44th Parl. 1st Sess.
April 26, 2022 10:00AM
- Apr/26/22 3:30:16 p.m.
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Madam Speaker, I would like to dedicate my speech today to Tania Woroby, now retired from teaching, but who taught me my first economics class ever when I was in CEGEP in Montreal. Ms. Woroby had a gift for explaining economics with crystalline clarity.
A good economics professor can play a crucial role, as I am sure the members for Joliette and Mirabel would agree.
How would Ms. Woroby have graded the official opposition's response to the budget? She would have probably awarded them low marks for their partial analysis of the state of the economy. However, like a kind and patient teacher, she would perhaps have allowed them to rewrite the mid-term.
There is a real economy and a money economy, as I learned in Ms. Woroby's class, and yes, they are connected, but the Conservatives insist on ignoring what is going on in the real economy. They focus solely on monetary policy, which seems misplaced since the government does not control monetary policy, something the Prime Minister has tried over and over again to explain in the simplest terms.
The Great Depression highlighted the potential impacts of catastrophic events in the real economy. In the Great Depression, we saw the collapse of agriculture, the hangover from industrial overproduction, the rise of trade protectionism and a general crisis of confidence, something Keynes incorporated in his analysis under the rubric “animal spirits”. All these factors combined calamitously to sink the economy against the backdrop of a shrinking money supply tied to widespread bank failures. The money supply is always the backdrop, but contrary to what the Conservatives believe, the money supply is not the main driving force behind economic activity.
As Andrew Coyne put it in a recent column, inflation is not “too much money chasing too few goods”. Rather, the price of a good or service rises when demand outstrips supply. For example, if the price of oranges goes up because of a frost in Florida that killed the crop, that is not inflation. It is a price signal that oranges are in short supply relative to demand, a gap the free market will move to fill by offering more economical substitutes.
Quantitative easing, or “unconventional monetary measures” as it has been called, did not unleash inflation in the United States between 2009 and 2015 when the Federal Reserve used it in response to the 2008 financial crisis, because the state of demand in the real economy was weak, deflationary even. What quantitative easing did was save the international financial order. Quantitative easing has been front and centre during this pandemic, but this is not what has fuelled inflation. As Ian Lee, a professor of economics at Carleton University, says, “Over the last two years people realized there's some things they don’t need as badly or as much as they thought they needed.”
What is more, those who received COVID benefits did not spend more. They essentially borrowed less and saved more. Canadian household savings rates rose during the pandemic, and much of the savings are still in personal bank accounts. Bank deposits have grown by an average of around $12,000 per household compared with prepandemic trends. Also worth mentioning is that consumers are expected to use their credit cards less in 2022 in favour of instead using cash. According to Nicole McKnight of finder.com, “Three times as many people said they would either stop using their credit card or use it less often, than those who said they would use it more.” None of this suggests a credit-driven spending spree linked to inflation.
Quantitative easing is not the same thing as creating cash. It is not printing money, as the member for Carleton likes to tell us. Quantitative easing creates chartered bank reserves that are held at the Bank of Canada. These can be turned into loans, but this does not happen automatically. It happens only if there are profitable lending opportunities, including to businesses that want to expand capacity, something that actually mitigates inflationary pressure.
As global chief economist for Manulife Investment Management Frances Donald has said, “For the past 40 or 50 years, we've tended to view the economy through a demand-side lens. What is so unique about this [period today] is that it's the greatest supply side shock since the 1970s.” In others words, to quote economist Armine Yalnizyan, “This is pandemic economics. The regular rules may not apply.”
We have been living in a trade globalized world for the past two decades, with global supply chains built around just-in-time delivery and thin inventories that, if they had been more robust, could have better absorbed COVID supply shocks. When confronted by lockdowns at major ports and factories, the global just-in-time delivery system simply snapped.
Pandemic economics is mostly about capacity constraints, and demand shifting from services like travel and restaurant meals to goods, mostly ordered online, and not about too much money chasing too few goods. We are talking about fewer semiconductors for cars and washing machines, the halt in housing construction for weeks, if not months, at a time during the lockdowns and even capacity limits in the oil and gas sector following a downsizing of its workforce in response to a precipitous drop in economic activity caused by the pandemic. Of course, there is a war in Ukraine that has created uncertainty in energy markets causing prices to rise, which has in turn raised the cost of food production, among other things.
Energy prices may be about to stabilize. According to an article in the New York Times on April 12 referring to the impact of world oil prices on U.S. inflation:
...it now appears that the world oil market overshot in response to Russia's invasion of Ukraine.... President Biden's million-barrel-a-day release from the Strategic Petroleum Reserve makes up for much of the shortfall [in Russian oil supplies]. As of this morning, [on April 12], crude oil prices were barely above their pre-Ukraine level, and the wholesale price of gasoline was down about 60 cents a gallon from its peak last month.
Then there are the impacts of climate change on agriculture. To quote from a CTV article from this past January:
A recent NASA study noted that global agriculture is facing a new climate reality and with the interconnectedness of the global food system, impacts in even one region's breadbasket will be felt worldwide.
