CAW and Currency Rates

May 11th, 2007

Today, the CAW is calling on all members to “bring public awareness of manufacturing job losses.” They are marching in Kitchener, Ingersall and Oakville. The latter group will bus themselves to a Scarborough Town Centre and march to the Collins and Aikmen plant scheduled to close in July.

One of the CAWs bugaboos is the high Canadian dollar, which they claim is driving out exporters. I would argue their problem is the opposite, the low dollar of the Cretien era. While exporters and the unions loved the low dollar, and claimed it was driving growth through the 90’s, it was really driving the present manufacturing contraction.

Money’s value is determined, like any commodity, through supply and demand. If demand goes up for money, the price of it rises. Demand goes down, supply increases and price goes down. If you go to Florida, before leaving you go to the bank and convert some Canadian money to American money. You have added to the supply of Canadian funds and to the demand for American funds, thus lowering the value of the Canadian dollar vs. the American dollar. Now your $2,000 is insignificant, (remember the Bank of Canada trying to stave of dramatic decreases – and failing – by selling $50M US?), but what if you are a manufacturer?

Manufacturing plants spend hundreds of millions investing in their plants. They do a cost benefit analysis for a project and, if they see a future in a given location, they upgrade/improve/invest in their plant. In the 90’s everybody was building like mad, but not investing. Canada’s manufacturing facilities have fallen behind the rest of the world. Changes to manufacturing have been drastic the last 20 years, and manufacturers have not been investing in Canada. The result: loss of jobs now.

So to Buzz and the CAW. Before you blame the strong currency on your woes, understand that the low currency you so love is the long term root cause for the present problem.

CAW, Economic Fundamentalism, Wasted Away Again in Buzzistan

  1. Joanne (True Blue)
    June 6th, 2007 at 11:36 | #1

    Interesting analysis, Brian.

    The bottom line is that unions have little to no bargaining power left.

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