Ignatieff and Harper fail report card test

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Sure, Michael Ignatieff whipped up election panic this week over Stephen Harper's accountability summary, but let's be clear: the Tories and Liberals get nothing but failing grades on their report cards.

The exam is on the economy, and they are both way off the mark.

They'd better bone up, because like it or not, we are in a transformational time. For god's sake -- we just acquired a 12 per cent ownership stake in General Motors and paid inconceivably big money for it. Why? Head-in-the-sand denial of new realities and lack of innovation did in the industry.

All the indicators are pointing in a new direction. But, no, Ignatieff and Harper are like a pair of old-school auto execs. If they don't take off their blinders and hop on the innovation bandwagon, we'll soon be even further up shit creek without a bailout.

Here's a clue about the new politics we need: it isn't just how much we spend; it's what we get for our money that will make all the difference.

Harper's little progress report was right about one thing. The deficit itself isn't the really big problem. I don't get why Ignatieff is harping on it, because it's due mostly to Liberal government surpluses that Canada's debt relative to the economy as a whole (GDP) is on the low side.

But because we live in a time of rapid wealth-destroying change, if Canadians get nothing of real future value for all our deficit dollars, the "recovery" will be as problematic as the recession.

Why would Ignatieff let Stephen Harper pull off his almost laughably evasive progress report last week without challenging the basic framework of the whole enterprise? Iggy even had the governor of the Bank of Canada, Mark Carney, making it clear that Harper is in la-la land with his emphasis on "signs of stabilization" and his omission of all other relevant negatives.

Carney also mentioned a fundamental issue that Harper and Iggy both ignore at our peril. "The recent sharp increase in the value of the Canadian dollar, if it proves persistent, could fully offset recent positive developments in financial conditions, commodity prices and confidence," he said on June 11.

Adding fuel to the loonie-on-fire has been the astonishing rise in oil prices that's seen the cost of a barrel more than double since March, from $33 to $70-plus. This is despite the fact that demand for oil in the recession is still low. What will happen when demand actually picks up? Last July's devastating price of $147 a barrel seems a lot closer than it did a month or two ago.

So here is the conundrum. Once the economy sparks up, signs are pretty clear that the price of oil will rise even more. Carbon is going to yank on our cost chain big time no matter what happens. And that isn't just climate science.

What does all this have to do with innovation? Stay tuned. Former CIBC World Markets chief economist and energy expert Jeff Rubin has been studying the energy market for two decades. In his new book, Why Your World Is About To Get A Whole Lot Smaller, he does the new-economy math. The book isn't about the coming penalization of goods produced by dirty energy or the fact that our continued existence requires us to reduce greenhouse gases, both of which are indeed true.

He says there's just less of the easy-to-get stuff with every passing year. It's "the end of cheap oil."

What this means is that recovery will bring an economy-busting energy crisis driven by escalating fuel costs in everything we use, eat or depend on. This double bind is a far more devastating problem than Ignatieff's scattershot set of questions brings to the debate.

Yes, EI is critical, but this is no time for tinkering. Ignatieff only highlights his inexplicable commitment to issue avoidance by asking Harper how much stimulus money has been spent rather than how it's being spent.

Stimulus money that helps us get to the using-less place will be the source of our future prosperity. In a world without cheap oil, those who use the least will do the best.

This is not obscure, alternative thinking. Obama's doing it. But neither Harper nor Ignatieff sees the possibilities right in front of their noses.

Take GM, for example. How interesting it is that, along with the Yanks, our countries have ended up owning what we think is a car company just when we need to reinvent the way we power ourselves through life.

But what if we find a way for GM to produce energy solutions as well as cars? There's lots of hand-wringing over how electric cars will increase the need for coal-fired or nuclear-generated electricity. But electric car visionaries have long proposed that in the long term electric cars will have solar panels on their roofs and every sunny day will sit plugged in, soaking up the rays and in their millions delivering energy to the two-way grid.

This may not end up being the exact answer to the future of GM. But it is the direction we need our government to push the company to explore. Yes, in the short term, develop a stay-in-business strategy. But at the same time, why not invite us, owners and customers, to engage in a process that opens the whole company to the best minds everywhere?

We Canadians and our American partners could help create a great company that, through commitment to the social goal of carbon-free innovation, will pay gigantic dividends on the investment we made this year. These are the win-wins we need from government spending.

The saddest thing about this political report card saga, which will play out in a House of Commons vote tomorrow (Friday, June 18), is how far both parties are from the discussion we need to be having.

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