Down to Business: How Canada Will Recover from the Covid Recession

Matthew Lau
April 24, 2020
Clear skies in once-smoggy L.A. Wildlife wandering through cities and bedding down in parks. Deserted streets. Idled factories. For the left, the pandemic has created a convenient waypoint on their path to utopia. To the rest of us, it has furnished a nightmarish vision of a potentially destitute future, and a wakeup call to focus on what it might take to revive our economy. For Matthew Lau, the choice is clear. And while news media reports continue to promote fanciful progressive agendas, Lau sees encouraging signs that the imperatives of survival will enable practicality and common sense to prevail.

Down to Business: How Canada Will Recover from the Covid Recession

Matthew Lau
April 24, 2020
Clear skies in once-smoggy L.A. Wildlife wandering through cities and bedding down in parks. Deserted streets. Idled factories. For the left, the pandemic has created a convenient waypoint on their path to utopia. To the rest of us, it has furnished a nightmarish vision of a potentially destitute future, and a wakeup call to focus on what it might take to revive our economy. For Matthew Lau, the choice is clear. And while news media reports continue to promote fanciful progressive agendas, Lau sees encouraging signs that the imperatives of survival will enable practicality and common sense to prevail.
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What if they held Earth Day and everyone stayed indoors? It’s not a hypothetical question. April 22 was the event’s 50th anniversary, a day marked in previous years with flamboyant public displays of environmental martyrdom, marches, vigils and plenty of hectoring of politicians for not doing enough to promote clean energy, protect endangered species or deliver environmental justice. This year – not so much.

Back when there was less to worry about: Members of the West Kootenay EcoSociety mark Earth Day 2019 with a protest march.

“Cancelling Canada’s Earth Day was out of the question,” claimed Pierre Lussier, director of Earth Day Canada, as organizers of the event’s golden anniversary tried mightily to shoehorn their climate change obsessions into the global Covid-19 discussion. “The coronavirus pandemic reminds us of what’s at stake in our fight for the planet,” announced the global Earth Day 2020 website. “If we don’t demand change to transform our planet and meet our climate crisis, our current state will become the new normal – a world where pandemics and extreme weather events span the globe.”

In the end, however, most Earth Day 2020 commemorations were “virtual” and almost entirely invisible. A few sympathetic news media reports ran clips of blue skies in formerly smog-bound cities as some activists crowed about the environmental benefits of a crushed economy. But everyone else had better things to do − like trying to save humanity from a pressing viral threat. And figuring out how to rebuild the global economy once the threat eases. 

With the world preoccupied by other matters, the share of the public’s attention available for environmental issues that once dominated public discourse has shrunk to almost nothing. It’s hard to fret over the fate of the whales or the temperature of the world in 2050 when your grandparents are in a nursing home facing a potentially deadly coronavirus outbreak, you can only go outside to shop for necessities and your financial well-being is imperilled as whole sectors of the economy are virtually shut down.

Earth Day’s 50th anniversary on April 22 was completely overshadowed by more pressing issues; a scene from Royal Rose Place, a long term care home in Welland, Ontario suffering from an outbreak of the coronavirus.

And while environmentalists and assorted social justice warriors loudly declare the Covid-19 pandemic to be the ideal opportunity to remake the world in their desired image, the opposite is true. The sheer weight of necessity suggests the post-coronavirus world will value practicality, efficiency, productivity and profit above all else. For the first time in 35 years, numerous countries around the world are seriously concerned about facing starvation. When times get this tough, we all need to get down to business.

While there’s no shortage of huge issues at play, sometimes larger truths are illuminated by the smallest of details. And nothing more vividly illustrates the massive difference between pre- and post-coronavirus policy imperatives and public mentality than the turnabout experienced by single-use plastic bags. Just a few months ago they were considered a blight on society. Politicians and businesses across North America sought to boost their green credentials by loudly denouncing these horrors of modern convenience. Then, in a flash, they were transformed into sanitary saviours.

