Monday, December 15, 2008

Much Needed Stimulus: A Transportation Revolution for Canada

As the Liberals meet with the Conservatives to talk about the kind of stimulus package that needs to be included in the upcoming budget, there is a serious danger that what will be involved is low-level political maneuvering. The Conservatives will be aiming at a budget that contains enough stimulus to coax the Ignatieff Liberals into voting to support it and dump the idea of a Liberal-NDP coalition government. The Liberals will want to make it appear that they have won sufficient concessions to allow them to vote for the budget and survive the political onslaught from the centre and left for keeping Stephen Harper in power.

Over the next few weeks, it is essential to shift the debate to what Canada needs not only to safeguard Canadian wage and salary earners, pensioners, students, farmers and small businesses from the immediate crisis, but also to look to how we should restructure our economy for the 21st century.

There need be no contradiction between these two agendas. Indeed, the best way to protect Canadians today is for the government to invest for the future.

The Conservatives will want tax cuts and immediate bailouts to companies with few strings attached. The Liberals will want to point to a high dollar figure in the overall package that they can claim to have won.

What the nation needs is well thought out stimulus that will keep the public investments as much as possible inside Canada generating wages and salaries here. That way, the stimulus will not leak out in the form of additional demand for imports. Tax cuts risk generating higher imports and are the least effective form of stimulus.

One area (certainly not the only area) that requires imaginative thinking is the transportation sector. What follows is an introductory discussion of what needs to be done in that sector.

* * * * *

With an inefficient fleet of automobiles, poor public transit, an ailing rail system, and airlines plagued with a host of problems, Canada is woefully ill prepared for the 21st century transportation revolution. For a country whose vast size and low population have always made transportation a vital matter, the lack of planning by governments and industry to prepare for change has been flagrant, not to say negligent.

No country will be more affected than Canada by the global revolution in transportation.

Sailing vessels and canoes drove the first Canadian economies, those of the fishery and the fur trade. In these vessels, Europeans journeyed to the Grand Banks of Newfoundland and along the great waterways of the northern half of the continent in the quest for profitable commerce. In the early decades of the 19th century, canals cheapened the passage of goods on the Great Lakes and the St. Lawrence and made Montreal the leading centre of Canadian commerce. In the middle of the century, railways revolutionized life and played an enormous role in the creation of a fledgling Canadian nation that spanned the continent. Railways underpinned the new Canadian state, an east-west economy and the export of wheat from the prairies to Europe, making Canada an economic success with a rapidly rising population by the first decade of the 20th century.

The first mass age of the automobile in Canada came in the 1920s, as provincial governments built the nation's initial highways. It was not until the 1950s, following decades of depression and war that the automobile became a means of transportation for most Canadian families. Over the space of a few decades, governments built superhighways and the Trans Canada highway. Suburbs exploded outwards from the cities, suburbs that relied on the automobile as the crucial form of transportation. Urban density fell as city dwellers shifted from public transit to their cars. Expressways, such as the notorious Gardiner Expressway in Toronto, which cuts the city off from its lake front were seen by the public as symbols of progress. It was not until the 1970s, not coincidentally a decade when the price of petroleum exploded, that city dwellers perceived the downside of expressways that tore up neighbourhoods and in Toronto public pressure stopped the Spadina Expressway.

This first era of skyrocketing petroleum prices lasted from 1973 to 1982. From that date when prices plunged until the early years of the 21st century, petroleum was once again cheap, and Canadians, in company with Americans, purchased vast numbers of SUVs, vans, pickup trucks, and recreation vehicles, all vehicles with poor gas mileage. The rising price of petroleum during this decade, coupled with the bursting of the global property price bubble beginning in the United States and the onset of a global economic crisis, have plunged Canadians into a new world where transportation is concerned.

Over the past four centuries, as the modes of transportation have evolved so too the role of Canadians in designing, manufacturing and deriving their employment from the building of ships, canoes, trains, airplanes and motor vehicles has been subjected to enormous changes with vast implications for the economy and jobs. Disruption, dislocation, and, hopefully, successful adaptation will be elements of the 21st century Canadian story.

Of necessity, Canada’s transportation revolution will unfold as a part of the global transformation in the ways people and goods move.

