The economic cost of forcing nearly 3.3 million Canadians into unemployment by May 2020 is enormous and has yet to be tallied in full. While individuals and companies were able to receive some form of help from their governments, many businesses will not be able to rebound from their losses and many who do will not long survive.
The corrupting effect of subsidy is also being felt outside of the economic sphere, with many now pushing for the lockdown to continue, either because they live in fear of being infected by the virus or because the subsidies have made it more desirable to remain home than to work. As Félix Leclerc wrote in the 1950s: “The best way to kill a man is to pay him to do nothing.”
By March 2020, the Canadian economy had shrunk 7.2 percent, but the pandemic shutdowns did not begin until the middle of the month. April saw the economy contract by 11.6 percent, the deepest drop on record. About one-third of the workforce remains under-utilized by the fall 2020, either as a result of the highest unemployment since the 2009 recession, or as a result of roughly a million individuals ceasing to look for work.
Across most of the private sector, economic activity shrunk in record amounts. In March, manufacturing fell 22.5 percent, construction fell 22.9 percent, retail and hospitality fell 42 percent, and transportation fell a shocking 93.7 percent. In Atlantic Canada, for example, the governments of Newfoundland and Labrador, Prince Edward Island, Nova Scotia, and New Brunswick have opted for establishing a regional “bubble.” The rules allow for interregional travel but make it difficult for people “from away” to enter and exit. As a result, airports lost 92 percent of their summer traffic. The bubble decision caused the region to lose over five million visitors, forgoing the better part of $140 million in revenue for their airports. Figures for Canada show that between April and June, the annualized GDP dropped by 38.7 percent. By the summer, the deficit was 16 percent of GDP, the largest in the G7.
Government subsidies to individuals and businesses constitute the kind of help that hurts. It hurts people psychologically and economically, but the monetary subsidies most people received fell short of their effective losses, both for businesses and for individuals. These losses, again, were policy-induced, and their direct effects will be felt for years to come. Moreover, the government of Canada paid its citizens directly, whereas the Americans relied on businesses to channel money to citizens, which had the effect of maintaining the monetary link between businesses and employees. The difference was significant inasmuch as simple direct payments to Canadian citizens were offset by complex payment deferrals and loans to companies.
Philip Cross suggested the approach chosen expressed the typical suspicion of recent Liberal governments towards business in Canada. This obviously contrasted with the American attitude, but more importantly, it ensured that the reopening of the Canadian economy would take longer and would be accompanied by much greater hesitation than in the United States. The Conference Board of Canada came to a related conclusion about the state of the economy: “What we’ve come to realize is the economy will be operating well below (pre-pandemic) levels” for some time. In short, things are worse than originally expected. In addition, the massive debt that the provinces and federal government have taken on as a result of the decision to lock down will weigh heavy over the next couple of generations.
No expression could better describe the disconnect between the dire effects of policy decisions and the economic realities Canadians will have to face in the future than the prime minister’s belief that his government had relieved the burdens of economic responsibility from Canadian citizens; he declared that his government had taken on massive debt so that Canadians would not have to. Let us be frank: this is absurd.
In Alberta, where the authors live, and where a recession already was in place (in 2019, the Alberta economy contracted by 0.6 percent when the average growth in the country was 1.7 percent), the anticipated COVID-19 effects promise to be devastating.
Making matters worse, Alberta’s economy has been at the receiving end of two critical blows before and during the pandemic. A market glut of oil produced by a price war between Russia and Saudi Arabia reduced prices to levels that sent Canadian oil producers into massive cash-crunches, prompting new rounds of job losses to the province. In addition, as is well known, Alberta has been besieged for years by a federal policy embargo against development of its hydrocarbon resources. The province has for some time been economically choked by the Canadian government’s application of impossible standards to projects that would never be imposed on other industries — and in some cases, are not even imposed to the same or similar industries in other provinces.
Simultaneously, Ottawa, having been encouraged by eco-radicals and less-than-friendly sister provinces, has blocked efforts both to the east and west to build more capacity to send Alberta resources to market. Alberta then received Edmonton’s orders to lock down on March 17, 2020, adding an extra layer to further cripple its economic activity.
Robert Roach, Alberta Treasury Branch’s director of economics and research, noted that things in Alberta are currently in a “brutal” situation, pointing out that “this is going to be a year of deep recession.” The depth of the brutality Roach described in June is the result of the confluence of these economic and political hurdles facing the province. By mid-September, the situation in the province continued to deteriorate because of the consequences of the lockdown, which were more severe than in the rest of the country. “The lingering effect of COVID-19 continues to be felt harder in Alberta,” writes veteran Alberta journalist Bill Kaufmann, “with 53 percent of residents’ financial lives still disrupted,” whereas the equivalent figure for the rest of the country is 10 points lower. Similarly, 20 percent of Albertans are struggling with reduced work hours, where the equivalent is 15 percent in the rest of the country.
