Volume Ten, Number One   January 2005   www.columbiajournal.ca

BC’s economy still lagging, despite Outlandish Claims

Marco Procaccini

Despite a recent media advertising blitz by the Liberal government and business elite claiming BC is leading the country in economic recovery and job creation, the province’s economy continues to stagnate as wage rates fall and the consumer-price index widens, according to Statistics Canada reports.

Statscan also says while consumer spending, which dropped substantially in 2003, has improved slightly since the beginning of the year, it is minimal and the economy remains overall stagnant. It also reports that overall consumer savings in BC have now dropped to the lowest in the country. The consumer price index, the measure of consumer spending power relative to prices, widened again over the summer.

Also, it reports that the average wage rate in BC has fallen to the $16 an hour $17.80 an hour reported in 2000. That was just behind Alberta, which averaged $18.04 an hour. Statscan says while unemployment has dropped marginally to a seasonally adjusted rate of 6.9 per cent, the average yearly rate has remained above 7.4 per cent—well above the average during the five years prior to the liberals’ election to office.

According to a Canadian Center for Policy Alternatives study, declining capital spending a as portion of the Gross Domestic Product, the supposed saviour of the BC Liberals, is lower now than at any time during the tenure of the NDP government.

BC Federation of Labour President Jim Sinclair  says working people are the primary motivators of the economy and job creation through their constant investment of consumer dollars in the marketplace. He adds that moves by the BC Liberals to cut services and jobs, raises taxes and user fees on workers and building the new BC Ferries vessels off shore all contribute to higher jobless rates and lower consumer spending.

"Working people know that relying on a "Visa" economy is no way to rebuild our province's economic footing," Sinclair said, pointing out that average weekly wage rates for the first quarter of 2004 had decreased when compared to 2003. "Real spending power is on the decline. That’s what happens when you take money out of working people’s pockets by cutting wages, laying people off and cutting vital social services like health care and education."

In 2003, BC's personal savings rate as a percentage of disposable income was the worst in the country at negative 8.2 percent, he said.

Construction and real estate remain highly active due to prolonged low interest rates. But most of this activity remains confined to the lower mainland and southern Vancouver Island.

But both Sinclair and numerous economists warn that much of this is based on heavy borrowing of money, due to the decline in consumer savings and spending power.

“People aren’t buying houses because they have more money,” said David Fairey, senior economist and director of the Vancouver-based Trade Union Research Bureau, in a recent interview. “Rather they are taking advantage of the lower interest rate to buy homes now before they go up again.”

Fairey says it is no coincidence that increasing housing sales and residential construction across the country, and especially in BC, are accompanied by skyrocketing consumer debt loads due to mortgages. “Personal consumer debt is at an all-time high,” he said. “People are trying to buy houses and condominiums with less money in their pockets. Right now, lending institutions are happy to accommodate this because of the low interest rates of the Bank of Canada. That will change when they start to rise again.”

He added consumer desperation is the main cause of the buying spurt, as people try to take advantage of the low interest rates and resulting favourable mortgages to buy a home before they go up again, putting home ownership out of reach once more.

Sinclair highlighted increasing energy costs and BC's growing trade deficit as issues that needed immediate attention if BC is to achieve any real, sustained economic growth. Sinclair also commented on the BC Liberal's failing privatization strategy, calling it a sad effort to attract private investment to our province.

In spite of declining capital investment and consumer spending, along with rising unemployment, since the Liberals took office, Premier Gordon Campbell says the overall economy remains strong and things are looking up.

“We have a strong economy and a healthy investment climate,” he said in the September release of the New Era in Review. “We have set rules in place to streamline development projects…and our tax cuts have given consumers more money to invest in our economy.”

The government is celebrating its legacy of reducing  human rights and environmental standards and overriding of municipal powers as “as cutting red tape,” “increasing workplace flexibility” and “creating investment opportunities.”

Sinclair renewed his call for a summit on the economy that includes input from labour, small business, municipalities and community organizations. This demand has been accompanied by NDP leader Carole James’ call for an opening up of the government to a wide range of public input and idea on economic improvement.

But Campbell says the government’s progress board, made up exclusively of executives and senior bureaucrats of large corporations and elite investment agencies, is sufficient in assessing the state of the economy. Labour or community participation is not required.

The premier insists that the provincial government’s 2004-05 budget is balanced and will produce a substantial surplus of up to $1 billion, but Lee says the Liberals are relying on higher global commodity prices, especially for oil and natural gas and the fact the federal government is now putting money back into provincial transfer payments, especially for health care.

“In the 1990s, the provincial government had to deal with low commodity prices, higher interest rates and huge federal funding cuts, and it still managed to balance the budget (without the huge cuts of the BC Liberals),” he said. “Now it’s the other way around, the (BC Liberal) government is still cutting.”