Canada's Choices was written in August 1993 prior to the fall federal election. The purpose of this policy paper which was distributed to all candidates across Canada and many provincial politicians was to encourage thought and provoke debate on how to resolve Canada's debt problem before it truly became a crisis leading to a further devaluation of our dollar and destruction of financial assets in Canada. The accompanying piece "Towards a Third World Canada" was written as a short newspaper article for the regional weekly, The Lachute Watchman, and warned of the looming debt crisis well before the mainstream press. We regret we cannot provide the accompanying charts to the article as they could not be ported to this html document.

The solutions proposed in 1993 are still relevant in 1998 and most importantly, the underlying problem facing the Canadian economy of simply too much government overhead on the private economy still has not been addressed. Canada must address this issue of rebalancing public overheads and it would appear the international markets are telling us so with the most recent declines in our dollar. The dollar devaluation is not a result of external forces such as the "Asian Crisis" as many politicians would like to have us believe. It is directly related to the fact Canada is no longer an attractive place to save and invest because of extortionate levels of taxation and government interference in business.

International currency traders as well as many thinking Canadians have come to the conclusion that Canada cannot raise taxation any further to service an already over leveraged public sector and the Bank of Canada cannot raise interest rates without damaging the economy. The net result is an unattractive currency and it is being sold off. We will all face the ultimate tax of inflation in the coming months as the cost of imports soar and the full implications of this devaluation sink in. The dollar could well be driven substantially lower causing the necessary crisis to force our politicians to act.

Make no mistake Canada is still a great country with perhaps the greatest potential of any country on the earth, but both the federal and provincial treasuries have been plundered for the past 30 years by politicians more interested in buying votes short term than laying a foundation of long term prosperity. We must return to sane and justifiable fiscal management in our nation and only through a re-balancing of the public sector's share of GDP and its demands upon the private sector to generate the revenues to support it can we move forward.

Christopher C. Goodfellow August 1998

Canada's Choices

by Christopher C. Goodfellow B.A., M.B.A.

In March 1991, well before the mainstream press in Canada and assorted politicians had started to raise the alarm on the astounding rate of debt accumulation by governments in Canada, I wrote a short article for a small Quebec weekly paper (The Lachute Watchman) titled "Towards a Third World Canada". In the article, I drew attention to the looming debt crisis and the probable repercussions for Canada, especially on our standard of living and our dollar.

We are now two years further into what has materialized as the most serious economic crisis for Canada since the Great Depression. It is not going away anytime soon and as we look forward to a fall election in 1993, none of the political parties appear to have the policies to deal effectively with the situation. We hear a great deal about reducing the deficit, yet actual details and mechanics on how to reduce it are sorely lacking. While cutbacks in government services and spending controls are taking place and may reduce the deficit somewhat, policy makers are still not facing many of the structural problems confronting Canada's economy, and rhetoric by politicans is long on promises and short on specifics.

Unemployment represents a serious underutilization of human resources. Our mechanisms for dealing with this structural problem are outmoded. Bleeding payroll taxes at ever higher rates from productive workers to pay out unemployment benefits to those that have no hope of re-employment in the present context does not make sense. Why do we have such massive unemployment in a country that has such huge resources? How can we create an investment climate to get money into the economy to put people back to work? I will suggest several solutions in this article that are novel and feasible.

Free trade and trade issues are in the news everyday. Few Canadians really understand, even at the highest policy levels, the impact that our increasingly open economy has had on jobs. While I hold strong beliefs in the benefits of trade and comparative advantage, I will show how we have let the concept of free trade and an open economy to global competition become a mantra that is leading us down a path that continues to eliminate highly paid manufacturing jobs and dooms many Canadians to minimum wage service work and even more destructively dooms thousands to lives on unemployment and welfare.

Few of the present politicians and policy makers stop to think and reflect on Canada's most important comparative advantage. When economists talk of comparative advantage they usually are talking about resources, labour or technology. In fact, Canada is well endowed with all of these traditional advantages but it also has something that no other country can boast of anywhere on the globe. The fact is, Canada is the largest underpopulated country in a world exploding with overpopulation. We have living space. We have a potential for quality of life unequalled anywhere and lest any native born Canadian doubt it, anyone in the third world would give anything to come and live here in peace and plenty. It is time we examined how we can best lever this advantage to our benefit and design our industrial and social policies to maximize this quality of life advantage. I will propose trade solutions so that we are not left naked to the competition from the lowest common denominator of world labour markets.

It is a commendable objective of Prime Minister Campbell to reduce the deficit to zero in five years but has anyone seriously examined the more important problem of the accumulated debt that is now a reality that will be a drag on the economy for years to come. How do we deal with it? It's very existence will impact our interest rate structure for years to come even if we balance our budget. Last year fully one third of every dollar collected by the federal government went to pay debt service-$39 billion of total revenues of $120 billion. Even if the deficit is eliminated through lower government expenditures, this existing debt service requirement will take an even greater share of federal revenues when government is restructured. I will propose several novel ways of eliminating this debt.

I am writing this current paper with the intention that it is not for a business or an academic readership, but for all Canadians of all walks of life to read, so that they may understand the depth of the crisis facing the country and the possible solutions I propose. I would particularly urge media representatives to question why some of these practical proposals have not already been implemented. Occasionally you read government press reports about the monthly deficit or the monthly trade figures in your local newspaper. This is filtered data and very often you cannot get a feel for the true picture and developping trends because you do not have the data in a time frame long enough to identify problems and trends. I have included as part of the index over ten years of data on federal government revenues and expenses. This raw data will be used in generating tables and graphs in this article but it is there for you, the reader, to peruse at your leisure. If you ever wanted a lesson in pure financial mismanagement it is there for one and all to see. After the Pearson years, which left our federal government with almost no debt and a budget surplus, our leaders embarked on a spending frenzy that may never be seen again. Keep in mind that the perceived wealth and increase in your standard of living was largely financed by this debt. It is now over. The proverbial jig is up. The average Canadian will not feel prosperous for a long time. What was twenty years in the making will not be repaired in five. It may take ten or even more depending on how hard Canadians really want to work and how fast we change our attitudes towards what the role of government is. The global competition is tougher and wealth creation is more difficult in the face of this competition. The single most important thing to keep in mind as you read through this article is that we are all in this together and it will only be through co-operative efforts that we will work our way out of this situation. Those of you who have lived off government programs when you really did not have to, obtained grants when you didn't need them, or overbilled for fat management or legal services, you have only fooled yourselves. We all owe. We will all pay.

Throughout history most human progress has been attained by constant questioning of the conventional wisdom. Much of what I propose is a challenge to the status quo and very powerful interest groups. This is not a book of new age philosophy with impractical solutions. A lot of what I propose is just good old fashioned common sense and the solutions are realistic. I suggest you now start by reading "Towards a Third World Canada" in Apendix A.

Chapter 2