https://www.youtube.com/watch?v=ITaCe71si34
Freeland warns of ‘difficult days ahead' as economy slows | At Issue
Freeland warns of 'difficult days ahead' as Canada's economy shows sign of weakness
Finance minister says rising interest rates will cool economy, drive up unemployment
The Bank of Canada's recent rate hikes to tame sky-high inflation will increase borrowing costs for businesses and consumers alike, which will send shockwaves throughout the economy, Freeland said.
Speaking at an auto industry conference in Windsor, Ont., Freeland said she would be honest with Canadians about the roadblocks that lie ahead and the threat of higher unemployment and mortgage rates — developments that could hurt many households.
"Our economy will slow. There will be people whose mortgage rates will rise. Businesses will no longer be booming. Our unemployment rate will no longer be at its record low. That's going to be the case in Canada. That will be the case in the U.S. and that will be the case in economies big and small around the world," Freeland said.
"There are still some difficult days ahead for Canada's economy. To say otherwise would be misleading."
The Bank of Canada — like other central banks, including the U.S. Federal Reserve — has been aggressively raising rates this year to establish price stability and achieve its 2 per cent inflation target.
There's a long way to go. Statistics Canada reported Wednesday that the Consumer Price Index (CPI) rose 6.9 per cent on a year-over-year basis in September — marginally lower than the 7 per cent increase reported the month before.
WATCH: 'Our economy will slow' — Freeland discusses latest inflation numbers
With inflation so sticky, economists are expecting more rate hikes to reduce demand and cool the economy. That could prompt a recession sometime in 2023.
While inflation has slowed somewhat in recent months as energy prices have stabilized, Freeland said the government will not be able to help everyone ride the inflationary wave.
"We cannot compensate every single Canadian for all of the costs of inflation driven by a global pandemic and Putin's invasion of Ukraine," Freeland said.
But she promised relief for the poorest Canadians who are most vulnerable to sudden spikes in the cost of food and rent.
Freeland pointed to the passage of Bill C-30, government legislation to temporarily double the GST credit paid to low-income households.
Government estimates say this bill will give eligible people without children an extra $234 this year, while couples with two children will receive an extra $467 to offset rising costs.
Another bill before the House of Commons, C-31, would provide rent relief and send cheques to parents to cover the cost of their children's dental coverage.
Freeland said social programs like employment insurance (EI) will be available to help people who lose their jobs in the coming economic disruption.
Conservative Leader Pierre Poilievre has been tying inflation to the federal government's pandemic-era spending. (Sean Kilpatrick/The Canadian Press)
Critics, including Conservative Leader Pierre Poilievre, maintain it wasn't just pandemic-related supply chain disruptions or a war that caused inflation to spike here at home — that eye-popping government spending in response to the pandemic is also to blame.
During question period in the House of Commons on Wednesday, Poilievre said the federal Liberal government's "half-trillion dollar inflationary deficits" over the past two fiscal years are responsible for the higher costs.
Pointing to the planned low-income supports, Poilievre said the prime minister has done "nothing for the vast majority of struggling families."
"Even the small minority who do [receive the supports] will find it gobbled up by increased inflation," he said, citing a recent RBC Royal Bank report that found the average family will lose $3,000 in purchasing power this year as a result of higher prices and interest rates.
He called on the government to scrap planned hikes to the federal carbon levy — something Poilievre has called a "triple, triple, triple tax" that will drive food prices higher because it will impose added costs on all parts of the supply chain.
WATCH | Is a recession in Canada inevitable?
Trudeau defended the climate initiative, saying much of the money collected through the federal carbon tax is rebated. He said Conservatives can't be trusted on inflation relief because they oppose rental support and dental care for kids.
In the face of Tory criticism, Freeland said the federal government will continue to tighten its belt in the coming months so that Ottawa doesn't inadvertently drive inflation.
"Canadians are cutting back on costs and so too is our government. That's our part ... to not make inflation worse and more enduring," she said.
Asked later by reporters if the government has more inflation relief planned, Freeland said now is a time for fiscal restraint.
She said flooding the country with government support — like the emergency relief benefits Ottawa sent out during the worst of the pandemic — would be like "pouring fuel on the inflationary flames and we'd just make the Bank of Canada's job harder and inflation last longer."
With more stimulus money in circulation, there would be more demand for a limited supply of goods and services — which would only push prices higher and prompt yet another inflation fight, Freeland said.
"We're charting a balanced economic path. We're acting compassionately but we're very careful that our measures are targeted," she said. "We want to get past this inflation as soon as we can."
Freeland said Canada will deal with a slumping economy through a "muscular industrial policy" that will encourage companies to invest more in Canada. The government's last budget tabled in April included a $15 billion "Canada Growth Fund," a pool of money to stimulate growth in low-carbon industries and help with the country's transition to net-zero emissions.
The federal government has enjoyed some recent success in attracting major foreign investments in some economic sectors, notably electric vehicle manufacturing and critical minerals mining. Freeland said she wants to see more of that.
"We have a historic opportunity just in front of us to build an economy that will deliver great jobs and prosperity for generations to come," Freeland said.
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'Freeland Doctrine' could set the world on a path to a new trade cold war
Supporters of a trade bloc of democracies must prepare for an unwelcome reaction
But as Freeland announced that we must abandon the optimism that post-communist countries would gradually turn into healthy democracies and good global citizens, some critics were warning that she was helping to widen a new great divide in trade and politics that may not be as favourable to Canada as the original Cold War.
