Hey there, time traveller!
This article was published 5/5/2020 (296 days ago), so information in it may no longer be current.
As Manitoba becomes one of the first provinces in the country to start to emerge from the COVID-19 lockdown, the economic damage done and recovery challenges will start to become more apparent.
We asked Michael Benarroch, the incoming president of the University of Manitoba (he starts in July), what he thinks the economy might look like and how effective he thinks the public sector response to the crisis has been.
Benarroch is the former dean of both the University of Winnipeg’s and the University of Manitoba’s business schools and is an economics PhD who has published often on international trade.
He is just finishing off his term as provost and vice-president academic at Ryerson University in Toronto, pulling 12-hour days helping Ryerson transition to a virtual campus in short order.
Benarroch is a keen observer of provincial, national and global economic dynamics. In between teleconferences and meetings, Benarroch shared some thoughts with the Free Press on what the economy might look like in a post-COVID world.
(The interview has been edited.)
Free Press: How hard is it for a university — or a business — to do proper planning during a pandemic?
Benarroch: One of the real challenges that everybody is facing is the uncertainty. Manitoba is starting to open its economy a little but how do these businesses plan? What measures do you have to put in place? What if there is a rebound and everything shuts down again? There is just so much uncertainty. We always talk about what business wants. It is certainty, sometimes even more than low taxes or good value on the dollar. They just want certainty so they can plan and the pandemic has made it just so difficult to plan.
FP: Most of the forecasters are now convinced the country will be in a recession this year. I don’t imagine you disagree with that.
Benarroch: Absolutely not. A recession is unavoidable. There was already a downturn in the first quarter and there will be very deep negative economic growth in the second. And while a bounce back is predicted for the third quarter… we will not bounce back all the way. There is some talk about a V-curve, which is a big drop-off and then it comes right back up. But that is not what is happening… In a typical recession businesses start to suffer but they don’t go to zero revenue. But in this pandemic it was complete. Revenue fell to zero or close to zero. It will be impossible for everyone to stay afloat.
FP: What will this global economic disruption do to trade patterns?
Benarroch: I think there are going to be some adjustments around international trade. One of the things we are going to have to think about as a country and a province is, if we are hit with another pandemic or some other emergency, what are the critical products and services we want to make sure we produce in Canada, even if it’s more expensive to produce here than in Mexico or China or Taiwan? And our premier has talked about breaking down interprovincial trade barriers for a while. We have to do a better job of taking advantage of our country’s trade networks and to allow Canadian companies to be able to trade more across provinces to the benefit of the entire country.
FP: How appropriate has been the public sector response so far?
Benarroch: These times require everyone to work together, including government. They will have to go into debt to support the economy so that the recovery is not pushed further into the future. It has been the lifeline of the economy. We have learned from previous recessions that government needs to choose a policy that moves in the same direction as the economy. If there is a downturn and governments impose austerity measures, that just deepens the recession. We saw that very clearly in 2008 when some European economies were in financial problems and the IMF started to impose austerity that just deepened the crisis and made it more difficult to pay back loans.
FP: How will that debt load be dealt with in the future?
Benarroch: Governments have to spend wisely and stimulate growth… When growth happens then all citizens will be responsible for helping to pay it back. Maybe governments should think about… I don’t know… maybe a surtax on all Canadians. Government can’t keep writing debts forever. As the economy recovers that is the time you can begin to pay back some of the debt.
FP: That sounds reasonable but in this low-tax era it is almost sacrilegious to suggest taxes should be raised.
Benarroch: I think if you survey most Canadians and you said to them governments need to spend right now to help us (get) over the pandemic. Would you be willing to pay slightly higher taxes in the future to pay it back and delay when you have to pay it back until the economy is recovering? I think you would get most Canadians saying they would buy into that type of approach. There has been this whole narrative of pulling back and lower taxes and lower taxes. But with that comes fewer services and a strained health-care system… I think we have to have a national and provincial discussion about what we are willing to accept in the future and how much are we willing to pay for that.
Martin Cash has been writing a column and business news at the Free Press since 1989. Over those years he’s written through a number of business cycles and the rise and fall (and rise) in fortunes of many local businesses.