnon
In a letter to the Brandon Sun published on September 14th, Robert Rivard, the President of Manitoba Schools Board Association, expressed concern with the Let’s Pay Fair Coalition’s campaign seeking to eliminate all property taxes in support of education.
Rightly so he worries about the recklessness of assuming that the $750 million revenue shortfall would miraculously appear from elsewhere. He cautions that this approach is dangerous, amounting to “a game of chicken with our children’s futures”.
Shauna MacKinnon is the director of CCPA-Manitoba.
Where is Poverty in the Debate?
by Errol Black
During the current election campaign we’ve heard a good deal of noise from people with power about how hard done by we are in Manitoba. Their biggest beef is that corporate profits and personal incomes are taxed too high relative to resource rich provinces to the west of us.
However, we haven’t heard anything from individuals and families who are trapped in poverty situations – earning their poverty in low-wage, short-hour jobs, unemployed, on welfare, homeless, dependent on food banks and soup kitchens, etc. This is because the poor have no voice and no political clout. Therefore, they are of little interest to the people who run businesses and governments in our communities.
The sad thing about this state of affairs is that we have massive amounts of data and analyses which confirm that pervasive poverty adversely affects virtually all aspects of life in our communities including, crime, ill health, poor educational outcomes, and the overall quality of life, which in turn imposes significant burdens on resources in the health care, educational and justice systems. This was set out very clearly in a book published in 2010 by the Canadian Centre for Policy Alternatives-Manitoba, titled The Social Determinants of Health in Manitoba and by Wilkinson and Pickett (2009) in their international best seller The Spirit Level: Why More Equal Societies Almost Always Do Better.
Given these links between poverty and everything else, it would seem to make sense that in this province political parties would be attempting to develop economic and social plans that include at their core a commitment to invest in policies and programs that are designed to drive down poverty and alleviate the pressures on all levels of the public sector.
Is it too late for us to demand that party leaders participate in a debate based on poverty-related issues?
In yesterday’s leaders debate, all three leaders referred to poverty as a root cause of crime and comments were made about needing to support kids living in poverty and ensure them access to education. Selinger pointed to their record and intentions regarding minimum wage in recognition that poor kids have poor parents who need to earn a decent income. McFadyen is on record as opposing minimum wage increases and Jon Gerrard has been silent on the issue.
A question that won’t be raised during this election is: how are people on social assistance faring in Manitoba and what are the leaders going to do about it? The answer to this question is that people on social assistance are not doing very well. This is confirmed by a report from the National Council of Welfare on welfare incomes in 2009 which shows, amongst other things, that: (i) the welfare incomes of Manitobans rank near the bottom in most categories; and (ii) these incomes are much below welfare incomes in 1992, the peak year for Manitobans after which time they began a decline.
The poorest of the poor are those who must rely on social assistance for support. All political parties are able to avoid addressing this because people living in poverty have no political clout, and many are disillusioned and less inclined to vote.
Is it too late to get this important issue on the agenda?
Errol Black is the Chair of CCPA Manitoba