Plastic bags were banned in Fort McMurray, Alberta in 2010 and Thompson, Manitoba a year later; both municipal councils recently suspended their bans in response to the pandemic. In January, there was talk of a province-wide ban on plastic bags in British Columbia; last month the province’s Ministry of Health advised grocery stores to ban reusable bags instead. Recently Newfoundland and Labrador Premier Dwight Ball cited “public health risks with reusable bags” in announcing the deferral of a previously announced ban. Many grocery stores now won’t even let customers in if they’re carrying woven reusable bags. (San Francisco, the first major city in North America to ban plastic bags, also became the first to turn against the reusables it had championed for years.)

Modern scourge no more: The Covid pandemic has caused everyone to re-evaluate their relationship with plastic bags and bottles.

This return to practicality neatly encapsulates the dangers of overzealous environmental activism: things that might seem important when you have nothing else to worry about appear downright foolish when it all gets real. It also demonstrates the robustness of markets. Once demand for hygienic plastic bags returned, even jurisdictions that had previously banned them were quickly re-supplied.

More than just plastic bags are making a comeback amid the crisis. Regulatory common sense is also in ascendency as the survival instinct means practicality is beginning to trump narrow-minded affectations. Alberta has relaxed crushing environmental burdens that have long held back major projects in an effort to help move along any new construction projects that might still be proposed. Similarly, Ontario suspended some environmental oversight rules in order to avoid delays to any vital projects that would need to be built during the province’s state of emergency.

Pressing concerns about keeping grocery store shelves stocked with food and other necessities caused Ontario to suspend provincial laws governing tractor-trailer delivery times imposed long ago when some neighbours complained about late-night noise. Quebec also suspended bizarre provincial rules dictating grocery store employee shift scheduling. Federal rules covering truck drivers’ working hours were relaxed as well.

The supply chain imperative: Numerous government rules and regulations are being relaxed or eliminated to improve efficiency and productivity in this time of crisis.

Many provinces now allow restaurants to sell alcohol with take-out orders. Virtual doctor’s appointments and online prescription renewals are also possible in various provinces, greatly enhancing convenience for clients. In Alberta, doctors who could never be reached by telephone in the past are now happily making lengthy calls to their patients. Across Canada, the slow accretion of productivity-sapping rules and red-tape is being reversed as governments concentrate on what really matters. “We are seeing lots of examples of governments helping people and businesses by simply getting out of the way,” said Colin Craig, president of SecondStreet.org, a Saskatchewan-based think-tank that has compiled a lengthy national list of these regulatory removals.

And while bashing big business was a popular pursuit in earlier times, these days no one complains about the ability of large corporations to respond quickly to opportunities, and with overwhelming presence. As George Mason University economist Tyler Cowen recently observed in a Bloomberg column, large, often-reviled corporations such as Costco, Walmart, Amazon, Microsoft, and Netflix have proved themselves to be vital, and in some cases life-saving, services amid the pandemic. 

“Big business also has been ahead of the curve when it comes to prediction and adjustment,” Cowen wrote, noting the NBA shut down its season long before most politicians realized how serious the contagion could become. One result of the pandemic, he notes, is an erosion of faith in government. When people “need answers or simply a useful good or service, they are increasingly going to turn to the one institution that can reliably provide them: big business.”

Big, dominant businesses, such as Amazon, are proving their worth in trying times.

Even before the pandemic struck, governments were proving themselves unreliable at delivering important services people need – like a well-functioning health-care system. As Gwyn Morgan noted last month in C2C Journal, Canada is virtually the only country in the world that deliberately bans private health care. The implications of this mandatory public provision are stark and life-threatening: on a per capita basis Canada has only one-third the critical care beds the United States can muster. 

And the rapid retooling of businesses to produce the necessities of medical care – ventilators and face masks, for example – again demonstrates the speed with which the business community is able to respond to urgent needs. Government officials were hard-pressed merely to arrange their timely procurement (let alone executing their design and manufacture). Alberta now boasts of its special prowess in providing masks to the general public, with one official even describing this as an extraordinarily complex distribution operation. In fact it’s just one product, compared to the tens of thousands of SKUs any large retailer manages daily on a continent-wide basis.

So what does our experience to date portend for the post-Covid-19 era?

