เว็บพนันบอล ดีที่สุด _w88 ทาง เข้า ฝาก เงิน _ศัพท์พนันบอล https://www.google.com//ded PEF home page and weblog Fri, 02 Nov 2018 16:39:04 +0000 en-US hourly 1 Crashed: How a Decade of Financial Crises Changed the World https://www.google.com//ded/2018/11/02/crashed-how-a-decade-of-financial-crises-changed-the-world/ /ded/2018/11/02/crashed-how-a-decade-of-financial-crises-changed-the-world/#comments Fri, 02 Nov 2018 16:39:04 +0000 /ded/?p=20018 Book Review

Adam Tooze. Crashed: How a Decade of Financial Crises Changed the World. Viking. New York. 2018

The global economic crisis is now more than a decade old, and is far from definitively behind us. Indeed, many fear, with good reason, that the recent, uneven and lethargic global recovery may soon come to an end, and that the next crisis of global capitalism could be even worse than that of 2008.

The financial crisis and resulting crisis of the real global economy triggered by the collapse of Lehman Brothers and other major Wall Street banks has already prompted the release of a small library of books. ( The best, to my mind, is Martin Wolf’s, The Shifts and the Shocks.) But Adam Tooze provides us with the first truly comprehensive account. It is the work of a contemporary historian who draws on political and economic theory to frame a compelling and disturbing narrative, and is likely to become a standard and indispensable reference.

Over more than six hundred pages, Tooze looks at the origins and implications of the financial crisis around the world, proceeding both chronologically, geographically and thematically. In an extraordinary work of scholarship, he surveys the global political economy and financialized capitalism of the pre crisis period, the unfolding of the financial crisis in the United States and Europe, the spread of the crisis to developing countries and Eastern Europe, the extraordinary response of China, the euro zone crisis and the agonies of Greece and Southern Europe, and the political implications of the crisis.

He offers a coherent account of how the crisis set the stage for the rise of right-wing populism around the world, and speculates on how the global economy may evolve in a new age of explicit and escalating rivalry between the United States and China. What is at stake is the possible collapse of the ¡°neo liberal¡± global economic and political order.

One relatively novel argument made in the book is that the global economy has to be seen, not so much as a set of discrete national economies trading with each other, as a vast ¡°macro financial¡± web of corporate balance sheets and financial flows. In such a world, states can rapidly experience an exit of capital and economic collapse without necessarily running large trade or public finance deficits, while the hegemonic power, the United States, can readily finance such deficits by virtue of the unique status of the US dollar as the global reserve currency.

Tooze does not look in detail at the underlying contradictions of the pre crisis period, but he does note the key point that growth in an age of rising inequality and redistribution of income from labour to capital was dangerously reliant upon the growth of private debt, speculative bubbles, and the recycling of global trade surpluses to deficit countries, notably from China to the United States.

He broadly endorses the view that neo liberal capitalism has been associated with ¡°secular stagnation¡± due to inadequate demand, offset only by the massive expansion of debt. As he notes, the fear was that crisis would result from a collapse of the US dollar, but instead it came from the collapse of global finance due to a massive accumulation of bad debts dispersed across the world. In response to the crisis there was, somewhat ironically, a flight to the US dollar as US government bonds were seen as the safest asset available.

Where Tooze departs a bit from the standard account is in his understanding and insistence that this was not just a crisis of the US banks, but a crisis of global and especially North Atlantic finance. Tight links between the Wall Street banks, the City of London, and the major European banks produced a global systemic financial crisis, not a crisis of so-called Anglo-Saxon capitalism as many European critics have argued. The euro crisis was also the consequence of low quality debt and speculative housing bubbles in some countries (the UK, Spain) rather than the excessive growth of public debt. Indeed the fiscal problem of countries hit by crisis in southern and eastern Europe were mainly the result of the crisis of the real economy which increased government deficits and debts, and the decision of many governments (most notably Ireland) to transfer bad bank assets to the public sector.

Building on the historical analysis of Leo Panitch and Sam Gindin in The Making of Global Capitalism, Tooze argues that the global economy has been economically and politically dominated by the United States, which remained in 2008, and remains even more so today, the only power capable of providing global economic leadership. ¡°The crisis had the effect of recentering the world financial economy on the United States as the only state capable of meeting the challenge it posed.¡± He recounts how the US Treasury and the US Federal Reserve were absolutely key to resolution of the crisis of the banks in 2008, extending liquidity (very low interest US dollar credit lines) to global and not just US banks.

Similarly, massive US government purchases of distressed financial assets to bail out the financial system through the TARP and other programs were extended from the US banks to major European and even developing country banks. Key officials like Larry Summers and Tim Geithner won the day when they argued for ¡°big bazooka, shock and awe¡± tactics to stabilize the financial system.

While there was a lot of bungling, experimentation and political resistance along the way, the US Treasury and the US Federal Reserve were indeed able to stabilize the US financial system fairly quickly by a combination of outright injections of new capital and arm twisting to force mergers. ¡°Hair cuts¡± for those who had caused the crisis by investing in high risk, low quality assets and through reckless speculation and outright fraud were modest at best.

These bail-outs have been widely criticized, with good reason, for saving financial capital at the expense of working people who had to endure high unemployment and a huge wave of home foreclosures. But the US political system, even progressive Democrats included, would not even contemplate nationalizing the banks. In that context, a viable financial system and normal credit flows had to be restored by socializing bad debts.

The alternative to bail outs was to experience what happened in the eurozone, a failure to deal with insolvent banks through ¡°extend and pretend¡± half measures which postponed an outright collapse of the banking system but without dealing with bad debt. ¡°The eurozone, through willful policy choices, drove tens of millions of its citizens into the depths of a 1930s style recession. It was one of the worst self-inflicted disasters on record.¡± Tooze argues that the euro area also effectively sidelined itself from any pretensions to global economic leadership.

Fortuitously, US leadership also extended to fiscal policy in response to the collapse of the real economy. The stimulus program of the Obama administration could and should have been far bigger and lasted far longer, as was understood by those who had learned the lessons of the Great Depression in the 1930s, but again it was much more significant than similar programs in the UK and Europe endorsed by a new global forum, the G20 as an immediate fix.. Here there was a quick return to fiscal austerity and deep spending cuts long before growth and employment had recovered, with Germany and smaller Northern European countries demanding harsh and indeed sadistic fiscal measure as the precondition for any help to heavily indebted countries. In the most troubled countries, there was a death spiral as insolvent banks became every more shaky as the real economy collapsed and interest rates soared well above those of Germany.

The euro zone as a whole failed to act until very late in the game, when the European Central Bank finally announced in July, 2012 that it was prepared to ¡°do what it takes¡± to bring down interest rates on debt denominated in euros. This failure was partly due to institutional architecture (the narrow mandate of the ECB, tight rules on fiscal policy) and partly due to German insistence that recovery had to be based on austerity and wage discipline to restore global competitiveness, without heed to the immediate consequences. Greece was crucified as a salutary lesson to others. Today, the banking crisis is far from fully resolved, most notably in Italy, public debt has reached very high levels in some countries where the crisis has hit hardest, and output has grown little above pre crisis levels while unemployment remains very high.

Toooze further notes and details that China was an absolutely key player in resolving the crisis through massive fiscal stimulus, and continued willingness to retain and expand its enormous holdings of US dollars. ¡°China’s response to the financial crisis it imported from the West was of world historic importance, dramatically accelerating the shift in the global balance of economic activity towards East Asia.¡± To give an idea of the scale, between 2008 and 2014, China built 10,000 kilometres of rail capable of running trains at 360 km per hour, in the process gaining a massive technological advantage. And health care coverage was extended from 30% to 90% of the population through expansion of subsidies and a massive construction program for health care facilities.

Tooze endorses and details the argument that the bail outs of finance, massive unemployment and fiscal austerity set the stage for a major discrediting of centre left neo liberal parties and the rise of right-wing populism in the US, the UK in the form of Brexit, and much of Europe. In the United States ¡°in the name of economic nationalism and the American dream, the right wing claimed the cause of systemic change, while the Democratic Party establishment filled the middle ground the Republicans vacated. ¡° Trump explicitly challenges the global capitalist order in the form of America first economic nationalism and rejection of global institutions like the WTO.

More widely, ¡°(s)ince 2007 the scale of the financial crisis has placed the relationship between democratic politics and the demands of capitalist governance under immense strain. Above all, this strain has manifested itself … in a crisis of the political parties that have mediated the two.¡± Moderate parties of the centre left which championed global capitalism and did little to alleviate the impacts of the global crisis on working people have paid a high political price, threatening the future of the global system as is it still exists. Social democracy in the eurozone has massively retreated as the populist right has rejected globalism and even the European Union itself in favour of economic nationalism and racial xenophobia.

Looking to the future, Tooze notes with many others that the recent global recovery has been built on the fragile base of continued growth in debt with very limited reform of global finance. Future crises are hard to predict, but are inevitable. He could, perhaps, have said more about what a stable and equitable growth model might look like. What he instead stresses, rightly, is the crisis of global political capacity to regulate the system. ¡°With Trump as president and the Republicans dominating Congress, it is an open question whether the American political system will support even basic institutions of globalization let alone any adventurous crisis fighting at a national or global level¡±

The eurozone is seemingly incapable of resolving its own problems, as not just the UK but also Italy and the right in France look to the exits. Meanwhile, ¡°China’s economic triumph is a triumph for the Communist Party. This is still the fundamental reason for doubting the possibility of truly deep co-operation with China in global economic governance. Unlike South Korea, Japan or Europe, China is not a subordinate part of of the American global network.¡±

We indeed live in profoundly dangerous times. Fortunately Adam Tooze has given us a narrative and analysis that illuminates where we have been, though he has no clear view of how progressive forces should and could re-shape the crisis prone and deeply inequitable global capitalist system created in the run-up to 2008.

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Abraham Rotstein and the Radical Decade from the mid-sixties to the mid-seventies https://www.google.com//ded/2018/10/19/abraham-rotstein-and-the-radical-decade-from-the-mid-sixties-to-the-mid-seventies/ /ded/2018/10/19/abraham-rotstein-and-the-radical-decade-from-the-mid-sixties-to-the-mid-seventies/#respond Fri, 19 Oct 2018 21:43:00 +0000 /ded/?p=20009 Remarks at a posthumous book launch of his Myth, Mind and Religion at Massey College, University of Toronto, October 2018

For more than 50 years, going back to the days of the old Department of Political Economy, Abe was my colleague in teaching and researching economic history and political economy, my intellectual soulmate, and my closest friend. I have many fond memories.

Let me go back to that wondrous decade of the sixties. This incredible book which Abe has left us begins with what he calls the Radical Decade from the mid-sixties to the mid-seventies, and takes us back to that at the end.

The drabness of he boring 50s, when the conventional wisdom took up all the available intellectual space, morphed into the exciting 60s when suddenly anything seemed possible, from the powerful preaching of George Grant in his Lament for a Nation to, on this campus, that wildest of scholars, Marshall McLuhan – with both Abe and myself participating in his famous weekly seminar.

Even the venerable Department of Political Economy woke up. Under the leadership of Abe younger members of a rapidly growing faculty created the University League for Social Reform, the ULSR, and it began to publish a series of books in Canadian political economy.

Abe became editor of the fusty prestigious Canadian Forum, restructured it editorial board, and restored it reputation as the progressive magazine of Canada’s democratic left.

Abe was a member of a group of faculty and students, including Michael Ignatieff – and myself – which organized a most successful teach-in on this campus on the War in Vietnam.

A major issue on which the orthodox economists had closed their minds was that of foreign, specifically American, ownership of the Canadian economy as the central dimension of the Canadian-American relationship. Abe, though a junior member of the economics profession, had the courage to take a critical stance. He provided intellectual support for the Hon. Walter Gordon, who compelled the Pearson government to appoint a task force to advise on foreign ownership of eight economists including Abe and myself. Our report was a Canadian contribution to that celebrated year which is being widely celebrated at the moment. We briefly brought balance to the discussion of foreign ownership.

What I am saying may sound like a retreat into medieval, even ancient history for, as we know, the neo-liberal message of Thatcher, Reagan and Mulroney was shortly to return us to the status quo of closer integration of the Canadian economy into the larger imperial American economy.

Still, the nationalist surge of the 60s, of which Abe was the resident theorist, while it abated, arguably left as its legacy a clearer sense of what constituted Canadian identity.

Now there is Trump and we could once again use a voice like Abe’s, with its radical message delivered in a moderate tone with wisdom and wit.

Consider arguably the best pun of this renowned punster: “Every dogma has its day.” Can you not hear him saying: “Hard to Trump that.”

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Is there life after NAFTA? https://www.google.com//ded/2018/10/07/is-there-life-after-nafta/ /ded/2018/10/07/is-there-life-after-nafta/#respond Sun, 07 Oct 2018 17:17:39 +0000 /ded/?p=19987  

Like all sensible folk I was myself opposed to the NAFTA at the outset, convinced that it did more for the corporations than for the rest of us. I’m still of that view.

Is it possible that the biggest change that is now taking place is in the name itself, from NAFTA to USMCA- perhaps done so that Trump can boast that he delivered on his promise to get rid of NAFTA? A number of commentators on both sides of the CanAm border have written, in the words of John Ibbitson in the Globe and Mail, that the USMCA is “essentially the old NAFTA tilted more in America’s favour.” Is that all there is?

Firstly it’s quite a tilt – like the US keeping a special tariff on aluminum and steel from Canada, on the grounds, believe it or not, of national security. Talk about absurdly fake facts.

Let’s go back to the beginning in the late 1980s. US and Canada had just signed the Free Trade Agreement when, with the ink hardly dry, the US insisted on adding Mexico. We thought we’d made a one-on-one deal, a special arrangement that got us inside what our government thought, wrongly as it turned out, was a rising tide of American protectionism, which has now happened a quarter of a century later, and we waited almost a year to join this new round of negotiations. This initial lack of enthusiasm has not stopped us, from that time forward, peddling the praises of NAFTA? and fighting hard to keep it.

If we didn’t know it before we now do: that trade agreements go way beyond trade in their breadth of corporate rights making it hard to judge which side of ordinary people gets the net advantage. And we’re also learning, at least in the case of Brexit,? that abrogation, untangling it all, is hard to say the least.

Should Canada at some point – and not simply as a negotiating position – have left the table never to return?? To come down to earth, recall that Trump said that without an agreement he would impose a 25% tariff on cars made in Canada entering the US. The consequences would have been simply devastating, beyond contemplation, for southern Ontario, for Canada’s industrial? base. Significantly, Jerry Dias, President of Unifor, thinks the deal is good enough. It will push up car prices, but that will lessen carbon emissions.

Ibbitson goes on to write that the message from all this is “the mother of all wake-up calls for Canada to diversify.”? We’ve got too many eggs in the American basket and have to diversity our trade beyond the American market. That may strike y0u as a no-brainer. But what is being said is that, one trade agreement having failed us, we should sign on to more. Which is what we are already doing.

Methinks that is the wrong lesson. The whole vast apparatus that passes under the name of globalization has gone too far. We need less reliance on trade, not more.? We need to strengthen our domestic economy so it plays a bigger role in generating jobs and incomes.

Lest that sounds like whistling in the dark, it isn’t. Most economists admit that globalization has increased inequality within economies. In this regard, less globalization is of itself a good thing. What is likewise in order is active policies, like real rather than fake American-style tax reform, to increase equality within Canada and thereby the demand for goods and services.

One more point. Too much trade means too many goods being transported too far which means too much carbon emitted which means too much climate change which threatens to get us all. I’m too old to do the arithmetic, but diversifying Canadian trade reliance away from the US next door could be a mistake.



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The New Language of Resource Exploitation: From Staples Dependency to Extraction Empire https://www.google.com//ded/2018/09/25/the-new-language-of-resource-exploitation-from-staples-dependency-to-extraction-empire/ /ded/2018/09/25/the-new-language-of-resource-exploitation-from-staples-dependency-to-extraction-empire/#respond Tue, 25 Sep 2018 19:18:48 +0000 /ded/?p=19958 “Staples dependency” we know from Innis onwards.? It can mean reliant upon, dependent on, the export of staples, and permits of a staple theory of linkages as economic theory. It can also mean a resource margin of a more developed imperium. Economic theory is infused by the power relations inherent in “dependency” and is transformed into political economy. In the shifting fashions of scholarship, over time “dependency” came not to be permitted as appropriate political economy. This in turn meant the purging of “nationalism” as a tolerable response at the risk of losing a political edge.? But the idea of a “staples trap” implicit in Innis could not be wished away.

Take the phrase “extraction empire.” “Empire” takes on a new meaning. On the one hand, it is the terrible colonization within Canada of indigenous people. Canada as a settler society is exploiter rather than exploited. On the other hand, it is the transformation of resource exploitation at home into resource exploitation abroad. Comparative advantage in trade becomes? over time comparative advantage in outward direct investment, notably in mining. Canada becomes an imperium in its own right, though note this by no means requires it to shed its “dependency” within a larger imperium, such as the United States.

“Extraction” is a potent word that conjures up the wrenching, the wounding of the planet, the violation of nature as technology deeply alters environment.? It gives a whole new perception to the staples trap which, in the contemporary case of bitumen, becomes a deadly carbon trap. Governments, national and regional, are sucked into a black hole.

Our old friend Dependency takes on a stark new dimension.? Economics alone exposes economic rents, or surplus, which can be captured by the state and in what would seem like the best of all worlds, can be used to help the poor, creating safety nets and building a welfare state. But the society then becomes massively dependent on the surplus from the revenue resulting from resource exploitation, and dangerously exposed to social breakdown in the event of a plunge in the price of the staple – as we are presently seeing with respect to oil and Venezuela.

What triggers these ruminations on staples one more time is the appearance of a monumental 800 page book, titled Extraction Empire, published by MIT Press and edited by Pierre Belanger, a landscape architect at Harvard. Full disclosure: the opening essay in the book titled “Unsettling the Mining Frontier” is mine, billed as a Foreward. It takes off from Innis’s neglected classic Settlement and the Mining Frontier but shows Innis’s limitations as a white male with respect to the consequences of staples exploitation for indigenous people, for women, and for the environment a.k.a nature.

Back to the book which has the revealing sub-title Undermining the Systems, States and Scales of Canada’s Global Resource Empire 2017 to 1217. Counting back 800 years to the Magna Carta which reified property, and distinguished between property rights to the surfaces of lands and subsurface rights. This was critical to the appropriation of rights of indigenous peoples in the so-called New World, who not only failed to make settled use of the surface resources? and certainly had no claim through use to sub-surface rights.


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Teaching macroeconomics as though Lehmans didn¡¯t happen https://www.google.com//ded/2018/09/17/teaching-macroeconomics-as-though-lehmans-didnt-happen/ /ded/2018/09/17/teaching-macroeconomics-as-though-lehmans-didnt-happen/#comments Mon, 17 Sep 2018 13:42:45 +0000 /ded/?p=19956 September 15th marked the tenth anniversary of the fall of Lehman Brothers, destabilizing Western economies at levels not seen since the 1930s. It also marked the second week of fall classes, with many economics graduate students cranking through equations that define the discipline¡¯s conventional macroeconomic models. With such names as New Classical, Real Business Cycle and New Keynesian, these models can all be traced to the rational expectations revolution of the 1970s, which sought to explain stagflation when the conventional Keynesian framework could not. The rational expectations approach attempted to provide more precise behavioral microfoundations than the Keynesian model by positing that economic actors can form expectations of future economic values, say inflation, such that on average, their predictions of future values tend to be correct. This assumes the actors share the same understanding of the structure of the economy and past economic data. This research program would come to dominate macroeconomic scholarship and strongly influence policy makers, culminating in the creation of the dynamic stochastic general equilibrium (DSGE) model, a popular forecasting and policy analysis tool used in central banks and finance departments.

