Paul Martin’s tenure represents a decade of lost oppor- tunities for Canada. Those ten years marked the most significant changes in the global economy of any decade in history. It was during that period of dramatic global change that Canada unfortunately had a risk-averse government and a risk-averse finance minister. Paul Martin’s legacy is one of hesitancy, not action; timidity, not courage; and polls, not policy. While governments of other countries have taken risks to embrace innovation in tax and regulatory policy, Paul Martin and Jean Chrétien have eschewed risk in the interest of remaining popular. As a result, Canada has fallen behind while other countries have moved forward.

The deficit did disappear under Martin’s watch, but that had more to do with the bold initiatives taken by his pred- ecessors than anything done by his government. Whereas the Mulroney government focused on policies to prepare Canada to prosper in the 21st century, the Chrétien-Martin government has focused on short-term politics, not long- term policies for growth and prosperity. The ”œWorld in 1998” preview in The Economist (concerning the balanced budget) stated, ”œmuch of the credit goes to the passage of time and successful reforms earlier in the decade.” These reforms included free trade, the GST and deregulation of financial services, transportation and energy.

When the Liberals took power in 1993, the federal government had already achieved an operating sur- plus, and the deficit, as a percentage of GDP, had already been reduced by one-third. The prime rate was the lowest in 20 years and inflation was at a 30-year low of 1.5 per- cent. The economy had been restructured””Canada was open for business again. The free trade agreement with the United States had been signed, the GST and deregulation put in place, and privatization begun. Since 1993, free trade has created four out of five new jobs in Canada. In 1988, just before the implementation of free trade, Canada exported $100 billion of goods to the US; in 2001, mer- chandise exports reached $360 billion. When services are included, yearly two-way trade now amounts to $700 bil- lion, or roughly $2 billion a day.

Tax and other revenues have climbed by more than 50 percent since the government was elected, mainly because of economic growth generated by free trade coupled with tax revenue growth fuelled in part by the GST. In spite of some recent tepid tax reduction meas- ures, the government will still collect about $175 billion this year, compared to $116 billion col- lected the year it was elected.

Mr. Martin’s priorities must be questioned. He maintained excessively high EI premi- ums (premiums he called a ”œcancer on jobs” when in opposition) and slashed transfer pay- ments to the provinces without re-prioritizing federal government program spending. Shifting the burden to the provinces for these services was the easy but cowardly way to accelerate deficit reduction. The provinces are still scrambling to catch up on the lost Martin years of inadequate funding. The Chrétien-Martin cuts sent the health and education systems into crisis in every Canadian province.

There are other cracks in the Paul Martin legacy. While Paul Martin boasts of the Canadian books being in the black, Canadians have never been further in the red. Over and above what Canadians owe indirectly because of the national debt, Canadian households at the end of last year were $250 billion deeper in debt than they were at the end of 1993, an increase of 60 percent. The sum of money Canadians owe banks and other financial institutions has jumped by about $8,000 for every man, woman and child in the country. Individual Canadians are finding it harder to manage their own household debt. Last year 79,000 Canadians declared personal bank- ruptcy, 25,000 more than in 1993.

The most damning assessment of Paul Martin’s performance as finance minister is the fact that the dollar has dropped 16 percent since he entered Cabinet. It was then at 76 cents but today struggles to stay above 64 cents. Paul Martin’s limp loonie fosters low levels of produc- tivity growth. It has hurt Canadian companies trying to invest in expensive and usually import- ed new machinery with an aim toward improv- ing productivity. It has also contributed to what Canadian corporations describe as the “hollow- ing out,” or foreign takeover, of Canadian corpo- rate interests.

In 1993, the Canadian financial services sec- tor enjoyed a more supportive regulatory envi- ronment than did the US financial services indus- try, thanks to the deregulation of financial serv- ices that had occurred under the Mulroney gov- ernment. Since 1993, due to deregulation in the US and the cession of the last vestiges of the Glass-Steagle Act, the US financial services sector is better positioned than Canada’s. One concrete example of Paul Martin’s preference to do what is popular rather than what is right is his flawed decision to deny Canadian banks the opportuni- ties to achieve the economies of scale of their global competitors.

Our manufacturing productivity growth since 1993 has been less than half that of the United States. On average, Canadian labour pro- ductivity growth has lagged behind that of the United States by more than three percent per year since 1993.

Canadians’ standard of living has been slip- ping relative to other countries. In real terms, our national income per capita is now more than 35 percent lower than in the United States. Royal Bank has projected that if the trend is maintained over the next seven years, our per capita income will be half that of the United States.

If Paul Martin and Jean Chrétien had had their way, Canada would never have adopted free trade and the manufacturer’s sales tax would still be in place. The Paul Martin legacy will indeed be that of a finance minister who happened to be in office when the deficit was eliminated. But, will he be credited with the vision and work of preparing Canada for the challenges of a new century? I think he will he be labelled the unimaginative gardener who did some minor pruning but failed to plant the seeds for a more productive and prosperous Canada. 

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