Crawl Across the Ocean

Tuesday, March 28, 2006

Low Productivity Ate My Homework

A commenter on the last post pointed out that it was originally Trudeau who compared the U.S. to an elephant (hey, that was before my time!). In searching for proof via google that Mulroney had also made an elephant reference (if any readers can confirm for sure one way or the other, have at it) I found an old Hansard which makes reference to Mulroney's comment.

Flipping ahead in the old Hansard, I happened on the following statement from Ken Epp, the Alliance MP for Elk Lake,
"I have a question with respect to size, that is, the Canadian dollar. The member in his speech decried the fact that Canada has been sold at fire sale prices. That is because of the fact that our dollar has so eroded. The fact is that our dollar is a measure of our productivity and our productivity is down the tubes. He never mentioned a thing about how to improve productivity in this country, which is the real cause, I believe, for the fact that our dollar is so low. What is his comment on that?"

Of course, productivity vis-a-vis the U.S. has probably deteriorated since then, yet the dollar has soared. Normally, the game is for people to explain that if only their pet policy was followed, productivity would rise, but here we see the ever mysterious productivity bogeyman is cast in the role of cause, rather than effect. Still, I was amused to see that the game of relying on the inscrutable nature of productivity to make a point has been around for a while.


  • Politicians obviously don't have a clue that the only strong variable concerning the US-Canadian exchange rate is commodity pricing. When commodity markets are high, the Canadian dollar goes up, and vice versa.

    In terms of everything else, just because we export 85% of our trade to America, all the other financial variables are going to be fairly linked (e.g. interest rates).

    By Blogger Sacha, at 11:48 PM  

  • I'm sure some politicians are aware of the link between commodity prices and the exchange rate - just not Ken.

    Aside from commodities (which are typically the biggset factor, in my opinion as well), things like inflation, changing trade patterns, international money flows etc. could all have an impact.

    To be fair to Ken, if you kept everything else constant, significant differences in productivity growth could drive the exchange rate over time, but that's kind of meaningless since everything else never gets kept constant.

    By Blogger Declan, at 3:33 PM  

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