This approach to macroeconomic modeling came under scrutiny following the 2008 crisis, with Nobel laureate Paul Krugman asserting that most of the macroeconomics over the past 30 years was ¡°spectacularly useless at best, and positively harmful at worst¡±. While this did spark some soul-searching within the discipline, the debate has been inconclusive. Several policy-making bodies are taking seriously the limitations of 1970s macroeconomics. In its recent Medium-term Research Plan, the Bank of Canada recognises that the crisis has challenged its reliance on New Keynesian DSGE models, encouraging the exploration of alternative modeling paradigms, such as agent-based and stock-flow consistent models.

On Canadian campuses, however, where the next generation of macroeconomists are being trained, there is no clear signal that similar changes are being made in the curriculum of grad-level macroeconomics. A recent panel discussion among academic economists featured the admission that the 2008 crisis was the most embarrassing empirical failure of the profession since the Great Inflation of the 1970. Yet, in the same breath, that professor said he wouldn¡¯t change a thing in his teaching. Indeed, a glance at the macroeconomics syllabuses of several top Canadian grad schools find little evidence of a shift away from teaching the rational expectations-grounded macro models that have come under criticism.

Professors tend to teach what they are taught. With the sunk cost of prepping for PhD macroeconomic comprehensive exams, they have little incentive to develop a new course involving subject matter in which they are not trained. Further reinforcing the status quo is the tendency to teach what you research. Working in a climate of publish or perish, macroeconomic profs have good reason to not deviate from the dominant research agenda, which remains wedded to 1970s macro. In the absence of strong leadership for change or a mandate from either the dean or the premier to sit down with one another and re-design the curriculum, teaching macro in the post-crisis era will continue to be business as usual.

Yet this is not in the public interest. Given the acute financial stress experienced ten years ago, we have a stake in knowing that the policy makers of tomorrow are well prepared to confront episodes of economic downturn and instability. Learning to use a larger modeling toolbox is part of such preparation.

So, what are Canada¡¯s economics students to do in the meantime as they are grind through the math describing a DSGE model? As befitting any college course where critical thinking is one of the learning outcomes, here are some questions students may ask about the models they are taught:

1. Who is in the model? The basic models tend to have a single agent representing all consumers who are assumed to be sufficiently alike as autonomous rational optimizers sharing common knowledge. Can the model accommodate multiple actors who may differ by age, preference, belief, resources and class?

2. Is there room for ¡°black swans¡±? The 2008 crisis was precipitated by the collapse of the U.S. subprime mortgage market, an event deemed of low risk but of high impact. How does the model address this and other examples of fundamental uncertainty?

3. What kind of markets are modelled? Models with perfect competition behave very differently from more realistic models with imperfect competition, information asymmetries, price rigidities and institutional constraints.

4. Is there a financial sector? Perhaps the strongest criticism of the 1970s macro models was the reduction of complex financial plumbing to a single interest rate variable. Can these models feature lenders and borrowers? Are there banks? How does money fit in?

5. Does the model have to move to equilibrium? Following an economic shock, standard models tend to instantaneously jump to a new equilibrium path. However, observations of macroeconomic variables as they unfold over time suggest that such adjustment may be a much slower, sequential process. Understanding this path of adjustment may be of greater importance than the equilibrium destination.

6. How are these models empirically tested? A model¡¯s usefulness should be judged by how it explains actual economic history.

With these and other critical questions about the core macro teaching models, tomorrow¡¯s dismal scientists should be better prepared to confront challenging economics times.

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CLC Senior Economist Job Opening https://www.google.com//ded/2018/09/14/clc-senior-economist-job-opening/ /ded/2018/09/14/clc-senior-economist-job-opening/#respond Fri, 14 Sep 2018 18:41:36 +0000 /ded/?p=19953 There’s an exceptional opportunity for a bright and critical-minded economist who?is as passionate about social justice and working on behalf of unions and working people as they are about working with spreadsheets: CLC Senior Economist.

Application deadline September 21st.?? More details and job posting here.

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Call for federal support of cancelled Ontario basic income project https://www.google.com//ded/2018/09/10/call-for-federal-support-of-cancelled-ontario-basic-income-project/ /ded/2018/09/10/call-for-federal-support-of-cancelled-ontario-basic-income-project/#respond Mon, 10 Sep 2018 15:20:21 +0000 /ded/?p=19948 Members of the Progressive Economists Forum noted with dismay the premature cancellation of Ontario¡¯s basic income pilot and have penned an open letter to Federal Minister Jean-Yves Duclos (Families, Children and Social Development) calling for federal support for the project. So far, the letter has been signed by 50 Canadian economists and researchers.


Dear Minister Duclos:

As economists and researchers, we noted with dismay the premature cancellation of Ontario¡¯s Basic Income Pilot. The announced cancellation before the first anniversary of full enrollment ensures that no useful data can have been collected to date, and none will now be collected. This deprives not only Ontario but also the rest of Canada of valuable evidence that might have influenced policy. Ontario was one of several Basic Income experiments worldwide that, together, would have allowed international comparisons and rational policy development.

We, the undersigned economists and researchers, are writing to ask you to use the resources and authority of your office to salvage what you can of the Ontario Basic Income Pilot for the benefit of all Canadians and, especially, to ensure that the 4,000 vulnerable participants who agreed in good faith to participate in Ontario¡¯s experiment are treated in a just and humane manner.

Closing the experiment with no announcement of how participants will be transitioned out of the program is unethical. Participants used the money they received from participation in the experiment and relied upon the promises that were made by the Ontario government to make long-term plans to better their lives. They leased apartments, registered in postsecondary education and borrowed money to invest in the future wellbeing of their families. As a result of the cancellation, they are likely to be worse off now than before they agreed to open their lives to researchers. This is unconscionable and must not be allowed to happen.

Thank you for your consideration.


1. Abdella Abdou, Associate Professor, Department of Economics, Brandon University

2. Roy J. Adams, Professor Emeritus, DeGroote School of Business, McMaster University and Ariel Sallows Chair of Human Rights, Emeritus, College of Law, University of Saskatchewan

3. John Allett, Professor Emeritus, Department of Social Science, York University

4. Sheila Block, Senior Economist, Canadian Centre for Policy Alternatives – Ontario

5. Jordan Brennan, Economist, Unifor

6. Jerry Buckland, Professor, Menno Simons College, University of Manitoba

7. Mary Anne Coffey, Contract Faculty, Department of Social Science, York University

8. Anupam Das, Associate Professor, Economics, Department of Economics, Justice, and Policy Studies, Mount Royal University

9. Megan J. Davis, Associate Professor, Department of Social Science, York University

10. Robert W. Dimand, Professor, Department of Economics, Brock University

11. Susan Dimock, Professor, Department of Philosophy, York University

12. Lynne Fernandez, Errol Black Chair in Labour Issues, Canadian Centre for Policy Alternatives – Manitoba

13. Ernest Epp, Professor Emeritus, Department of History, Lakehead University

14. Evelyn Forget, Professor, Department of Community Health Sciences, University of Manitoba and Academic Director of the Manitoba Research Data Centre

15. Marjorie Griffin Cohen, Professor Emerita, Department of Political Science and Department of Gender, Sexuality, and Women’s Studies, Simon Fraser University

16. Ricardo Grinspun, Associate Professor, Department of Economics, York University

17. Trevor Harrison, Professor, Department of Sociology, University of Lethbridge

18. Alex Hemingway, Economist and Public Finance Policy Analyst, Canadian Centre for Policy Alternatives – British Columbia

19. Trish Hennessy, Director, Canadian Centre for Policy Alternatives – Ontario

20. Rod Hill, Professor of Economics, Faculty of Business, University of New Brunswick, Saint John

21. Ian Hudson, Professor, Department of Economics, University of Manitoba

22. Iglika Ivanova, Chair, Progressive Economics Forum and Senior Economist, Canadian Centre for Policy Alternatives – British Columbia

23. Mustapha Ibn Boamah, Associate Professor of Economics, Faculty of Business, University of New Brunswick, Saint John

24. Thaddeus Hwong, Associate Professor, School of Public Policy and Administration, York University

25. Andrew Jackson, Adjunct Research Professor, Institute of Political Economy, Carleton University

26. Peggy Keall, Assistant Professor, Department of Social Science, York University

27. Kamala Kempadoo, Professor, Department of Social Science, York University

28. Gerda Kits, Associate Professor of Economics, The King¡¯s University

29. Seth Klein, Director, Canadian Centre for Policy Alternatives – British Columbia

30. Tuulia Law, Sessional Assistant Professor, Department of Social Science, York University

31. Marc Lee, Senior Economist, Canadian Centre for Policy Alternatives – British Columbia

32. Martha MacDonald, Professor of Economics, Sobey School of Business, Saint Mary¡¯s University

33. Hugh Mackenzie, Consulting Economist and Principal, Hugh Mackenzie & Associates

34. Fiona MacPhail, Professor and Chair, Department of Economics, University of Northern British Columbia

35. Joan McFarland, Professor, Department of Economics, St. Thomas University

36. Merouan Mekouar, Assistant Professor, Department of Social Science, York University

37. Eric Miller, Contract Faculty, York University

38. Rob Moir, Associate Professor of Economics, Associate Dean (Research & Special Projects), Acting Dean, Faculty of Business, University of New Brunswick, Saint John

39. Linda Peake, Professor, Director of The City Institute, York University

40. Ellie Perkins, Professor, Faculty of Environmental Studies, York University

41. David Pringle, Progressive Economics Forum

42. Lars Osberg, Professor, Department of Economics, Dalhousie University

43. Mario Seccareccia, Professor Emeritus, Department of Economics, University of Ottawa

44. Brenda Spotton Visano, Professor, Economics and School of Public Policy and Administration, York University

45. Jim Stanford, Harold Innis Industry Professor of Economics, McMaster University

46. John Stapleton, Social Policy Expert, Open Policy Ontario

47. Almos Tassonyi, Executive Fellow, School of Public Policy, University of Calgary

48. Mel Watkins, Professor Emeritus, Department of Economics, University of Toronto

49. Barry Watson, Associate Professor of Economics, Faculty of Business, University of New Brunswick, Saint John

50. Vicki Zhang, Assistant Professor, Department of Statistical Sciences, University of Toronto

Cc: Hon. Lisa MacLeod, Ontario Minister of Community and Social Services

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When tenants ¡®graduate¡¯ from Housing First programs https://www.google.com//ded/2018/09/07/when-tenants-graduate-from-housing-first-programs/ /ded/2018/09/07/when-tenants-graduate-from-housing-first-programs/#respond Fri, 07 Sep 2018 14:59:00 +0000 /ded/?p=19944 Over at the Research Blog of the Calgary Homeless Foundation, I’ve written a ‘top 10’ overview of a study on which I’m co-author. It essentially asks the question: “When homeless people are placed into subsidized housing with social work support, for how many months/years do they require that social work support?”

The study relies on an impressive data set about ex-homeless people who’ve been placed into subsidized housing with social work support in Calgary. Methodologically, the study uses survival analysis and hazard models.

The blog post can be accessed here.

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Rotstein’s Monumental Epitaph https://www.google.com//ded/2018/08/28/rotsteins-monumental-epitaph/ /ded/2018/08/28/rotsteins-monumental-epitaph/#comments Tue, 28 Aug 2018 19:26:43 +0000 /ded/?p=19883 The late Abraham/Abe Rotstein (1929-2015) was an economist of a leftist persuasion, literally a Left Liberal. He left behind an almost completed manuscript which he had been working on for more than three decades. It has now been published.? Its title Myth, Mind and Religion: The Apocalyptic Narrative is indicative of its extraordinary breadth.

Problems, possibilities, catastrophes, which compel resolution present themselves in an apocalyptic manner: oppressor/victim, inversion of victims into masters, and a salvation regime as the outcome.? There are chapters on Jesus, Luther, Hegel, Marx, Hitler, etc.? For example, Marx, in a manner familiar to economists: capital oppresses labour, the proletariat as victim overthrows the capitalists, there is heaven a.k.a. communism on earth.

Rotstein chose to go far beyond his own discipline of economics – which is a tribute to his intellectual courage – but he is not without relevance to our present day concerns about matters economic and beyond in these turbulent, perhaps apocalyptic, times.

On contemporary matters,? Rotstein reminds us of, in his words, the Radical Decade from the mid-1960s to the mid-1970s. The cry was for liberation – by black people and indigenous people from racism and for civil rights, students, colonies and dependencies from the imperium, women, gays – and for respect for the environment, for Nature, from the assaults of capital in particular. Radicalism proved ephemeral but the demands have not ceased.

Rotstein was writing before Trump and the rise of the alt-right, but, as noted, he does deal with Nazi fascism, of the perverse claim that the populace was oppressed by the Jews, the Other of the times, and must be annihilated. Today it is immigrants and refugees who constitute the Other and who must therefore be oppressed in the name of white supremacy.

Rotstein sees out-of-control technology as the apparent menace of? our times – think today’s carbon emissions and climate change, the attacks on privacy and democracy by digital media, job destruction from artificial intelligence, “the robotization of life.” The victims are the many but what or who are the oppressors and what is to be done.

Rotstein is no longer with us to discuss these matters.? His legacy is to warn us of the dangers of apocalyptic thinking, a mode of thought that he sees as characterizing the Judaeo-Christian West for three millennia.


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Ontario Electricity Sector VI ¨C Meet the new boss… https://www.google.com//ded/2018/08/08/sepulveda-ontario-electricity-vi/ /ded/2018/08/08/sepulveda-ontario-electricity-vi/#respond Thu, 09 Aug 2018 02:18:32 +0000 /ded/?p=19914 The provincial election of June ended 15 years of Liberal electricity policy in Ontario. Anger over high electricity prices continued to be an election issue, contributing to the Liberal loss of power and official party status (reduced from 55 to 7 seats). The PCs have formed Government with 76 seats, while the NDP is official opposition with 40 seats, and the Green Party won their first seat.

The PC Government has moved quickly to act on some of their election promises and other unannounced initiatives, including on the electricity file, convening an exceptional summer session of the Legislature. The new Minister of Energy, Greg Rickford, cancelled 756 renewable energy contracts via Ministerial Directive in early July. Later in the month the Government rushed an omnibus Act through the Legislature (time-allocated debate, no Committee review, no public hearings, no opportunity for amendments) that changed the governance of Hydro One and canceled the White Pines wind power contract in Milford. Here I will first review the Government¡¯s options with respect to the Liberal¡¯s ¡°Fair Hydro Plan¡± (FHP) before I discuss these cancellations.

Fair Hydro Plan

In 2017, the Liberal Government introduced the FHP that reduced electricity prices by 25%, consisting of 17% from the deferral of a portion of payments to power producers and 8% from the rebate of the provincial portion of the HST (financed from the tax base). Figure 1 shows how the FHP has impacted Ontario’s electricity CPI and how even after this reduction, Ontario’s CPI is higher than the average electricity CPI for the nine other provinces (“Rest of Canada”). The FHP¡¯s initial 17% reduction was financed from the ¡°rate base¡±, largely through borrowing by the Government¡¯s newly-created Fair Hydro Trust (FHT).


To maintain below-cost pricing the Government must periodically instruct the FHT to borrow; in effect, the FHT issued $500 million of ratepayer obligation charge (¡°ROC¡±) bonds in February and another $400 million in April. These bonds will start to pay out in 2027, via the ¡°Clean Energy Adjustment¡± line item that will be added to electricity bills in Ontario.

As planned by the Liberals, the FHP would borrow about $19 billion over 2017-2026 and pay it back, along with $21 billion in interest, over 2027-2047. I do not believe Minister Rickford will increase current below-cost prices by stopping the subsidy financing. Nor do I believe that the PCs will implement the FHP as planned by the Liberals. What are some of the possibilities? One would be for the PCs to shift the subsidy financing away from ¡°off-book¡± FHT borrowing to the tax base (recall that the Liberals had created the FHT so that its borrowing would not be classified as Provincial debt.)

Why would the PCs willingly make the Province¡¯s books look ¡°worse¡±? Because the political calculus has fundamentally changed. In the lead-up to election, the Liberals needed to show the electorate, even by accounting tricks, that they were prudent fiscal managers. Post-election, the PCs have an incentive to try to show the Liberals as bad managers and indeed that they were ¡°cooking the books.¡± A revised set of fiscal accounts and additional electricity subsidy financing would provide the new Government with a fiscal “crisis” that would bolster the rationale for implementing livescoreทีเด็ด PC election campaign promised “efficiencies” and further previously-unannounced expenditure cuts that would increase income inequality.


Cancellation of Contracts

In previous blogs I¡¯ve concluded that the main driver of Ontario¡¯s inflated electricity cost structure has been the over-supply of regulation-exempt, long-term contracts to procure new private sector generation at above the wholesale market price (HOEP), and therefore that the review (e.g. regulation) or cancellation of some of these contracts is the single most cost-effective manner to reduce both Ontario¡¯s current surplus electricity and its inflated cost structure.

During the election the PCs stated that they would ¡°cancel energy contracts that are in the pre-construction phase and renegotiate other energy contracts.¡± Deciding which contracts to review / cancel should include a comprehensive cost-benefit analysis. Table 1 summarizes the Contract provisions related to cancellations for the feed-in tariff (FIT) and large renewable procurement (LRP) programs. FIT-2 to FIT -5 and LRP-I contracts have “pre-Notice to Proceed¡± (¡°pre-NTP¡±) and pre-Key Development Milestones (¡°pre-KDM¡±) provisions if the “Buyer” (the Province) unilaterally cancels the Contract at those stages. Generally, NTP and KDM are granted by the Buyer after the Contractor has obtained all necessary environmental and other approvals (after which the Contractor may commence actual construction). If cancelled by the Province ata this stage, the Buyer would have to compensate the Contractor for its ¡°Pre-Construction Development Costs¡± (¡°PCDC¡±) up to a maximum defined Pre-Construction Liability Limit (¡°PCLL¡±). For example, the PCLL for a wind project is $400,000 plus $2.00/kW of Contract capacity, so that would total $436,900 for an indicative (see below) 18.45 MW wind project.

FIT-4, FIT-5 and LRP-I all have post NTP/KDM ¡°Optional Termination¡± compensation provisions in the form of a formula that includes a series of components related to the costs incurred, including those related to financing, invested equity capital, but generally not including future profits. There are no equivalent ¡°Optional Termination,¡± provisions for FIT-1 to FIT-3 or for Other projects for post NTP/KDM. Table 1 further shows that none of these programs include provisions related to cancellation after the start of commercial operation (¡°CO¡±).

If the Buyer were to unilaterally cancel Contracts in such cases where no compensation is specified, the Contractor would have to pursue any remedies via a generic “breach of Contract” or under the ¡°Discriminatory Action¡± provisions. The Contractor would first have to engage in good faith negotiations with the Buyer, and if unsuccessful, participate in binding and final arbitration. The Arbitration Panel would presumably consider a number of factors in making its decision. One such principle would be to make the Contractor ¡°whole¡± by establishing an award equal to the NPV of forecast Contract future sales minus expenses, as set out in the Discriminatory Action provisions.



FIT 2-5 and LRP-I Cancellations

The Ministerial Directive cancelled all the pre-NTP FIT-2 to FIT-5 projects, a total of 746. Based on IESO data, these totaled 268 MW of capacity, or about 41% of the total of FIT-2 to FIT-5 contracted capacity. The Directive cancelled all ten pre-KDM LRP projects, which accounted for 175 MW or 38% of total LRP-I capacity. The combined cancellation of 443 MW accounts for about 4% of all contracted renewables and about 1% of all capacity in Ontario.

Given the PC election promise and relatively modest contractually-defined cancellation compensation (PCDC), it is not surprising that these pre-NTP/KDM contracts were cancelled. The long-term public benefits from the cancellation depend on contracted price. For example, for an indicative 18.45 MW wind project with capacity factor of 35%, the cancellation of a FIT-2 contract price of $135/MWh would have a net benefit of about $114 million over 20 years (not discounted). The LRP-I prices were determined based on a competitive process and were much lower, averaging about $86 MWh, which would translate into an undiscounted net benefit of about $74 million over the same period for an equivalently-sized project.


