Wednesday, November 28, 2001
What’s the Canadian dollar worth?
A CBC Radio Commentary
By Brian Lee Crowley
Those who dismiss out of hand the growing calls for Canada to adopt the US dollar as its currency are making a big mistake. Canadians have paid a steep price for our weak dollar policy, and the growing controversy is a sign that resistance to this silent undermining of our standard of living is rising. Yes, the dollar is a symbol of Canadian sovereignty, but if we want to protect that symbol, its price must not be unreasonably high.
The last time that the US and Canadian dollars were at par was November, 1976. Today the loonie stands at a mere 63 cents or so, and tests new lows each week. This represents a very significant decline in our standard of living, because we either have to buy less from our US neighbours, or else we have to pay more for the same things.
Remember when cross-border shopping was so huge? Now the cross-border shoppers are Americans, who can’t believe what a bargain Canada is. And those cross-border shoppers are companies as well as individuals. That’s why, for example, for the first time in years, the Canadian oil patch is nearly majority owned by Americans, not Canadians.
Think about that: the biggest beneficiaries of our low dollar are Americans. Every time the Canadian dollar falls, we offer even deeper discounts to our neighbours on our goods, our services, our resources and our companies. And the premium we pay on goods from the south goes up, because the falling dollar is a kind of targeted inflation. Everything that is made in the US is rising in price for Canadians, even though the US dollar price may be stable, or even falling.
Devaluation often looks like a good deal in the short run, but it almost always masks a declining standard of living. Bitter experience from around the world teaches that you cannot devalue your way to prosperity.
As for the benefits of keeping the Canadian dollar, we run a referendum on that in Canada every day as people make choices about whether to use the loonie or the greenback. And the loonie is slowly losing ground. Many of our largest companies now keep their books and price their products in US dollars. High flyers in the corporate world are now demanding their salaries in US dollars. Most people with an RRSP do everything they can to maximize the US dollar action. If we stay on our present course, more Canadians will find ways to dollarise their activities.
Whether or not to have a Canadian dollar is something that should be judged on the benefits it creates for Canadians compared to the alternatives. Those benefits are slowly disappearing and being replaced by costs. At some point, if we do not change course, Canadians will conclude, reluctantly, that the costs have become too high.
For Commentary I’m Brian Lee Crowley in Halifax.