Sunday, December 28, 2008

The Economy

As the biggest issue in the minds of Canadians along with our current political predicament, the economic recession is beginning to make itself felt in ways small and large from coast to coast to coast. Gas prices have dropped to eighty one cents in Victoria, British Columbia, and that's saying something for a city not only with a carbon tax but a reputation for prices in the $1.40 range. Dropping oil prices hit industries in Alberta and Newfoundland very hard, causing the losses of jobs, profits, and prosperity across the board.

This is only one example of how the recession of our times is becoming physically well known to everyone in this country. Let there be no doubt that hard times are ahead, and without some sensible action our prosperity will stop increasing, and may begin to slip downhill.

Sensible action though it seems, is a bit too much to ask for. From what I understand of the various bailouts that are being proposed to many businesses here in Canada, they make little sense. General Motors and Chrysler are asking for the Canadian and Ontario governments to give them a bailout of approximately $4 billion dollars.

Indeed, the automotive industry has been one of the hardest hit industries in both Canada and the United States by the recession. However, these industries were already lagging behind in their performance before the recession hit, having been surpassed by auto makers in Asia such as Toyota, Honda, and Mazda. It has been said that when a crisis hits a company, the mettle of it's business practices is tested more so than at any other time. None of these Asian companies have asked their governments for a financial bailout package, because their business practices are financially sound and they can maintain their companies without a crutch from the state.

Of course, one must be aware of all the jobs that are at stake in Canada if the automakers were to shut down. I believe the figure of jobs lost in the automotive industry in Ontario in the past year is close to 100,000, and that figure would likely multiply significantly if the auto makers in Canada were forced to cut costs even more. But bailing out these companies would delay the inevitable. Canadian automakers have offered little in the way of a scheme by which they would put their businesses, well, back in business. To offer the big 3 automakers taxpayers money so they can fix their problems without any plan to do so is like asking every man, woman and child in our nation to shred $120 and hope for the best. It's ridiculous, and irresponsible.

There are better solutions. Make the bailout conditional on a blueprint for success to start with. If GM wants our money, they should tell us exactly how they will make it work for them, and for us. In addition, parliament should discuss regulation of mass employers like the GM and Chrysler that gives us some kind of insurance that these kinds of job losses won't happen again.

But at the very least, don't loan my money away to someone who doesn't even know if they can pay me back.

1 comment:

~Julia said...

Gas hit over 1.50 in Victoria last summer - I walked past a gas station everyday and I could almost hear the angished screams of those who were filling up their cars. Now, like you said we're back down to around 80 cents. 75 in Duncan.

It will be interesting to see how the bailout goes, after all, the US will also be loaning them money and so they will no doubt be asking for the same things that we are, but they have more money.

Its true they certainly haven't planned well, and haven't accurately determined what we, the consumers, want. Obviously if gas is more expensive we want smaller vehicles, or at least more efficient ones. We're starting to see that now, but development has definately been lagging behind the Asian car markers.

An economist being interviewed on CBC had an interesting view - he suggested that the stimulus package to be included in the budget should be targeting green initiatives. Companies that get government money should be helping the environment, and especially limiting our reliance on oil. According to one article I read, we are running out of oil faster than expected, which is certainly not good considering we have no alternative fuel for least not yet.

I agree - why loan them money if they can't pay us back? Some economists say, cut them loose - its their own faults. True enough, but no government can let that number of jobs, and towns, slide by the wayside.

We will have to wait and see how this all plays out... with morbid curiosity...