White Pines Wind Contract Cancellation

Previously I’ve written that the Government could enact legislation to establish or unilaterally change or eliminate any compensation requirement from it unilaterally cancelling or revising a contract. This is exactly the reason the PCs cancelled the White Pines project via legislation rather than by Directive. (By way of summary background, the White Pines project Contract was awarded a FIT-1 Contract in 2010 for a 29 turbine facility near Milford. Like many other wind projects, it faced opposition from some local residents for environmental reasons and health concerns; it was also supported by others. It received a Renewable Energy Approval (REA) from the Ministry in 2015 for 27 turbines. Local residents appealed the REA to the Environmental Review Tribunal (ERT), which reduced the project to 9 turbines with a total capacity of 18.45 MW. Based on this and other approvals, IESO awarded the project its NTP in May, which allowed the Contractor, a German-owned company, to start construction, including installing some of the turbines.)

Table 1 indicates that there are no FIT-1 Contract provisions setting out the process for a pre-NTP (or NTP) cancellation. With respect to the former, it is important to highlight that in the lead-up to the October 2011 provincial election, in August that year the Liberals unilaterally offered to waive its right to cancel FIT-1 projects at pre-NTP status. Based on the likelihood that the project took advantage of this waiver option in 2011 (as most other projects did), it would not have mattered contractually that IESO issued the NTP after the elections writ was dropped – there were no pre or post NTP cancellation provisions. The White Pines cancellation legislation establishes the process and methodology to be used for compensation, similar in spirit to those used for post-NTP/KDM ¡°Voluntary Terminations¡± for FIT 4-5 and LRP-I programs noted above.

The PCs did not provide a rationale for cancelling this particular project but not others via legislation. Based on IESO data, there are 336 MW of pre-NTP FIT-1 projects that could have been cancelled that would have required setting aside the granted waiver by legislation. The Government could establish the relatively inexpensive PCDC as the compensation methodology for these cases. There are about 340 MW of NTP/KDM FIT1-3 projects for which the Government could establish the White Pines methodology as a model for compensation. That is on top of the 350 MW of FIT 4-5 and LRP-I projects with NTP/KDM for which Contract cancellation provisions exist. That is a potential total of about 1 GW of additional cancellations with lower? (pre-NTP) or comparable (NTP/KDM) complexity/cost than the White Pines project.

It could be the case that the Minister is testing his approach to cancellation. The general reaction amongst many financial analysts has been negative due to the likely increase in sovereign risk to Ontario from the White Pines legislation. Many legal analysts recognize that well-crafted legislation of this type would likely be successful in limiting compensation to domestic Contractors, but it is an open question whether it would stand up to the investment protection provisions included in free trade agreements, including NAFTA and the recently-implement CETA with the EU. The latter is particularly relevant because White Pines is German-owned, and the German Ambassador to Canada has publicly commented on the matter.


Concluding Thoughts

The new PC Government has moved quickly on the electricity file. It has cancelled 443 MW of pre-construction projects that would have added about 1% to Ontario’s capacity, further exacerbating the province’s surplus of expensive electricity that rate-payers would have had to pay for. Among the hundreds of other similar pre-construction/operation projects of more than 1 GW of capacity that are slated to come onstream and for which cancellation legislation would be necessary, the PCs focused their legislative power on cancelling a relatively small (18.45 MW) foreign-owned wind project. Although this was a high-profile project, it would appear to me that the PCs would not have used precious “honey-moon” legislative capital on a single project unless it also sent a very strong and clear signal to current Contractors, absent which they would not have any incentive to sit down with the Government to renegotiate operational Contracts, as the PCs have also promised to do. In a previous post I discussed the cancellation and renegotiation options and my preference that any negotiations result in the implementation of transparent rules-based economic regulation. Nothing the PCs have done so far indicates that this is their intention, unfortunately.

On the bigger dollar issue of the FHP, I expect the first indication of PC intentions will come in the fall when new subsidy financing would be required to maintain current below-cost prices. Something else to watch for are any decisions related to Ontario’s first-in-Canada low-income electricity monthly subsidy program, the OESP, introduced by the Liberals in 2016. Given recent PC decisions to reduce planned Liberal increases to social assistance rates and to eliminate the Liberal-introduced basic income pilot project, I would be concerned that the PCs may also shrink or eliminate the OESP.

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Was Innis Wrong? https://www.google.com//ded/2018/08/01/was-innis-wrong/ /ded/2018/08/01/was-innis-wrong/#respond Wed, 01 Aug 2018 23:38:42 +0000 /ded/?p=19885 The question is taken from the title of an article by Nancy Olewiler of Simon Fraser University in the Canadian Journal of Economics (November 2017), which, as it happens, was delivered as the Innis Lecture at the meetings of the Canadian Economics Association in 2017: “Canada’s dependence on natural capital wealth: Was Innis wrong?”? Her answer: she writes “Literature and recent debate reject his prediction that Canada would suffer lower levels of economic growth and well-being due to its dependence on exporting its natural resources,” and then, after some testing of her own, reaffirms this position. Her research is of interest in its own right but quite misleading as to Innis.

It is not even clear that Innis can be read as holding to such a pessimistic view. The economic historian Peter George, in an overview of the history of mining in Ontario in 1967 writes: “Innis believed that the mining industry would reduce Ontario’s dependence on the export of staple commodities? by contributing to a highly integrated advanced economy” and adds “Ironically Innis was wrong in his optimism with respect to mining.”

Innis was, it must be insisted, an economic historian? and can hardly be said to have had a central interest in “prediction”? – or even policy which is the central concern of the economist today. In fact, Olewiler offers no evidence that he was wrong in his historical writings which is what matters most in an evaluation of Innis. The jury can give little weight to Olewiler’s substantive contemporary findings, post-1990 – being? two decades of a half-millennium!

Olewiler’s error lies in imagining that she is giving a definitive assessment of Innis or of the staple approach to Canadian economic history.

What is lost in Olewiler’s reductionism of Innis is the breadth and depth and sheer power of his historical writings: “The economic history of Canada has been dominated by the discrepancy between the centre and the margin of western civilization. Energy has been directed toward the exploitation of staple products and the tendency has been cumulative…Agriculture, industry, transportation, finance and government activities tend to become subordinate to the production of the staple for a more highly specialized manufacturing country.”

It is true that Innis was incorporated in the 1960s and 1970s into the emergent New Canadian Political Economy where there was a tendency to see Innis as a pessimist and Mackintosh as an optimist on Canada’s economic prospects as an exporter of staples. But to be fair both to Innis and to the new political economists, their focus was more, much more, on Canadian dependence as a? marginal area within the American empire. This is not a matter on which Olewiler has anything to say; she is an economist and not a political economist and her answer must be seen in that context.

Daniel Drache described Canada as a case of “advanced resource capitalism” and Olewiler’s evidence on productivity supports that designation. Drache is also known as a leading analyst of the “staple trap” and it would be hard to find a clearer example of that than today’s bitumen.

Olewiler is also unaware of the important post-Innisian book by the respected economic historian W.T. Easterbrook, North American Patterns of Growth and Development (1990) which sees Canada’s economic history in a continental context in the long run as one of “growth, “of a “pattern of persistence” as a staple exporter, in contrast to a “pattern of transformation,” of “development,” in the northern United States. To return to mining as a staple, to further complicate the story, Canada’s new global dominance in gold might be cited today as evidence of imperial competence suggestive more of the transformation of a centre than the persistence of a margin.

Where Olewiler is to be lauded – and forgiven overall – and where Innis, albeit like the mainstream economists who were his contemporaries, was wrong, was with their general neglect of social costs such as the consequences for the environment of resource extraction. I am wholeheartedly in agreement with Olewiler that, whatever our view of Innis, climate change from fossil fuels – from oil and gas as staples – compels us to see their extraction as intolerable.

Olewiler is also right in seeing Innis as a student of regionalism and its exacerbation by staple exports, which is indicative of his relevance to the study of Alberta and the tar sands.? National policy on climate change is presently impaled by this. In the insightful language of Brendan Haley, the staples trap is alive and well as it has morphed? into the carbon trap. And as Gordon Laxer has demonstrated in his research on the tar sands, the staple approach has, unfortunately, been given a new life in Canadian studies. Olewiler, in her deft description of the tar sands and climate change, unwittingly affirms the staple approach and Innis in the large.


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Value Creation vs Value Extraction in Today’s Economy https://www.google.com//ded/2018/07/31/value-creation-vs-value-extraction-in-todays-economy/ /ded/2018/07/31/value-creation-vs-value-extraction-in-todays-economy/#respond Tue, 31 Jul 2018 20:04:54 +0000 /ded/?p=19901 Book Review

Mariana Mazzucato. The Value of Everything: Making and Taking in the Global Economy. Allen Lane. 2018.

The playwright Oscar Wilde quipped that a cynic is a person who ¡°knows the price of everything and the value of nothing.¡± As Mariana Mazzucato argues in her important and stimulating new book, ¡°The Value of Everything,¡± that adage could be applied to the vast majority of mainstream, neo-classical economists.

Mazzucato is the author of the previous bestseller, The Entrepreneurial State, which argued that governments have been absolutely pivotal to the innovation process in successful advanced industrial economies, often taking on big risks and opening the way for later private sector investment. Her new book broadens the argument, claiming that mainstream economics is systematically wrong about the value creation process and needs to be replaced by a new framework which distinguishes clearly between value creation and unproductive and destructive value extraction.

This argument is important in setting the stage for a social democratic economics and a genuinely mixed economy where governments would take an active economic leadership and investment role and tightly regulate the private sector in the public interest. Social democrats have too often conceded to the argument that private sector entrepreneurship is the driving force of wealth creation, and that governments should largely confine themselves to re-distribution of income and wealth through progressive taxes and welfare state programs.

Contemporary neo classical economics makes market prices the only measure of value, and sets aside the distinction made by the classical economists (Smith, Ricardo and Marx) between productive and unproductive economic activity and labour. In the neo classical world, profits reflect and are justified by the productive contribution of capital, and the fact that goods and services are sold on the market for a profit shows that they have value to consumers. In this light, the national economic accounts largely exclude or hugely undervalue production outside the market by households and by governments, and fail to register the fact that many significant private sector activities are parasitic on the productive economy and actually destroy value.

The dominant paradigm was actually overthrown at a highly theoretical level during the famous Cambridge capital controversy of the 1950s and 1960s, when Joan Robinson argued that profits could not be shown to reflect returns to capital, but rather reflected the balance of bargaining power between capital and labour. To be sure, investment in physical capital and research by the private sector make an important contribution to value creation, but wealth creation is above all a social process.

It is nonsense to argue that the wealth and income of hedge fund billionaires reflects their individual productive contribution, as opposed to their ability to extract profits from socially created value. Many progressive economists such as Nobel prize winner Joe Stiglitz argue that much of the modern economy consists of sectors in which rents or excess profits are extracted by dominant businesses due to limited competition and control of intellectual property rights among other factors. For example, big pharma and the tech giants like Google and Facebook earn profits well above normal rates of return due to their power to shape markets.

Mazzucato closely documents the value extraction role of the finance sector, whose share of total profits has grown rapidly since deregulation in the 1970s. While banks and other financial institutions do play a productive role in part by directing financial capital to productive uses, most real business investment is in fact financed by retained corporate earnings. Meanwhile, finance has directed resources to almost purely speculative and economically destabilizing activities such as hedge funds and creation of exotic financial instruments such as derivatives which merely transfer dollars between winners and losers, as in a casino where the dealer always wins.

As well, finance has had damaging impacts upon real economy highly productive businesses by inisting on maximizing shareholder value and demanding short term profits paid out through dividends and share re purchases as opposed to providing ‘patient’ capital for long term investment in equipment and innovation which boost real value added and productivity. Despite years of so-called financial innovation, it is hard for truly innovative new companies to attract capital since even venture capital funds are oriented to a quick turnover of capital and have very high ¡°hurdle¡± rates of return In this context, very early start up capital often comes from governments which are prepared to take bigger risks for bigger long-term payoffs.

Mazzucato further argues at length that governments play a much more important role in value creation than is often appreciated. Much of government activity is treated in the national economic accounts as consumption, even through public services help create a great deal of value in the private sector. Public sector spending in areas such as education at all levels and basic research is very much part of the social process of production and value creation, and governments often create the markets served by the private sector. For example, the DARPA program in the United States created the internet and the basis for much of the digital information economy through basic research and support for private sector pioneers.

It has only been recently that government investment has been partially recognized as such in the economic accounts, and conventional accounting still judges the value of public services to be the costs of inputs, mainly labour. By this definition, more public spending cannot raise productivity and value-added in the economy.

As in her previous book, Mazzucato is very much an advocate of an expanded entrepreneurial role for government in supporting, not just research and high levels of public investment, but also in setting ambitious goals and missions, such as decarbonizing the economy. She argues that governments should take an ownership stake in the productive economy to collect a social return on public investment for citizens which could be used to fund social programs and public services as well as to create greater social equity. In the Canadian context, she would likely favour taking large equity stakes in innovative enterprises to provide long term capital for growth, while also seeking greater control of the economy and a fairer distribution of income and wealth.

The Value of Everything is a stimulating and informative overview of value creation and destruction in today’s economy. It is very much part of a wider project to develop a new progressive and social democratic economics oriented towards the creation of real value and social equity, as opposed to maximizing GDP.

Andrew Jackson is Adjunct Research Professor in the Institute of Political Economy at Carleton University, and senior policy adviser to the Broadbent Institute

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An Analysis of Financial Flows in the Canadian Economy https://www.google.com//ded/2018/07/05/an-analysis-of-financial-flows-in-the-canadian-economy/ /ded/2018/07/05/an-analysis-of-financial-flows-in-the-canadian-economy/#comments Thu, 05 Jul 2018 20:35:54 +0000 /ded/?p=19871 An essential but perhaps overlooked way of looking at the economy is a sector financial balance approach. Pioneered by the late UK economist Wynne Godley, this approach starts with National Accounts data (called Financial Flow Accounts) for four broad sectors of the economy: households, corporations, government and non-residents.

Here¡¯s how it works: in any given quarter or year each sector can be a net borrower or lender, but the sum of the four sectors¡¯ borrowing/lending must equal to zero. This is an accounting identity reflecting the fact that one sector¡¯s borrowing must be another¡¯s (or the combination of all others¡¯) lending.

Consider a government deficit. The flip side of that deficit is that some other sector(s) is in credit by the same amount. For example, a $1 billion in government borrowing must be matched by $1 billion in lending from some combination of households, businesses and non-residents. The same is true about the balances for any other sector. The overall balance for the domestic economy (households, corporations and government) must be offset by an equivalent balance vis-¨¤-vis non-residents.

We can look at these flows over time and map them on to events and policy actions affecting the Canadian economy. Some caution must be taken around interpreting causation in this analysis, but it is a useful framework for thinking about what¡¯s happening in the economy.

Figure 1 shows the four sector balances going back to 1990 (as a percentage of GDP). The lead up to and period after the 2008 global financial crisis is also of great interest. Lines above zero represent a credit position, or net lending; below zero is a deficit position, or net borrowing.

Figure 1:

Source: Statistics Canada, Financial Flow Accounts, Table: 36-10-0578-01 (formerly CANSIM? 378-0119)


Let¡¯s start with government, in this case the combined federal and provincial government balance (in grey). Many readers will remember the large government deficits of the 1980s and early 1990s, which were headline news and to this day have biased the thinking of all political parties towards austerity. In the early 1990s, those government deficits were largely financed by households (blue) and non-residents (yellow).

As the Canadian economy recovered from a bad recession in the early 1990s, it gained strength through the rest of the decade. Strong revenue growth combined with spending restraint drove combined federal and provincial deficits to zero by 1997, followed by surpluses for most of the next decade (apart from two very small deficits in 2002 and 2003).

In the wake of the 2008 financial crisis we then see the government balance drop to a deficit of 4.7% of GDP in 2010, reflecting expansionary fiscal policy. Relative to GDP these later deficits are nowhere near as large as the deficits in the early 1990s. In each case of deficit, however, it is useful to remember the flip side: the private sector wanted to buy government bonds. Around 2008-10 in particular, investors wanted safe havens in which to place their money.

The changing behaviour of households (in blue) is significant. Historically, it was households who were net lenders to corporations and governments. I was not able to get data prior to 1990 online but that surplus position for households continues before 1990 as well.

That dynamic changes in the mid-1990s. As governments borrowed less, households lent less. But when governments turn to deficits after 2008 it is not households from whom they are borrowing (as would have been expected given historical patterns). Indeed, households become net borrowers as of 1997 and remain so to this day, with net borrowing peaking at 4.8% of GDP in 2007. There is some retrenchment back to 2.2% of GDP by 2009, but household borrowing starts to grow again in the 2013 to 2017 period, and hits 3.5% of GDP in 2017.

This should not be a surprise to anyone following the Canadian economy, in particular the run-up in mortgage debt in recent years. This era, especially 2001 onward, is characterized by very low interest rates, which enable households to take on more debt for a given level of income. And as home prices rose, this new equity for homeowners allows for even greater debt loads. Unfortunately, these data do not break down the distribution within the household sector, so the total is masking some deeply indebted households while some percentage of wealthy households would be in credit positions.

What about corporations? Historically corporations borrowed from households (before the period in Figure 1), but starting in the 1990s, then really picking up in the 2000s is the fact that corporations become net lenders. A study from Statistics Canada attributed this to surging profits accompanied by a slowdown in capital investment (i.e. machinery, equipment and factories) and an increase in financial investments. This pattern of ¡°dead money¡± ¨C in the livescoreทีเด็ด words of then-governor of the Bank of Canada Mark Carney ¨C has deteriorated in recent years and the corporate sector even goes into deficit in 2015.

Figure 2 breaks out the corporations balance into financial (banks, insurance companies, etc) and non-financial corporations. Financial corporations are consistently in a net lender position, as would be expected. Non-financial corporations show greater volatility, but notably swing into a net borrowing position since 2012.

Figure 2: Net financial investment of financial and non-financial corporations


Finally, go back to Figure 1 and look at non-residents. In the early 1990s non-residents lent to Canadian governments, but during the 1999-2007 period Canadian corporations were net lenders to non-residents, perhaps reflecting trade and investment liberalization.

After 2008, we see a dramatic shift to non-resident lending, and at fairly large magnitudes of around 4% of GDP per year. Even while government deficits shrink after 2010, the total inflows from non-residents continue through to 2017. These data do not tell us from which countries the flows from non-residents are coming, although the US is historically Canada¡¯s largest foreign investor by far, followed by several European countries (Netherlands, Luxembourg, UK and Switzerland).

Overall, this analysis shows some major shifts in the relationships across sectors of the Canadian economy. The shift of households into an ongoing deficit position is notable, as is the role of non-resident lending in recent years. Restrictions to dampen housing markets and the introduction of foreign buyer taxes in BC and Ontario suggest non-resident lending will decline as a share of GDP. And the record levels of household indebtedness, plus increases in interest rates, also point to a potential rebalancing for the household sector.

** With thanks to Joelle Leclaire and David Pringle for comments on an earlier draft.

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Carey Doberstein’s book on homelessness governance https://www.google.com//ded/2018/06/07/carey-dobersteins-book-on-homelessness-governance/ /ded/2018/06/07/carey-dobersteins-book-on-homelessness-governance/#comments Thu, 07 Jun 2018 10:53:23 +0000 /ded/?p=19863 I’ve just reviewed Professor Carey Doberstein’s book on homelessness governance (UBC Press). The book looks at the way decisions were made pertaining to funding for homelessness programs in Vancouver, Calgary and Toronto during the 1995-2015 period.

Points raised in my review include the following:

-Homelessness trends look quite different across the three cities. For example, it can be growing in one city, but declining in another.

-One of the book’s main arguments is that better decisions pertaining to homelessness programming are made when multiple stakeholders are engaged in decision-making early and often.

-The book argues that Vancouver and Calgary have done a relatively good job of such engagement¡ªmore so than Toronto.

My full review can be read here.

(A modified version of this review will appear in an upcoming edition of the Canadian Journal of Political Science.)

