Thomas Mulcair vs Evidence -- a Very One-sided & Nasty Fight

Mulcair decries the damaged Canadian reputation that wasn't

Thomas Mulcair wants you to think Canada has a bad reputation. And he wants you to think Prime Minister Stephen Harper is to blame.

This is actually nothing new. It's a familiar tactic adopted by the opposition throughout the entirety of the Harper government era. And never once have any of its proponents been able to produce even a shred of evidence to support the claim. Not one.

"The Canada that [the Conservatives] are projecting onto the world stage is no longer recognizable to our many partners around the world who have always admired and worked with Canada, and it’s no longer recognizable to us," Mulcair declared. He attributes these comments to a European Union diplomat whom he recently met with.

This, of course, is a conversation that took place in private. No European Union diplomat has come out and gone on the record saying that Prime Minister Harper has hurt Canada's reputation. And apparently we're supposed to take Mulcair at his word. Because he's a politician, and no politician would ever lie or embellish anything.

Right? Right.

But, just as with Mulcair's "Dutch Disease" thesis, Mulcair is sorely at odds with the evidence on this one. Just what should Canadians believe? Mulcair's claims that Canada's reputation is suffering? Or scientific polling that demonstrates Canada's reputation is quite strong, and getting stronger?

The last time that such a poll was conducted, 57% of respondents around the world gave Canada a favourable rating. Even more tellingly for Mulcair's claims about Canada's reputation, only 12% gave Canada an unfavourable rating.


Once again, the evidence is stacking up against Mulcair. Which is far from shocking. But even if a few disgruntled EU diplomats were griping to Mulcair in private, it likely had far more to do with getting him on-side with the sovereign debt bailouts that the EU wants copious amounts of Canadian dollars for. Which is a colossally bad idea, as the risk attached to European sovereign debt skyrockets.

"We had these weird statements from Conservatives saying that [the crisis] was because of the sumptuous lifestyle in Europe. They turned it into a local, parochial, partisan, political fight, whereas this is literally something where we're all attached," Mulcair complained.

First off, there's nothing "weird" about those comments. Many of the European countries that are on the verge of collapse accumulated that debt somehow. And whether Mulcair wants to admit to it or not, everyone already knows how.

But it's true that Canada is attached. But some of us are more attached than others. Mulcair, for example, has to be keenly aware that the collapse of Europe is a stinging historical rebuke for his party's ideology. Europe has long been the NDP's model for Canada, and as goes that model, so will go the NDP. They aren't very good at going back to the drawing board when their ideas fail -- ergo the need to obfuscate the failures of their ideas.

Bailouts are something that every government should avoid. But sovereign debt bailouts are the absolute worst bailouts, and have always brought nothing but economic disaster. It happened in the 1930s with Germany, happened in the 1980s with various Latin American countries, and it's happening again now. There have been more than 250 defaults on sovereign debt since 1800. Many of them -- in particular Germany's -- were made far, far worse by the bailouts they had received in order to avoid such a default.

So certainly, yes. Canada is attached to the European economic crisis. Due to the nature of the global economy, pretty much everyone is. But Mulcair needs to ask himself a very serious question: if Europe is sucked down a whirlpool of debt, should Canada follow just to spare the NDP a little wounded pride?

Unfortunately, it's easy to forecast Mulcair's answer. He's proven exceedingly poor at coping with the bruises to his pride since he became Leader of the Opposition. Whether it was dealing with all the informed observers who demonstrated that his "Dutch Disease" theories were complete and utter bunkum, whether it's his claims about Canada's international reputation -- again, flying in the face of the available evidence -- or whether its the future of his party's model for Canada, he's shown he's just not very good at dealing with these things.

Thomas Mulcair and evidence don't get along very well. It's been a nasty and one-sided fight, with the evidence doing all the hitting. It's enough to make the prospect of Prime Minister Thomas Mulcair a deeply disturbing one.

The Phantom Menace: The OECD "Dutch Disease" Report That Never Actually Was

If you were to believe Canada's left, there's a malaise ravaging Canada's economy. And conveniently for them, they can blame it all on Alberta, where practically no one votes for them.

They call it Dutch Disease. And they're grasping at any straw they can find in order to make Canadians think that Canada has it. Including a report by the Organization for Economic Cooperation and Development which, they say, identifies symptoms of Dutch Disease in Canada.

But the report isn't the blanket confirmation of NDP leader Thomas Mulcair's wacky economic thesis that they think it is. In fact, there's far more in the report that disputes Mulcair, and reveals his economic ideas to be shortsighted and dangerous than there is anything that actually backs him up.

Mulcair claimed that Canada suffers from so-called Dutch Disease on account of what he considered an over-valued Canadian dollar, which he attributed to resource revenues, singling out the oilsands in particular. The Dutch Disease argument holds that resource exports, which help drive up the value of the dollar, "hollow out" a country's manufacturing sector. A country's exports become more expensive by comparison to their international competitors, driving down sales, and labour demand from the booming resource industries leave the manufacturing sector unable to compete for labour.

