◼ ECONOMICS Bloomberg Businessweek March 2, 202025DATA:
OFFICE
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STATISTICS,
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ECONOMICS
● Tokilla pipelineproject,demonstratorsare
targetingtransportlinks,paralyzingindustryShutting Down
Canada
Thelong-simmering conflict between Canada’s
indigenous people and its leading industries has
boiledover again, but this time it’s not just delaying
a pipelineor halting a logging project—it’s threaten-
ingtohitan already shaky economy.
Thelatest flare-up started in January, when
membersof the Wet’suwet’en First Nation in British
Columbiablocked roads to try to halt construction
oftheCoastal GasLink natural gas pipeline through
theirlands. In recent weeks, protesters showing
solidaritywith those Wet’suwet’en have blockaded
raillines,ports, and other key economic arteries.
Thedemonstrations have backed up cargo ship
traffic,temporarily halted the nation’s passenger
railservice, and caused more than 400 freight train
shipments to be canceled, delaying deliveries of
oil,grain,propane, and consumer goods. The pro-
testers,who use the hashtag #ShutDownCanada,
aretakingon new targets every day. The disrup-
tionsmayknock first-quarter economic growth
inCanadato a 1.5% annualized rate, down from
a previous estimate of 1.8%, according to Capital
Economics analyst Stephen Brown.
PrimeMinister Justin Trudeau, whose LiberalTHEBOTTOMLINE Johnsonis preparedtodepartfromhis
party’sfiscallyconservative tradition to make good on his promise
to“levelup”Britain’s struggling regions.law,Sunakcouldeasilyrelaxthemif hewantsto
increasespendingfurtherorcuttaxes.Thetiming
fora fiscalstimulusispropitious:Thecostof
borrowingforinvestmenthasneverbeencheaper,
withyieldson30-yearU.K.bondsnowbelow1%.
Johnson inevitably invites comparisons
withDonaldTrump.Bothrodewavesofpop-
ular discontent and they stand outside the
fiscallyconservative traditions of their own par-
ties. The fiscal boost being prepared in the U.K.
could exceed that in the U.S. in 2018, which the
International Monetary Fund estimates at around
1.3% of GDP.
But there are key differences. The Trump stim-
ulus cut taxes more than it increased spending,
and the effect was immediate but short-lived.
Officials had hoped businesses would use their
tax savings to increase investment, but so far this
hasn’t been the case. That may be due partly to
uncertainty created by Trump’s trade wars, as
White House Chief Economist Tomas Philipson
recently acknowledged.
Johnson’s budget, with its emphasis on cap-
ital spending, may take longer to feed through.
Infrastructure projects take time to come
onstream, and some proposals could fall by the
wayside. However, investment ultimately delivers
a greater economic impact than tax cuts, not least
because wealthier individuals often save rather
than spend their tax windfalls. Infrastructure
spending can also eliminate bottlenecks and ele-
vate the growth potential of an economy in a more
lasting way.
“The debate around fiscal policy in the U.K.
was turned on its head in the recent election,” says
Dan Hanson of Bloomberg Economics. “A discre-
tionary loosening of about 1.5% GDP in the com-
ing fiscal year, which is possible if the government
manages to find enough shovel-ready investment
projects, would have been unthinkable under
recent Conservative administrations. And with
Sunak rumored to be considering ditching the fis-
cal rules he inherited from his predecessor, the
giveaway could be larger still.”
The end of austerity in Britain comes amid
a global debate over the role of fiscal policy. A
decade of crisis-fighting has left central banks
depleted, and they’ve been pleading with pol-
iticians to use whatever resources they have to
pump money into their economies. The call has
so far fallen on deaf ears in Germany, whose devo-
tion to budget rectitude is unparalleled in Europe.
France, on the other hand, has reaped clear ben-
efits from loosening its purse strings. The tax cuts
President Emmanuel Macron enacted to appeasetheantigovernment Yellow Vest protesters proved
well-timed, stimulating the economy in 2019, as
the manufacturing recession took hold in Europe.
Growth still slowed, but France’s 1.3% was better
than the euro zone average of 1.2% and more than
twice Germany’s rate.
GrowthinBritainis expectedtoslowthisyear
butreboundin 2021 and2022,withrobustgov-
ernment spending and investment. Johnson is
hoping the momentum extends as far as the next
general election in 2024, when voters will decide
whether the new prime minister has lived up to
his promises. �Andrew Atkinson“This is a dress
rehearsal for
illegal protests
on pretty much
any major
project”