Creating Confidence

The back-and-forth among political and business journalists about whether Harper or Dodge are right about the prospects for the Canadian economy has been interesting. I believe there are elements of truth in both of their stances and arguments. I also believe that both are correct to take the positions they have.

Former Bank of Canada Governor Dodge may very well be right that our recovery will be slow and weak. He points out that certain sectors, in particular motor vehicles, may never recover. This is likely true, but has little to do with the downturn; the current economic weakness merely sped up the decline of the weakest companies. For this reason I do not see a subsequent non-resurgence in especially weak sectors as a justification for a weak recovery. This also goes for media and newsprint, and other sectors and companies. Other weakened sectors like aerospace, commodities and technology will recover as the economy recovers. Dodge is right to point out that this is very much dependent on the pace of the recovery in the US.

Prime Minister Harper is finally getting on the right path after some worrying bouts of denial and waffling. He could very well be wrong that our economy will see recovery sooner rather than later, but he has an important role to play in reversing the broad-based loss of confidence. As long as too many people are worried about their jobs, incomes and retirement savings, we are not in control of our own destiny. If left to fester this attitude will guarantee that the scenario Dodge lays out will come to pass: that our recovery will lag that of the US and other consumers of our exports, and that we are wholly dependent on external triggers to begin the recovery.

Let the (justified) sniping over Harper's unexpected voice of optimism continue. Even so it will have an effect if he does it in measured tones and without let-up for the next several months. The 92% of people that are employed need some help from our political leaders to take a deep breath and renew their previous patterns of consumption and investing. That alone should do the trick. It's a matter of confidence about the future, and hearing a few more optimistic voices. Optimism is justified.