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Ontario Electricity Sector V – What they knew, and when they knew it… https://www.google.com//ded/2018/06/06/ontario_electricity_v/ /ded/2018/06/06/ontario_electricity_v/#comments Wed, 06 Jun 2018 08:21:47 +0000 /ded/?p=19851 Last month I published a full-length article in the “The Monitor” magazine providing a “how we got here” analysis of the Ontario electricity sector and some options for the next Government.? Since then, two things have changed: first on May 31 two investigative journalists, Carolyn Jarvis and Brian Hill, wrote an excellent story for Global News about how successive Liberal Ministers of Energy ignored expert agency advice, which resulted in Ontario households having to pay billions of dollars more for electricity (see 3:51 Global News video here); and second, on June 2 the current Liberal Premier conceded that the Liberal party will not win the election to be held tomorrow (June 7).

My article brings together and updates the four electricity-related blogs that I’ve prepared at the PEF (first, second, third and fourth), focusing on the gradual, stealth privatization of electricity generation and showing how criticism of this process by progressive groups was muted by the promise of energy democratization and renewables (wind and solar) generation that would help reduce emissions and pollution. The electricity sector in Ontario became a prime case study of some of the inequality-creating trends buffeting our societies. Corporations (and their investors) who secured lucrative contracts and high-income households and speculators that could afford solar panels made out like bandits, while low-income households in Ontario faced growing electricity poverty. When prices became a political liability, the government responded not by going after the power producers, but rather by borrowing on behalf of ratepayers. I argued that objectives matter, and that the experience in Ontario shows that governance, policy and implementation matter even more.

The Liberal Premier’s concession confirms that a new government will indeed be able to review and implement new electricity policy in Ontario. Jarvis and Hill’s reporting shows how much work awaits the new Minister of Energy. Their story is based on over 4,000 pages of internal emails, ministerial briefings and other documents created by OPA in the 18 months staring January 2009 during which the Green Energy Act (“GEA”) was being discussed and the feed-in-tariff (“FIT”) program was being designed and implemented. These are the most relevant findings and how they fit into the themes I develop in my article:

1) The Ministry ignored Ontario Power Authority (OPA) and other expert advice on the design, pricing, and scope of the FIT program

In past blogs I’ve sometimes critiqued the professionalism of the relevant bureaucracy because it was hard to believe that they would have proposed/signed off on some key design aspects of the FIT and other programs. Based on the Global News story, it appears I may have been too harsh. The story highlights the fate of the key bureaucrat in charge of the FIT program, presumably now retired and feeling comfortable enough to talk about his experience almost a decade after the fact. The story is one of the Ministry apparently going “full steam ahead” on the FIT program regardless of expert opinion that would have saved billions of dollars. I have covered in detail the policy lunacy of front-end loading high-priced long-term contracts without any price-adjustment mechanism. According to the OPA documents and the person in charge of the FIT program, the Liberals knew this and still went forward with it. Ontario rate-payers and tax-payers will continue to pay the price.

2) In addition to having widespread support from environmental organizations to move forward with the FIT program, the Ministry was being pressed by the private sector

The Ministry was selling the GEA generally and the FIT program specifically as the “green” alternative that would kick-start the “democratization” of the “distributed” grid. Environmental groups were on board, along with most progressives. So were the capitalists. As policy, the Liberals specifically excluded the provincially-owned generating company, OPG, from renewable generation programs. So green energy would be provided exclusively by the private sector. Energy cooperatives got the smallest pieces of the pie. The process favored corporations and other independent entrepreneurs, who made out like bandits. The Global News article notes that in stakeholder meetings, industry groups?and individuals pressed the government to increase FIT prices, which were ultimately established by the Ministry, often above the prices and/or for longer periods than recommended by the experts.

3) The Ministry did not appear to have evidence-based rationale behind its claim that the FIT program would only “add 1% per year for 15 years” to electricity prices

According to the FIT expert and OPA record, it appears that the Liberal Minister of Energy’s 2009 claim that the cost impact of the FIT program would be minimal was not based on OPA advice. At the time, the Ministry did not provide the OPA its rationale for the 1% figure. That figure was ludicrous then and has now been proven to be false. In the absence of such rationale, it seems that the 1% was a politically-driven “alternative fact” designed to sell a policy that would not have been implemented, or would have been implemented very differently, had the public, progressives and environmentalists known its true ultimate economic and social cost.

And political cost… it appears that high electricity prices have been an important factor in this election and is one of the reasons voters appear in the mood to punish the current government. The electricity file will be a priority for the new government. However, the new Minister of Energy will unfortunately have limited scope to deal with the problems of the future, as s/he will be burdened from having to deal with these legacy issues from this sorry past.

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Ford Plan for Ontario ¨C Potential Employment Impacts https://www.google.com//ded/2018/06/04/ford-plan-for-ontario-potential-employment-impacts/ /ded/2018/06/04/ford-plan-for-ontario-potential-employment-impacts/#comments Mon, 04 Jun 2018 18:44:26 +0000 /ded/?p=19832 Ontario Conservative leader Doug Ford finally released a partially costed version of his election promises in his Plan for Ontario in the last week before the election. This includes approximately $7.6 billion in tax cuts and revenue reductions and a net $500 million reduction in annual spending.[I]

At the same time, Ford has also promised that ¡°we will balance (the budget) maybe the third or fourth year¡± e.g. by 2021/22. While Ford has claimed he wouldn¡¯t lay off public sector workers¡ªunlike his predecessor Tim Hudak who promised he¡¯d lay off 100,000¡ªwith his additional billions in tax cuts, it will be impossible to balance Ontario¡¯s budget in three or four years without job losses.

This analysis provides best guess estimates of the employment impact of Ford¡¯s promises using economic multipliers publicly available from Statistics Canada and Finance Canada.? A previous post by Edgardo Sepulveda?includes an analysis of?the impacts on inequality of the different parties’ fiscal plans, finding that the Ford plan would increase inequality the most, while the NDP plan would reduce it, while a recent post by Jim Stanford includes a prescient guestimate that Ford’s plan would lead to a net loss of about 75,000 jobs.?? The analysis provides a more detailed summary estimates of the likely impact of Ford’s plan on jobs using these multiplier tools.

Ford has said he would balance the budget by achieving ¡°efficiencies¡± through spending cuts of about 4%, but he hasn¡¯t provided any details of those. Given his promises of over $7.6 billion in annual tax cuts, a 4% cut to the Ontario government¡¯s overall spending still wouldn¡¯t be enough to balance the budget by 2021. He¡¯d need to cut Ontario¡¯s program spending by 4.9% from its projected levels in 2021/22 to eliminate the deficit[v]. In the absence of any further information from Ford and the Conservative party of what degree and how he would cut spending, this analysis considers three scenarios:

  1. A proportional cut to Ontario¡¯s program spending[ii] of 4% or $6.2 billion effective in 2021. This would still leave a deficit estimated at $1.3 billion for that year using the Liberal government¡¯s accounting.
  2. A proportional cut to Ontario¡¯s program spending of $7.6 billion or 4.9% of program spending that would be required to balance the budget by 2021 given Ford¡¯s additional tax cut promises.
  3. A cut to public spending of $13.6 billion or by 8.8% of program spending, in 2021. This is the amount that would be required to balance Ontario¡¯s budget in 2021 using the Auditor General¡¯s recommended accounting treatment for the Liberals Fair Hydro Plan and net pension assets, which adds $6 billion to the deficit.

The job losses from these spending cuts would be?counter-balanced to some degree?by indirect and induced job gains resulting from increased private sector spending resulting from Ford¡¯s promised tax cuts. However in all these scenarios, the public and private sector job losses associated with spending cuts would significantly exceed job gains from tax cuts. In fact, even with the more modest spending cut scenario, the largely private sector job losses resulting from cuts to public spending would exceed the jobs generated from tax cuts.

Ford¡¯s plan includes by far the least detail of all the major political party¡¯s election platforms, and some of the costs he¡¯s included for his promises are clearly far below any reasonable estimates for these promises.[iii]? Nevertheless, rather than second guessing their estimated costs we¡¯ve accepted them and used the tabulation Western economics professor Mike Moffatt has helpfully provided and posted on-line.[iv]

The Conservative party plan also doesn¡¯t include a fiscal or deficit forecast, and has been widely criticized for not doing so.? However, Mike Moffatt has also helpfully overlaid these costs onto different fiscal and deficit projections, including Ontario¡¯s Fall Fiscal Forecast, deficit forecasts including the Auditor General¡¯s recommendations regarding hydro plan and pension assets, and using Budget 2018 as a base.?? For this analysis, we¡¯ve used Moffatt¡¯s ¡°most likely¡± estimates using the Fall Fiscal Forecast, with and without the Auditor General recommendations. Ford wouldn’t be expected to adopt many if any of the Liberals proposals in the 2018 budget, so there¡¯s?little point in using those higher deficit figures as a base.

Ford¡¯s plan would lead to the highest deficits, as Moffat has observed, reaching $6.99 billion in year three (2020/21) and $7.63 billion in year four, 2021/22, compared to $6.5 billion and $5.6 billion for these years for the Liberals. Of the three major parties, the NDP¡¯s plan would result in the lowest deficits, of $6.47 billion in 2020/21 and $5.04 billion in 2021/22. With the accounting rules proposed by the Auditor General and Ontario¡¯s Financial Accountability Office, these deficits would be $6 billion higher per year.

To calculate how this degree of spending cuts would affect the economy and jobs, I assumed these cuts would be proportional to existing shares of program spending, which are 42% for health, 28% for education and training, 12.3% children¡¯s and social services, and 17.7% in justice and other programs. I then applied Statistics Canada¡¯s economic multipliers, derived from provincial input-output tables for Ontario, to calculate the direct, indirect and induced employment impact of these reductions for these provincial government and non-profit industry sectors, adjusted for projected inflation to 2021.

In summary, these employment multipliers for Ontario calculate that

  • $6.2 billion in spending cuts in 2021 proportional to current program spending would lead to a loss of 74,340 jobs in Ontario, including 44,445 direct public sector jobs and an additional 29,895 indirect and induced jobs, mostly in the private sector (all figures rounded to closest unit of 5).
  • $7.6 billion in spending cuts in 2021 proportional to current program spending would lead to a loss of 91,020 jobs in Ontario, including 54,430 direct public sector jobs and an additional 36,590 indirect and induced jobs, mostly in the private sector.
  • $13.6 billion in public spending cuts in 2021 proportional to current program spending would lead to an estimated 163,010 job losses, including 97,490 direct public sector jobs and another 65,520 indirect and induced jobs, mostly in the private sector.

Against these job losses from spending cuts should be added the jobs that would be generated from Ford¡¯s promised tax cuts. Statistics Canada doesn¡¯t provide these economic and job multipliers for tax cuts, but various private proprietary econometric models do.?? I don¡¯t have access to these, but Finance Canada published multipliers in their 2009 budget for various types of tax cuts, including for corporate, personal income, payroll taxes and ¡°measures for low income households.¡± I¡¯ve allocated Ford¡¯s proposed $7.6 billion in tax cuts by these areas ($1.36 billion in corporate tax cuts, $2.26 billion in personal income tax cuts, $950 million in measures for low incomes and applied $3 billion to payroll tax impacts) and adjusted these figures to adjust for projected GDP and job growth to 2021.? Calculations using these multipliers suggest that $7.6 billion in tax cuts would generate 3,680 jobs in the first year, rising to 28,040 jobs after two years¡ªas it generally takes about two years for these measures to achieve their full impact.

Overall in net terms, the combined impact of $7.6 billion of Ford¡¯s tax cuts and the $7.6 billion in public spending cuts that would then be required to balance the budget by the end of his mandate would lead to a net loss of 62,980 to 87,340 jobs. This includes 54,430 direct public sector jobs and an additional 8,550 to 32,910 indirect and induced job losses in the private sector, even after accounting for the stimulative effect of tax cuts.

If Ford cuts spending deeper¡ªby $13.6 billion¡ªto balance the budget consistent with the auditor general¡¯s accounting recommendations, then the net job losses associated with these spending and tax cuts could reach over 135,000, including 97,500 direct public sector jobs and another 37,500 to 61,900 net indirect and induced job losses in the private sector.

Even the more moderate spending cuts also suggested by Ford of 4% of program spending in 2021 (which would still lead a deficit) would still lead to significant job losses, after accounting for stimulative effects of tax cuts. Overall net job losses for this scenario would amount to 46,300 to 70,660, including 44,440 direct public sector job cuts and between 1,860 and 26,215 job losses in the private sector, depending on the timing of these impacts.

These estimates are of course just that: estimates. Different econometric models and different assumptions could of course yield different results. The job impacts of spending cuts could be quite different depending on where cuts are made, but in the absence of any further information about where they would be, the most reasonable assumption is to assume that spending cuts would be proportional to current program spending levels.? I may have made some errors and if so, please send me a message and I’ll endeavour to correct asap with an update.

While this analysis uses multipliers published by Statistics Canada and by Finance Canada, this use of course doesn¡¯t imply their endorsement, nor should they be considered accountable for any use of these statistics or tools.??

[i] This net change in spending reflects $2.17 billion in specified annual spending cuts and $1.64 billion in specific spending increases for a net decline of approximately $500 million annually.

[ii] Program spending is total spending less debt interest payments.

[iii] For instance, Ford has promised to ¡°Conduct a value-for-money audit of every government program¡± and ¡°Launch an independent commission of inquiry¡­ to get to the bottom of the deficit scandal and to propose timely solutions to solving the deficit problem¡±¡ªand said this would cost a total of $1 million, which of course is ridiculously low.

[iv] Moffat¡¯s figures don¡¯t include the costs associated with Ford¡¯s promise to provide an additional 15,000 long-term care spaces over five years as the total estimated costs for these aren¡¯t included in Ford¡¯s plan, but they are likely to add at least $1 billion annually for 15,000 spaces and at least $2 billion annually for 30,000 spaces (at $62,000 for annual operating costs plus capital for each space).

[v] Using the Fall 2017 Fiscal Update projections, e.g., not including budget measures announced or revisions since then.

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The Bank of Canada should target full employment: 61 economists https://www.google.com//ded/2018/06/04/the-bank-of-canada-should-target-full-employment-and-inflation/ /ded/2018/06/04/the-bank-of-canada-should-target-full-employment-and-inflation/#comments Mon, 04 Jun 2018 14:55:16 +0000 /ded/?p=19810 On May 28th, 61 Canadian economists (myself included) signed the following letter urging the federal government to instruct the Bank of Canada to consider full employment and not only inflation when conducting interest rate decisions.? It was through the great organization of Mario?Seccareccia that this was made possible and has received reviews by several media commentators, notably Barrie McKenna?and Neil Macdonald.? Follow the links for the PDFs of the English letter, French letter.? This is the text of the English letter:

Letter Addressed to Honourable Bill Morneau, Federal Minister of Finance of the

Government of Canada, by Canadian Economists in Support of a Multi-Goal Mandate for the Bank of Canada

We wish to encourage the Canadian Government and, more specifically, the federal Minister of Finance, the honourable Bill Morneau, to instruct the Bank of Canada to pursue policies more consistent with its official broad mandate as stipulated in the preamble to the Bank of Canada Act:

¡° ¡­ to regulate credit and currency in the best interests of the economic life of the nation, to control and protect the external value of the national monetary unit and to mitigate by its influence fluctuations in the general level of production, trade, prices and employment, so far as may be possible within the scope of monetary action, and generally to promote the economic and financial welfare of Canada.¡± http://lawslois.justice.gc.ca/eng/acts/B2/page1.html

The current official mandate of a 2 per cent inflation target is the outcome of a specific monetary policy framework put in place since 1991 when the Bank of Canada and the federal Minister of Finance of the then Progressive Conservative Government of former Prime Minister Brian Mulroney agreed on an inflation-targeting regime to conduct Canadian monetary policy. Through a decision of the Cabinet, the Canadian Government renews every five years this specific inflation target agreement with the Bank, with the most recent being in 2016 for the 2016-2021 period. Because this inflation-targeting regime has been in place for over a quarter century, we believe it is time to assess the current framework and open the discussion to the possibility of a broader mandate, which is more consistent with the spirit and intent of the original Bank of Canada Act.

In its current narrow policy framework, the Bank monitors and is supposed to act exclusively on the performance of the actual monthly inflation rate when the latter deviates from its annual target of 2 per cent inflation rate. Admittedly, the Bank takes decisions on the appropriate target overnight interest rate also by monitoring the evolution of the unemployment rate (or the ¡°output gap¡±, as defined by the Bank of Canada), but this is only for preemptive purposes, as a tool for controlling future inflation, on the basis of some hybrid Phillips Curve relation. There is strong indication, however, that the Phillips Curve is a relatively flat trade-off relation when observing evidence over the last decade or more. For instance, we have witnessed some very wide fluctuations in the unemployment rate since the global financial crisis of 2008, despite relatively small changes in the inflation rate.? This suggests that, in addition to demand-side factors, there are other important determinants of the inflation rate over which the central bank has little control. In addition, there is a growing amount of empirical research that indicates that deflationary pressures on the economy triggered by actions of central banks to restrain inflation can be detrimental to the economy, not only in the short term, but also in the long term: output and employment on average never recover the trend levels that were previously forecasted. A side effect of this research is to question the validity of the output gap measures used by central banks to justify their pre-emptive strikes against inflation.

Recognizing the sharp decline in the Bank¡¯s target overnight interest rate despite the small changes in the inflation rate over the last decade, it would appear that both former Governor Mark Carney and current Governor Stephen Poloz have actually shown a high degree of pragmatism since the global financial crisis of 2008. This would suggest that, in practice, the Bank has pursued a policy that has shown great concern also with the level of employment and output, not as a predictor of future inflation, but primarily because high unemployment is detrimental to the welfare of Canadians who find themselves in such a socially unacceptable labour-market state. The same applies for the concern of the Bank with the high household debt ratios of Canadians, which may well be another reason why Governor Poloz has been reluctant to raise interest rates more quickly in recent years, despite the nearly continuous fall in the unemployment rate. Such decisions taken by the Bank have not directly been a response to changes in the inflation rate. They go beyond the Bank¡¯s official single-goal commitment of solely achieving its 2 percent inflation target. The Bank¡¯s behaviour seems, in fact, to be much more consistent with a broader multi-goal mandate that should be entrenched officially in any future government decision guiding monetary policy.

Also, strong, shared and sustainable growth and full and productive employment are among the goals of the United Nations that were adopted in 2015 in its 2030 Agenda to promote sustainable development, and full employment remains a goal for the US Federal Reserve under the Humphry-Hawkins Full Employment Act. We believe that such goals should be part of a broader vision of the Bank of Canada’s strategy to improve the well-being of all Canadians.

That is why we are proposing that the Bank of Canada Act be amended to move the preamble text into the Act itself and thus become section 1 of the Act. We also propose to add the notion of full and productive employment as defined in Goal 8 of the United Nations 2030 Agenda. This article could read as follows: Article 1: The mandate of the Bank of Canada is to regulate credit and currency in the best interests of the economic life of the nation, to control and protect the external value of the national monetary unit and to mitigate by its influence fluctuations in the general level of production, trade, prices and employment, so far as may be possible within the scope of monetary action, and generally to promote the economic and financial welfare of Canada as well as full and productive employment.

We also propose to add a new article to the Act pertaining to the framework of monetary policy. It could read as follows: Article 2: In the name of the principle of transparency and to ensure the conformity of the framework of monetary policy with the mandate of the Bank of Canada set out in Article 1 of the Act, twelve months before the renewal of its (five-year) framework for the conduct of monetary policy, the government and the Bank of Canada table for the consideration of the Parliament of Canada (the House of Commons and the Senate) an evaluation of the monetary policy framework for previous years, including the effects of this policy on economic growth, inflation, employment and income distribution at the national and regional levels. This report also includes a presentation of the proposed new five-year framework for the conduct of monetary policy.

