Flat productivity coming out of the pandemic is now being blamed on markets rather than a forced shutdown followed by monetary explosion
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The top chart below allegedly defines a major Canadian economic problem. Published last week by Statistics Canada, it’s one of numerous similar graphics using various statistics that are said to represent a national productivity crisis requiring major changes in government policy.
As the data line makes clear, the starting point for the GDP-per-capita crash in early 2020 was a direct result of Ottawa’s COVID-19 lockdown policies that “left real GDP per capita seven per cent below its long-term trend, equating to a decline of about $4,200 per person.” The Statcan paper never uses the word lockdown and refers instead to “the COVID-19 pandemic” as a causal factor, thereby implying the virus and its medical impact, rather than lockdown policies, triggered the productivity crash.
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The same theme was outlined last month by Bank of Canada Deputy Governor Carolyn Rogers, who said that Canada faces a national productivity emergency and it is time to “break the glass” and fix the problem. The Bank of Canada uses the same analytical lockdown dodge. In her speech Rogers claimed “the pandemic upended economies around the world and sparked the biggest global inflationary episode in decades. This led central banks — including the Bank of Canada — to raise interest rates sharply so that we could get inflation under control.”
That’s not quite what happened. Faced with the medical pandemic, Ottawa ordered unprecedented social and economic closures to “flatten the curve” of contagion. To offset the inevitable economic decline, government spending soared and the Bank of Canada unleashed a major monetary expansion, claiming at the time that it could do so with minimal inflationary disruption. The Bank was wrong.
This public policy alignment of Statcan and the Bank of Canada raises questions. Both institutions claim the pandemic exposed major underlying economic problems that call for a rethink of industrial, competition, immigration, housing and other policies. Policy changes are definitely needed, but is this the role of........