Steady as she goes: Data show the economy grew just as fast under the BC NDP as it has since under the BC Liberals

* This is the first segment of a four part analysis of BC’s economic performance under the BC NDP government(s) in the 90s and the BC Liberals government(s) since. The summary page can be read here. 

GDP

Among the most common starting points for evaluating the performance of an economy is a look at annual gross domestic product (GDP), which (roughly speaking) measures the value of everything an economy produces in a year. The faster GDP grows from year to year (after accounting for inflation), it’s claimed, the ‘better’ the economy is doing. Even if we accept this premise, it’s hard to know how ‘well’ an economy should be doing, though.

As I mentioned above, comparing one province to another–or to the country as a whole–is by no means ideal. But it’s a start. I went to Statistics Canada to get some GDP data (Table 384-0038). I compare BC’s real annual GDP growth rate to Alberta, Ontario, and Canada as a whole (also showing the simple difference between BC’s growth rate and the others in the right-hand chart).

Growth in Final Consumption Expenditure, Chained (2007) Dollars. Data sourced from Statistics Canada (Table 384-0038).

Growth in Final Consumption Expenditure, Chained (2007) Dollars. Data sourced from Statistics Canada (Table 384-0038).

BC’s economy was booming during the BC NDP’s first half-decade in government.

Hmm. BC’s GDP growth seems less volatile than the other jurisdictions since 1991, typically growing between 2% and 4% per year. Over the first half of the BC NDP’s time in office the Province’s economy grew faster than did those of Alberta, Ontario, and Canada as a whole, but slower from 1997-2001. Under the BC Liberals the Province has been pretty average, save for a relative boom from 2005-2007 (before the global financial crisis hit) and another quite recently. Over both parties’ time in government, the economy grew at the same average rate.

It’s worth remembering a few things, though. First, the Asian financial crisis hit in the middle of 1997, rocking the economies of those countries. More than any other Province, BC’s economy was and remains linked to Asian economies, meaning disruptions across the Pacific had knock on effects in BC beyond government control.

Take visitors from Asia, for example. Since 1992 (the first year for which Table 427-0006 records numbers for BC), total visits from Asia to BC have been fully 50% of the total to all of Canada. Yet the size of BC’s economy has averaged only 13% of Canada’s.

Annual visits from Asia, % change.
Data sourced from Statistics Canada Table 427-0006 (April 2017)

More than any other Province, BC’s economy was and remains linked to Asian economies. As the Asian financial crisis hit, growth in visits from Asia suddenly went from positive to negative double digits, shocking the BC tourism industry and the Provincial economy.

As the Asian financial crisis hit, in 1997, growth in visits from Asia suddenly went from positive to negative double digits, shocking the BC tourism industry and the Provincial economy.

Canada as a whole saw an even greater relative decline in visits from Asia that year, but the impact on the BC economy was substantially greater because of the relative importance to the BC economy. This isn’t just my own speculation: Moody’s noted the impact of the Asian financial crisis on the Province in their May 2000 rating report for BC.

An additionally important thing to note is that from 1997 until 2015 Alberta typically grew faster than everywhere else. This growth was, of course, driven by the oil boom… which is why the Albertan economy fell so badly in 2015, when the world price of oil collapsed.

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Resource dependent economies can rise and fall with world commodity prices regardless of what governments do.

This is instructive. Resource dependent economies can rise and fall with world commodity prices regardless of what governments do. In fact, the better part of the BC NDP’s decade in power was accompanied by a pretty dismal period* for global prices of coal and copper, which were then and remain some of BC’s most valuable mining commodities*. Conversely, the BC Liberals enjoyed an incredible commodities boom* over their first decade in power (putting aside the immediate effects of the 2008 financial crisis).

Despite these factors–the Asian financial crisis, commodities prices, and the global financial crisis, both parties presided over average real GDP growth of just under 3% over their respective periods in power. So… how again was it that the BC NDP mismanaged the economy?

GDP per Capita

We want to know how well a typical person is doing

The working age population grew enormously in the years prior to 1997. The massive surge in the population dampened BC’s GDP per capita growth even as the economy outgrew its peers in real terms.

GDP growth isn’t a great way of measuring how well people in an economy are doing. GDP per capita (per person in the economy) is often touted as a better measure because, it’s said, the metric is more suggestive of how well a typical person is doing in an economy. China’s economy, for example, is second in size only to that of the US, but it has more than four times as many people. So depending on how you measure prices (US or Chinese prices), Chinese GDP per capita is less than one sixth that of the US.

I supplement the GDP data with working-age (18-64) population data (Table 051-000, which I plot below in the graph on the right). The relative (to other jurisdictions) growth rates of GDP per capita are pretty similar to the GDP figures above, though compared to those figures it looks like BC may have performed a little worse relative to the other jurisdictions during the BC NDP years, and a little better during the BC Liberal years.

Final Consumption Expenditure per Capita, Chained (2007) dollars. Data sourced from Statistics Canada (Tables 384-0038 and 051-0001)

Growth in Population Aged 18-64. Data sourced from Statistics Canada (Tables 384-0038 and 051-0001)

But that doesn’t really tell us anything, because the working age population grew enormously in the years prior to 1997. Those were largely economic migrants from other provinces moving to BC to look for work. Relative to the rest of Canada (and obvious from the real GDP growth graph above), BC’s economy was booming during the BC NDP’s first half-decade in government. The massive surge in the population dampened BC’s GDP per capita growth even as the economy outgrew its peers in real terms. The BC Liberals have never had to deal with that sort of population growth, making their GDP per capita growth figures look relatively flattering despite pretty consistent real growth over both parties’ time in office.

The claim that the BC NDP mismanaged things seems pretty empty so far

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Growth in both GDP and GDP per capita was equally impressive under the BC Liberals and the BC NDP

So neither GDP nor GDP per capita growth impressed more during the BC Liberal time in power than they did under the BC NDP. But maybe those aren’t the metrics people are thinking of when they they ‘remember’ the bad times. Maybe what they’re referring to is something that better indicates how well-off is a ‘typical’ person in an economy. There are a lot of different ways to try to measure this; I next look at the labour market: unemployment, wages, and hours worked.

 

Detailed analysis, Part 2: The Labour Market