Canindia News

COVID-19 throws up major challenges for Canada

Darshan Maharaja

The virus Covid-19 has spread globally and governments all over are implementing drastic measures to stop its spread. While necessary in the immediate term, many of these measures will likely cause long term consequences, including in Canada.
These consequences can be broadly classified into four categories: budget deficits, the trade-off between oil and the environment, our attitude towards plastics, and the balance between laws and individual rights. Here are my views on each of these:

Budget Deficits
One peculiar problem on this front is that even before Covid-19 made it imperative for governments to incur hefty deficits, both the federal and Ontario governments had been spending like there was no tomorrow. Ontario has the dubious distinction of being the most indebted sub-sovereign borrower in the entire world. Its debt currently stands at around $ 350 billion. The federal government, having inherited a tidy surplus in 2015, has been on a spending binge of its own ever since taking office, incurring record deficits year after year. For the latest year, the deficit was almost $ 27 billion. Total federal debt as per the last budget is $ 681 billion.
Such high levels of indebtedness, coupled with continued heavy spending in excess of revenues, would normally result in the governments being unable to borrow further. The government of New- foundland & Labrador has already reached this point; its Premier recently wrote to the Prime Minister saying that the province’s recent efforts to raise funds through borrowing had failed. However, it is very likely that the federal government will find ways to raise the needed money. Economic theory says that the interest rates would have to rise in that case. However, another way would be by devaluation of the Canadian dollar. At the same time, increase in taxes or reduction in services (or perhaps both) can be resorted to as well. Any which way they choose, the result is very likely a reduction in the standard of living of Canadians.

Oil v/s Environment
Since the current government took power in 2015, the balance in the equation between the oil industry of Canada, largely based in Alberta and Saskatchewan, and the environmental concerns had tilted in favor of the latter. Coincidentally, the Covid-19 crisis has come at a time of a trade war for oil between Saudi Arabia and Russia. The price for Alberta’s heavy oil dropped below $ 4 per barrel, a record low. PM Trudeau’s government was seen as being antagonistic to the oil industry so far, but it would have to come up with a rescue package for the oil industry sooner or later. So we can look forward to a restoration of balance of power between the two contenders.

It would be more appropriate to say petrochemicals. The recent negative propaganda against such products basically evaporated when Covid-19 highlighted their importance in modern civilization. Petrochemical products are light-weight, economical and versatile, and until a viable substitute is found, they will sustain us and our way of life. Opposition to them is, therefore, likely to be muted.

Law v/s Rights
Governments at all the three levels have enacted emergency regulations that, in normal times, would be seen as unduly restricting the rights of individuals, including the rights to free movement, assembly and make a living. Once the situation returns to normal, these regulations will have to be rolled back if Canada is to continue to be a free democracy.

(Darshan Maharaja writes regularly on Canada’s social, political and financial issues at his website He can also be followed on Facebook (Darshan Maharaja) and Twitter (@TheophanesRex).)


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