CIIA Toronto - Past Events

Event Summary:

Bernard Wolf, Pierre Lassonde Chair in International Business and Professor of Economics and International Business at the Schulich School of Business, York University, & Jim Stanford, Chief Economist, Canadian Auto Workers

19 February, 2008
McMillan Binch Mendelsohn, Toronto

Summary by
Fardin Chadorshabchi
Criminology Student (York University)
Although a very cold noon in Toronto, the frozen Lake Ontario looked magnificent from the host offices of McMillan Binch Mendelsohn at BCE Place. The Canadian International Institute was holding this luncheon for an exclusive Panel discussion presented by Bernard Wolf, Pierre Lassonde Chair in International Business and Professor of Economics and International Business at the Schulich School of Business, York University, & Jim Stanford, Chief Economist with the Canadian Auto Workers, 44 storeys above the busy Downtown Toronto streets. The Panel set out to presage whether the New Year would be the year of the Rat or the Bear. The two economists, after being introduced by Renee van Kessel, member of the Executive Committee of CIC Toronto Branch, not only began their individual accounts of the Canadian and the Global economy, but also embarked on frequent debates on diverging economic viewpoints.

Jim Stanford, CAW chief economist who has also recently been appointed one of the two Vice-Chairs of Ontario’s first Manufacturing Council by the McGuinty government focused more on the restructuring Canadian economy in the global milieu. He purported that Canada has developed a resource-reliant economy by increasingly exporting these resources. This reliance, he went on to say, poses a risk in the long term. One of the leading causes of this, he explained, is the reallocation of real production towards minerals due to the global commodity boom, paired with good Canadian mineral industries. Moreover, Stanford asserted that Dollar’s assent reflects the corporate financial effects of the mineral boom. Yet, this has led to the decline in other industries while making the resource-based industries the only survivable ones. Having said that however, Jim Stanford illuminated that “the mineral boom supports the strong overall macro-conditions” such as investments.

Bearing in mind the topic of the Panel discussion, the question arose, “how long?” In answering that question, Stanford provided the leading factors in the deceleration of industries other than the resource-based ones, such as the auto industry. He presented that the increasing price of Loonie has instigated a structural revolution in Canada, which provokes challenges such as higher unemployment. The Canadian Dollar is too expensive and therefore capital is being put into non-private services. This also has a ripple effect of poorly paid jobs within the private sector, as businesses divert from reinvesting. The impact of “mega-takeovers” has also created shocking net FDI reversals. The higher Dollar, Stanford went on to say, squeezes anything into exports, including services.

Nevertheless, Stanford suggested a few solutions in prolonging growth in the resource-based industries, as well as triggering growth in other sectors. These solutions included actively managing the economy by cutting interest rates, deliberately slowing down resource production (more taxes), and slowing down takeovers. “Don’t let things just happen.”

“Let China sleep, for when she wakes the world will shake.” Bernie Wolf’s Napoleon quotation indicated the framework of his discussion. Wolf paid more attention to the evolving economic superpowers such as China and their influence on the Canadian economy. In comparing this rapidly growing nation with Canada, Wolf emphasized on infrastructure. He illustrated that one of the main reasons of growth in China is their focus on infrastructure, whereas Canada has always undermined infrastructure and redevelopment. Accordingly, as part of the economists’ recurring debates, Wolf disagreed with Stanford’s suggestion of cutting GST. Instead he proposed that higher taxes could be injected into roads, schools and airports. In addition, he stressed that it would be a mistake to move into protectionism as he referred to the 1930’s crisis. Aside from the enormous increase on Chinese infrastructure, he predicted that the Chinese economy will slow down given the current sub-prime mortgage disaster in the US. In closing, Wolf typified the current situation in the US to the world at large by indicating that there is a growing increase in world liquidity as the banks lend out and do not consider the impeding risks!

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