According to Canada's Food Price Report, in 2021, Canada experienced climate change-related adverse weather effects, such as severe wildfires in British Columbia and drought conditions in the Prairies, that affected the prices of meat and bakery products.
Finally, there are the all-too-familiar labour supply constraints, including shortages of port workers and drivers, who are so vital to a functioning supply chain. Here in Canada, the pandemic depressed immigration levels in 2020 and forced hundreds of thousands of women out of the workforce. That is why we are investing in immigration and child care.
To see the impact of supply-side inflation, one needs only to dissect the components of the consumer price index. The main components of a rising CPI, in February 2022 relative to February 2021, were transportation, at 8.4%; food, at 6.5%; and shelter, at 6.6%. That is not to be confused with the cost of housing, but includes mortgage interest, property taxes, fuel and electricity. If we take energy and food out of the equation, the inflation rate in February was only 3.9%. When we looked at the inflation figures for March, we saw that the price of gasoline, year to year, went up about 40%. While mortgage interest, household operating costs, rent and furnishings are included in the basket of goods that make up the CPI, home prices are not. This is because homes are capital assets.
Bidding wars have driven home prices to unprecedented levels, due in part to people moving away from core areas, shortages of new supply and cheap mortgages, clearly. However, house-asset inflation does not squeeze disposable income the same way that a rising CPI does, though it creates intergenerational inequality and this is a problem. That is why the budget is addressing housing supply and housing affordability. Independently, of course, the Bank of Canada is addressing interest rates and the cost of mortgages.
Monetary policy, however, can dramatically suppress economic activity. It can cause great misery for a great many. We can think of the Federal Reserve's actions during the first Reagan administration, when former Fed chairman Paul Volcker wrung inflation out of the U.S. economy through an aggressive, tight money policy that created a deep recession.
The question for the official opposition is this: What should the Bank of Canada have done at the start of COVID-19? Should it have suffocated the economy during a global pandemic and created deflation worthy of the Great Depression, in the process destroying production capacity in a way that would have comprised economic growth across future generations? Also, what should the Bank of Canada do now that it is not already doing? Should the bank go even harder on raising interest rates, to the point of provoking house price deflation and a deep recession? Would that bring down the international price of oil and food, or would these remain a problem, especially for the larger number of Canadians suddenly thrown out of work? Would a more aggressive interest rate policy resolve supply chain issues? No, and that is why our budget is taking aim at the supply chain problem.
These are some of the questions that the official opposition needs to answer. They are answers that Canadians would like to hear.
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- Apr/26/22 3:43:04 p.m.
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Madam Speaker, it can in certain circumstances, but I do not think the member would like to argue that the massive amount of spending that took place during the depths of the pandemic was crowding out private investment. It is quite the contrary. It was helping to maintain private investment and was shifting the debt burden from individual Canadians to the government.
If one looks at the recent budget, it allocates only about $31.2 billion in new spending over the next five years. That is about $6 billion a year. That is less than what is being invested in the REM project in Montreal.
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- Apr/26/22 3:44:29 p.m.
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Madam Speaker, I was happy to see an injection of about $25 million into the Experimental Lakes Area and an injection of about $8 million into creating the freshwater action plan.
This is one budget, but there will be others to follow, and I can assure the member that I will continue to advocate for greater and greater investments in freshwater science and protection. There is money for the Canada water agency. The agency will take a while to develop, so it is good to take a step-by-step approach to funding it.
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- Apr/26/22 3:46:21 p.m.
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Madam Speaker, that is an extremely important issue and priority, obviously. The government has taken housing very seriously from day one of its election in 2015. We are already on track, by 2027-2028, to deliver more than $72 billion in financial support through the national housing strategy, which is the very first national housing strategy in Canadian history. Of course, a priority on indigenous housing is an important part of that, and it should be. It is something we need to keep an eye on in the future.
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- Apr/26/22 3:48:12 p.m.
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Madam Speaker, as I recall, the framework for the Bank of Canada in terms of its inflation target has not really changed much over the past few years. It is still aiming for a 2% inflation rate, so I do not see that there has been a radical change at that level. It is very important to recognize that the Bank of Canada is independent.
I am quite fearful that private member's bills such as the one introduced by the former leader of the Conservative Party somehow try to shift the blame to an independent institution, impugn it and attack its credibility in the eyes of Canadians. I think that would be a great threat to the economic policy in this country.
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- Apr/26/22 3:49:43 p.m.
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Madam Speaker, housing is a very complex area. We have brought in some important measures to help with housing affordability. We have a new savings vehicle. It is a very creative combination of a TFSA and an RRSP that will benefit first-time homebuyers.
There are other aspects of the housing situation that are under the control of municipal governments. I think the member has probably seen this in his area. I have seen it in mine. There is a big debate going on in my community about densification, and some amount of densification is going to be necessary if we are going to increase the housing supply in a geographic area that is already highly developed. Obviously, we cannot influence municipal bylaws and permitting, but through the housing accelerator fund we can exert a certain amount of influence, and hopefully that will be helpful.