In 2007, the skyrocketing price of fuel, in conjunction with other factors, such as the shift to large scale production of ethanol and prolonged drought in Australia, provoked a severe increase in the price of food worldwide. In rich countries, the consequence was an annoying increase in the cost of living, in poorer countries, it meant real hardship and in the poorest regions of the world, populations faced starvation. At hand, was a multifaceted global crisis whose epicenter was transportation.

Then in late 2008, as the financial crisis dragged down the global economy, the price of petroleum plunged. The oil price decline, while affording consumers relief at the gas pumps and for home heating bills, did not signal a long-term downward trend. As in the 1970s, oil price increases slowed economic growth and this triggered declines in petroleum prices. The long-term trend in petroleum prices, as will be seen in lock step with eventual economic recovery will be upward.

The long-term trend toward higher fuel prices means that the movement of goods to markets will be much more costly and that the movement of people in their daily commutes or on their longer journeys will carry a higher price tag. The transportation crisis takes different forms in different countries. In the United States and Canada, the sale of pick up trucks and SUVs has plummeted in favour of a rising market for cars and crossover vehicles, along with heightened demand for hybrid vehicles. Tens of thousands of auto workers face the closing of the plants where they work and the loss of their jobs. Airlines in both countries have laid off thousands of employees and cut back the number of flights they offer. In the U.S., major airlines confront the prospect of financial failure.

In Spain, France, and the United Kingdom, higher fuel prices have provoked work stoppages, blockades and demonstrations by truckers who insist the new situation threatens them with bankruptcy. In France and Spain, fishermen went on strike to protest higher fuel costs for the operation of their vessels. In Europe, where the price of gasoline has been about double that in North America, the gas mileage of the European auto fleet is approximately twice that of its North American counterpart. The price of fuel, to which is added the high price of toll roads in many countries, has already dramatically altered the driving habits of Europeans.

In Asia, as markets for automobiles have expanded rapidly, an Indian manufacturer has launched the world's lowest priced automobile. To fuel its vehicles and to keep its industries humming, China has entered into deals with petroleum producing countries in Latin America, Africa and the Middle East, heightening its growing global rivalry with the United States.

In Brazil and the United States, in addition to other countries, the production of bio-fuels has added appreciably to the rising price of food.

Inextricably linked were the global petroleum and food crises and these drove the necessity to transform systems of transportation in virtually all regions of the world.

In Canada, what is needed is not a piecemeal approach to the transportation revolution, but an overall plan. The risk is that Ottawa will simply hand out money to the Big Three auto makers once the Americans have decided on the scale and terms of their bailout plan. All that does, at best, is to buy us a share of North American auto production and jobs.

Canada needs to be involved in designing and building the vehicles we need for the new age in which we live. Auto manufacturers, auto parts producers, other manufacturers, the Canadian Auto Workers, transportation specialists, municipalities, provinces and the federal government need to go to work on the new transportation plan. Of necessity, the transportation plan will have to be dovetailed with new plans for the design of our cities and urban transit systems.

The future of airlines in Canada, and of airports, needs to be dovetailed with the development of passenger rail service for the 21st century. One obvious idea, long-discussed and long-overdue, is to construct an intercity high speed rail system with dedicated lines to service the Quebec City to Windsor corridor to include services to Ottawa. A high speed line between Edmonton and Calgary ought to be in the works as well. Increasing the emphasis on rail and decreasing the number of short-haul flights is essential to save energy and move toward a green transportation system.

We have the design and manufacturing capability in Canada. Such a project will create thousands of jobs. This is both a stimulus project to create employment in the near future and an investment in reconstructing our transportation system to make it more cost effective and less polluting.

Let’s think big as we plan how to spending tax dollars. There is much more at stake than a struggle over which party or parties will hold office in the next couple of years.


My Cat Knows Better said...

The issue of transportation is clearly one that is under the radar of most of our political elite. Witness the continuing destruction of the rail links throughout the country, many of the old railway rights of way being converted into hiking trails, and the expenditure of billions of dollars to four-lane highway 400 throught the Cambrian Shield to Sudbury. On most days one can drive the completed sections without scarcely seeing another vehicle for miles. This is a project that is clearly out of step when the world is looking at a peak oil crisis.

ml johnstone said...