We believe that this expanded mandate would be more consistent with the spirit of the original Act. It would also make monetary policy more transparent and understandable to all Canadians who know very well that such a policy can have an impact not only on the rate of inflation but also on economic growth, the level of employment and unemployment rate, as well as on the distribution of income and wealth of Canadians.

Signed by:

Mario Seccareccia (Professor Emeritus of Economics, University of Ottawa)

Marc Lavoie (Senior Chair of Excellence, University of Sorbonne Paris Cit¨¦, and Professor Emeritus of Economics, University of Ottawa)

Hassan Bougrine (Full Professor of Economics, Laurentian University)

Louis-Philippe Rochon (Full Professor of Economics, Laurentian University)

John Smithin (Professor Emeritus of Economics and Senior Scholar, York University)

Mathieu Perron-Dufour (Associate Professor of Economics, Universit¨¦ du Qu¨¦bec en Outaouais)

Lars Osberg (McCulloch Professor of Economics, Dalhousie University)

Pierre Fortin (Professor Emeritus, Department of Economics, Universit¨¦ du Qu¨¦bec ¨¤ Montr¨¦al)

Kari Polanyi Levitt, CM (Professor Emerita of Economics, McGill University)

Mel Watkins (Professor Emeritus of Economics and Political Science, University of Toronto and Adjunct Research Professor, Institute of Political Economy, Carleton University)

Jim Stanford (Harold Innis Industry Professor of Economics, McMaster University, and Director, Centre for Future

Work, Australia)

Brian MacLean (Full Professor of Economics, Laurentian University)

Ian Hudson (Professor of Economics, University of Manitoba)

Robert Dimand (Professor of Economics, Brock University)

Sheila Dow (Professor Emerita of Economics, University of Stirling, UK, and Adjunct Professor of Economics, University of Victoria)

Jordan Brennan (Economist, Research Department at Unifor, Toronto, and Visiting Scholar, Harvard Law School)

Lynne Fernandez (Errol Black Chair in Labour Issues, Canadian Centre for Policy Alternatives, Manitoba)

Simon Black (Assistant Professor, Department of Labour Studies, Brock University)

Marjorie Griffin Cohen (Professor Emeritus, Simon Fraser University, and Chair, BC Fair Wages Commission)

Michel Chossudovsky (Professor Emeritus of Economics, University of Ottawa)

Ellen Russell (Associate Professor, Digital Medial and Journalism and Social and Environmental Justice, Wilfrid Laurier


Anupam Das (Associate Professor, Faculty of Arts, Economics, Justice and Policy Studies, Mount Royal University, Calgary)

Andrew Jackson (Adjunct Research Professor, Institute of Political Economy, Carleton University)

Lynne Pajot (Research Specialist, Canadian Union of Postal Workers, Ottawa)

Larry Kazdan (Retired Instructor of Accounting, British Columbia Institute of Technology)

Anna Klimina (Associate Professor of Economics, St. Thomas More College, University of Saskatchewan)

Kim Jarvi (Senior Economist, Registered Nurses¡¯ Association of Ontario, Toronto)

Robert Chernomas (Professor of Economics, University of Manitoba)

David Macdonald (Senior Economist, Canadian Centre for Policy Alternatives, Ottawa)

Isabella Bakker (Distinguished Research Professor, York University)

Pierre-Antoine Harvey (Economist, Centrale des syndicats du Qu¨¦bec (CSQ), Montreal)

Brenda Spotton Visano (Full Professor, Department of Economics and School of Public Policy & Administration, York University)

Paul Makdissi (Professor of Economics, University of Ottawa)

Myra Yazbeck (Assistant Professor of Economics, University of Ottawa)

Joan McFarland (Professor of Economics, St. Thomas University)

Toby Sanger (Senior Economist, Canadian Union of Public Employees, Ottawa)

Harold Chorney (Professor, Political Economy, Concordia University)

Michael Bradfield (Retired Professor of Economics, Dalhousie University)

Shehrnaz Choksi (Lecturer (Retired) Economics Department, Vanier College, Montreal)

Eric Kam (Associate Professor of Economics, and Director, Learning and Teaching, Ryerson University)

Roy Culpeper (Senior Fellow, School of International Development and Global Studies, University of Ottawa, and Adjunct Research Professor, Norman Paterson School of International Affairs, Carleton University)

Marguerite Mendell, CM (Professor, School of Community and Public Affairs, Concordia University, and Director, Karl Polanyi Institute of Political Economy)

Paul Bowles (Professor of Economics, University of Northern British Columbia)

Myron Frankman (Retired Professor of Economics, McGill University, and Senior Research Fellow, Centre for International Sustainable Development Law)

Fiona MacPhail (Professor and Chair, Department of Economics, University of Northern British Columbia)

Ricardo Grinspun (Associate Professor of Economics, York University)

Paul Tulloch (Director of Research, LivingWork Analytics)

Mark Peacock (Full Professor of Economics, Department of Social Science, York University)

Anthony Myatt (Professor of Economics, University of New Brunswick, Fredericton)

Mustapha Ibn Boamah (Associate Professor of Economics, University of New Brunswick, Saint John)

Rob Moir (Associate Professor of Economics, University of New Brunswick, Saint John)

Najib Khan (Assistant Professor of Finance, John Molson School of Business, Concordia University)

Rapha?l Langevin (Economist and Research Associate at IRIS, Montreal)

Manfred Bienefeld (Professor Emeritus, School of Public Policy and Administration, Carleton University)

Roderick Hill (Professor of Economics, University of New Brunswick, Saint John)

Talan Iscan (Full Professor and Chair, Department of Economics, Dalhousie University)

Pierre Paquette (Professor of Economics and Management, Royal Military College, Kingston)

Andrew Sharpe (Executive Director, Centre for the Study of Living Standards, Ottawa)

Gordon Betcherman (Professor, School of International Development and Global Studies, University of Ottawa)

Martha MacDonald (Professor of Economics, Saint Mary¡¯s University)

Mohamed Douch (Associate Professor and Head, Management & Economics Department, Royal Military College of Canada, Kingston)


livescoreทีเด็ด D¨¦claration des ¨¦conomistes canadiens – Banque du Canada – Mai 2018

Declaration by Canadian Economists – Bank of Canada – May 2018


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Ontario Election: Inequality Impacts of Fiscal Plans https://www.google.com//ded/2018/05/29/inequality_and_ontario_fiscal_plans/ /ded/2018/05/29/inequality_and_ontario_fiscal_plans/#respond Tue, 29 May 2018 06:13:43 +0000 /ded/?p=19766 In the context of Ontario¡¯s upcoming June 7 election, I just finalized an article on the CCPA¡¯s ¡°Behind the Numbers¡± blog, exploring the fiscal plans of the three major political parties from a historical and comparative context. I concluded that while the Ontario election offers voters three distinct fiscal visions, it is also true that all three would maintain Ontario¡¯s comparatively low program expenditures and own-source revenues, at least during their first term. Building on my prior work examining the impact of fiscal policy on inequality, I develop a novel, regression-based model to forecast the impact that each fiscal plan is likely to have on income inequality in Ontario, as measured by the after-tax income Gini coefficient and conclude that the NDP would decrease inequality moderately, the Liberals would decrease it slightly, and the PCs would increase it significantly.

Ontario Inequality in Context

Figure 1 presents “market income,” “total income” and “after-tax income” Gini coefficients for Ontario from 1986 to 2016. Market income is before taxes and government cash transfers, total income includes market income and cash transfers, while after-tax income is after taxes and cash transfers. The Gini coefficient varies from 0 to 1.00, with higher values representing higher inequality. Figure 1 shows a significant increase in inequality for all measures over the first decade of the study period, after which most Gini coefficients stabilize.

Governments reduce market inequality via the tax and transfer systems, and hence after-tax, income Gini coefficients are lower than market income coefficients. I define this difference as ¡°Fiscal Redistribution¡±. There are two components of Fiscal Redistribution. One is related to cash transfers and is the difference between total income and market income Gini coefficients, which I define as ¡°Transfer Redistribution¡±. The other is related to taxes and is the difference between after-tax and total income Gini coefficients, which I refer as ¡°Tax Redistribution¡±.


Fiscal redistribution varies significantly across time and jurisdictions. In an update to my OECD-related post I noted that Canada has historically had lower levels of Fiscal Redistribution than the OECD average. Figure 2 shows how Ontario compares to thee jurisdictions. To look at how Ontario compares to the rest of Canada, I include the average Fiscal Redistribution for the 9 Other Provinces.? In tis regard Figure 2 shows that Ontario has traditionally had lower redistribution than other provinces. However, that gap has started to shrink in the last decade or so. The USA has traditionally had a relatively low and stable level of redistribution, which Ontario has tracked for about two decades. As discussed previously, Ontario (and Canada generally) start with a relatively much lower level of market income inequality relative to the USA. Ontario’s redistribution is significantly lower than the OECD-12 average (a sample of OECD Member-States).



Regression Analysis to Forecast Inequality in Ontario

My objective is to forecast the impact of the three fiscal plans on after-tax income inequality in Ontario because understanding inequality impacts should be a critical decision criteria in the election.

There are a number of challenges associated with this endeavour. First, as far as I am aware, there is no publicly-available model that calculates fiscal policy changes in Ontario. Perhaps the SPSD model developed by Statistics Canada comes closest, in this respect, in that it can estimate impacts of well-defined fiscal policy changes by income categories (such as the the so-called “middle-class personal income tax cut announced by the PC leader), but does not provide an inequality measure such as the Gini coefficient.

The second challenge is lack of specificity. As I noted in the CCPA article, the PC party has not released a comprehensive fiscal plan, but have been running on a set of ad-hoc announcements and general commitments, including to reduce program expenditures by about $6 billion dollars via ¡°efficiencies¡±. Detailed models like the SPSD cannot be applied based on such broad generalities.

In the absence of alternatives, I develop a novel, regression-based model to predict the After-Tax income Gini coefficients for each fiscal plan. I do this by separately analyzing and forecasting Transfer Redistribution and Tax Redistribution and then subtracting them from the forecast Market Income Gini coefficient. Because this is a novel approach to an issue that has not been otherwise addressed during this or other elections in Canada, I provide my intermediate results for ¡°peer review¡± purposes.

There are data challenges even with the regression approach. Ideally, I would want regress historical federal and provincial cash transfers against Transfer Redistribution and apply the results to forecast federal and provincial transfers to predict future Transfer Redistribution. However, while the amount of transfers could be calculated for the NDP and Liberal fiscal plans, that is not the case for the PCs because of lack of specificity. As an alternative, I use Program Expenditures (as a percentage of GDP) (¡°PE%GDP¡±) as a proxy for all the transfers (federal and provincial) that have an impact on the size of Transfer Redistribution. Figure 3 shows that PE%GDP has tracked Transfer Distribution very well over the last there decades in Ontario. The correlation coefficient is relatively high, as is the R2 and the regression results are significant.


The same data constraints apply for Tax Redistribution. In this case, I use Own Revenues as a percent of GDP (¡°OR%GDP¡±) as a proxy for all taxes (federal and provincial) that have an impact on the size of Tax Redistribution. Figure 4 shows that OR%GDP has tracked Tax Redistribution relatively well over the last three decades. The correlation coefficient is moderate, as is the R@ and the regression results are significant.

Table 1 includes the PE%GDP and OR%GDP for 2020 for the Base and three main political parties that I developed in the companion CCPA article. They show that relative to 2017 the NDP would increase PE%GDP and maintain OR%GDP, while the Liberals would increase PE%GDP and decrease OR%GDP and the PCs would decrease PE%GDP and OR%GDP.

Applying these fiscal plans to the regression parameter values provides me predicted Fiscal Redistribution for each of the there main political parties, as presented in Figure 5. It shows that to 2016 (last available data from Statistics Canada), the NDP would increase the amount of redistribution, while the Liberals would increase it moderately and the PCs would decrease it significantly. Figure 5 also shows the predicted estimates for the historical period 1986-2016 and shows that predictive values tracked actual values relatively well over the period, especially over the latter period from 2008-2016. This provides me with some confidence that the parameter estimates are likely provide reasonable forecast estimates for the 2017-2020 period. Further, the scale of the forecast estimates are consistent with past experience.

Forecasting Inequality

Based on trend analysis I forecast the Market Income Gini co-efficient to remain at the same level as 2016 (0.4450) for the 2017-2020 period. From this I subtract the predicted Fiscal Redistribution for each of the fiscal plans to calculate the After-Tax income Gini coefficients, presented in Table 2 and graphed in Figure 6.

These estimates indicate that the the NDPs’ fiscal plan would decrease the after-tax income Gini coefficient by about 1.5% relative to 2016. The Liberals would decrease it by 0.5%.? The PCs’ reduction of program expenditures and own revenues would increase the after-tax income Gini coefficient by about 2.6%.

Concluding Thoughts

Based on my analysis of the fiscal plans of the three major political parties in my companion CCPA blog, in this post I developed a novel, regression-based impact model to estimate the likely impact on inequality of those plans. While the approach is novel, and there is a confidence interval around any point estimate, I am reasonably confident that I have forecast the direction and order-of-magnitude of the inequality impacts: the NDP would decrease after-tax income inequality moderately, the Liberals would decrease it slightly, and the PCs would increase it significantly. For any voter concerned about inequality, these findings provide the first available quantitative estimates of those impacts, thus allowing a broader economic discussion on fiscal plans to include equity and efficiency considerations.

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NDP Math Error will Help the Party, Not Hurt It https://www.google.com//ded/2018/05/23/ndp-math-error-will-help-the-party-not-hurt-it/ /ded/2018/05/23/ndp-math-error-will-help-the-party-not-hurt-it/#comments Wed, 23 May 2018 21:36:59 +0000 /ded/?p=19761 The number-cruncher in me cringed in sympathy for the anonymous research nerds who made the now-famous math error in the Ontario NDP¡¯s fiscal platform. They wrongly added a $700 million contingency reserve?to net revenue, instead of to expenses.? The result is an underestimation of the?planned deficit (if we include that reserve ¨C more on that below) by $1.4 billion in each year.

Pompous voices predictably crowed that this error confirms the NDP¡¯s supposed lack of fiscal credibility. In practice, though, this accounting tempest will turn out to be a non-event in this dramatic election campaign ¨C and in fact, it may counterintuitively help the party¡¯s surging campaign, rather than hurting it.First off, the budgeting error is clearly insignificant in the overall fiscal picture, no matter how much critics try to make it seem big and scary. The true effect on the bottom line is $700 million per year (not $1.4 billion), because the reserve itself was funny money in the first place; removing it has no real fiscal impact.? (What you can’t do is count it as revenue.) The remaining $700 million represents less than half of one percent of the total budget.? It wasn¡¯t much of a ¡°cushion¡± in the first place: the side effects from any run-of-the-mill macroeconomic swing would overwhelm it in weeks.

NDP Leader Andrea Horwath quickly acknowledged the error, and then pledged (credibly) that it would not alter the overall trajectory of program spending and taxes under her government. Yes, the deficit would be a little bit bigger, but the overall fiscal stance of an NDP government would not be affected.? This response was far more honest, and more effective, than former PC leader Tim Hudak¡¯s stubborn, doomed denial of his own mathematical problems in the 2014 campaign ¨C a denial which raised deeper questions about his very character, not just his skills with a calculator.

Most importantly, the attention on the NDP¡¯s detailed fiscal plan merely highlights the complete lack of fiscal clarity from its main opponent: Doug Ford¡¯s Conservatives. He is issuing a growing list of blank-cheque promises to any constituency with a populist-friendly gripe.? Power prices too high?? We¡¯ll fix it.? Gas prices too high?? We¡¯ll fix that too.? Transit woes?? We¡¯ll build a subway.? Sick of health care waits?? We¡¯ll fix it.? (Won¡¯t tell you how, or how much it will cost, we¡¯ll just fix it.)? And we¡¯ll cut corporate taxes while we¡¯re at it.

Some philosophical conservatives (like the National Post¡¯s Andrew Coyne) challenge Mr. Ford¡¯s expensive, unprincipled promises.? Most, however, are opportunistically keeping quiet: they don¡¯t want to stand in the way of possible victory, nor undermine their chances to play a role in (or otherwise benefit from) a Ford-led government.? (We saw exactly the same dynamic in the U.S.: principled Republicans, initially appalled by Donald Trump¡¯s contradictory policy scatter-gun, got quieter the closer he got to power.)

In previous work I argued that Doug Ford would face a serious fiscal challenge to reconcile his self-evidently contradictory promises of tax cuts, new program spending, and a reduction in the provincial deficit.? Using Patrick Brown¡¯s ¡°People¡¯s Guarantee¡± as a starting point, I estimated that Ford¡¯s various promises at that point left a $25 billion fiscal gap over three years ¨C and $10 billion (or over 1 percent of Ontario GDP) in the third year alone.? Closing that gap through spending cuts (the most likely response of Conservatives if they win power) would likely cost the province 75,000 jobs.

How little did I know that Mr. Ford was just getting started! Almost every one of his grandiose promises since then either adds to spending, or subtracts from revenue ¨C making the fiscal gap all the bigger.? Observers are scrambling to update the price tag; no-one (and certainly not the Tories) has a credible handle on the total cost.? Behemoth promises to create 30,000 long-term care beds (likely cost $4 billion) and build a new subway in Toronto ($5 billion for starters) pushes the total tab well into the tens of billions of dollars. Ford¡¯s strategy is clearly to promise anything to anybody, not even pretending to make it add up, all framed as helping ¡°the people,¡± in order to win power.? Whether such a cynical strategy actually works will be an important test of Ontario¡¯s democratic culture.

On one level these Conservative promises, if actually realized, would constitute a massive fiscal stimulus. The combination of tens of billions of dollars of tax cuts and new spending, other things being equal, would drive a lot of new economic activity and job-creation (the spending much more than the tax cuts).? Whether that scale of stimulus makes sense at this stage of the macroeconomic cycle is a big question ¨C even for someone, like me, who rarely meets a deficit they don¡¯t like.

The problem is that all else will not remain equal: clearly there is another shoe to drop.? So far the only source of funds to pay for all these promises is Mr. Ford¡¯s laughable, unspecified ¡°efficiencies.¡±? Get on your unicorns, people, and ride to the fiscal happy place.? Of course, what Mr. Ford blithely calls ¡°efficiencies¡± will turn out, by necessity, to be enormous reductions in program spending.? His promise to not cut a single job will be the first one broken.? In the end, the stimulus of his big-ticket promises will be counteracted (and then some) by the employment and macroeconomic side-effects of the corresponding austerity.? At the bottom line, the net fiscal retrenchment will be similar to what I suggested in the first place: around 1 percent of GDP in the third year, with a corresponding hit on jobs.? What is gained from Mr. Ford¡¯s surprisingly expansionary promises will be more than given back through the austerity required to pay for them.? (I say ¡°more than given back¡± because the contractionary effects of spending cuts are bigger than the expansionary effects of tax cuts, for well-known reasons.)

These fiscal unknowns are dozens of times larger than the NDP¡¯s $700 million ¨C pocket change by comparison. That¡¯s why the Tories are being surprisingly laid-back about the NDP¡¯s error; as the Globe and Mail¡¯s Adam Radwanski points out, they don¡¯t want any fiscal magnifying glasses turned on their own fiscal costing.? (Oh wait¡­ they don¡¯t have a fiscal costing.)

The NDP¡¯s true error, in my view, was including a phony fiscal cushion in its platform in the first place. After all, the practice is a purely symbolic sop to the goals of fiscal rectitude (and ultimately austerity), and bears no relevance to true fiscal performance.? It was former Finance Minister Paul Martin who pioneered this manipulative practice in his austerity budgets of the mid-1990s.? On top of billions of dollars in program cuts, he built in billions more in fiscal padding (through both deliberately conservative economic assumptions and explicit fiscal reserves).? Hence his super-austere budgets were even tougher than they looked (to the joy of financial analysts).? Finance Ministers ever since have copied this phony strategy, supposedly proving their ¡°prudence¡± ¨C and setting themselves up for positive budget ¡°surprises¡± when the year-end numbers come in.? This manipulative, inherently conservative gimmick had no place in an NDP platform in the first place.

