SIX STEWARDS OF CANADA’S ECONOMY — HISTORY BY THE NUMBERS FAVOURS MULRONEY AND CHRÉTIEN, WHILE TRUDEAU LEAVES A LEGACY OF DEFICITS AND DEBT Michael Hart and Bill Dymond Assessing the economic legacy of the six full-term prime ministers of the last half-century is easier done than said. In economic rankings, statistics are more than empirical data, they are objective evidence. Numbers talk. The authors focus on three main criteria: Canada’s performance as a trading nation during each PM’s tenure; the fiscal state of the country at the beginning and end of his time in office; and the “misery index” of inflation, unemployment, exchange rates and economic growth. They conclude that Brian Mulroney, left an economic mess by Pierre Trudeau, had the most challenging economic context of any of the six major prime ministers of the last 50 years, and did the most to improve it. Jean Chrétien also receives high marks for having the good sense to leave free trade and the GST in place, and for having the political courage to rid Canada of its crushing legacy of deficits. Lester Pearson and Louis St-Laurent guided the country through boom times, while John Diefenbaker’s vision did not translate into a good economic performance. Trudeau receives the worst economic scorecard from the authors, both former senior economic officials and authorities on international trade. Évaluer l’héritage économique de six premiers ministres n’est pas une mince affaire. Dans un classement, les statistiques ne sont pas que de simples données empiriques, elles deviennent de véritables preuves objectives; les chiffres parlent. Sur la base du bilan commercial du Canada pendant le mandat de chaque premier ministre ; de l’état des finances du pays au début et à la fin de chacun de leur mandat ; et de « l’indice de misère », combinant inflation, chômage, taux de change et croissance, Michael Hart et Bill Dymond ont accepté de relever ce défi. D’après ces critères, c’est Brian Mulroney qui a hérité de la conjoncture économique la plus difficile, vu l’état désastreux dans lequel Pierre Elliott Trudeau avait laissé les finances publiques, et c’est lui qui a le plus accompli pour améliorer les choses. Jean Chrétien a également reçu d’excellentes notes pour avoir eu la sagesse de maintenir le libre-échange et la TPS, et le courage politique d’en finir avec nos déficits endémiques. Lester B. Pearson et Louis Saint-Laurent ont gouverné en des temps de forte expansion, tandis que John Diefenbaker a échoué à traduire sa vision en une performance économique digne de ce nom. C’est enfin à Pierre Elliott Trudeau que revient la palme du pire bilan économique. ow well did Canada’s most recent major prime and Pearson, and consider it too early to assess Chrétien. ministers do as stewards of Canada’s economic The man in the street would also be wrong. H welfare? What criteria would be appropriate for More than for other prime ministerial legacies, their making such an assessment? The man in the street’s gut feel- economic ones rely on objective criteria. As a relatively ings, fed by popular media perceptions, might be to praise open economy, for example, Canada’s performance as a Trudeau, bury Mulroney, forget St-Laurent, Diefenbaker, trading nation can provide useful insight into a govern- 30 OPTIONS POLITIQUES JUIN-JUILLET 2003 Six stewards of Canada’s economy ment’s economic stewardship. Equally, anced budgets, low inflation, and had begun to enjoy a high and rising the fiscal state of the country at the politically acceptable levels of cyclical standard of living and an increasing beginning and conclusion of a prime unemployment. The overall impact range of government services. For the minister’s period in office can be an was a steady improvement in Canada’s first time in Canadian history, the important indicator. Then there is the economic prospects, a reality well cap- growth in the economy — output rose misery index of inflation and unem- tured by the Final Report of the Royal 64 percent between 1944 and 1957 — ployment levels, as well as such data as Commission on Canada’s Economic had come largely from domestic exchange rates, economic growth, and Prospects in 1958. demand. New investment had risen interest rates. This article focuses on 249 percent while government capital the first three criteria as the major ot everyone agreed that the St- spending during this period had risen pointers to the stewardship of the gov- N Laurent Liberals delivered the by 776 percent. Domestic demand out- ernments of the six most recent full- best possible policy to pursue Canada’s paced foreign demand to the point that term prime ministers, and throws in a economic development. Tory national- exports steadily declined as a percent- few of the other factors where they are ists disliked the individualism of clas- age of