Thanks again, monsieur.
Trains are still the best
In 26 minutes a person can get from Coquitlam to Waterfront in downtown Vancouver. A beautiful quiet, clean,very comfortable ride with beautiful scenery. But only available at morning and late afternoon rush hour.This Westcoast Express should be running everyday from early am to late pm.By car, depending on congestion, its about an hour. By bus, 50 minutes.
It is the stupidest thing we do. Get in these sinking, noise producing tanks to move a few pounds of flesh. And pick up a plastic bagful of groceries spending 20 minutes to find a parking spot closest to the store.
47,000 Americans kill each other and themselves at a cost to society of $269 Billion. This doesnot include the cost of roads and maintenance. $65 Billion goes for police surveillance and road patrol.
$25 Billion for advertising paid out by the big 3. These big 3 spent much time and lobbying to convince people to forsake the rail for another or more of their wares.
Now we can't see the people for the cars.
Iraq is building a carfree city. Others are lobbying for their cities to be carfree.
Was it the Mulroney era that killed our rails, our grain elevators and hence a big piece of our national identity?
To not participate in the madness, last year I got an electric bike and I take public transit or walk the talk.

the regina mom said...

I'm so envious of you folks with train transport. Here, in Regina, we have no train service. If I want to go by train, I'll travel first by bus or car to Melville, 90 mins from here. There are rumours that the old tracks the passenger trains once traveled from Regina to Saskatoon are being removed. What has been done to public transport in the name of "efficiency" is despicable.

ml johnstone said...

I gre up in rural Saskatchewan along that old #11 hiway. We loved the rain. It was our connection to the world outside. As teenagers we took the train to the big city, Regina,to shop.
Later, when I attended university in Saskatoon, I went home on weekends by train. We crossed Canada on the rails.
We counted the box cars. They took our grain. All that labour to put in the rails. Now it costs three times as much on VIA. No respect for our heritage. Thanks to General Motors. The car habit is killing us and our kids. Biggest cause of death for youth: auto accidents.
This is the best article I have read in the past weeks and maybe years. I hope it stimulates the minds of our MPs.

rgl said...

I have recently spent two years in China where Canadian technology (Bombardier) is used to ensure a high speed train service servicing transport between major cities and a number of minor cities in between. Imagine trains travelling 200+kmph between Ottawa-Toronto-Montreal-Qu├ębec and Winnipeg-Regina-Saskatoon-Calgary-Edmonton. It's doable as it is already being done in China. I agree that this is the direction a stimulus package should be going. I don't know if corporate welfare handouts from our government to the big three is the way to go forward.


joeyhall said...

I have dreamt of a bullet train crossing the country for years. I would then be able to visit family and friends without going into debt. Not overstay my welcome as it would take no time at all to get home here to Ontario.
The jobs that would be created, just making the line would employee enough people that we wouldn't be in this economical fix.
Yes we would probably owe on it but then. I owe on my car and it is not a crime, so why is it a crime for the government.
When in return the country would be united as it never has been before.
Imagine people making the trains, building the rail, small towns actually getting goods and services.
We could actually care about other provinces doing well because we would then understand how much we all really do depend on each other.
And it would be green. Enough said.
Not really, but I am but one person and according to the government I don’t count. Thanks Mr. Harper, as a Canadian I really need to feel like my vote or ideas don’t mean a damn thing to you.
Just your bottom line, but then you are not and never have been working class, or worked with the poor and sick. It’s all image to you well, I believe most Canadians would rather the image be projected on to us as a people who don’t want to be the country that saved itself into the poor house. Some times making the country better is better then a balanced budget. We’ll make the money back we always do.

Anonymous said...

Prof. James:
The government has just created a commmittee of wise guys to advise it on the economy. Predictably, its members are all neo-cons: former B.C. finance minister Carole Taylor, businessmen James Irving, James Pattison,a car dealer, and University of Calgary professor Jack Mintz who is the former president and CEO of the C.D. Howe Institute. Surprise! Surprise!
Why doesn't the NDP put together it's own committee -- I nominate Jim Laxer -- at least then the party will have something to say when the budget comes down and thereafter?