There’s been a lot of talk recently about the Canadian dollar. Hard to imagine for anyone who grew up in the mid-late 1990s and early 2000s when the Canadian dollar was often derided as a local embarrassment. Austerity wasn’t thrown around as much back then, but the global and local economic situation that so defined the early years of the Chretien administration necessitated major federal spending cut backs. Military spending and manpower was very quickly and dramatically slashed, as were transfer payments intended for healthcare, social services and education. The Provinces, after the failed Meech Lake and Charlottetown Accords, were keen to flex some muscle, with various governments claiming they would bring about better local conditions as a rejection to the perceived forced federalism of previous governments. Many provincial governments reacted poorly. In Québec, the combination of federal austerity and failed constitutional talks, in conjunction with a variety of other social factors, led to the 1995 Referendum. The more things change…
In any event, thankfully by the late-1990s the nation was still whole and the economy was beginning to improve after the global shock caused by the end of the Cold War. Currency, market, corporate and banking regulations were in full effect (remember when the Big Five wanted to become the Big Two?) and the dollar was manipulated to be lower than the American dollar so as to make Canadian manufactured goods less expensive. Today a lot of the regulatory power remains in place and in effect, though some believe there may be cracks in the facade, pointing to corruption in the construction industry, a possible residential housing bubble in much of the country and strikes at some of the country’s most vital corporations. Regardless, speculation aside, the Canadian economy is robust, appears to be growing and the dollar is so strong other countries want to start using it. And if it’s advantageous for Iceland, how many other nations might also benefit from the insurance of using the Canadian dollar as their currency as well? A strong dollar is the result of a largely resource-based economy in which the resources are highly valued. For the time being, our tar-sands are providing for our wealth, stability and international economic stability. But for how much longer? The danger isn’t so much that we’ll run out too soon (because we can always place production caps) but that someone else is going to make a major find, flood international markets with a cheap new source of petroleum and render our extraction process prohibitively expensive. For how long can we guarantee a high dollar value with a resource-driven economy?
There’s been talk recently about possibly purposely undervaluing our currency so as to increase the number of manufacturing jobs and get Canada back into an industry-oriented economy. The idea here is that providing many more manufacturing and heavy industry jobs will be advantageous given the spin-off funding for scientific research and development, not to mention that it could potentially increase the size, economic power and quality of life of the middle-class. The downside here is that pushing industrial development often requires a lot of federal government involvement and provides long-term economic stability at the expense of brief though potentially meteoric gain and growth. It’s a conundrum, what can I say?
But on a final thought, I must say that while I consider the penny to be useless and worth scrapping, I lament that we haven’t attempted price controls. It seems to me that $20 buys you about as much today as it did ten years ago, and in both cases it’s not much. And it’s odd that $20 American dollars can still buy more despite their dollar having lost a lot of its value, their economy being in far worse shape than our own and our dollar having been stable and near parity, consistently, for what seems to be at least a few years now.
So why am I still paying several dollars more for a book or magazine? Why is a decent cup of coffee $2.50 in most places and how is it that $40 only fills half the tank of my compact Japanese sedan when Canada’s economy is supposedly in the best shape its been in thirty years?
A conundrum I say.