GNP. The economy had become helpful in fixing praise or blame. sical liberalism and the continentalism more diversified and capable of provid- When the young Princess that flowed from Canada’s geography. ing Canadians with a growing array of Elizabeth ascended to the throne in They preferred the ties of history, goods and services and with high- 1952, and at the time of her corona- Empire, and sentiment to those of paying jobs. Canada had become more tion in June 1953, her Canadian geography, technology, and economic urbanized and the quality of life, at dominion was firmly under the man- interests. Economic nationalists simi- least materially, had improved with it. agement of the Liberal Party, with larly deplored the US connection be- Canadians could look with satisfaction Louis St-Laurent serving as its manag- cause it tied Canada into the world’s at a government that had delivered the ing director, having taken over the pre-eminent capitalist economy and prosperity it had promised. Looking reins of power upon the retirement of undermined Canada’s ability to act back from the perspective of 2003, we Mackenzie King in 1948. His hold on independently. What they wanted was can appreciate even more the benefits power had been confirmed in the gen- a Canada that could pursue its own Canadians had derived from the mana- eral election of 1949 and would be destiny, often defined as anything but gerial competence of St-Laurent and extended for a further mandate in that of the United States. his colleagues, setting a standard that 1953. This final phase of the long These concerns, however, engaged his successors would find difficult to Liberal hegemony was by 1953 in its only a few. By the middle of the match, let alone surpass. ninteenth year, dating back to 1935. decade, most Canadians had many But political success requires more St-Laurent’s core team consisted of good reasons to be satisfied. Canadians than managerial competence. By the veterans like himself, Douglas Abbott at Finance, Jimmy Gardiner at Agriculture, and the minister of every- CANADA: EXPORTS OF GOODS AND SERVICES thing, C.D. Howe, at Trade and 50 Commerce and Defence Production. It 45 had been enriched by the addition of Lester Pearson at External Affairs. 40 Together, they offered sound, smooth, 35 predictable, and pragmatic gover- nance, carefully matching their own 30 preferences to those of the popular 25 will, broadly considered. of GDP Percent 20 On the trade front, St-Laurent and his ministers and officials expended 15 considerable effort to find the most 10 realistic and workable trade regime, one that opened markets for Canadian 5 agriculture and resource producers but 0 1960 1966 1972 1950 1962 1964 1954 1956 1958 1968 1970 1978 1988 1990 2000 1948 1974 1976 1980 1982 1984 1986 1992 1994 1996 1998 2002 that protected the vulnerable 1952 Canadian manufacturing sector. Their St-Laurent Diefenbaker Pearson Trudeau (Clark) Mulroney Chrétien approach to fiscal policy was similarly Total To USA To Others cautious and pragmatic and brought Source: Statistics Canada, Canada’s International Balance of Payments and unspectacular but positive results: bal- National Income and Expenditure Accounts. POLICY OPTIONS 31 JUNE-JULY 2003 Michael Hart and Bill Dymond mid-1950s there seemed sufficient dis- either Diefenbaker’s anglophilia capital and a precipitous reduction in content to sweep the Grits from office N nor his anti-Americanism, for Canada’s reserve position. and install a minority Tory govern- example, translated into constructive On other economic factors, ment under their new leader, John policies. He had never been shy about Diefenbaker’s record is equally trouble- Diefenbaker, bringing to an end a gov- his dislike of the Americans as a some. While inflation remained low, ernment that had served Canada well nation. Once in office, however, there unemployment increased, aggregate but had become somewhat tired and was continued rhetoric but little seri- growth rates stagnated and the burden of arrogant in the process. In 22 years, ous effort to reduce Canadian depend- government spending increased, as did the Liberals had at one time or anoth- ence on the US market or to reduce US taxes. On the trade front, Diefenbaker er offended a lot of groups, from investment in Canada. Diefenbaker’s exacerbated a number of Canada-US files wheat farmers to anglophiles. Could ministers used the occasion of the first (e.g., the extraterritorial application of US Diefenbaker and his ministers respond meeting of the Joint Canada-US law), missed opportunities at both the to their complaints and do better? Ministerial Committee to express their Dillon Round of GATT negotiations and As it turned out, they could not. desire to try to diversify Canadian in the lead up to the Kennedy Round, In fact, they did worse.