Stoking Political Rhetoric Can Often Hurt the Economy

I returned from a short vacation last week, which took me partly through the United States. That always means that you have to clear customs, something that we do often here in southwestern Ontario. However, this time was different because American TSA agents, who were not being paid because of the government shutdown in the United States, were questioning me. I must admit it was kind of a strange feeling going through the lines to be questioned by people who I knew weren’t being paid. Some of the Americans in line were openly offering sympathy to their plight.

I will not even attempt to understand the situation. The American political system is a bit of a mystery to me. I told some of the Americans I was with, in Canada our government never shuts down, in fact, it usually gets bigger and bigger and everybody gets paid. I don’t know if the Prime Minister could shut it down even if he wanted to. However, in Canada we do have examples of government workers not being paid, but it has more to do with the failed Phoenix payment system than any political rhetoric.

That payment system is a billion-dollar problem, which seems to only get worse. In the American case, it has much more to do with political rhetoric about building a wall on the southern border. On one side of the ledger we have the President and many of the Republicans versus the Democrats who see things much differently. I do not know what is going to happen but it’s increasingly affecting the economy. It is also affecting the many American farmers reading this, who receive payments concerning crop insurance and farm loan programs. There are also a myriad of other things that the US Department of Agriculture does that are not being done. Of course last week we missed the USDA’s final production report on the 2018 crop.

The political rhetoric in the United States regarding this issue is rising to the point where the President canceled a last minute a foreign trip for Democratic leaders. At the same time, some of the Democratic leaders were suggesting the State of the Union address be delayed because of lack of security. Of course we all know the political rhetoric concerning the southern border wall. All of this is a great example of something that can affect our economy if the political rhetoric grows too shrill. We will hope for some type of resolution.

The government shutdown in the United States may be growing shrill, but it almost pales in comparison with regard to the current goings-on regarding Brexit. Last week British Prime Minister Theresa May’s plan on leaving the European Union was defeated in Parliament. This was followed by a no-confidence vote, which she actually did win to survive another day. It opens up the specter of a hard Brexit exit, where there is no plan. It is almost hard to imagine all of this happening from simple political divisions amplified a couple years ago followed by a referendum on leaving the European Union. I’m sure in retrospect many people in Britain would’ve preferred not to get so emotional about an economic issue, which is exploding around them.

This has great agricultural implications going forward beyond the British farmers looking for markets for their commodities. In Canada we have a CETA agreement with the European Union, which has meant much Ontario corn has found a home there over the past two years when American corn was not welcome. With Britain uncertain or unprepared about leaving the European Union, there will be many adjustments in agricultural trade across the pond. It certainly will affect on the foreign-exchange values of the Euro and the US and Canadian dollar.

In Canada we have not been immune from political rhetoric and emotionalism getting the best of us. In 1995, we came very close to breaking apart his country, when Québec came within 1% of starting the process to leave Canada. We were not prepared for what that would mean at the time, but we need only look to Brexit now to give us some clues. It would’ve been very difficult economically for both Québec and Canada. Simply put, when people vote on an emotional issue, typical of referendums, sometimes their emotions get the best of them and bad things happen. Luckily for Canada, we whiffed on the apocalypse.

Let’s hope Britain avoids the same thing. As far as our American friends go, I’m hoping the political rhetoric cools a bit to get that government back working. Sure, I’m a bit biased as I plan to visit the US again soon. However, I’m sure there are a lot of American farmers that feel the same way. Political rhetoric at times can be colorful and entertaining. Sometimes though, it stokes division, which are hard to meld back together.