In a speech to the Brookings Institution on Oct. 11 that is still making waves around the world, called variously — though not by her — a "manifesto" or the "Freeland Doctrine," the deputy PM and finance minister laid out groundwork for a new global trade regime.
Stop supporting autocracies
Using Russia's Feb. 24 invasion of Ukraine as a jumping-off point, Freeland's proposition — titled How Democracies Can Shape a Changed Global Economy (well worth a listen on the Brookings website) — insists that we should stop supporting autocracies such as Russia and China and focus on trade and investment in the countries of our democratic allies.
Parts of the idea — including the "friend-shoring" proposed by U.S. Treasury Secretary Janet Yellen as a solution to supply chain problems — are not entirely new. But in an impassioned and rational presentation to a collection of global policy wonks, Freeland sketched a blueprint for how Canada and its allies must respond to the world's latest crop of autocrats.
This week, Freeland is following up her Washington talk with speeches across Canada, the first on Monday in Gatineau, Que., expanding on how her global plan will affect Canadian workers and livelihoods as inflation lingers and the world appears to be heading into recession.
While many trade experts have warned in the past that pulling away from Western dependence on Chinese manufacturing and Russian energy will create economic pain, Freeland said it is also a rare chance for a departure from the status quo.
"This change represents an economic opportunity for Canada," she told employees at a Quebec plant making green hydrogen from electricity. "An opportunity which only occurs once per generation."
She warned that brewing inflation means the federal government cannot bail out everyone the way it did during the COVID-19 economic collapse. But by investing in Canada and promoting investment by our democratic trade partners, governments can help restart the West's technology and industrial engines, she said.
Nokia, not Huawei
As if a demonstration of Freeland's new push, on the same day she spoke, federal and provincial governments announced a new investment in research and development in Ottawa's Silicon Valley North with Nokia — a company from Finland that is a democracy and prospective NATO member on the frontier with Vladimir Putin's autocratic Russia. Canada used to have similar deals with China's Huawei.
"We can ensure that our economy prospers for generations to come," Freeland said in what could have been a hustings speech. "This is the future we can create for ourselves and our children."
Political grandstanding aside, the three pillars of Freeland's manifesto — trading with our friends, being inclusive of like-minded governments and breaking with the autocrats — really does represent a new paradigm after decades of globalization.
After the end of the Cold War, American scholar Francis Fukuyama — apparently "Frank" to Freeland, who rang him up beforehand to discuss her Washington speech — proposed "the end of history," the concept that once the postwar rivalry of communism and capitalism had ended in the collapse of the Soviet Union, the world was on a single path toward growing liberal democracy and rules-based trade.
A
firefighter works in a residential building destroyed by a Russian
drone strike on Monday. Freeland described Russian attacks on Ukraine as
'naked evil.' (Roman Petushkov/Reuters)
But what Freeland called the "naked evil" of Russia's action in Ukraine and the growth of autocracy in China, where this week Xi Jinping appears to have become president-for-life, means the world must wake up from the dream of global co-operation, universal democracy and rules-based trade.
But deciding it is now time to give up on good trade relations with Russia and China may have other consequences.
A more powerful Comecon?
Evidence of how quickly the world has forgotten the global divisions of the past — before perestroika and glasnost and the collapse of the Berlin Wall — came in a recent online search for Comecon and Canada. Instead of offering details of Canada's relationship with the Eastern Bloc's Council for Mutual Economic Assistance, the search offered a long list of happenings for Comicon, those "fan expo" events where people dress up as fuzzy creatures and superheros.
Only decades ago, Comecon was a formidable economic counterpart to the market forces of the capitalist West, just as the Warsaw Pact was the counterpart to NATO.
Already crumbling, Comecon disintegrated in 1991 as market reforms and the new opening to the West gave Russia, its former allies and its satellites access to the tools of capitalism. But Radhika Desai, a professor at the University of Manitoba in Winnipeg who specializes in international political economy, says the modern equivalent may be no pushover.
"If China and Russia are able to achieve a really coherent collaboration, which I think is happening more and more ... I think they are going to create a really dynamic duo," Desai said on the phone this week.
"China has shown that it is not just a low-cost producer, but it can also take the lead in technology."
Desai is concerned that a tighter alliance of Canada with the United States and Britain could lead to an increase in the power of corporations and the loss of clout by workers and citizens, as parties in democratic states find ways to co-opt poorer voters who feel they have been left behind.
Chinese
President Xi Jinping attends the opening ceremony of the 20th National
Congress of the Communist Party of China, in Beijing on Sunday. He was
given a third term in office, which many observers say means he will be
China's president-for-life. (Thomas Peter/Reuters)
But whether all of her democratic allies and their eventual political replacements will agree, Freeland offered a stunning condemnation of globalization and the cheap labour in places like China that has added to the profits of many global companies.
"Workers in our democracies have long understood that global trade without values-based rules to govern it made our people poorer and our countries more vulnerable," she said. "They have long known that it enriched the plutocrats but not the people."
Freeland said the world's democracies must have confidence that their system, one where governments change and people have the right to criticize their leaders, has what it takes to defeat economies based on coercion and to demonstrate to developing countries — once more forced to choose sides — that liberal democracy works.
And just as in the days of Comecon and the Warsaw Pact, there are already signs a Eurasian alliance may be acting to convince the undecided that autocracies can also work, building the groundwork for competition between two new economic — and military — paradigms and power blocs.
Maybe the "end of history" has been postponed.
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