Economic Problems Founded in Mistrust

By Peter Lindfield, published in the Telegraph-Journal 17th August 2012

We are surrounded by crises. The eurozone is in jeopardy of breaking apart as it has become a structurally flawed monetary and economic union. The United States is still suffering from fallout of the 2007-2009 financial crisis which has triggered widespread deleveraging across the public and private sectors. The U.S. simultaneously is experiencing a growth slowdown, a persistent unemployment problem, an adverse shift in income distribution and structural challenges.

Canada has not been spared. While the federal government has not subscribed to the austerity strategies that have figured prominently in Greece, Ireland or Spain, there have been reductions in the size of the public service, and numerous government programs have been shut down. The impact of fiscal prudence has been fairly mild.

In New Brunswick, however, an economic slowdown has all but halted growth and has worsened already persistent unemployment. While the most notable challenge of fiscal deleveraging appears to have been met, at least in the near term, the economy is faced with additional risks associated with an aging population, rising health care costs and possible changes to the federal equalization formula.

Despite this catalogue of economic problems, some of which have a complex genesis, New Brunswickers have had a fitful relationship with economic reform. Politicians and policymakers worry whether there is a sufficient sense of urgency to engage in change at all, whether transformative or incremental.

It is clear that the negative effects of the province’s long-standing problems are mounting. But among the public, despite a palpable sense of apprehension that something is vaguely wrong, the prognosis for the political support necessary to underpin any significant and ongoing change is worsening. What accounts for this apparent lack of ambition to drive change across a broad range of issues?

The first response to this question is lack of leadership, which has become the default diagnosis in the face of unpopular policy decisions. Failure of leadership is the popular rationale for the recent NB Power fiasco for example. But this rationale does little to explain why new provincial political leadership under Premier David Alward has found the road hard going.

A second possibility is that the available policy mechanisms are simply ineffective in complex conditions where there are many factors outside the control of the policymaker, at least within certain time-frames. Even under the influence of stern discipline, economic deleveraging cannot be achieved overnight and eliminating deficits quickly without creating adverse political and social effects simply may not be possible. Growth and prosperity may require years of transition, adjustment and investment but expectations may be significantly more aggressive. Finance Minister Higgs therefore can be seen as aggressive and unambitious at the same time, depending on those expectations.

A third explanation is that the absence of trust in the political environment is characteristic of the failure of political institutions. A perception exists that many of New Brunswick’s problems have not been well managed in the past and there is an interconnected suspicion that elites continue to place their own interests above shared social values. Not only does this perception create a corrosive cynicism about the past performance of politicians and policymakers, but it gives rise to unrealistic expectations about our options, who will benefit from them or the time-frame required to exercise potential solutions.

Restoring trust to politics will take time. A quick solution may not be available to address complex, structural problems but that does not mean that progress has not been made. Communicating progress against achievable goals is the cornerstone of a successful change agenda.


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Filed under Fiscal Policy, New Brunswick

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