How Campbell Tied His Own Hands as Economy Plummeted

There have been a number of "good grief" moments in this election. One was Gordon Campbell's statement, while accepting the solicitor general's resignation, that it is important "for all of us" to set a good example while driving. But that was nothing compared to the Liberals' boasting in their platform that because of their policies, B.C. is in now in "much better shape than most other places" to weather the economic storm.

As The Tyee has reported, the most recent data tell a different story.

Follow these links to Stats Canada and find how BC has outdone every other province in a number of categories: the largest jump last year in EI recipients; the largest drop in jobs -- 22,600 -- in the most recent monthly data; the biggest decline last year in manufacturing sales.

The Liberals sum up their economic platform in one, capitalized word: "CONFIDENCE." Explaining government's role in the economy, Gordon Campbell told reporters "You have to ask outsiders what the government is responsible for... We have to set an environment that creates a sense of confidence in the people that are investing in British Columbia."

For the Liberals, making investors confident in B.C. has meant cutting taxes and tying government's hands. They imposed balanced budget legislation so that the provincial government could not play a counter-cyclical role, evening out the downturns in our resource-based, boom-and-bust economy.

They only lifted this constraint temporarily, with an election looming.

Killing development programs

The Liberals had moved quickly in their first term to eliminate a variety of economic development programs put in place either by the NDP or the Socreds, including the Fisheries Renewal Act, the Forest Renewal Act, the Industrial Development Incentive Act, the Natural Resource Community Fund Act, and the Small Business Development Act.

Sometimes the amounts involved were quite minimal, so the motivation behind the cuts appears to have been driven by ideology rather than savings. For example, the Science Council used to give out small start-up grants through the B.C. Technology Fund to entrepreneurs with innovative ideas, one of the first programs the Liberals put on the chopping block.

Tied up by TILMA

In 2006, the Liberals locked in this restriction on the role of government in a pact with Alberta: the Trade, Investment, and Labour Mobility Agreement (TILMA). TILMA is essentially a more extreme version of the NAFTA and WTO agreements, adding more to the list of things governments are not allowed to do. One example of how trade agreements really bite is physically embodied by the abandoned canneries along the B.C. coast. A trade panel ruled in 1989 that Canada's ban on the export of unprocessed salmon and herring was a violation of the first free trade agreement between the U.S. and Canada.

A key provision imposed by TILMA is that government cannot provide either direct or indirect subsidies that "distort investment decisions." You would think there are times when corporate investment decisions need to be distorted. Now, for instance, when corporations have decided not to invest, banks have decided not to lend, and regions are facing extremely high rates of unemployment. Williams Lake, the community suffering the worst jobless increases compared to any other municipality surveyed, has seen the number of its residents on EI go up by 189 per cent in the past year.

But TILMA was signed in secret so the public discussion around the pros and cons of permanently eliminating business subsidies never happened.

As well as prohibiting most kinds of business subsidies, TILMA obligates governments not to place conditions -- such as local hiring -- on investment crossing the B.C./Alberta border.

No more preference for local contractors

And then there's the ban on local preferences in government purchasing. In this election season, community papers are crowing about "local contractors" getting work because of the Liberals' infrastructure spending. But what most people don't know is that under TILMA, government-funded construction projects of any significant size cannot in any way be steered towards local contractors. Again, British Columbians did not get to debate whether or not they might want their municipal and provincial governments to include some kind of preference for local businesses when they buy goods and services.

TILMA's restraints on government were supposed to create eye-popping increases in economic activity. Colin Hansen has made this the centrepiece of his pitch for the agreement. The claims are still, all evidence to the contrary, up on the Liberals' website, which states "TILMA will add $4.8 billion to real GDP and is forecast to create 78,000 jobs in B.C."

Bad research, self-inflicted pain

When you drill down to find where these numbers came from, you get a frightening picture of the state of research being used to justify policy.

Businesses were asked, without ever checking what they knew about the agreement, to rank its likely effects. These rankings were magically translated into predictions of GDP and job increases.

John Helliwell, a UBC professor emeritus of economics, dismissed this methodology by saying "Since there was no research or quantitative base for this translation, it has no empirical basis, and hence cannot be treated as evidence.... In my view, this is an inappropriate use of the survey instrument, akin to estimating national GDP by asking households how they think everyone else is doing these days...."

Arguments are made, particularly by the B.C. Business Council, that the economic crisis is not the Liberals' fault and their government was helpless to do anything about it. But some of the Liberal government's helplessness was self-inflicted, and that they should be held accountable for.

Related Tyee stories:

• Province's Economy Much Worse than We Were Told
  New StatsCan numbers likely mean bigger budget deficit or spending cuts: experts.
• How We Are Outsourcing BC
  A special Tyee series by Charles Campbell.
• Campbell's Claim that Jobs Lifted Many out of Poverty Proves a Myth
  Delayed government report shows no real gains.