And so the symptoms of the so-called "Dutch Disease" are pretty clear: struggling manufacturing,  suffering sales, and lost jobs.

But to identify the symptom is hardly to diagnose the disease. And as a diagnostic tool, the OECD report actually tells a very different story. The report actually found what the IIRP did -- that the problem with manufacturing in Canada is below-nominal innovation. "While Canada has made great strides in macroeconomic and structural policy settings, and its academic research is world class, the pay-off in terms of business innovation and productivity growth has not been large. Business R&D is particularly low, despite significant policy support, suggesting substantial scope for improvement."

So the government of Canada has been doing its part. Particular sectors of the economy -- particularly the high-labour, low-wage subsectors of Canadian manufacturing that have been struggling -- have not been doing their part. Which, you may recall, was precisely what the IIRP concluded.

The report also found that opening sheltered sectors of the economy -- such as network communications -- up to greater competition would be beneficial. (Prime Minister Stephen Harper's government has been doing just this, and it's been driving the opposition batty.)

On the whole, the OECD report concluded that the problem with the Canadian economy is not the competitive pressures imposed by a higher exchange rate, but rather failures by specific sectors of the Canadian economy to respond to them. Which confronts Thomas Mulcair, the NDP, and his standard bearers with some very stark realities, and some equally stark challenges.

For example, Mulcair cites Canada's strong dollar as a problem, implying that something needs to be done about it. Yet the OECD gave Canada a sold thumbs-up on its monetary policy, although noting that the Bank of Canada should stand prepared to respond to inflationary pressures. So policy measures to erode the Canadian dollar don't seem to be in order.

So even if the OECD agreed with Mulcair that some symptoms of Dutch Disease are present, that's just one thing. And the presence of symptoms alone are not enough to diagnose the Dutch Disease. They also need to be able to identify the cause.

This is where some control comparisons come in handy. If the oilsands, and the energy industry in general, were really spurring Dutch Disease in Canada, then the struggles of Canada's manufacturing sector should be unique. But unfortunately for Mulcair and his fans, those struggles are not unique. Not even within OECD countries.

In fact, comparing declines across OECD countries is rather telling. While Statistics Canada identified a general downturn in Canadian manufacturing since 2004 -- something that Mulcair's followers point to as symptoms of Dutch Disease -- that downturn wasn't limited to Canada. The downturn in Canada's manufacturing industry was approximately 14%. But during the same period of time, Great Britain experienced a manufacturing downturn of 29%. Japan experienced a downturn of 24%. It was 20% in Belgium and Sweden. And an identical 14% in France.

This is all particularly telling, because it begs an important question: can the UK, Japan, Belgium, Sweden and France -- or most of the OECD. for that matter -- blame the decline of their manufacturing sectors on the oilsands? Do they even have an oilsands resource export equivalent that they can blame the decline on? Or is that general decline symptomatic of something else?

This is almost certainly why the OECD declined to cite Dutch Disease in their economic survey of Canada, and why a reporter for the Canadian Press had to do it for them: because the malaise of manufacturing is not uniquely Canadian, not attributable to Dutch Disease, and instead attributable to standard global economic forces.

Simply put, Canadian firms that placed their bet on high-labour, low-wage manufacturing in Canada made a poor bet. They're losing their sales to firms located in companies that have a competitive advantage in unskilled labour. In essence, they're paying the price for their own bad business decisions.

Thomas Mulcair and his followers point to this as evidence that Canada's economy is becoming "unbalanced," and that something needs to be done about it -- even though they're all lacking in ideas as to what exactly they want to do about it. They all seem to lack ideas about just what an "unbalanced economy" even means, and how to achieve a "balanced economy," and for good reason:

That isn't even remotely what the problem is. The OECD knows that, even if Mulcair and his followers so desperately want to pretend otherwise.

The Junk Economics Behind the "Dutch Disease" Theory

Far-left response to Dutch Disease theorem short on facts, long on... pretty much nothing

With the far-left doubling down on NDP leader Thomas Mulcair's "Dutch Disease" thesis -- arguing that an artificially high Canadian dollar, allegedly inflated by Canadian energy exports, has hollowed out the manufacturing sector -- it should be far from surprising that the so-called "Progressive Economics Forum" is following the same lead.

Responding to a Glibe and Mail editorial which agrees with Mulcair that the oilsands industry should do more to protect the environment -- they should always be striving to do better -- which attributes their struggle to competition from Chinese manufacturers as much as to a comparatively high Canadian dollar,.Andrew Jackson overlooks a very basic detail.

The PEF's response, written by Jackson, is only four paragraphs long, so it can't help but be short on the facts. While it does offer one fact for consideration, that the Chinese Yuan, like the Canadian dollar, is managed against the US dollar, he actually declines to mention just what the Chinese Yuan-to-US dollar exchange rate actually is.

In fact, as of the time of this writing it happens to be approximately 6.4 Chinese Yuan to one Canadian dollar. This means that it takes approximately 6.4 Chinese Yuan to purchase one American dollar, making US manufactured products very unattractive to Chinese buyers.