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- Apr/26/22 3:51:25 p.m.
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Madam Speaker, by that logic we could ask how the RRSP benefits anyone or how the TFSA benefits anyone. I just said in my speech, if the member was listening, that households have higher savings than before, so if those savings can be channelled into a creative instrument such as the first-time homebuyers' savings account, I think that would help. It will not be the solution to everything, but it is part of a bigger puzzle.
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Madam Speaker, I, too, would like to acknowledge that we are here today on the traditional unceded territory of the Algonquin people.
I am honoured to rise this afternoon to speak to Bill C-226. The bill is being sponsored today by the member for Saanich—Gulf Islands, but it was first introduced in the 43rd Parliament by Lenore Zann, the then member for Cumberland—Colchester. It was quite a visionary bill, because the concept was not talked about at the time. I hope she will be back in the House soon.
In a way, it is indeed a new concept. The member for Saanich—Gulf Islands mentioned that environmental racism has been recognized as a problem for quite a long time in the United States, but it is still a fairly new concept.
I think Bill C-226 comes at a good time for our society, as that society is questioning the very systems it created. When we talk about discrimination and racism, whether it is environmental or otherwise, we recognize that it is not just a matter of personal prejudice, but that it exists, perhaps impersonally, in the very systems that we have built and that reflect a certain way of thinking and of ranking priorities.
This bill makes us think about that idea, which was not really well known until Lenore Zann introduced her bill. I am very grateful that she took the time back then to talk virtually about her bill to the Lac-Saint-Louis youth council, whose members were also unaware of this notion of environmental racism in the context of the concept of environmental justice.
I would like to talk a little bit about what Bill C-226 proposes.
The bill outlines the components that would be included in a national strategy, such as a study that would include an examination of the link between race, socio-economic status and environmental risk. It also sets out a non-exhaustive list of measures that may be taken to advance environmental justice. These measures would assess, prevent and address environmental racism, including possible amendments to federal laws, policies and programs; compensation for individuals or communities; and the collection of information and statistics related to health outcomes in communities located in proximity to environmental hazards.
This is what it is all about at the end of the day. We want to make sure no one's health is compromised and no one's quality of life is compromised because of who they are and which group they happen to be living in proximity to. It is about quality of life and dignity for all peoples, regardless of background.
The bill would require the minister to table a report setting out the national strategy within two years of the bill receiving royal assent, publish that report on the departmental website, and prepare and table a report on the effectiveness of the strategy every five years. The bill aligns with this government's plan to develop an environmental justice strategy and to examine the link between race, socio-economic status and exposure to environmental risk.
We look forward to working with others toward not only getting this bill passed but also supporting its quick passage through the House of Commons. Supporting quick passage through Parliament is important, as the bill comes at a time of heightened awareness of systemic racism and growing concern for environmental justice among Canadians and around the world. It has become increasingly apparent that environmental benefits and harms are not shared equally among different members of society.
Certain groups and communities, namely indigenous and racialized communities and those with lower socio-economic status, often bear a disproportionate share of environmental burdens, such as environmental pollution and degradation. I think it was mentioned by the member for Repentigny that in some cases those who are disadvantaged by a government decision, at whatever level of government, are not necessarily part of racial group per se, but are actually defined by a lower socio-economic status.
I was reading the other day about an area of Montreal called Goose Village. It no longer exists. It was basically wiped off the map around the time of Expo 67. Goose Village was close to Griffintown in Montreal. It was a poor neighbourhood, but the people had their dignity and their properties were well kept. At the time it was felt by the mayor of Montreal, Jean Drapeau, and his administration that this area, which was close to the site for Expo 67, was a bit of an eyesore for those who would be visiting the city for the world's fair. This was before environmental assessments and before the kind of activism that we see today.
It was decided that this area should be razed, and they said it was because of unhealthy conditions and because public health was not good there. What I read is that when they looked at the report from the public health department of Montreal, it said that it was a well-kept community. It was of low socio-economic status, but it was very well kept. People took pride in their homes and their surroundings. Again, this was not racially motivated. It was using the power of government to suppress the rights of a lower socio-economic group.
That led me to think of the construction of the Ville-Marie Expressway in Montreal. It was not built through the highest-income area, and in this case it did displace a racialized community. It displaced a good portion of the African-Canadian community of Little Burgundy. Today, Little Burgundy is not as whole as it used to be. There is an expressway running through it, and it is at bottom of a hill in Montreal, not at the top of a hill.
This is a very historic community. Oscar Peterson came from that community. The Union United Church is in that community. Jackie Robinson, when he played for the Montreal Royals, went to the Union Church. It has a deep history. There is film footage of housing being torn down to build the expressway. It was not an exclusively Black neighbourhood, but it was a poor neighbourhood.
This makes us think that we need an approach to looking at how we make decisions that makes sure we do not have these implicit biases in the kinds of decisions that governments make. Environmental justice is a step forward for our society. It means that we are getting better at recognizing people's interests, dignity and quality of life, regardless of their background, socio-economic status or race, and that decisions need to be proper.
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