Government Edge: Good Government as a Competitive Advantage
Speaking Points by Wayne G. Wouters for the Canadian Chamber of Commerce
October 21, 2009
Good public policy has been key to Canada’s relative success during the financial and economic crisis
The key message that I would like to give to you today is that good public policy is essential to achieving healthy, stable economic growth. Making good public policy choices today, we set the stage for a successful economic climate tomorrow.
As you all know, we are slowly emerging from a severe economic and financial crisis. Despite the fact that Canada is a very open economy and is highly exposed to the U.S. economy, the deterioration of Canada’s economy has actually been less severe than in other major industrialized countries.
The reason Canada has fared comparatively well during this crisis, I would argue, is in no small part because of good public policy.
Canada entered the downturn in a strong economic and fiscal position, which was the direct result of good public policy choices. Canada recorded more than 10 years of consecutive surpluses and took action to put Canada’s debt burden on a firm downward track. Reductions in the debt burden in recent years provided Canada the flexibility to put in place measures to support the economy during the downturn.
The financial crisis has also clearly demonstrated why prudent and responsible regulation and supervision are so important. Canada’s financial system has performed extraordinarily well during the crisis, reflecting in large part strong prudential regulation.
As a result, this year, the World Economic Forum rated Canada’s banks as the soundest in the world for the second year running.
The strength of Canada’s financial system during the crisis meant that, although credit growth in Canada slowed during the crisis, it did not slow to the same degree as in the United States.
Thanks to a strong fiscal position, Canada was able to respond quickly and decisively to the crisis through the Economic Action Plan. The Plan was carefully designed not only to support the economy in the near-term, but also with an eye to improving longer-term productivity. It is positioning our economy for long-term success through a more competitive tax system, leadership in research and innovation and support for critical industries.
Looking ahead, public policy challenges will require government and business to work together
In recent months, governments have, understandably, been firmly focussed on managing the crisis. However, once the crisis is behind us, policy makers will need to turn their attention to a number of other critical challenges facing this country.
History shows that balanced budgets have served Canada well. Over the medium term, as the economy improves, Canadians will expect their Governments to return to balanced budgets. This will require sustained discipline and will entail important public policy choices.
As well, the financial crisis has had a more severe impact on the U.S., which over the years to come will need to reduce its indebtedness and its large current account deficit. As a result, our exports to the U.S. may grow less quickly than before. Canada will therefore need to seek out and develop new markets in rapidly growing countries.
Looking over the longer term, one of the most important challenges facing us is the need to improve our productivity growth. Canada has a significant and long-standing productivity gap with the United States.
Productivity growth will become an increasingly important source of growth in Canadian living standards in the coming decades as Canada’s population ages.
As well, as the population ages, Canada will increasingly face a scarcity of labour. We will clearly need to continue to invest in education and learning and ensure that all Canadians, particularly Aboriginal Canadians, have the education and skills they need to participate in the economy.
Finally, Canada, along with the rest of the world, faces an environmental challenge. Canada has an important natural resource advantage, which continues to generate wealth for Canadians. The challenge will be to balance the development of these natural resources with environmental developments, and evolving international responsibilities and obligations. These include areas such as the Arctic, ocean resources and greenhouse gases. These are not challenges that Canada can meet alone.
We are currently at an important moment in history. It is not enough for us to weather this crisis well, we must plan for a future in which the world will likely look very different from the way it did before the crisis. In order to ensure our place in the new global economic order, we must all, governments and the private sector, be working towards the same goal—boosting the competitiveness of the Canadian economy and working to raise the quality of life for Canadians.
As you know, government is not in unique possession of good public policy ideas, nor do we control all the levers needed to achieve our goals. Government must reach out to the private sector and other stakeholders, ensure that your ideas are heard and capitalize on your suggestions.
The private sector has historically played a critical role in public policy development. Free trade, tax reform and fiscal consolidation were all important reforms that created an economic environment in which Canadians can prosper, and in which policy makers had strong support from Canada’s business community.
I believe we are quickly approaching another important window to position Canada for the future coming out of the recession, and I urge you to engage and contribute, as you have in the past, to the public policy dialogue needed to help shape our future in response to some of the challenges we are discussing here today.
Thank you.