Nevertheless, that small self-inflicted wound is easily cured with a public correction and a?band-aid. And the whole incident has focused more attention on the Tories¡¯ much larger, unanswered fiscal questions.? Hence the math error will do more good than harm for the NDP.

And that¡¯s a nice bit of poetic fiscal justice, as the province hurtles toward a historic election on June 7.

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Rethinking the economics of extreme events https://www.google.com//ded/2018/05/15/rethinking-the-economics-of-extreme-events-2/ /ded/2018/05/15/rethinking-the-economics-of-extreme-events-2/#respond Tue, 15 May 2018 16:01:10 +0000 /ded/?p=19753 Review of Worst-Case Economics: Extreme Events in Climate and Finance by Frank Ackerman


Long ago economics was termed ¡°the dismal science,¡± but in recent years that title has arguably been passed on to climate science, with its regular and dire warnings that humanity needs to rapidly transition off of its use of fossil fuels for energy. In the face of such calls to action, progress has been frustratingly slow. The 2015 Paris Agreement offers some hope, as does the small-but-growing share of renewable technologies, but by and large countries are not doing enough to meet Paris¡¯ grand aspiration of keeping temperature increase between 1.5 and 2 degrees above pre-industrial levels.

Our collective inability to rise to the climate challenge may be related to our inability to imagine the consequences of inaction. Humans tend to think about immediate threats to our well-being, whereas climate change is a slow burn without clarity about how it will play out spatially and temporally. We understand that tipping points with irreversible consequences lie ahead, but do not really know at what point those critical thresholds will be crossed.

Worst-Case Economics steps into this fray by providing a refreshing look at the state of the economics discipline and how its standard toolkit leaves us poorly equipped to address two pressing concerns of the 21st century: financial crises and climate crises. The book aims to infuse recent lessons of the former into the latter.

Over the years I have greatly admired Frank Ackerman¡¯s work on cost-benefit analysis, the social cost of carbon, and the economics of climate change. This book compiles much of that analysis under one cover, but goes beyond by critically examining how economists think (or don¡¯t think) about extreme events.

Ackerman shines when dissecting the core assumptions of neoclassical economics, the dominant academic form of the discipline. His critique begins with 19th century economic models emulating classical physics and the concept of equilibrium. But while physics moved on in the 20th century, economics did not. So we are left with theoretical models that require an array of simplifying assumptions that abstract away from the nature of real-world economic problems. In the simplified neoclassical view of the economy humans are assumed to be rational, self-interested maximizers, who are unswayed by advertising, fashion or the behaviour of their peers. There is no market power, insider information, nor external costs imposed on third parties (like carbon emissions).

To be fair, each of these limitations has been explored in the economics literature, but usually only as one-offs, while still upholding the other standard assumptions. Ackerman points out that it is precisely these deviations from the model ¨C bounded rationality, susceptibility to social pressures, imperfect markets ¨C that are central to understanding financial or climate crises.

That said, Ackerman may be putting too much blame on economics, and not enough on the failure of politics to implement adequate climate policies. Climate change is a collective action problem that requires governments to step in, but this fundamentally conflicts with conservative values and the free market worldview of the right.

One area where economists have had a disproportionate effect on the public climate conversation is around carbon taxes. The economics of carbon taxes goes back to the Arthur Pigou looking at smokestack England in the 1920s, and the idea that there are external costs imposed onto third parties from certain market transactions. In the case of carbon emissions the fix is to ¡°internalize the externality¡± through a price on carbon.

Ackerman comments that ¡° ¡¯getting the prices right¡¯ is an incomplete response to climate change and other complex environmental problems.¡± We don¡¯t actually know when certain tipping points will be reached, and poorly understand the value of expected damages. We can develop estimates from models but they are riddled with uncertainties about the future. At one extreme, the ¡°dismal theorem¡± proves the value of carbon reductions to be literally infinite if we accept worst-case scenarios that destroy the sources of human well-being or that undermine the ability of the human race to survive.

Standard cost-benefit analysis is particularly ill-suited for addressing extreme risks in Ackerman¡¯s view. Even under ideal circumstances, attempting to put a dollar value on human life or suffering is a task that is fraught with difficulty. For finance and climate, cost-benefit analysis has limited utility because it looks at potential outcomes in terms of averages, and does not consider low-probability events with catastrophic implications. It is one thing to assess risk when dealing with well-defined problems with an accumulated evidence base from past events; quite another when uncertainties abound and climate change itself affects the probabilities and magnitudes of damages.

In place of neoclassical approaches, Ackerman shows that financial crises are far more common than would be expected from a ¡°normal¡± distribution (i.e. the standard bell curve). The same non-linear relationship is likely for climate extremes meaning our standard practices greatly understate the likelihood of extreme events. Such extreme weather events are already becoming our new normal: heavy precipitation events that overwhelm storm sewers; heat waves causing premature death; and, extreme dry conditions fueling forest fires.

Insurance is central to a response. Ackerman notes that people are risk averse and so are willing to pay for a proposition that is likely to lose them money on average in order to guard against a truly catastrophic outcome. It would be interesting to scale this thinking globally to events larger than private insurance companies can handle: regional crop failures or disasters that displace millions of people.

Likewise, developing scenarios can help us make decisions. But when all we can know is what the worst-case scenario might look like, the precautionary principle should guide our decision-making. Ackerman invokes the war-time mobilization as a model for rapidly dealing with climate change.

The book¡¯s linkage to our growing understanding of financial crises provides much interesting fodder. But the analogy is imperfect: economic thinking based on periodic financial crashes does not ultimately translate well into the climate discussion of crossing irreversible and catastrophic tipping points, such as changes in the Earth¡¯s ocean circulation system, the collapse of the Amazon rainforest, or the loss of Greenland¡¯s ice sheet.

It may just be that rigorous mathematical economic models are not suitable for these lurking disasters. Ackerman concludes by stating: ¡°There is no fixed formula for good policy decisions about the greatest risk, no calculation that leads automatically to the right answer. Politics, ethics, and judgment inevitably enter the decision-making process, along with science and economics.¡±

In other words, just get on with it. The future is at stake and we can, and must, do better.


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Winner of the 2018 Galbraith Prize in Economics: Jim Stanford https://www.google.com//ded/2018/05/07/winner-of-the-2018-galbraith-prize-in-economics-jim-stanford/ /ded/2018/05/07/winner-of-the-2018-galbraith-prize-in-economics-jim-stanford/#comments Mon, 07 May 2018 14:20:48 +0000 /ded/?p=19745 The Progressive Economics Forum is pleased to announce Jim Stanford as the winner of the 2018 Galbraith Prize in Economics.

The selection committee included Fletcher Baragar (Manitoba), Hassan Bougrine (Laurentian), Toby Sanger (Canadian Union of Public Employees), Christine Saulnier (CCPA-NS) and Kevin Young (University of Massachusetts at Amherst), and was chaired by David Pringle (PEF). Jim has accepted the Prize and will deliver the Galbraith Lecture at the Canadian Economics Association meetings at McGill University, Montreal on Saturday, June 2 (https://economics.ca/2018/en/program.php).? Many thanks to our judges and to the Galbraith family.

Below is the nomination statement of Dr. Stanford by Marc Lee (CCPA-BC) and thirteen other signatories, which does a great job to summarize his extensive career.

We nominate Jim Stanford for his outstanding contributions to progressive economic thought and movement-building in Canada over the past two decades.

Jim¡¯s PhD dissertation at the New School developed a CGE model using real-world assumptions leading to results that challenged the mainstream view about the benefits of NAFTA.

Jim rose to prominence as a public intellectual as Economist for the Canadian Auto Workers union and Unifor (for which he played a significant role in its founding). His work at the bargaining table supported the interests of hundreds of thousands of workers in Canada.

Also during this time, Jim was a key Research Associate and Board member of the Canadian Centre for Policy Alternatives. He published accessible op-eds and research papers on a wide range of economic policy topics, including the federal budget, free trade deals, industrial policy, labour markets and regional development.

At the CCPA, Jim was a guiding force behind the Alternative Federal Budget. His AFB forecasts regularly embarrassed the federal government, whose ¡°prudence¡± often caused greater-than-necessary austerity. Jim¡¯s track record was perhaps the single most influential reason why Canada now has a Parliamentary Budget Officer.

Jim¡¯s first book, Paper Boom, published in 1999, was an early critique of financialization ¨C the split between the real economy of work and wages and the paper economy of speculation and finance. His second book, Economics for Everyone, is a guide for activists, trade unionists and the general public, and is notable for its inclusion of the history of economic thought and discussion of capitalism as an economic system.

In recent years, Jim has been a respected contributor to economic debates via The Globe and Mail and CBC news panels, among other outlets. He has always done so with great compassion and humour.

All the while Jim managed to contribute papers to academic journals and conferences, and has mentored dozens of students and young economists.

Finally, Jim¡¯s role in starting the Progressive Economics Forum cannot be understated. His efforts to build a social network of Canadian economists spanning academia, labour, research institutes and independent researchers is an enduring legacy from which we have benefitted.

All told, Jim¡¯s accumulated body of work and contributions to labour and social movements make him an ideal winner of the 2018 Galbraith Prize.

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Saskatchewan budget misses opportunity on rental housing assistance https://www.google.com//ded/2018/05/02/saskatchewan-budget-misses-opportunity-on-rental-housing-assistance/ /ded/2018/05/02/saskatchewan-budget-misses-opportunity-on-rental-housing-assistance/#respond Wed, 02 May 2018 20:33:42 +0000 /ded/?p=19738 I recently wrote a ‘top 10’ overview blog post about the 2018 Saskatchewan budget. Following on the heels of that, I’ve now written an opinion piece about the budget’s announcement of a phase out a rental assistance program for low-income households.

Points raised in the opinion piece include the following:

-Across Saskatchewan, rental vacancy rates are unusually high right now, making this a good time to provide rental assistance to tenants for use in private units (indeed, right now it’s a so-called renter’s market in Saskatchewan, meaning it’s a relatively good time for tenants to negotiate rental agreements with private landlords).

-Thus, rather than phasing out the program, it would have been sensible to have expanded it.

-Phasing it out will very possibly lead to more homelessness, which in turn may lead lead to higher public costs elsewhere (especially to the health care sector).

Interestingly, just yesterday the Saskatchewan Landlord Association made many of these same points themselves; they like the rental assistance program, as it increases demand for its members’ housing units (many of which are currently sitting empty).

It’s of course also important for government to finance housing owned by non-profit entities. I recently wrote about the importance of a variety of measures to improve housing affordability in the housing chapter of this year’s Alternative Federal Budget.

Meanwhile, the link to my recent opinion piece is here.


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Ten things to know about the 2018 Saskatchewan budget https://www.google.com//ded/2018/04/20/ten-things-to-know-about-the-2018-saskatchewan-budget/ /ded/2018/04/20/ten-things-to-know-about-the-2018-saskatchewan-budget/#respond Fri, 20 Apr 2018 18:13:28 +0000 /ded/?p=19734 I’ve written a ‘top 10’ blog post about the recently-tabled Saskatchewan budget. Points raised in the blog post include the following:

-This year’s budget was quite status quo.

-Last year’s budget, by contrast, included a series of cuts to social spending. Last year’s budget also announced cuts to both personal and corporate income taxes that were subsequently reversed.

-Saskatchewan has one of the lowest debt-to-GDP ratios in Canada.

-This recent budget announced the phase out of a rent supplement program that helps low-income households afford rent on the private market.

Here’s the link to the full blog post.

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The Contemporary Relevance of Karl Polanyi https://www.google.com//ded/2018/04/13/the-contemporary-relevance-of-karl-polanyi/ /ded/2018/04/13/the-contemporary-relevance-of-karl-polanyi/#comments Fri, 13 Apr 2018 21:04:11 +0000 /ded/?p=19699 The political economist Karl Polanyi, author of the 1944 volume The Great Transformation: The Political and Economic Origins of Our Time, is arguably better known today than during his lifetime. The time has come for a major biography of Polanyi, Karl Polanyi: A Life on the Left by Gareth Dale. It is thoroughly excellent and provides the occasion to ponder the relevance of Polanyi today.

His book was a response to more than a century of globalization that fell apart in the 1920’s and 30’s, culminating in the Great Depression, Hitler’s fascism and World War II – all of which came to be seen, in the boom times of the 50s and 60s, as? merely bad old history. Meanwhile in recent times the renewed wave of globalization following that War went seriously awry in the financial crisis of 2007-8 and the emergence (again) of the fascistic alt.right, with the unimaginable triumph of Trump in America, the very centre of global capitalism. Economics had wandered off to the right and was less than useless on such matters. Politics had to be brought into that universe and Polanyi’s progressive economics a.k.a. political economy was suddenly relevant again, there for the taking.

By 2001 when a new paperback edition of The Great Transformation was published there was sufficient unease about the drift of things global that the progressive Nobel prize winning economist, Joseph Stiglitz was asked to write a new Foreword, and he began, in true Polanyi style, by citing the reaction, the progressive countermovement, evident in the public marches against international financial institutions in Seattle in 1999.

Now, in 2018, things have degenerated sufficiently that it makes sense to go back and see what Polanyi saw as the explanation for fascism and how that might cast light on today’s darkness. Ironically, Hungary, from whence Polanyi came, has, as I write, re-elected to a third consecutive term, a right populist alt.right government with a stunning two-thirds majority.

For Polanyi, famously, there was a double movement in the annals of political economy: the driving force of the market creating losers as well as winners, as movement, the responding force of democracy as counter-movement. If the outcome became one of stalemate, there would be crises without a government able to resolve them, a situation much worsened historically by the rules imposed by the international gold standard.? The deadlock created an opening for extremism, of the revolutionary left as in the Soviet Union as reaction to World War I, of fascism as in Italy and Germany, with the latter as reaction to the former. Each in its own way meant the end of democracy. Out of all this came the barbarism of World War II.

Today, the gold standard has been replaced by the iron laws of globalization. The extreme neoliberalism of the American government precluded offering protection, or assistance, to the losers, notably in the American rust belt who became the core support for Trump.? We are now observing a threat to the American way of conducting politics, of American democracy, analogous to that of the 1930s. The creative response then was the New Deal, its legacy now exhausted. Today it is Trumpism, still in its early days, the fullness of which is uncertain, as is the fate of America and thereby of the rest of us.? At the same time, similar forces led to Brexit, the consequences of which, for Europe and, again, the rest of us, remain to be seen. Polanyi sees unresolved national issues – open sores, bleeding wounds, like anti-semitism and the humiliation of the settlement of World War I in Germany – as critically important to the mobilization of the masses to fascism. For Trumpism, racism, white nationalism, with deep roots in America,? is manifestly the rallying cry.? Stay tuned in, CNN or Fox, watch?one, conjure up the other, think like Polanyi.

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Newly-signed FPT housing framework agreement https://www.google.com//ded/2018/04/12/newly-signed-fpt-housing-framework-agreement/ /ded/2018/04/12/newly-signed-fpt-housing-framework-agreement/#comments Thu, 12 Apr 2018 20:53:47 +0000 /ded/?p=19723 I’ve just written a blog post about the newly-signed federal-provincial-territorial housing framework agreement. This agreement builds on (and helps move forward) Canada’s National Housing Strategy, which was released last fall.

One of the points made in the blog post is that the federal government’s stated objective of removing approximately half-a-million households from core housing need is very ambitious, in light of what we know about the Strategy.

The link to the full blog post is here.

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2018 PEF Student Essay Contest is Open! https://www.google.com//ded/2018/04/04/2018-pef-student-essay-contest-is-open/ /ded/2018/04/04/2018-pef-student-essay-contest-is-open/#respond Wed, 04 Apr 2018 16:00:45 +0000 /ded/?p=19704 The 2018 PEF Student Essay Contest is? open!

The deadline for submitting essays is quickly approaching: April 30, 2018.

Please use this? submission form ?(fiche d’inscription concours).? You can download a poster (English ,? Francais) here ¡ª please help us out and post one in your department.


? Open to all Canadian students, studying in Canada and abroad, as well as international students presently studying in Canada. All entrants receive a complimentary 1-year membership in the Progressive Economics Forum.
? The definition of ¡°student¡± encompasses full time as well as part time students.
? Students eligible for the 2018 competition must have been/be enrolled in a post-secondary educational institution at some point during the period of May 2017 ¨C May 2018.

There are two levels of competition:
? One for undergraduates;
? One for graduates.*
*Note: Those who have previously completed an undergraduate degree or a graduate degree, and are returning to do a second undergraduate degree will only be considered for the graduate student competition. The same holds for student who spend part of the academic year in a graduate program.

? Entries may be on any subject related to political economy, economic theory, or an economic policy issue, which best reflects a critical approach to the functioning, efficiency, social, and environmental consequences of unconstrained markets.

Eligible entries will be¡­
? ¡­sent by email at the latest on April 30, 2018, to:
? ¡­the only submission by the author(s) (i.e. one submission per person);
? ¡­between 20-40 pages in length, and typed in 12-point font, double spaced;
? ¡­referenced to academic standards (including any data);
? ¡­written in either English or French;
? ¡­original essays that do not infringe upon the rights of any third parties;
? ¡­accepted on re-submission once;

? ¡­unpublished work;
? ¡­accompanied by a signed scanned file of the completed PEF Essay Contest Submission Form.

Entrants consent to having the Progressive Economics Forum publish essays from winners and those receiving honourable mention. Each applicant will submit a valid email and postal address for correspondence.

? A panel of judges selected and approved by the Progressive Economics Forum will judge entries.
? Entries will be judged according to the following criteria: substance and originality, writing style, composition, and organization.
? The Progressive Economics Forum reserves the right not to award a prize or any prize where submissions do not meet contest standards or criteria.

? The winning essays will be announced at the Annual General Meeting of the PEF.
? A cash prize of $1,000 will be awarded the winner of the graduate competition; and $500 will be awarded to the winner of the undergraduate competition.
? The winning essays will be published on the PEF website.
? Judges¡¯ decisions are final.


Concours de textes ¨¦tudiants ¨C ¨¦dition 2018

Qui peut participer ?

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A Tale of Two Books https://www.google.com//ded/2018/03/28/a-tale-of-two-books/ /ded/2018/03/28/a-tale-of-two-books/#respond Wed, 28 Mar 2018 18:17:24 +0000 /ded/?p=19595 Just published is Volume I of an exhaustive – occasionally exhausting – biography of Paul Samuelson. It’s titled?Founder of Modern Economics: Paul A Samuelson Vol I:?Becoming Samuelson,?1915-1948 and authored by Roger E Backhouse.

The two books of my blog title are?Foundations of Economic Analysis,?published in 1947, a revision of Samuelson’s Harvard doctoral dissertation, in which he unearthed the mathematical scaffolding of economic theory, and?Economics: An Introductory Analysis,?the first edition of his textbook which was published in 1948 and became an? instant bestseller which was to go through many editions. It’s a remarkable achievement, to simultaneously write a brilliant but quite inaccessible book on the foundations of economics and, at the same time, write a highly accessible first year text. The skills required to do both of these are combined in a single individual, which is a truly rare event.

Harvard had first hand knowledge of Samuelson’s genius but it somehow managed not to make him an offer sufficient to keep him at Harvard. Part of the reason was that MIT, having an economics department that taught economics to engineering students, was ready to launch itself into having a graduate program in economics, and Samuelson was the star around which they could assemble what quickly became one of America’s – if not the world’s – greatest economics department.

The challenge appealed to Samuelson. But it is made abundantly clear from this book that an anti-semitism that was pervasive in American universities was certainly in evidence at Harvard, but not at MIT.? (As for Canada. while a graduate student in economics at MIT, I dropped into the political economy department at the University of Toronto where I had done my undergraduate degree and one year of graduate study. I ran into one of the senior economics professors and when I told him I was at MIT he said in a matter of fact way, “That’s where they have that smart little Jew, Samuelson” – who was short.)

