◼ ECONOMICS Bloomberg Businessweek March 2, 202025DATA: OFFICE FOR NATIONAL STATISTICS, BLOOMBERG ECONOMICS
● To kill a pipeline project, demonstrators are
targeting transport links, paralyzing industryShutting Down
Canada
The long-simmering conflict between Canada’s
indigenous people and its leading industries has
boiled over again, but this time it’s not just delaying
a pipeline or halting a logging project—it’s threaten-
ing to hit an already shaky economy.
The latest flare-up started in January, when
members of the Wet’suwet’en First Nation in British
Columbia blocked roads to try to halt construction
of the Coastal GasLink natural gas pipeline through
their lands. In recent weeks, protesters showing
solidarity with those Wet’suwet’en have blockaded
rail lines, ports, and other key economic arteries.
The demonstrations have backed up cargo ship
traffic, temporarily halted the nation’s passenger
rail service, 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,
are taking on new targets every day. The disrup-
tions may knock first-quarter economic growth
in Canada to a 1.5% annualized rate, down from
a previous estimate of 1.8%, according to Capital
Economics analyst Stephen Brown.
Prime Minister Justin Trudeau, whose LiberalTHE BOTTOM LINE Johnson is prepared to depart from his
party’s fiscally conservative tradition to make good on his promise
to “level up” Britain’s struggling regions.law, Sunak could easily relax them if he wants to
increase spending further or cut taxes. The timing
for a fiscal stimulus is propitious: The cost of
borrowing for investment has never been cheaper,
with yields on 30-year U.K. bonds now below 1%.
Johnson inevitably invites comparisons
with Donald Trump. Both rode waves of pop-
ular discontent and they stand outside the
fiscally conservative 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 appeasethe antigovernment 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.
Growth in Britain is expected to slow this year
but rebound in 2021 and 2022, with robust gov-
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”