One of the major problems with what is happening in the world is that it is happening so fast. The sudden decrease in the value of the Canadian dollar in relation to the US greenback is a case in point. Last spring, the two dollars were more or less at par, but today the loonie is worth about the same as it did 15 years ago. The advantages of having “cheap” manufactured goods are a long way from being felt. No one is sure how long this will last so no foreign enterprise is going to make long term commitments to buy Canadian products and in so doing kick start manufacturing here.
Another pitfall of the rapid downslide of most economic indicators is the declining attractiveness of green energy projects. As Thomas Friedman noted in The New York Times this week, when gasoline prices rose our consumption fell. With a petroleum and petroleum prices falling, however, the temptation is to think that it will be business as usual in the future and to quit encouraging green initiatives.
That would be a terrible mistake. The future will belong to those who see beyond the current crisis and plan for a high-cost petroleum world. The political jurisdictions who come out of this crisis with the least damage will also be those who think ahead. That is why putting money into infrastructure projects—as Quebec Premier Jean Charest has been proudly saying lately—is a good way to cushion the roller coaster ride we’re on. One can argue about what the best of these projects are, but this kind of Keynesian stimulus is the path that all governments should take.
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