Back to the textbook. One of its distinguishing features was its focus on Keynes. Samuelson was a proponent of Keynes, though Backhouse makes the point that he partook of Keynes to a large degree through Alvin Hansen, who was at Harvard and was the key person who brought Keynesianism to America and Americanized it in the process.

As Backhouse hints,? that Americanization of Keynes consisted of embedding it as part of the essential base of America’s now central role in the world economy, of trade and finance. What began as revolutionary economics – of the Keynesian Revolution variety – was domesticated, reduced, to imperial economics. Progressive economists, like Samuelson,? were conservative, at best indifferent, outside their own terrain.

This latter? point escaped some MIT alumni on its governing council who thought Samuelson was a dangerous radical and tried to block the use of the text at MIT. Samuelson kept his cool and patiently dealt with complaints. The top administration totally backed Samuelson. A “compromise” was reached on the understanding that further readings included books by the American Chamber of Commerce and such like. Instructors showed their disdain for Samuelson’s critics by giving an assignment on finding all of? the errors in such screeds.


A second feature of the textbook was, notwithstanding?Foundations,?that the math in it did not go beyond that of Marshall. At MIT, where the text was, of course, used in? the introductory course for engineering students, Samuelson advised those of? us who taught sections thereof not to use any math beyond the text since engineering students would otherwise treat the course as applied math and not master the study of the economy.



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Five things to know about the 2018 Alberta budget https://www.google.com//ded/2018/03/26/five-things-to-know-about-the-2018-alberta-budget/ /ded/2018/03/26/five-things-to-know-about-the-2018-alberta-budget/#respond Mon, 26 Mar 2018 11:20:59 +0000 /ded/?p=19697 On March 22, the NDP government of Rachel Notley tabled the 2018 Alberta budget. I’ve written a blog post discussing some of the major ‘take aways’ from the standpoint of Calgary’s homeless-serving sector (where I work).

Points made in the blog post include the following:? this was very much a status quo budget; Alberta remains the lowest-taxed province in Canada (and still the only province without a sales tax); Alberta still has (by far) the lowest net debt-to-GDP ratio of any province; and it’s been six years since social assistance recipients in the province have seen an adjustment in their benefit levels (to reflect inflation, for example).

The full blog post can be read at this link.

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Ten proposals from the 2018 Alberta Alternative Budget https://www.google.com//ded/2018/03/21/ten-proposals-from-the-2018-alberta-alternative-budget/ /ded/2018/03/21/ten-proposals-from-the-2018-alberta-alternative-budget/#comments Wed, 21 Mar 2018 12:51:12 +0000 /ded/?p=19688 The 2018 Alberta Alternative Budget (AAB) was released yesterday¡ªit can be downloaded here. An opinion piece I wrote about the AAB appeared yesterday in both the Calgary Herald and the Edmonton Journal.

Inspired by the Alternative Federal Budget exercise, this year¡¯s AAB was drafted by a working group consisting of individuals from the non-profit sector, labour movement and advocacy sectors.

Here are 10 proposals from this year¡¯s AAB.

  1. Introduce a 5% provincial sales tax. The AAB gives the Notley government credit for generating additional revenue by increasing both personal and corporate tax rates, while also increasing tobacco and fuel taxes. However, in light of the very substantial loss in revenue as a result in the drop of the price of oil, we¡¯d like to see the Alberta government take one step further and introduce a provincial sales tax. A 5% provincial portion, added on to the 5% Goods and Services Tax, could result in a 10% Harmonized Sales Tax (HST). This would generate approximately $5 billion annually.


  1. Introduce an HST rebate for low-income households. It¡¯s well-known that sales taxes in general have a larger impact on low-income households than on higher income households (that¡¯s because lower-income households spend a larger proportion of their income on consumption). To counteract that, the AAB proposes the introduction of an HST rebate for low-income households.


  1. Introduce provincial pharmacare. Many low-income Albertans currently struggle to afford prescription medication; and many employers (especially small businesses) struggle to afford health and dental programs for their employees. Not only would a universal coverage prescription drug plan ensure prescription drug coverage for all; it would take advantage of bulk purchasing, reducing costs for both households and employers.


  1. Increase staffing in long-term care facilities. This year¡¯s AAB would hire more registered nurses and health care aids for Alberta¡¯s long-term care facilities. We would spend enough to bring facilities up to the minimum recommended staffing levels. This would result in improved quality of care.


  1. Reduce class sizes in K-12 education. Specifically, the AAB proposes to bring class sizes at the K ¨C 3 level down to levels recommended by the Alberta Commission on Learning. We¡¯d do this by hiring more teachers, education assistants and support staff.


  1. Reduce tuition fees for all post-secondary students in the province. While we believe the complete elimination of tuition fees is a laudable long-term goal, for this coming budget year, the AAB proposes to reduce tuition fees for all post-secondary students in Alberta by 20%. The AAB would also eliminate the interest on the provincial portion of student loans, as well as invest in grants to current students.


  1. On the Indigenous file, create an Intergovernmental Relations position in each provincial ministry. The AAB would invest in cultural capacity-building in all 22 provincial ministries. One Intergovernmental Relations position would be created in each ministry; that role would focus on relations between the ministry and Indigenous peoples, keeping in mind challenges when working across ministries and departments at all orders of government.


  1. Implement universal child care. The AAB would expand the Notley government¡¯s current pilot program of $25-per-day child care, making subsidized and regulated child care to all Alberta households. Among other things, we expect this to result in increased labour market participation by women.


  1. Increase social assistance benefit levels. Social assistance (i.e., ¡®welfare¡¯) recipients have seen the monthly value of their benefits decrease in real terms over the past several years. Today, a single adult (without dependents) on social assistance in Alberta receives just $8,000 annually to live on.[1] The AAB would increase monthly benefit levels by $150 and index these benefits to inflation going forward.


  1. Create more affordable housing. The AAB would fund the repair of existing social housing units; it would also provide funding to build new affordable housing for vulnerable populations (e.g., persons experiencing absolute homelessness, the frail elderly, persons with HIV/AIDS). Further, it would provide funding for rent supplements (i.e., financial assistance for rent) to low-income households.


In Sum. Budgets are always about choices, and that principle has guided alternative budget exercises across Canada for over two decades. This year¡¯s AAB proposes a costed-out set of policy proposals that would improve labour market, health and education outcomes, while also addressing principles of reconciliation and reducing income inequality.


[1] A person with a severe disability can receive more.

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Media release: Alberta needs a provincial sales tax https://www.google.com//ded/2018/03/20/media-release-alberta-needs-a-provincial-sales-tax/ /ded/2018/03/20/media-release-alberta-needs-a-provincial-sales-tax/#comments Tue, 20 Mar 2018 11:38:32 +0000 /ded/?p=19685 (March 20, 2018-Edmonton) Today, a coalition of researchers, economists, and members of civil society released an alternative budget to boost Alberta¡¯s economic growth while reducing income inequality.

¡°Alberta is on the road to recovery after a deep recession,¡± said economist Nick Falvo, ¡°now is not the time to reverse the course.¡±

The document, High Stakes, Clear Choices, sets a progressive vision encouraging public investment to stabilize tough economic times, reduce poverty, support our seniors, and create good jobs.

The report reveals that, since taking office in 2015, the Notley government took important measures to support poverty reduction. These include: introducing the Alberta Child Benefit; the near doubling of annual spending on housing; and, increasing minimum wage.

The authors note, however, increasing staffing for long term care facilities, universal child care and pharmacare, and reducing class sizes in K-12 are necessary to forge ahead towards economic prosperity.

The report further calls for government action to implement budget processes honouring the duty to consult with Alberta¡¯s Indigenous communities, as well as more funding for Indigenous programs.

¡°Budgets are always about choices,¡± says contributing researcher Angele Alook. ¡°Alberta continues to have the lowest taxes in Canada and that is nothing to be proud of.¡±

Alberta could implement a 5% provincial sales tax and still be the lowest tax jurisdiction in the country, she added.

¡°Increasing tax revenues would provide a foundation for economic sustainability,¡± added Falvo.

Finally, the report emphasizes that Alberta must forge ahead with a more diversified economy and creating good, green jobs for Albertans.

Download report.

– 30 –

Media contact:

Nick Falvo, Editor ¨C Alberta Alternative Budget, (cell) 587-892-7855, (email) falvo.nicholas@gmail.com


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Inequality-redistribution in Canada update https://www.google.com//ded/2018/03/18/inequality-redistribution-in-canada-update/ /ded/2018/03/18/inequality-redistribution-in-canada-update/#comments Sun, 18 Mar 2018 06:56:34 +0000 /ded/?p=19649 Two years ago I posted my first guest blog focused on income inequality, specifically how changes in Canada’s redistribution over the last three decades have increased after-tax income inequality, and how these changes compared to OECD trends. The figures and analysis in this post update the earlier blog, based on the most recent OECD data to 2015. I also look at the market inequality-redistribution relationship and find that Canada is the only country that combines low market inequality with low redistribution.

Figure 1 presents market and after-tax income Gini coefficients for Canada and selected OECD countries. Market income is before taxes and government cash transfers, while after-tax income is after such taxes and transfers. The Gini coefficient varies from 0 to 1.00, with higher values representing higher inequality. Figure 1 includes data on the USA, the four larger Nordic countries (“Nordics-4”): Denmark, Finland, Norway and Sweden) and the other eight OECD countries for which data are available from the mid-1980s (“Other OECD-8”: Australia, France, Germany, Italy, Japan, Netherlands, New Zealand and UK). I have annotated Figure 1 to explain these inequality-related concepts and data. Focusing on the last few years (readers can refer to the earlier blog for a longer-term analysis), Figure 1 shows a general continuation of recent trends. Market inequality in the Other OECD-8 and Nordics-4 has continued to increase, while the long-running economic expansion in the USA appears to have finally (and perhaps only temporarily) paused the long-term increase in market inequality in that country. Canada continues to have relatively low market inequality and average after-tax inequality.


Figure 2 shows the percentage point difference between market and after-tax income Gini coefficients and reflects the extent to which Governments reduce market inequality by taxes and cash transfers. The Nordics-4 have traditionally had the highest level of such redistribution, currently lowering inequality by about 50% more than Canada does. Over the last decade Canada and the USA have had about the same low levels of redistribution (the two lowest among the OECD).


Figure 3 shows the political-economy outcome of the market inequality-redistribution relationship. For each of the 14 OECD countries listed above, Figure 3 includes average market inequality plotted against average redistribution (as measured above). Figure 3 appears to include three distinct ¡°clusters¡± of countries:

  • Low market inequality with medium redistribution, including Denmark, Netherlands, Norway and Sweden.
  • Medium market inequality with low redistribution, including Australia, Japan and New Zealand
  • High market inequality with high redistribution, including Finland, France, Germany and Italy.

These three clusters include a total of eleven countries, leaving three “outliers” that do not belong to any particular cluster. Canada is one of these outliers, being the only “low inequality / low redistribution” country. Others are the USA (high market inequality with low redistribution) and the UK (high market inequality with medium redistribution).

Each country’s inequality-redistribution outcome is the result of a series of complex national political-economy interactions. The cluster analysis in Figure 3 shows, however, that international and regional influences also matter. It is perhaps not surprising that Australia and New Zealand are in the same cluster, as is Japan. The “Nordic” cluster (including Netherlands but excluding Finland) could also be expected given proximity and historical ties. France and Germany being in the same cluster is also consistent with this hypothesis. That the UK is an outlier is perhaps not surprising (e.g. Brexit, etc.). The USA has always followed its own path and therefore is also a high inequality / low redistribution outlier.

Which brings us to Canada, another outlier, the only low inequality/low redistribution country. It has maintained Nordic-type levels of low market inequality via the public provision of universal human-capital-enhancing programs (e.g high quality health care, education, etc.), while implementing only USA-type levels of redistribution. Current political battles and outcomes related to the minimum wage, taxes and social assistance indicate that market inequality-reducing measures (e.g. minimum wage, etc.) continue to be more politically-feasible than those that increase redistribution and reduce poverty outcomes (e.g. more progressive taxation, increased social assistance, etc.). While fighting to maintain and expand universal social programs, progressives should work harder to prepare the political ground for Canada to increase redistribution, especially for when market inequality increases.



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Homelessness and employment: The case of Calgary https://www.google.com//ded/2018/03/17/homelessness-and-employment-the-case-of-calgary/ /ded/2018/03/17/homelessness-and-employment-the-case-of-calgary/#respond Sat, 17 Mar 2018 13:42:38 +0000 /ded/?p=19664 I’ve just written a blog post about homelessness and employment, with a focus on Calgary (where I live and work).

Points raised in the blog post include the following:

-Persons experiencing homelessness usually have poor health outcomes, making it especially challenging to find and sustain employment.

-There are several non-profits in Calgary that assist persons experiencing homelessness to find and sustain work.

-Persons finding the most success in those programs tend to be relatively healthy (compared with their peers) and be between the ages of 25 and 60.

-In some cases, persons experiencing homelessness are overqualified for jobs.

-There is some evidence that subsidized housing can improve employment outcomes.

The link to the full blog post is here.

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How to Measure and Monitor Poverty? LIM vs LICO vs MBM. https://www.google.com//ded/2018/03/09/how-to-measure-and-monitor-poverty-lim-vs-lico-vs-mbm/ /ded/2018/03/09/how-to-measure-and-monitor-poverty-lim-vs-lico-vs-mbm/#comments Fri, 09 Mar 2018 12:55:10 +0000 /ded/?p=19646 The federal government has promised to launch a Canadian Poverty Reduction Strategy in the coming weeks or months on the basis of now completed consultations with Canadians and the still ongoing deliberations of an advisory committee. As part of this process, there has been discussion about which poverty or low income measure or measures should be used for the purpose of monitoring levels and trends in the incidence of poverty and gauging the impact of poverty reduction policies. At various times, there have been calls for an official Canadian poverty line, as exists in the United States and some other countries, and some have called for poverty reduction targets which would require the specification of a poverty line or lines. (See https://www.canada.ca/en/employment-social-development/programs/poverty-reduction/reports/proverty-reduction-strategy-what-we-heard.html#section9 )

It should first be noted that any poverty line dividing the poor from the non poor at a given level of income and for a given household size is arbitrary and value-based. It explicitly or implicitly involves a judgement as how far below the mainstream people should fall before they are considered to be poor in terms of either their income or their ability to obtain the essentials of life. And any line must be used to tell us not just how many persons are poor at any point in time, but how far the poor fall below the poverty line. (For example, most social assistance recipients live in deep poverty, while most seniors in poverty are clustered just below the poverty line due to receipt of the Guaranteed Income Supplement to Old Age Security.)

The line should also be used to inform us how long the poor remain poor. (For example, social assistance recipients with disabilities tend to remain in low income much longer than the working poor who cycle in and out of poverty.) Finally, a useful poverty line should inform us of the incidence of poverty by age, gender, racial status and aboriginal status, disability status, economic family type, and so on, as well as by province and region.

A single poverty line as called for by some has the merit of being relatively simple and potentially easy to communicate. As well, a clear indicator showing the impact on the incidence and depth of low income of policies such as increased child and senior benefits could help build public support for a poverty reduction strategy.

However, choosing a single measure risks glossing over different concepts of poverty and overly minimizing the complexity of the issue.

Currently, Statscan provides annual data based on three different measures of low income ¨C the LICO AT, the LIM AT and the MBM. (See CANSIM Table 206-0041 for detailed data on poverty using these measures.) LICO estimates are also presented on a pre tax basis but these are seldom used. While the three measures in use today are not described as poverty lines, they are generally used as such, and they all allow for assessment of levels and trends in a disaggregated fashion.

The LICO AT (after tax) tells us that a person or family is spending a much higher than average percentage of its income on the essentials of food, shelter and clothing (based on family size and with account taken of the size of the community in which the household resides.) The LICO line is based on 1992 living costs, so trends tell us how much progress has been made over time in terms of the ability of Canadians to purchase a basic basket of goods at 1992 spending weights..

The poverty rate in 2015 based on this measure was 9.2%, down from a high of 14.0% in 1983, but it can be questioned if poverty has really fallen so significantly. The LICO has fallen into disfavour because it does not tell us how many persons are unable to achieve a basic standard of living in terms of what Canadians are consuming today, as opposed to twenty-five years ago. For example, the LICO basket does not include the cost of internet access. The LICO does, however, give us some sense of the very long-term trend in the living standards of the poor, and tells us that there has been some absolute income growth over time among the poor.

The Market Basket Measure tells us that a household ¨C in after tax terms, adjusted for family size ¨C has insufficient income to purchase a modest basket of goods and services. The MBM was called for by federal and provincial ministers, and the composition of the basket was determined by government officials rather than by Statistics Canada. It has been calculated since 2002 for a reference family in a large number of communities, so it varies with the local price of housing and food. It is more than an extreme bare bones, basic needs budget insofar as it includes child care costs and the cost of a modest vehicle where transit is unavailable.

That said, there has been a lot of disagreement about the contents of the MBM basket, and many argue that it is a poor measure of the consumption gap between low income Canadians and the mainstream. MBM does not centrally view poverty as being about distance from the mainstream, bur rather as having an income which is insufficient to meet the basic needs of a low income family.

In 2015 the MBM rate at a national level was 12.1%.

The LIM measure (Low Income Measure After Tax) draws a low income line based on 50% of the income of a median household of the same number of persons. It is a purely relative measure with poverty being seen as having an income well below the norm defined as the income of a mid point Canadian family.

In 2015, the national LIM rate was 14.2%. This measure is based only on income relative to the national median income, and is not a measure of basic needs based on consumption.

LIM is very useful in terms of telling us how the bottom of the income distribution is doing compared to the broad middle-class, and how that is changing over time. It is also very useful in terms of international comparisons, telling us that the gap between the bottom and the middle is much wider today in Canada than many European countries, but that low income is much less prevalent in Canada than the United States.

The big problem with the LIM is that it does not take account of large differences in living costs between cities and regions. For example, no account is taken of very large differences in rents between big cities, or the high cost of food in many remote and rural communities.

There is not a great difference between the LIM and MBM measures when it comes to calculating the overall incidence of low income. Over the past five years, the LIM rate has averaged 13.5% compared to 14.2% for the MBM rate. Both rates have remained fairly constant since 2002. (The gap in 2015 ¨C a 14.2% LIM rate compared to a 12.1% MBM rate – was unusually large.)

However, there have been some important differences over time and for some sub populations.

There is a huge difference between the LIM and MBM poverty rates for seniors (14.3% vs 5.1% in 2015.) Also, there have been big changes over time in the LIM based poverty rate for seniors. This fell from 33.1% in 1977 to a low of 3.9% in 1995, before increasing to 14.3% in 2015. The income gap between seniors and other families narrowed initially due mainly to improvements in public and private pensions, but in recent years the incomes of many seniors have been falling behind those of working age families in relative terms. This is not captured in the MBM measure. (As an aside, the LIM poverty rate for seniors would likely not rise if Old Age Security and the Guaranteed Income Supplement were to be indexed to wage growth and not just inflation.)

The apparent stability of the LIM rate over time also hides a long-term increase in the low income rate for the working age population, especially single persons, and, importantly, a major decline in the low income rate for single parent families headed by women reflecting a significant rise in participation in the labour market.

There is also a big difference between LIM and the MBM when it comes to calculating the incidence of low income in Quebec. The Quebec LIM rate is 16.2% compared to a 10.9% MBM rate. The LIM rate in Quebec is 2.0 percentage points above the national LIM rate, but the Quebec MBM rate is 1.2 percentage points below the national MBM rate. This difference is likely due to low housing costs in Quebec compared to other provinces.

The key point is that the conceptual and measurement differences between LIM and the MBM result in significant differences in rates of low income for important sub populations. It is important to have both measures to account for this complexity.

It is also important to appreciate that the drivers of the LIM rate and the MBM rate are different. The LIM rate reflects changes, not just in the incomes of low income families, but also in median incomes. The LIM rate could rise if median wages began to grow after years of stagnation, and if bottom incomes did not follow suit. By contrast, the MBM rate could fall due to increased income supports which lowered the real cost of living of the poor, even if the gap between the middle and the bottom were to grow. Both measures should register major changes in the labour market and in income transfer programs.

