Driving to work this morning, I listened to
The Current on CBC Radio. The topic
du jour was "one of the biggest news stories in recent memory"--the soaring Loonie. In the course of the hour, guest host
Kevin Sylvester questioned guests from across the country on the impacts of the increase in value of our dollar. They covered a lot of territory, literally (what it means in Alberta and its effects on businesses in Quebec and Nova Scotia) and in terms of economics (how the dollar is tied to the price of oil; resource versus manufacturing sectors; the far-ranging impact of any further decline in the American dollar; etc.) Sylvester also talked to
Michael Adams, author of
Fire and Ice: The United States, Canada and the Myth of Converging Values and
Unlikely Utopia: The Surprising Triumph of Canadian Pluralism, who addressed the issue of whether the rise of the Loonie hadn't provided Canada with a psychological boost--the chance to "kick a little sand in Uncle Sam's face for a change." In the course of the conversations, someone opined that the average person must be very confused about exactly what the soaring Loonie means. Sitting in rush hour traffic on the Gardiner, I thought, you've got that right.
The results of our Dollar Dilemma survey (see below) made one thing clear: consumers don't understand -- or don't care about -- the economics of the situation, and retailers and suppliers find this very frustrating. The media and politicians were both cited as having failed to explain the economic realities of the supply chain. They simply called for lower prices without bothering to speak about business principles such as purchasing power parity. With regard to this omission and in response to the question of whether government intervention was needed, Michael de la Place, St. Geneve, wrote the following:
"The market will do what it has to do. The strange thing is that purchasing power parity pegs the Canadian dollar at under $US 1.00. PPP, if you don't know, directly compares the value of work that it takes to purchase the same item in both countries. If government gets involved, it will be purely political, as when the Minister of Finance last week said he was going to meet with major retailers and tell them to lower their prices. My letter to the editor which was published in the Vancouver SUN read: 'So Finance Minister Jim Flaherty is instructing retailers to lower their prices because of the stronger Canadian dollar. Mr. Flaherty is apparently unaware that goods cost more in Canada because of much higher transportation costs due to Canada’s immense size, and much higher Federal Gas Taxes. Taxes that his department sets. He is apparently unaware that the Canadian government charges much higher duty rates than does the United States. Duty rates that his department sets. He is apparently unaware that minimum wages (set by government) are higher in many parts of Canada than in many parts of the USA He is apparently unaware that stores are selling goods that they bought months ago when the dollar was weaker. He is apparently unaware that the USA market is more than eleven times the size of the Canadian market. California by itself is bigger than Canada. He is apparently unaware that economies of scale are very powerful. Perhaps he missed that lecture in bookkeeper school. Given all these fundamentals, Mr. Flaherty seems to be catastrophically incompetent to be the minister in charge of finance."
I haven't noticed too many front page reports on those issues, and this whole thing makes me wonder if it's possible for a politician to get up and tell the truth: to admit that an issue is complex; that markets often take some time to work themselves out; and that through their policies and taxes, governments (federal, provincial, Liberal, Conservative, etc) are complicit in the situation. Is honesty too much to ask for?