The Morning Brief – 04.08.20

By Bruce Carson


Economy—Canada 2020

The Recovery Project -The Big Picture for Canada. A Virtual Roundtable Discussion.

On Monday of this week, Canada 2020, a think tank located in Ottawa convened a roundtable discussion among four knowledgeable people to kick of its answer to public policy development during COVID-19, The Recovery Project.

As with many similar organizations across Canada, Canada 2020 had a full schedule of events prepared and had actually held one, on health innovation, before COVID-19 struck. The answer as to what to do that might be helpful for policy makers and those seeking guidance during this troubled time was The Recovery Project.

This project and work carried out under it will focus on what comes next; what will Canada look like as it emerges from the virus, what lessons have we learned and what do we need to do next as a country to smooth out recovery?

The session on Monday held by Zoom technology was the first such virtual meeting and was to look at the Big Picture going forward.

Those leading the discussion were Tiff Macklem, Dean of the Rotman School of Management at the University of Toronto, formerly with the federal department of finance, Heather Scoffield, Ottawa Bureau Chief and Economic columnist for the Toronto Star, Anne McLellan, former Deputy Prime Minister during some of the Chretien years and Minister of Health during SARS and Canada’s first Parliamentary Budget Officer Kevin Page, who now heads up the Institute of Fiscal Studies and Democracy at the University of Ottawa.

The group started by looking at getting through to recovery and concluded it could be a really tough slog, a mess, or alternatively Canada could learn from the COVID-19 experience and engage in bold steps to recovery. All agreed we as Canadians have never seen anything like this before.

Health Care System

One positive from this ordeal is that it has exposed weaknesses in Canada’s health care system, especially public health which was described as the poor cousin of most health care systems. We need to learn from this experience in order to prepare for the next global crisis.

Addressing weaknesses means putting resources into the health care system and developing integrated systems across the country. Procurement is an obvious weakness and looming challenge. The present situation was compared with SARS and H1N1 where there was cooperation among jurisdictions as now we are very much in charge of our own destiny as a country. We can’t depend on our friends; in fact it is difficult to determine who our friends are.

This makes it imperative that the federal government take the lead and determine what a national stockpile looks like in medical equipment but with other matters, including food. This will require a high level of cooperation and integration among governments. It will also require that medical equipment be produced in Canada.

The United States and Multilateralism

Previously Canada has always been able to rely on and look to the United States for leadership but that is no longer the case.

The question this raises is are we moving into an era of broad based protectionism?  Lack of international cooperation could lead to a mentality of looking after one’s own concerns first and foremost just at the time when it should be recognized that we are all in this new reality together. We need the U.S. to step up as Canada can’t lead a global recovery by itself.

This led to a discussion of Canada’s role in international organizations. In the financial crisis of 2008-09, the world came together using the G20 as a vehicle. On health related matters, the WHO should play a leading role in the future. This goes against President Trump’s musings of yesterday about cutting financial support to the WHO.

Recovery Phase

Canada can’t move to recovery stage until we have pushed back on the virus. Specifically Canada must look at the near, medium and long term, develop and implement policies for all three periods.

In the near term, where we are now, emergency relief needs to flow immediately. In this period, emphasis should be on execution and delivery of aid. This presents enormous challenges; the private sector needs to work with its customers building a bridge to the other side of COVID-19.

We also need to be thinking now about how we are going to get back to normal; back to work when restrictions are lifted. How do we get back to work without spreading the virus through inadvertence? This is the challenge for which every employer should be developing answers. For getting back to work to be successful, government needs to ramp up testing.

The third stage moves beyond emergency relief to stimulus spending we are familiar with, the construction of large nation building infrastructure projects. In addition, there will have to be significant investments in public health care.

The recovery phase raises many questions. For example, in order to enter this stage decisions will have to be made regarding when to lift containment measures. Recovery must instill confidence in the economy in order to build and attract investment. How does Canada deal with China and the United States during this phase?

Will the recovery phase be global in nature with global stimulus? And will multilateralism survive COVID-19 to provide coordinated action without U.S. leadership? If recovery is to be global, it will need the support of multilateral organizations but will this actually occur. The view was hopeful, but skeptical.

Recovery may present opportunities for the application of artificial intelligence dealing with data collected from the provinces and federal government which may help with future medical research so we can get back to work without spreading the virus.

Will a feature of recovery be a basic income or guaranteed annual income? Getting back to work in 2020 or 2021 will be a lot different from getting back to work in 2009. The ramp up to restarting the economy will be long with no magic switch that can be used to turn it all back on again. Many jobs in the service sector will have been lost, never to reappear.

Will this mean that the Canadian Emergency Response Benefit (CERB) moves, with some tweaking, to becoming a guaranteed annual income? Income support will be needed beyond the end of COVID-19. Do the programs that are being implemented now stay on, perhaps in some other form to address the needs of those who might otherwise fall through the cracks?

Energy Sector

Finally, the group tackled the situation in Alberta. The question that policy makers have to address is what the energy sector may look like in a carbon constrained world. The transition had already started before the virus hit as energy companies were reducing emissions.

The present need is for liquidity as the energy industry is facing an emergency. Prices are not sustainable with the collapse of demand and the Russia-Saudi Arabia price war. Governments and the industry need first to address rescue and then transition using technology to reduce emissions. Also the workforce may need to engage in further skills training supplied by industry and government.

Costs of Recovery

As to the costs of recovery, they will be enormous but manageable even if the federal government moves to a stimulus package of 5% to 8% of GDP. For this the federal government will have to step up as the provinces cannot afford to. This means the federal government needs to put in place a new fiscal stabilization program for the provinces, at least by summer.

If there is a conclusion to be drawn from the discussions, it is that recovery will not be simple and easy as the entire economy will need to reboot. Canada may look different coming out of COVID-19 than it did going in regarding health care spending and the provision of an economic safety net that could start with CERB as its base.

To Come

  • In a pre-COVID-19 world, the Stanley Cup playoffs begin
  • Building permit numbers for February to be released
April 9 or 10
  • House of Commons may reconvene, unlike last time the draft legislation reflects the government’s proposed wage subsidy program
April 9
  • Job numbers for March to be released
  • OPEC+ meeting, Alberta to join the virtual meeting
  • Conference call among Energy Ministers from Canada, United States and Mexico, initiated by Canada’s Natural Resources Minister O’Regan to prepare for the G20 Energy Ministers meeting
April 10
  • G20 Energy Ministers meet by video conference to deal with price and supply of oil
April 15
  • Bank of Canada deals with interest rates and releases its Monetary Policy Update