Economic analysts cited by the Pembina Institute claim that the "natural value" of the Canadian dollar ranges from 80 cents to 90 cents. If the Canadian and US dollars are at parity, this would put the Chinese Yuan-to-Canadian dollar exchange rate ranging from 5.12 Canadian dollars-to-Chinese Yuan to 5.76. This means that it would take anywhere from 5.12 to 5.76 Chinese Yuan to purchase a single Canadian dollar on the international currency market.

As of May 12, the exchange rate was 6.1 Chinese Yuan to Canadian dollars.

This confronts people like Andrew Jackson with a very stark question: just how far should Canada's dollar be de-valued, and by what means, in order to allow Canadian manufactured goods to gain a competitive foothold against Chinese products, let alone in Asian markets? And what kind of other economic disaster would befall Canada if the dollar were artificially devalued to that extent?

Imagine what would happen to the royalties collected from resource exports, among other things. One thing becomes perfectly clear: whatever the future of Canada's economy, it had best noted by planned by the braintrusts of the Progressive Economic Forum. They're pretty clueless.

Delivering the Death Blow to Thomas Mulcair's "Dutch Disease" Theory

NDP leader Thomas Mulcair is a man with a theory. And like many previous men with many previous theories, he isn't willing to get go of it.

His theory is that the strength of Canada's resource sector -- particularly the energy sector, especially the oil sands -- hurts Canada's manufacturing sector. In greater detail, he argues that exports of energy resources have "artificially" inflated the Canadian dollar, making manufacturing exports more expensive to international buyers.

When Mulcair first floated this thesis, response to it was fairly tepid. But it has slowly picked up steam, and revealed to Canadians precisely how ill-suited Mulcair is to become Prime Minister. Even as all the evidence disputing Mulcair's thesis has trickled out, Mulcair refuses to back down. No matter how many economists dispute his thesis, Mulcair simply insists that "everybody knows" that Canada is suffering from Dutch Disease. Despite the fact that this can immediately be seen to be untrue.

There was Jack Mintz in the Financial Post pointing out that the so-called decline of the manufacturing sector in Ontario and Quebec closely mirrors that of US rustbelt states like Michigan and Ohio -- two states that don't have booming resource sectors to blame for their plight. Then there was the Institute for Research on Public Policy pointing out that Canada has a mild case of Dutch Disease at best, and that the symptoms suffered by the sectors of manufacturing that have struggled can actually be attributed to their products, and to their failure to reinvest in capital. Mulcair simply pretended that the IRPP report supported his thesis -- it doesn't -- and pro-NDP hacks on Twitter attacked Mintz on an ad hominem basis. Neither is what anyone would expect from people who are confident in their own theories.

Now, Philip Cross has delivered the death blow to Mulcair's thesis, pointing out that a stronger dollar is good for Canada, and that the benefits far outstrip any harm that a stronger currency would do. Cross points to the addition of low-wage, manufacturing jobs in Canada during the 1990s -- manufacturing products such as textiles, clothing and furniture -- at a time when other countries were shedding those jobs in favour of adding high-wage jobs. It's certainly no coincidence that those are the very manufacturing sectors that are suffering under a stronger Canadian dollar.

It's in the wake of this particular point that it becomes clear that Thomas Mulcair never heard of a man that you may have heard of... a man by the name of Steve Jobs.

Steve Jobs was a person who never bothered making products of low differentiation and low complexity, even in compared to his immediate competitors. Nor was he a person who focused on making a product that was less expensive compared to his competitors. What the success of Steve Jobs, Apple, and their various products -- particularly the iPod, the iPad and the iPhone -- is that if someone wants or needs a particular product badly enough, they will buy it at a more expensive price. Certainly, nobody ever bought any of these products because they were less expensive. They weren't. Therein lies the shortest logical route in demonstrating Mulcair's thesis to be both shortsighted and foolish. And it applies to Canadian manufacturing just as much as it applies to resource exports.

In fact, the success of the oilsands, even with a stronger Canadian dollar, proves that people will buy what they need at a comparatively higher price if they want or need it badly enough. The United States badly needs Canadian oil. China badly needs Canadian oil. India badly needs Canadian oil. And they're all buying it, despite the strength of the Canadian dollar, and despite the detail that this makes Canadian oil more expensive for them to buy. As it turns out, the same has turned out to be true for Canadian manufacturing. Sales in most of Canada's manufacturing sectors have actually climbed, despite the strength of the Canadian dollar.

There's a reason for this: it's because in these particular cases Canada is making what consumers -- whether they're individual household consumers, companies, or entire countries -- want and need. And when that is the case, consumers are buying it despite any additional expense. This is what Thomas Mulcair clearly doesn't get: is that a lower Canadian dollar isn't a substitute for innovation in Canadian manufacturing, creating a quality product, or even simple competitiveness. It's been made clear that these are the things that are wrong with the sectors of Canadian manufacturing that struggle under a stronger dollar.

But Thomas Mulcair has clearly never heard of Steve Jobs. So Thomas Mulcair doesn't know that.