EDITORIAL PAGE — Payoff time

The Great Depression of the 1930s still evokes images of soup lines, stock-market casualties, bankruptcies and mortgage foreclosures, topped off by one of the worst droughts in Canadian history.

Canada’s then prime minister, Richard Bedford Bennett, tried to play down the economic crisis. Later, as public discontent grew, he started a modest public works program that even he acknowledged was merely a palliative. He believed — as many have, before and since — that economic salvation could be found in protective trade tariffs. “We have been content since 1922 to send out of Canada into other lands, free, the resources of this country and buy back from them the manufactured materials. Thousands in the United States have been given employment fabricating Canadian goods. They’ve got the jobs and we’ve got the soup kitchens.”

Fast forward to the 1990s where, surprisingly, this view persists. Social activists and labor leaders argue, albeit no longer persuasively, that Canada’s high unemployment rate could be slashed by ending free trade and increasing government intervention in the marketplace.

On the other side of the coin are economists and fiscally conservative governments — including Canada’s ruling Liberals — who argue that free-trade initiatives and tight controls on government spending are about to pay off, big time. The evidence suggests they may be right.

International trade has become the backbone of the Canadian economy, with inflation-adjusted exports rising $2 for every $1 advance in national output since the decade began. Foreign sales now account for 37% of gross domestic product, compared with 25% in 1990, making Canada the most trade-intensive economy of the G-7.

Canada is on-track for a record $37 billion trade surplus this year, ten times the level five years ago. Further growth and improved competitiveness are expected to push this to $40 billion next year.

These numbers do not just reflect sales of logs, minerals and other primary resource products. The transportation sector is benefiting from record assemblies and increased sales. Exports of telecommunications equipment and software are outpacing the growth in total shipments by a wide margin.

Bennett would probably be amazed at the variety of resource-based products, such as petrochemicals and fertilizers, which are now adding value and increased depth to the manufacturing sector. And he would be delighted to learn that more than half of Canada’s manufactured output is destined for export — largely to the buoyant U.S. market.

While all this is small comfort to the unemployed, there is a light at the end of that tunnel. Private-sector employment is trending higher, with manufacturing accounting for most of this year’s job gains. The private sector has created roughly 150,000 jobs in the first nine months of this year, offsetting cuts in the public sector by a factor of more than three-to-one. Investment plans are being revved up and reduced interest and inflation rates are putting more discretionary income in the pockets of consumers.

Government’s fiscal performance is improving, deficits are being wrestled down and borrowing is shrinking dramatically. If the present trend continues and governments stay the course, the end result will be lower taxes, as well as increased protection of health care, education and essential social services.

While not everyone agrees on the merits of free trade and open markets, history shows that, since the dawn of time, every great nation in the world has been a trading nation.