Canada Moves to Join the Great Club of Relevance: Amity Shlaes
2006-01-25 00:09 (New York)
(Amity Shlaes, author of ``The Greedy Hand: How Taxes Drive
Americans Crazy and What to Do About It,'' is a Bloomberg News
columnist. The opinions expressed are her own.)
By Amity Shlaes
Jan. 25 (Bloomberg) -- Canada is facing up to one of those
universal truths. A country can't merely show up at the summits.
The country has to go beyond reacting to leading and competing.
It can be in the G-8, but it also has to be a member of another
club -- we'll call that the Club of Relevance.
By giving Stephen Harper and his Conservative Party a
plurality in Monday's election, Canadians are giving Canada a
shot at relevance.
This may come as a surprise to Canada cynics. It is
probably even a surprise to many Canadians, who thought their
election was about the child-care subsidy. Still, with Harper at
the head and the wounded Liberals going along with various
adult, pro-growth projects, relevance may be the outcome.
And what a change that would be. Canada in the past has
exhibited deep ambivalence about the relevance trait. The Canada
we know didn't want to lead, or even to argue. It wanted to
fiddle with its Blackberry. It wanted to kick sand in election
cycles.
Just a year ago, Prime Minister Paul Martin announced he
would not join the U.S. missile-defense plan after all. He had
signaled the opposite at a summit with President George W. Bush.
Martin, likewise, dissed Bush whenever possible on global
warming, leaking memos to demonstrate U.S. arrogance on the
topic. Martin talked about prosperity, but Liberal governments
acted to serve their interest groups. Three monumental scandals
have dominated Canada in the past decade.
My favorite, already almost forgotten, was the jobs
scandal. It seems the government spent a billion Canadian
dollars or so to create jobs without recording just how.
Lower Productivity
Economic growth overall has perked along, but the
government kept too much of that money and real wages didn't
grow sufficiently along with national wealth. In the end, such
policies hurt relative competitiveness, a key qualification for
the Club. The average growth in labor productivity for Ireland
was almost 5 percent between 1995 and 2004. For the U.S. that
figure was more than 2 percent.
In Canada, it was 1.5 percent, according to the Fraser
Institute, a think tank in Vancouver. This placed Canada 18th
among industrialized nations, according to author Jason Clemens.
Canada's marginal effective tax on capital is second-highest in
the same group. Such conditions have long made inventors and
investors ask: Why bother with Canada?
Cut Taxes
To be relevant, Canada needed to tax capital less than the
U.S. That's not even hard, since the U.S. overtaxes capital
itself. Instead, Canada taxed and faded. The Liberals campaigned
on cutting business taxes, but the rest of their agenda got in
the way.
Now things look brighter. On foreign policy, Harper may not
agree with the U.S., especially not the Bush administration. Nor
will many of his countrymen. Indeed, notes David Frum of the
American Enterprise Institute, Canada's Bush-bashing continues.
``Liberals did well, and not only in the `Michael Moore'
precincts, but also in a lot of areas where their scandals
should have hurt them more,'' Frum said. British Columbia, for
example.
Of course, some Canadians still think that America-bashing
is a form of relevance. But sometimes bashing merely betrays
weakness.
Abramoff for Senate
Harper is more likely to take a strong pro-Canadian stand
than a strong anti-American one. Dismantling the interest-group
culture also is a Harper goal. The prime minister now appoints
senators for life, often as a reward for loyalty. Former Prime
Minister Brian Mulroney even gave a senate seat to his director
of appointments, Marjorie LeBreton. (Imagine: Jack Abramoff
wouldn't have had to content himself with lobbying; he could
have asked to be made senator.)
Harper wants to change things so voters have more of a say.
Such moves should cut down on the scandals.
In economics, Conservatives should push through the laws
that will make increased productivity possible. This year may
even see an elimination of Canada's uncivilized capital tax --
an asset tax that penalizes the very existence of business.
Harper has a plan to eliminate capital gains taxes on proceeds
from investments that are reinvested within six months. Clemens
of the Fraser Institute sees new hope for cutting the corporate
income tax.
Finally, there is the Conservative commitment to reduce
Canada's goods and services tax to 6 percent, or even 5 percent,
from 7 percent. Those dollars will make Canadians feel more
relevant.
Irrelevant Separatists
The party most fundamentally opposed to pro-productivity
changes, the New Democratic Party, failed to garner enough seats
to hold the balance of power. The Conservatives did well in
Quebec, pushing back the Bloc Quebecois. That's good news.
Separatist groups are highly irrelevant.
A more relevant Canada will be good for the U.S. President
Bush does not listen enough. The message from his Defense
Department has often been ``Go along or shut up.'' Harper, a new
face in the club, will be in a good position to call Donald
Rumsfeld on that.
The Bush administration has let Canada down when it comes
to the nations' soft-lumber and agricultural disputes. The
explanation always was the need to win elections. Maybe Canada
can show the U.S. the way on this one.
But Canada is today's story. A Harper government will be a
minority government. It may fall. Still, it represents the best
chance in years for Canada to play a useful role in the Club of
Relevance. Stephen, welcome.
--Editors: Greiff (jto) From Bloomberg |
