The Couillard Government: A Mid-Term Review | Part I: The Mediocre Failure

January 1, 1970

6-minute read

After two years of Liberal rule in Quebec under Premier Philippe Couillard, it’s time for a mid-term review. Let’s look at empirical data to see how things have changed.

I've prepared a review based on criteria that the government itself values and taken a look at how the indicators that it cares about have fluctuated. In the second part of this blog post, I will attempt to review other indicators that I find more useful in assessing a government's performance.

To sum up the findings in this first part, the Couillard government's performance is very average. Lack-luster and without any surprises, it also comes with no catastrophes. According to the government's own top indicators, its current record is banal and ordinary. Things aren't doing too bad, but they aren’t going so well either.

 

Growth

Like pretty much all governments worldwide, the government of Quebec worships gross domestic product (GDP) growth, which is thought to be the ultimate indicator, a direct representation of collective wealth. We previously published a brochure questioning that representation. Let’s nonetheless take a look at what has happened to GDP growth since the Liberals took power in Quebec.

 

Chart 1: GDP-Growth Rate, Quebec, 2006 to 2016 (per annum, %) Source: Institut de la statistique du Québec (ISQ), Interprovincial comparisons, “4.1 PIB au prix du marché”.

 

Over the last ten years, the average has been a 1.4% growth rate per annum. If we exclude 2009, the only year that saw a decline in GDP, the average rate sits at 1.6% per annum. When the Liberals took power, the 2013 data had just been released: 1.2%, a very low growth rate, but still an improvement on that of 2012.

In 2014, the growth rate fell within the ten-year average, hitting 1.5%. Can the Liberals, who had just gotten into office in April, take any credit? It’s hard to tell. In 2015, however, the growth rate was back down to 1.1%, the second-to-worse result (excluding the year that the crisis hit). Looking forward, it seems that this year we will be back in the average.

To be honest, I’ve always thought it was unfair to judge a government on an indicator as strange and vague as GDP growth: its fluctuations have very little to do with government action (or only very indirectly). Nonetheless, the government itself considers it to be of the upmost importance. We therefore have no other choice but to admit that the last two years' record is far from stellar: one bad year, one no better than average.

 

Employment (or lack thereof)

How did Quebec's unemployment rate fare in the last two years? The next chart shows how it's evolved over the last ten years. Please note that the data is seasonally adjusted, meaning that seasonal variations have been eliminated to reveal the underlying trends.

 

Chart 2: Seasonally-Adjusted Unemployment Rate, Quebec, January 2006 to May 2016 (%) Source: Statistics Canada, CANSIM, Table 282-0087.

 

I’ve included a trend line in the graph. It shows a slight mid-period increase caused by the crisis. Nonetheless, the most significant trend over the last ten years has been that unemployment rates have remained fairly stable, fluctuating between 7% and 8%.

The average unemployment rate across the entire period sits at 7.7%. When we remove the crisis period, it barely changes: it comes at 7.6%. Such a small difference between the two averages clearly illustrates that the indicator varies only slightly over the course of the last decade. And where does the mean unemployment rate stand under the current government? At 7.6%. It's neither catastrophic nor excellent. It's just very average.

The problem is that the government promised to create 250,000 net jobs over the course of its term. It's quite an ambitious commitment, and the opposition is more than happy to throw it back at the government. Let’s therefore look at the data on job creation, using the most reliable source: Statistics Canada’s Survey of Employment, Payrolls and Hours.

If we just count plain and simple the number of jobs that there were in April 2014, when the government took power, and compare it with the data from March 2016 (the latest available numbers), we find that 9,686 jobs were created in the last two years. This comparison however is unfair because of seasonal variations. Let’s instead compare the average number of jobs in January, February and March 2014 with the average from the same months in 2016. The result is much better: 25,612 jobs created. But it’s still a far cry from the 250,000-job target.

It therefore seems as though, at the half-way mark, the government has only reached 10% of its goal. Things could always change drastically, but job creation would need to be stronger than it has ever been over the last ten years. Indeed, I did a quick search and found that, between 2006 and 2008, around 92,000 jobs were created, which seems to be the best performance we've had in the last ten years. I might have overlooked some piece of information, but creating 225,000 jobs within only two years —as is needed to meet the objective— would be very miraculous indeed.

In short, we can safely claim that, regarding employment, the province of Quebec is treading water for the time being. We are doing neither better nor worse than before, we’re basically just in the same position. Given the Liberals’ promises, however, this average score can only be understood as proof of how ineffective the government’s strategy has been.

 

Private investments

The government of Quebec likes private investments because, according to orthodox or mainstream economics, these investments stand at the heart of growth. That’s why, with each budget, it keeps on offering businesses tax credits and reductions as well as grants and subsidies. It believes that businesses will use this decrease in tax payments to invest capital, to increase productivity, to create jobs, and to increase collective wealth.

Chart 3 shows how private investment varied in Quebec over the course of the last decade. Please note that I used only data on capital investments because data on repairs is not available for 2015 and 2016 yet.

 

Chart 3: Corporate Capital Investments, Quebec, 2006 to 2016 (in millions of 2015 current dollars) Source: ISQ, Capital and repair expenditures by industry (NAICS), all of Québec, 2010-2016.

 

Over the entire period, average private capital investment was $37.7 billion per year. As the trend line clearly shows, during the current government’s term, private investment was far lower at $34.9 billion, i.e. 7% below the average for the entire decade. It’s worth noting that, if the situation ends up being worse than projected in the ISQ’s intentions for 2016, the gap between the government’s performance and the average for the last decade will be even greater.

All these initiatives to assist companies are really working, aren’t they?

 

Exports

Another key factor to measure an economy's health, according to orthodox economics, is exports. Are our businesses performing well enough to ship their products all around the world and for us to receive financial flows that allow us to generate jobs and wealth? Chart 4 shows Quebec’s exports since 2007. This graph starts one year later than the previous ones because data for 2006 was too time-consuming to retrieve for a mere blog post.

 

Chart 4: Company Exports, Quebec, 2006 to 2016 (in millions of 2007 current dollars) Source: ISQ, Databank of Official Statistics on Québec, International trade, “Seasonally adjusted monthly international exports by sections of the North American Product Classification System (NAPCS), current dollars, Québec”.

 

The current government is doing much better in this regard, though the omission of 2006 in my calculations probably plays in its favour. Quebec’s exports are doing better ($6.2 billion per year on average) than they were during the period spanning 2007 through to the beginning of 2016 ($5.5 billion per year on average).

If the government’s performance stands out positively on this issue, we must qualify one point and ask a question. Renewed strength in the U.S. economy (Quebec’s top partner outside of Canada) since 2013 has played an important role in the increase in exports during the current term, and the government of Quebec itself had no part to play in this development. Furthermore, since the other economic indicators haven’t moved, could it be in fact that exports are compensating for lesser economic activity elsewhere (in government spending, for instance, constrained by cuts)?

All in all, out of four, we’ve seen two average scores (GDP growth and unemployment), a clear failure (investments) and a single success (exports, a success that must nonetheless be qualified). An ordinary, bland, and unsurprising record according to the government’s own standards and priorities. Given the wonders that were promised (a “Liberal effect” that would stimulate growth, the creation of hundreds of thousands of jobs, a recovery in private investment), these “average” scores must actually be read as a resounding failure of the current economic strategy.

In my next blog post, I will present this government's mid-term review as drawn from indicators that are, in my opinion, much more interesting than those used in this post.

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