Mr. Speaker, it is indeed a pleasure to respond to the Speech from the Throne as the industry critic for the Canadian Alliance.
First I would like to thank the electors in the Peace River constituency who have returned me for a third term and who in doing so again placed a responsibility upon me to carry out their interests in Ottawa. I intend to do just that.
In order to respond to the Speech from the Throne, I think we need to examine the government's proposals to help Canadian industry through the looming downturn in the economy by increasing Canadian competitiveness in the new economic environment, which is necessary.
In order to do that, we need to look at Canada's historical position in terms of what we have done in the economic area in the last several years. We have to ask what went wrong in the past and evaluate whether the proposals in the mini budget and the throne speech are adequate to see us through. I would like to make the case that these are not the right formula. The formula the Liberal government has in those two areas will not see us through adequately and will not put us back into a competitive position.
The finance minister and the industry minister both maintain that everything is okay, and we heard it from the parliamentary secretary too. It is sort of a head in the sand approach that has become all too common from the Liberal government; everything is going to work out, do not worry about it.
Let us look at an historical review. Last spring the Standing Committee on Industry tabled a report regarding Canada's productivity. The study was initiated in response to concerns expressed by many prominent economists and business leaders who warned of an alarming productivity gap developing between Canada and the United States, particularly over the past decade.
These leaders confirmed through statistical evidence what Canadians instinctively already knew. Our standard of living had fallen over the past 30 years and the rate of decline had accelerated in the 1990s. Witnesses told the committee that on average Canadians earn $9,000 less per capita than their American counterparts. This illustrates how Canadian productivity has impacted on our standard of living. That is what this is all about. It relates to our standard of living; are we better off or worse off than we were a decade ago.
Between 1996 and 1998, the U.S. increased its productivity at double the rate of Canada. No wonder the 1990s were called a dec-a-dis hor-ri-bil-is by the hon. member for Markham when he was the chief economist at the Royal Bank of Canada. All of a sudden he has completely changed his tune. I wonder why?
What happened to Canada's productivity and why did we slip out of the game? We went from being number two in 1976 but we slipped badly. In fact, from the 1950s to the mid 1970s we had tremendously high rates of growth of productivity in this country. In 1976 Canada was second only to the United States in terms of productivity among the G-7. While the United States remains number one, Canada no longer holds that second place position. By 1997 we were in fifth place. Italy, France and Germany have all passed Canada by and more countries will do so if we do not get our fundamentals right. Members might rightly ask how did this happened. We need to pursue this further.
The issues related to Canada's loss of productivity and weakened competitiveness are complex, to say the least. Many factors, including external shocks to the economy of a country can cause disruption. However, the United States was better able to adapt and restructure their economy. The restructuring which took place in the U.S. during the 1980s enabled the Americans to lead the way in growth for much of the 1990s, as is the case today.
Why did it happen? How did it happen? I suggest that it is 30 years of bad public policy in Canada that has caused that to happen. I see a denial happening in government ranks again that they do not recognize what happened and therefore cannot make the shift.
I would like to argue that the fundamental shift in government policy in the 1960s and 1970s, specifically major social programs that were introduced and the federal government expansion during those years, created the conditions that led to Canada's decline of productivity and currency devaluation.
One might ask whether it was a coincidence that the Canadian dollar has had a 30 year decline, that Canada's productivity has had a 30 year decline and that the investment in Canada had a 30 year decline. I suggest that at the same time taxes went up, the debt went up. There is no coincidence. It is bad public policy by the Liberal and Conservative governments of the day which has led to the decline and currency devaluation that we are suffering today.
As an example, changes to the employment insurance program moved it away from the concept of an insurance program to more of a social program function. The result was an increase in unemployment rates, several points higher than that of the United States over the last 30 years. It remains there in good times or bad times. It is just an example of growth or government expansion.
Federal government spending continued to grow every year, which had to be financed by tax increases and deficits. The result was a $585 billion debt. It was largely glossed over until about 1993-94 when we had to finally admit that we were virtually bankrupt.
What was the government's response at the time? That was a brand new Liberal government and many of the members here today came in at that time. The newly elected Liberal government raised taxes and cut transfers to the provinces to get itself out of the problem.
Did it cut its own spending? Very little. Program spending is starting to grow again, which shows the Liberals do not recognize what needs to be done. They increased excise taxes on gasoline which added to transportation costs. They hiked capital gains tax in those years which discouraged investment. They allowed the discounted Canadian dollar to insulate Canadian exporters from restructuring and improving their own productivity through investments in technology and innovation.
No wonder the Canadian standard of living was slipping away and our best and brightest were leaving for better opportunities in the United States and other countries.
Despite what the finance and industry ministers are saying today, Canada is not well positioned as a low tax jurisdiction. We just have to look south of the border. We have not even caught up to them from the last time. Now the Republican government of George W. Bush is moving the yardsticks again with lower taxes.
While the overdue tax cuts in October's mini budget were welcome, their value is hampered by long phase-in periods and other half measures. For example, the corporate tax rate was reduced by a mere 1% this year. The planned seven year reduction will not be fully achieved until 2005-2006.
I maintain there is a very real danger that Canada will become the incubator economy for the United States and our people will be lost to foreign multinationals. Why does this government not learn from the experiences of Ireland, the Netherlands, Georgia, Michigan, Ontario and Alberta. They cut taxes and within a year or two saw their revenues grow as an increased growth in the economy quickly made up for those cuts. Canada's national debt right now is roughly $565 billion; 25 cents out of every tax dollar goes just to pay interest on debt.
We know what is happening in Washington. It is moving again to cut taxes. In fact, it is telling us that the U.S. debt is going to paid off by the end of this decade. Where is the finance minister of Canada's plan to pay down the debt? At the rate he is going it will take him 190 years. That is simply not good enough. We are not sending the right kind of signals to our business community for investment.
I think this begs the question. Where is Canada's plan? I do not see it in this throne speech. I did not see it in the mini budget and I do not think they have one.
What about the low Canadian dollar? Defenders of the low Canadian dollar argue that it helps exporters and therefore creates jobs. It begs the question. If a 66 cent dollar is great, why do we not move to 50 cents? Would that not be better? The answer is no because it does not encourage investment by Canadians and foreigners in our country. What it does encourage, I would suggest, is other people from other countries coming up and buying up companies like the Montreal Canadiens and taking them outside the country because our dollar is so weak.
We have to look at investment. Currently, I think the real problem in Canada is the lack of private investment, especially investment in research and development. Canada is currently ranked 15th amongst OECD nations on how much it spends on R and D. U.S. venture capital investments were 12 times that of Canada in 1995 and have moved to 18 times what Canada spent on venture capital in the year 2000.
We are going the wrong way. Public money under the Prime Minister's leadership cannot fill that void. It has to be filled because we need to have investors confidence that they will get a return on investment. I would argue that that is happening because we have an unfavourable tax climate which has caused lack of confidence.
To sum up, it is simply a matter of bad public policy. I am concerned that that bad public policy is continuing. We have had 30 years of decline and it is not over yet. Canadian industry needs the government to finally pay attention to getting the fundamentals right and creating the business environment so Canadian companies can succeed on their own. They need to boldly cut taxes to get not just the same as the United States but more.
My belief is this is a very weak, timid response. We have to do much better. I would encourage the Liberal government to bring down a budget to that effect as soon as possible.