Alongside Earth Day organizers, many other vocal activists argue that the coronavirus crisis should be seen as an opportunity to displace capitalism altogether. Writing in the Globe and Mail last month, film-maker Avi Lewis (a frequent collaborator with wife and high-profile anti-capitalist Naomi Klein) declared the pandemic to be “a once-in-a-lifetime opportunity for the federal government to initiate a reset of our economy and society, putting Canada on a path toward zero emissions, and bringing immediate material benefits and enhanced, 21st-century universal public services to everyone – prioritizing Indigenous, racialized and working-class communities.” Having virtually covered the politically-correct pantheon in a single sweeping sentence, Lewis added, “This is the ideal moment for Canada to launch the decade of the Green New Deal.”

There’s little doubt restarting an economy beaten down by a global pandemic will be a “once-in-a-lifetime” moment. But why this should precipitate a socialist utopia is much less clear. As University of Guelph economist Ross McKitrick points out, anything that was a bad idea before the crisis is still a bad idea today.

With a $200 billion-plus federal deficit in the offing for Canada this year (plus massive provincial deficits and municipalities spending their way towards bankruptcy), McKitrick observes that many activists “are looking at this huge amount of government spending as kind of a windfall” to be aimed at their own pet projects. But the tidal wave of government stimulus should not be seen as an excuse to waste resources, he says in an interview. The huge deficit is a result of the massive drop in income and employment caused by the economic disruption and the federal programs necessary to provide short-term assistance to people and businesses. 

Bad ideas then are still bad ideas now: Activist filmmaker Avi Lewis (left) and University of Guelph economist Ross McKitrick (right) trade views on a “once-in-a-lifetime opportunity.”
Bad ideas then are still bad ideas now: Activist filmmaker Avi Lewis (left) and University of Guelph economist Ross McKitrick (right) trade views on a “once-in-a-lifetime opportunity.”

 It means, moreover, that Ottawa and the provinces will have far less money to spend on climate change and other fanciful or ancillary programs once things calm down. “If anything has changed,” remarks McKitrick, “It’s that oil prices are a lot lower, which makes it a much harder case to make that we should switch off the fossil fuels” and ramp up expensive clean energy through new mandates or subsidies. This crucial point is apparently lost on Congresswoman Alexandria Ocasio-Cortez, the radical-left Democrat who sponsored the Green New Deal in the U.S. In one of her latest attempts at economic analysis, she argued the current low price of oil makes it “the right time” to use less of it and switch to more expensive renewables.

Wealth-destroying policies such as Ontario’s Green Energy Act will be impossible to justify in the post-Covid era.

For the broader implications of an Avi Lewis-style “reset” of the Canadian economy post-coronavirus, consider the record of Ontario’s 2009 Green Energy Act. It was supposed to expand renewable energy and create green jobs by displacing fossil fuels. The result, according to a report by the province’s auditor-general in 2015, was that Ontarians were fated to pay a cumulative $170 billion more for electricity between 2006 and 2032 than they otherwise would have. Any environmental benefits were minimal. And instead of creating productive jobs, the policy destroyed an estimated 75,000 jobs in the manufacturing sector alone over a seven-year period due to higher electricity prices, according to a Fraser Institute study. As we emerge from what is being described as the “Great Lockdown,” this sort of wealth-destroying activity will become even harder to defend. 

Prior to the coronavirus crisis, it was popular among climate activists to invoke wartime terminology in making their case for the broad public sacrifices they deemed necessary to create a clean economy. Last year, for example, the federal Green Party’s election platform called on voters to adopt “the spirit of Dunkirk” in rallying to fight an alleged “climate emergency.” Rather than huddling in bunkers against a Nazi Blitz, however, the Green Party’s idea of wartime sacrifice involves massive confiscatory tax hikes of $57 billion in the first year, rising to $89 billion by the fourth − or about $9,000 annually for a family of four. (Figures are relative to the Parliamentary Budget Office’s baseline case.)

The first line item in this enviro-military commitment was $100 million per year for a national cycling and walking infrastructure fund. According to University of Calgary economist Trevor Tombe, improving cycling infrastructure costs taxpayers roughly $500 per tonne of greenhouse gas emissions abated. By comparison, the current carbon tax in Canada is $30 per tonne. Similarly, a massive energy efficiency retrofit of buildings as also proposed by the Greens’ platform would cost $270 to $425 per tonne of emissions abated. Again, many times higher than the current carbon tax, and thus indefensible on the basis of cost-benefit analysis.

