Bruce Johnstone

BUSINESS

Martin must not forget problems at home

Is it a bird? Is it a plane? No, it's Super Finance Minister! Having broken the back of Canada's chronic deficit, wrestled inflation to the ground and brought interest rates to their lowest level in decades, Paul Martin is now looking to tackle the world's financial problems.

In a fiery, campaign-style speech to the party faithful in Regina Thursday, Martin gave his definition of what the Liberal party stands for.

"Liberalism is not a rigid ideology," Martin said. "Liberalism is about an ever-growing, ever-vibrant middle-class ..."

Sounding like a Bay Street version of Tommy Douglas, Martin said other nations must learn that "the backbone of any society is an expanding middle-class. The stronger that backbone, the greater chance of that society's success."

Presumably, this was the message Martin took to the meeting of the finance ministers of Asia Pacific Economic Co-operation (APEC), which includes the U.S., Japan, Indonesia, Malaysia, Thailand and the other so-called Asian tigers (although they're acting more like kittens with distemper these days).

As chairman of the APEC meeting in Kananaskis, Martin is promoting a "made-in-Canada" solution to the problems plaguing the Asian economies, namely the virtual collapse of their currencies and banking systems due to widespread corruption, nepotism, cronyism and mismanagement.

Specifically, Martin is calling for an "improved international surveillance system" to detect problems in banks and other financial institutions before they become crises.

Had there been adequate banking oversight during the last two or three years, the Asian crisis either wouldn't have happened or would have been far less severe. "An ounce of prevention is worth a pound of cure," Martin added.

Given the astronomical cost of bailing out basket-case Asian economies ($57 billion for Korea, $43 billion for Indonesia and $17 billion for Thailand), that's a huge understatement.

And Martin isn't proposing to create another world-class bureaucracy, like the International Monetary Fund and World Bank, to act as an international banking watchdog.

Instead, he wants existing agencies, like the IMF, World Bank and lesser known bodies, like the Bank of International Settlements (BIS) and International Organization of Securities Commissions (IOSCO), to better co-ordinate their activities.

But Martin's mission doesn't end there. He wants to see these countries transformed into something more closely resembling Canada's pluralistic, democratic, bourgeois, if you will, society.

In Martin's view, economic and social policy are one in the same; you can't have one without the other. "Secure social programs make good economics and a growing economy is the best social policy of all."

Martin's views are laudable; in fact, most, if not all, Canadians would agree with them. But before the finance minister attempts to save the world, he would do well to remember there are still some battles to be won on the home front.

A recent StatsCan study indicated that in 1995 average Canadians earned six per cent less than they did in 1990, and virtually the same as they did in 1985.

In other words, Canadian families saw their incomes either stagnate or decline over the preceding decade. Single-parent families saw no increase in income since 1980, and male single-parent families actually earned 11 per cent less than they did 15 years ago!

This, of course, was mainly due to the recession of the early '90s and the resulting downsizing of the private sector, and governments' ongoing battle with the deficit and debt, which reduced both employment and income.

Even in 1998, unemployment and the debt remain stubbornly high. And, despite low inflation and above-average economic growth, the dollar remains stuck under 70 cents US.

Clearly, the international investment community is less impressed with Canada's economic recovery than Martin is.

This is not to suggest that Martin doesn't have something to crow about. Anyone who can balance the books after 30 years of futility deserves some credit.

But that doesn't mean Canadians are living on Easy Street and can lord it over the rest of the world. Any declaration of victory over Canada's economic problems is premature and greatly exaggerated.

Johnstone is The Leader-Post's financial editor

From page D10 of The Leader-Post, Saturday, May 23, 1998