Martin versus the old economy

Lawrence Solomon
National Post
September 26, 2003

In presenting his vision for the country in Montreal last week, incoming Prime Minister Paul Martin rightly extolled the New Economy and the importance of using capital efficiently.
Paul Lachine

He rightly extolled the benefits of globalization and the need for more Canadian multinationals pursuing more trade in a more competitive environment.

And he rightly ignored the Old Economy of farming, logging and mining because these uncompetitive Canadian industries, as we know them, have no constructive role to play if his Canada is to become "a 21st century economy."

Critics of Martin’s New Economy speech saw it as a series of meaningless motherhood statements in which he tried to be all things to all people by simultaneously promising fiscal discipline, new social spending and new economic spending.

Maybe so. But Martin did more than lay out a vision in which he rewards high-tech winners in an information economy. He also vowed to end support to losers.

"(Prudent fiscal management) means focusing on results, on outcomes, on improving programs that work and bringing those that don’t work to a deserving end," he stated bluntly. And without compromise. "The fact is Canadians have come too far, worked too hard and sacrificed too much to go back to the era of deficits."

While Martin didn’t spell out which failed programs he had in mind – the eve of his ascent to power is no time for dark news – the writing is on the wall. The programs that most spectacularly don’t work – that most threaten to return us to the era of deficits, and that are most deserving of an end – involve Canada’s resource subsidies, particularly to farming.

Among the international-governmental-financial elite, Martin is a highly regarded player. This elite believes – correctly – that agricultural subsidies are the single biggest impediment to global trade and the single biggest irritant between rich and poor countries, whose farmers cannot compete against the US$300-billion a year that Western nations lavish on their farmers. If for no other reason than to maintain his standing with these friends and luminaries, Martin would feel compelled, at a minimum, to root out the most egregious subsidies among them. After trade talks collapsed in Cancun, for example, Agriculture Minister Lyle Vanclief admitted that our extreme position on protectionism was untenable: "There is only one country in the WTO that wants zero changes in the over-quota tariff," he told reporters. "That’s Canada."

But Martin has even more compelling domestic reasons to get farmers out of the trough and into the modern economy. Canada’s near-Soviet-style agriculture is the antithesis of the New Economy: large-scale, polluting, reliant on massive doses of subsidized petrochemical inputs, and extraordinarily money-losing. For every dollar of income a Canadian farmer earns, Canadians provide close to four dollars in subsidies. Instead of producing high-value niche crops for upscale local markets, which farmers can do without subsidy, farmers produce subsidized, low-value commodities that our government then exports at a loss.

Does Martin have the stomach to take on Canada’s farmers and enforce a long-overdue restructuring? He is among the very few Canadian politicians to have had the guts to take on farmers in the past. It was Martin who in 1995 accomplished a feat many then considered political suicide – he abolished the Crow’s Nest Pass rail subsidy to western grain farmers and slashed dairy subsidies by 30%, cutting more than $1-billion a year in subsidies in what was the agriculture lobby’s first great defeat.

In a letter this summer to the head of the Canadian Federation of Agriculture, Martin put farmers on notice that "agriculture must be understood as a vital part of the ‘new’ knowledge-based economy and a key sector on the nation’s agenda for innovation, investment and growth." His goal: to end bankrupt policies that see farmers reel from one disaster to another and build a "less vulnerable and more profitable rural economy."

An advisor in bringing the resource economy into the New Economy is expected to be Maurice Strong, a close confidant and the same person that the Liberals called on in the 1980s to sweepingly restructure government by privatizing Crown assets. Strong, a renowned figure in international development who renounces foreign aid, is the world’s leading critic of the estimated US$700-billion in subsidies that governments worldwide spend on agriculture, water, energy, and transportation. The Third World needs trade, not aid, he and Martin both believe. Ending resource subsidies is thus a moral position that also does a world of good: It helps them, it helps us.

Little wonder that one of the few countries that has successfully slashed farm subsidies to help finance high-tech – Australia – has become a model for Martin. "Look at Australia," he told his Montreal audience. "Throughout the 1990s Australian companies invested enormously in new technology, much of which was produced abroad. With what result? Australia’s productivity growth rate was the second highest in the OECD, outstripping Canada’s and even that of the U.S."

Martin is not a small government neocon or a free-market ideologue, despite his promotion of free trade and globalization. But neither is he a stand-pat manager, content to follow an agenda set by pressure groups. Martin is a cautious planner with a vision for a new society that he has waited long and patiently to pursue, and with the dogged perseverance to see it through.

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