Wartime fatigue: After surviving the Great Lockdown, Canadians will have no patience for Green Party leader Elizabeth May’s calls for another 30 years of similar sacrifices to fight climate change.

Displaying a comparable level of economic acumen as Ocasio-Cortez, the Green Party justified its programs by confusing economic costs with benefits. The high labour cost of the retrofits was purported to be an economic benefit because it would create jobs. In reality, the jobs “created” would represent effort diverted from productive economic activity to fulfill regulatory requirements. That’s a cost, not a benefit.

Demands for ever-higher fuel-efficiency standards similarly rely on this sort of backwards accounting, McKitrick notes. The U.S. Environmental Protection Agency’s analysis of America’s fuel efficiency standards for vehicles showed far higher costs than benefits until the EPA added $534 billion in purported economic “benefits” because people would be forced to drive smaller, fuel-sipping cars. “By the same logic,” he suggests, “we could save consumers hundreds of billions by banning lots of other things, like restaurants or fitness clubs or Netflix.” What people are willing to spend on something is a measure of its perceived benefit to them.

The Green Party’s platform is full of sweeping bans on many things that are now considered vital, including internal combustion engines and a wide range of obviously-useful single-use plastic products. These impoverishing ideas didn’t make any sense back when the economy was flush and “coronavirus” simply meant you’d had too many Mexican beers the night before. Given the damage such policies would do to the economy and the public, they seem downright criminal today. 

While the public has been largely tolerant of the massive economic and social sacrifices required by social distancing and keeping the spread of coronavirus at bay, restlessness at these measures is already beginning to show. News that such restrictions could be required for up to 18 months, or whenever a vaccine is widely available, inevitably generates widespread groans and expressions of disbelief. How might the country react to news that a similar but far longer-lasting set of wartime-style sacrifices will be necessary to prevent a slight increase in the Earth’s temperature 30 years from now? The notion that Canadians would be willing to accept the massive and interminable costs associated with a Green New Deal – after having just suffered through the unprecedented upheaval of the Covid-19 crisis – seems utterly implausible.

As the Ontario experience with mythical green jobs makes plain, government efforts to redistribute economic capital towards unproductive causes destroys both industries and jobs. To climb out of the economic hole created by the coronavirus and the resulting restrictions, the burdens on industry and taxpayers will have to be lightened – not increased. The evidence to date of businesses being exempted from over-weaning regulation (such as plastic bag bans and grocery store delivery rules) should be seen as simply the first move in a sweeping commitment to government getting out of the way in order to unleash the vast potential of the business community to create wealth. 

Lau - Inset 9 (above)
Capitalism is not the enemy: While climate activists seek a revolution, the only practical path to economic recovery will be to let business flourish.
Capitalism is not the enemy: While climate activists seek a revolution, the only practical path to economic recovery will be to let business flourish.

As the country seeks maximum growth, one can hope that it will become politically and economically untenable to throw up barriers to this process. Even some of the most militant public sector unions seem to appreciate this necessary triumph of pragmatism over ideology. In the midst of the pandemic, Ontario’s teachers’ unions quietly signed contracts with the province; and after having gone on strike in large part to protest the province’s plan to enhance online education, they meekly got down to the business of teaching students online. 

The C.D. Howe Institute’s Crisis Working Group on Business Continuity and Trade – part of the centrist think-tank’s “playbook” on restarting the economy − offers numerous suggestions for how governments can ease the transition back to growth by simplifying rules, restrictions and regulations on businesses. Reflecting the delicate times, it makes no mention of imposing new clean-energy burdens, carbon taxes or otherwise obsessing about climate change. The economic and fiscal crisis brought on by Covid-19, far from being an attractive launching pad for a more socialist economy, provides powerful evidence that the progressive dream of launching a Green New Deal on the heels of the coronavirus is economically and politically absurd. 

If we have learned anything from the suffering brought on by the pandemic and its painful cure, it’s that economic destruction, not climate change, is the single greatest threat to our way of life. And we should do all we can to avoid more of this sort of self-inflicted damage in the future.

Matthew Lau is a Toronto-based writer specializing in economic principles and fiscal policy. 

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