The move was as much symbolic as practical. How better to prove to Canadians that the federal, Tory regime is on the right, fiscally hawkish course than by selling its last, remaining stock in the giant auto company it bailed out when it was on a far more fiscally dovish flight path?
With that, Finance Minister Joe Oliver proclaimed the end of an era this week, authorizing his government’s divestiture of 73 million common shares in General Motors to Goldman, Sachs & Co. “We have eliminated a market exposure for Canadian taxpayers and returned GM to private-sector ownership, having supported its continued contribution to the Canadian economy,” he declared in a statement.
What a difference eight years makes to the leadership sensibilities of the governing classes. We may recall the bad, old days of global, financial collapse in 2008 and the Great Recession that followed, when the still tender-footed Harper majority was, like the normally counterpoised Obama administration, committed to economic stimulus not austerity, spending rather than restraint.
At that time, allowing the big automakers, GM and Chrysler, to fail was unthinkable on either side of the 49th parallel. Indeed, less than a year after Parliament Hill and Queen’s Park banded together to drop a combined $14 billion on the crippled manufacturers, then-federal Industry Minister Tony Clement declared, “This was not a decision we took lightly. But, at the end of the day, we knew that if we did not participate, what was at risk was not just the (direct) jobs but all the other parts manufacturers and other industries that go into having an auto sector in this country, and that has been estimated to be over 400,000 jobs that were at risk.”
He was probably, if frustratingly, correct. Now, it appears, the nation’s economy has recovered well enough to justify liquidating the government’s auto assets (reportedly worth about $3.5 billion) just in time to balance the budget later this month, roughly half-a-year before the next general election.
All of which may only prove that hawks and doves really can occupy the same airspace, depending on which way the political wind blows.
Still, the larger issue that concerns many economists in this country is whether a hell-bent rush to book a balance in the public accounts, come what may, is rational (or even possible) in the medium-to-longterm. The GM cash-out may not be, technically, a windfall, but something about it feels awfully like found money (“Don’t worry, Mabel, we’re saved from perdition; I just found Uncle Harry’s collection of gold nuggets buried in a coffee can down by the river).
Meanwhile, storm clouds are once again gathering in the broader economy – which is expected to grow only fractionally over the next quarter – a point that Bank of Canada Governor Stephen Poloz made clear in an interview with The Financial Times last week. “When the oil shock came, it was clear we would no longer be able to close the output gap by 2016, but by 2017,” he was reported to have said.
“Since we had some firepower, we took some insurance and cut rates. . .The first quarter of 2015 will look atrocious, because the oil shock is a big deal for us. . .
In theory lower oil prices mean (putting) more money in consumers’ pockets, but. . .if an oil company cancels (an investment) project, laying off a worker, that guy will not have the money to buy a new pickup truck.”
A balanced budget is a desirable objective for any lawmaker, but not when there are girders in the economy to support – and certainly not when all such book entries are manufactured for more symbolic than practical reasons.