By way of conclusion, the LIM and the MBM are conceptually different measures, both of which provide useful and important information for analysts and policy makers. We need both to get a handle on overall low incomes and trends in different populations.

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Budget Fails to Crack Down on Private Corp Tax Shelter https://www.google.com//ded/2018/03/06/budget-fails-to-crack-down-on-private-corp-tax-shelter/ /ded/2018/03/06/budget-fails-to-crack-down-on-private-corp-tax-shelter/#respond Tue, 06 Mar 2018 22:10:20 +0000 /ded/?p=19640 The federal Budget changed the rules a bit re the taxation of passive investment income in private corporations, but falls well short of what was promised in terms of extra revenues and more tax fairness. The “small business” lobby helped the wealthy big time.




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Clarksonian Mega-Challenges for Canada and North America Mich¨¨le Rioux https://www.google.com//ded/2018/03/03/clarksonian-mega-challenges-for-canada-and-north-america-michele-rioux/ /ded/2018/03/03/clarksonian-mega-challenges-for-canada-and-north-america-michele-rioux/#respond Sat, 03 Mar 2018 22:31:19 +0000 /ded/?p=19628 Stephen Clarkson


This is the final essay in the PEF series to commemorate the life of Stephen Clarkson. ?It is fitting that it is written by Mich¨¨le Rioux, a colleague in Quebec. ?Stephen worked closely with many in Quebec and the relationship between Quebec and Canada was an important part of his analysis of North America.

Mich¨¨le Rioux?is a Professor in the Department of Political Science, UQAM and Research Director at the Center for research on integration and globalization (Centre d¡¯¨¦tudes sur l¡¯int¨¦gration et la mondialisatieon). ?Stephen loved Quebec and Montreal and was frequently invited to the Centre to speak, including attending the event to mark the?20th anniversary of NAFTA at la Maison du D¨¦veloppement Durable.


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by Mich¨¨le Rioux


The Neoliberal Trade Agenda @ Bay

North America has been an experimental model of trade and integration for at least the last 25 years. Stephen spent his life understanding North America and how the region shaped the Canadian political economy and society. An excellent, innovative researcher, he kept asking questions, many without clear-cut answers that led to a dozen high impact publications. Always kind and generous, intellectually challenging, he had an engaging personality and a very contagious smile. In this short article, remembering his critical influence he had on my research and in the field of Canadian political economy, I will specifically explore three topics that are central to his many contributions:
? The singular importance of the world economic system and the emergence of powerful multinational corporations as pivotal actors in diminishing the role of state everywhere.
? The asymmetrical growth in social inequality from new market access and free trade in North America and their ¡°capture¡± of the public policy process.
? The transformative impact of regional economic integration models on the dynamics of state sovereignty and comparative international political economy.

Burned At The Stake Of International Competition

Stephen¡¯s first major influence is to be found in his contribution to the most important debate on the highly controversial role of US MNCs and their impact on Canada¡¯s economic sovereignty. Stephen had a leading role along with other experts stressing the dangers of a globalization process in Canada that left unchecked, would lead to economic domination by the US capitalism and the eventual loss of Canadian sovereignty through what Kari Polanyi has called a ¡°silent surrender¡± in her book with the same title.

The debate on trade and industrial policies took place in the 1970s under the government of Pierre Trudeau and did not lead to a very successful interventionist state- centered Canadian policy ¡®independentiste¡¯ model. What was called the Third Option never went anywhere as a policy idea requiring Canada to reduce its dependence on the American market through targeted diversification. Instead, successive Liberal governments did exactly the reverse and opted for closer integration with the United States, along with an aggressive policy of deregulation and privatization of the Canadian economy, its primary policy orientation of the 1980s and 1990s.

Nowadays, the dangers of this economic domination are still significant for the Canadian state and a range of public policies. As Clarkson stated at the end of his book Uncle Sam and Us:

Rather than proposing yet another big idea to achieve still further leaps of integration with the United States on the dubious assumption that erasing the economic border will magically increase the standard of living, the Canadian state needs to recommit itself to its historical task of strengthening its own democracy.
The issue of the role and rights of foreign investors in Canada is still of great significance and has played a central role in the debates surrounding the Comprehensive Economic and Trade Agreement (CETA) and the renegotiation of NAFTA. Foreign investors are powerful agents in the world economic system, They have gained economic, political and legal authority with few binding obligations in terms of protecting the public interest. This can be viewed as the continuation and exacerbation of the ¡®silent surrender syndrome¡¯ .

The globalization process has undermined national and international regulatory frameworks and in their place supported the emergence of new ¡®globalist¡¯ institutional and normative frameworks. Such frameworks are much more complex than those from the past since they deal with issues like investment, competition, services, public procurement and intellectual property; all of these areas that were outside of international negotiations in the past. This structural shift from national economic space towards a global economy has enormous implications on societies and on the behaviour of international relations. A long-term momentous shift in competitive strategies between global corporations for market share in regional markets the world over has given them unprecedented leverage to control where production is located and investments are made to support the unprecedented growth in global value chains, one of the key organizational principles of the crisis-ridden global economy. Stephen was one of the early Canadian researchers to analyze the important role of free trade agreements in the shift from Keynesian to a globalized economic policy model.


NAFTA, Neoliberalism and The Trouble with Bad Ideas

Clarkson did not agree with orthodox trade policy. He labelled them as ¡®economic constitutions¡¯ and described how they shape societies economically and politically. In an article entitled Apples And Oranges: Prospects For The Comparative Analysis of the EU and NAFTA as Continental Systems, he develops the idea of NAFTA as a comprehensive constitution setting the rules and regulations of state-market relations and as an American mode of regulation.

This is a very powerful idea and was highly provocative at the time. Nowadays, it is very clear that if trade agreements are not constitutions, they have great implications not only at the border but also behind borders. We now understand that these trade deals have developed into a very powerful intrusive legal instrument that affect policy and regulatory systems at different levels of the political order. The relation between states and markets, for Stephen, was at the very core of his perspective.

He critically understood the North American integration model as a reflection of changes in the relationship between states and markets in the region and compared with integration models elsewhere (see, for instance, his article Apples and Oranges). Indeed, North America emerged in the 1990s as a strong and influential regional model of integration. As such, it brought about new regulatory and strategic instruments deployed at multiple and diversified levels of governance. From the US point of view and, to a lesser extent from that of Canada, one of the initial and most important objectives of the North American Free Trade Agreement (NAFTA) was to improve the competitiveness of the region by relocating in Mexico, especially in the area of border production, where production functions were low-tech and labour intensive in auto assembly, light manufacturing and other industries that benefited the American consumer at the checkout counter. It was the ¡®trump card of the United States¡¯ both before and after negotiations (Rioux et Deblock, 1993). NAFTA has spread beyond North America, and we can agree with Stephen¡¯s most important insight that neoliberal trade governance has entertained a complex relationship with globalization.

One very important factor and structural element shaping governance and regulation of economic integration in North America is the importance of Asia and more specifically of China for the region. The now defunct Trans-Pacific Partnership (TPP), was to meant to transform NAFTA beyond the original three countries involved. This would have been a de facto renegotiation of NAFTA. The last time I met Stephen was at a conference on ¡°NAFTA at 20¡± and the TPP negotiations were perceived as a way to ¡®modernize¡¯ NAFTA on the Trans-Pacific front. The TPP allowed the three countries to negotiate new trade related regulatory issues with the strategic goal in mind to deal with inter-regional issues linked to the development of new global value chains. It meant that, instead of being a m¨¦nage ¨¤ trois, North America was immersed into an intense model of coopetition shaped by global value chains across the Pacific.

In this new context, the conference participants saw emerging transnational regulatory responses accelerating the disappearance of the boundary between the public and private spheres at various levels ?local, national, international and global? giving way to a complex system of networks between authorities endowed with overlapping rights and obligations from the perspective of the trade deal. The exact relationship between national sovereignty and transnational trade governance was never clear in a third generation of regional/interregional trade agreement. Does this contribute to the convergence of regulation and governance models or to the hegemonic diffusion of the US regulation model? Of course, once Donald Trump scrapped the TPP, challenged NAFTA and TTIP, the US regulatory model was no longer in the driver¡¯s seat even have it remains a powerful force in its own right. Yet, this might also be a strategic move to ensure that the contested US model is accepted in exchange for access to the US market. Since the 1930s, the United States always promoted trade liberalization based on a system of legal rules and principles ¡°organizing¡± the trading system and their relations with trading partners.

I want to quote from the preface of the conference proceedings to emphasize this point:
“The tragic misrule in North America’s three-state space and in most of Latin America over the last few decades has undermined the significant achievements of the post-World War II Keynesian state which achieved high rates of economic growth while developing publicly financed education, health, employment, and pension policies and consequently reducing the inequality between rich and poor. Neo-liberalism’s populist, anti-government rhetoric has blinded public consciousness to the costs of empowering market actors freed of responsibility for the destructive environmental and social consequences of their corporate actions.” (Pr¨¦face in English, Rioux & al. 2016).

North American trade deals have increasingly shaped our societies and they can, as Clarkson suggested, be considered like new global trade constitutions empowering multinationals and constraining governments.

The Contradictory Impacts of Regional Economic Models

The third Clarkson narrative concerns regional integration models. He compared regions mostly North America with Europe and how both regions differed in their approach to integration processes. As regions are increasingly negotiating trade agreements with one another, he contributed to the development of the concept of inter-regionalism to explain both the dynamics of convergence and divergence across highly dissimilar regional economies.

When comparing the North American regionalism with the broader European model, Stephen was evidently disappointed. In North America, regional integration is a less ambitious project. It has developed as a mainly contractual and essentially strategic model, oriented on economic issues. In North America, there was no plan for a gradual and incremental process leading to a single market or to a monetary and political union. The goal is primarily opening up markets and adopting rules for markets in an attempt to boost competitiveness. Partners work to eliminate restrictive policies and regulations rather than to build a common and supranational approach in a multidimensional perspective; i.e. taking into account the public good in economic governance as part of a wider social and political integration project. Nowadays, the European Union is an economic, legal, monetary and political reality, even though an imperfect and contested one. Fiscal and social policies and the pressures linked to the 2008 economic crisis and the management ¨C or the lack of ¨C of the migration issues in the recent past have paved the way for new risks of institutional implosion such as Brexit, which is underway, and in the recent past, the forced upon departure of Greece or Grexit.

Clarkson was pragmatic about how far he could take this comparison. Even though, he liked the European model, he also knew that it could not be adopted in North America. He distinguished between the two models of regionalisms, the first developed in Europe and a second generation type emerging in North America in the late 1980s and early 90s. In the European case, the economic dimension would be completed by adding a very elaborate supranational legal and political institutions evolving over time. There is a strong sense of community and identity that speaks volumes about the national and sub-national layers of governance in the European Union. Like Robert Pastor who, in the United States, deployed much time and energy to define and promote the concept of the importance and value of an emerging North America community that existed beyond the free trade ideal, Clarkson also pushed the idea that a sense of community could and should emerge in North America.

More recently, CETA, the negotiations of TPP and the Transatlantic Trade and Investment Partnership involving the United States and the European Union, have launched a new process of inter-regionalism that would incorporate and articulate a developed regional integration models of regionalisms. Stephen also sought to grasp these new realities of integration processes in his later writing and research.

When Canada and the EU negotiated an ambitious agreement like CETA, how does this agreement compare to the regional integration processes underway on both sides of the Atlantic? What does it mean for their respective lives of citizens and for their interactions with government and nonstate actors that will increase over the next years as the Agreement become a living experiment and eventually take a life of its own. For some, this indicates the emergence of a third generation of integration processes that is increasingly interregional in nature. Recent trade agreements are very ambitious, more ambitious than NAFTA, but there are no plans or possibility of creating a single unit like the EU. New words, like comprehensive and partnership, combine to define what Christian Deblock depicted as an ¡®interconnection¡¯ model that is essentially geared towards regulatory cooperation and governance. He writes that:

In the current decade, two trends closely related to the new issues of globalisation have begun to emerge. First, trade negotiations increasingly revolve around cross-border trade, digital trade and value chains. Second, they are characterised by their interoperability. Today’s globalisation does not so much integrate as connect. And with interconnection, the problem of international regulatory cooperation arises. This issue is now at the core of discussions within the OECD, APEC or new trade agreements, according to terms and principles very different from previous negotiations. (Deblock, 2016, p. 9)

CETA involves regulatory co-operation in many domains and certainly has the potential of significantly changing national regulations. The intent of the TPP also placed emphasis on regulatory co-operation across the Pacific. The Transatlantic Partnership (TTIP) negotiations between Europe and the United States also involved such far reaching regulatory cooperation. The EU negotiator for the TTIP made no secret of it. Important issues are the investor-state dispute mechanism, electronic commerce, norms and standards, including labour standards and rights. Undoubtedly, this interconnection model does not imply loss of sovereignty, but it certainly will have a great impact on many policies and regulations. This raises several questions, including that of the democratic legitimacy of a new and further shifts of power and regulatory authority between states and markets.

Pessimist or Eternal Sceptic?

Building on the fundamental complex relationships between states, markets and North American integration, Clarkson identified the powerful and often dangerous dynamics unleashed by globalization, Clarkson always paid attention to power relationships and asymmetries in the light of Canada¡¯s relations with its continental global neighbour. He was critical but never pessimistic about North America. Yet, I think he wished for more cooperation and more balanced relations between countries and between states and markets. At that time of pessimism and national retreat, we will miss his insights but we are lucky to have such a rich legacy of scholarship and intellectual research to draw on.

It is hoped that trade deals will also strike new balances between states and markets. Transparency, more participatory process during negotiations and enforcement, and more balanced agreements taking into account the social and environmental dimensions are key elements for the future of globalization. North America has to invent new types of cooperation and governance, regulatory schemes in this world of transnational and global networks. In my view, this is the biggest challenge we have before us and one that Stephen was always motivated to undertake with boundless energy. He believed that Canada would find a way to provide answers to the complex challenges of North American integration. Perhaps the trump card of NAFTA is the Trump Presidency which has triggered a wider discussion on North American regional integration. Canada is now promoting a new progressive trade agenda in North America with its trading partners around the world. Last May, Ed Broadbent challenged the perspective and its depth in these words:
“One part of a response to growing inequality is to change the rules of the game in international trade. The Liberal government has suggested it wants such change. It claims to believe in “progressive trade.” However, in the recent negotiations with Europe, the government signed on to a pact, the Comprehensive Economic and Trade Agreement, that pays only lip service to labour rights.”

It is also the case that Canada is intent to negotiate several new trade agreements, particularly with China and Mercosur, and has started NAFTA re-negotiations. The interaction between globalization and social progress is becoming increasingly important in the public debates. Many international instruments exist; however, they remain largely ineffective to produce a socially responsible globalization process. More ambitious social and environmental clauses in trade agreements might be elements of a wider solution, but significantly there is a deeper questioning of the social and political significance of what states are attempting to achieve while multiplying trade agreements.

In these new conditions unquestionably Canadian political economy will be subjected to powerful and volatile structural forces determined by the wider North American political economy. But there is no doubt that Clarkson also believed in Canada and its potential in playing a key role within the international system as well as in the world economy. Yet, for this to occur, one must learn from history and understand how to steer collective action nationally and internationally towards a better life in North America. In this regards, it is important to end with the one more quote from Clarkson:

Whatever label one uses to describe the centrality of the past in limiting the options available in the present which determine the shape of the future, it is important to keep it in mind since, because world power relations are in such a constant flux, so much analysis has focused on immediate happenings that “change” is typically presented with little attention being paid to the historic roots of the reality experiencing change. (Pr¨¦face in English Alena conjugu¨¦ au pass¨¦, pr¨¦sent et futur. Rioux &al. 2015.)

It is in this context that Canada faces numerous challenges. Not only regional integration has changed, but Canadian economic productivity has also lost ground to American industries and lags further behind the US commanding presence in new global value chains and digital trade. Clearly, Canada also needs to move towards a more innovative and progressive trade agenda. In this new setting, Stephen Clarkson¡¯s contribution to the study of political economy of North American regionalism and globalization has much to teach us


Ed Broadbent, ??Let¡¯s make human rights central to a new NAFTA?? The Globe & Mail, May 5th, 2017.

Stephen Clarkson, Uncle Sam and Us: Globalization, Neoconservatism, and the Canadian State. Toronto; Washington: Toronto UP and Woodrow Wilson Center Press, 2002

Christian Deblock, ¡°From regionalism to cross-regionalism¡±, Great Insights, December 2016, p. 8-9.

Mich¨¨le Rioux, Christian Deblock et Laurent Viau, L¡¯Al¨¦na conjugu¨¦ au pass¨¦, au pr¨¦sent et au futur, PUQ, 2015.

Mich¨¨le Rioux, Mathieu Ares and Ping Huang (2015), Beyond NAFTA with Three Countries: The Impact of Global Value Chains on an Outdated Trade Agreement. Open Journal of Political Science, 5, 264-276. doi: 10.4236/ojps.2015.54028.

Mich¨¨le Rioux and Christian Deblock “NAFTA: The Trump Card of the United States?”, Studies in Political Economy, no. 41, 1993, pp.7-44.

Douglas A. Ross, ¡°Clarkson, Stephen. Uncle Sam and Us: Globalization, Neoconservatism, and the Canadian State¡±, International Journal, October 1, 2004.

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Five Things to Know About the 2018 Federal Budget https://www.google.com//ded/2018/03/02/five-things-to-know-about-the-2018-federal-budget/ /ded/2018/03/02/five-things-to-know-about-the-2018-federal-budget/#comments Fri, 02 Mar 2018 21:43:06 +0000 /ded/?p=19625 I’ve written a blog post about the 2018 federal budget.

Points made in the blog post include the following:

-Important new housing investments were made for First Nations, Inuit and?M¨¦tis people.

-The Working Income Tax Benefit was expanded, made automatic and rebranded (i.e., renamed).

-Canada’s official unemployment is now the lowest it’s been in decades.

-Canada’s federal debt-to-GDP ratio is (by far) the lowest of any G7 country.

The link to the full blog post is here.

/ded/2018/03/02/five-things-to-know-about-the-2018-federal-budget/feed/ 2
The Stock Market Jitters https://www.google.com//ded/2018/02/28/the-stock-market-jitters/ /ded/2018/02/28/the-stock-market-jitters/#comments Wed, 28 Feb 2018 23:06:58 +0000 /ded/?p=19620 The real problem is the absence of a sustainable growth model.

My latest Globe ROB column.



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¡°Nationalism versus Continentalism: Clarksonian Perspectives” https://www.google.com//ded/2018/02/27/nationalism-versus-continentalism-clarksonian-perspectives/ /ded/2018/02/27/nationalism-versus-continentalism-clarksonian-perspectives/#respond Tue, 27 Feb 2018 16:18:08 +0000 /ded/?p=19614  

?Greg Inwood

This is a contribution from Greg Inwood for the series commemorating the work of Stephen Clarkson who died in 2016.

Greg Inwood is a Profesor in the Department of Politics and Public Administration, and a member of the Yeates School of Graduate Studies at Ryerson University. ?He is the author of?Understanding Canadian Public Administration and?The Politics and Legacy of the Macdonald Royal Commission. ?He is the recipient of the Donald Smiley Prize in 2006 for the best book published on government and politics in Canada.

This tribute to Stephen Clarkson begins with his personal connection, where Stephen, in very Clarksonian style, dismissed Greg’s choice of thesis topic as ‘boring.’

Stephen Clarkson

Nationalism versus Continentalism: ?Clarksonian Perspectives

by Greg Inwood

In perhaps my first encounter with Stephen Clarkson in the Fall of 1986, we were seated beside each other at a seminar in the Department of Political Science at the University of Toronto where I had just arrived as a graduate student undertaking a PhD. We struck up a conversation, and he asked what I was planning to write my PhD dissertation on. I was still undecided, but told him someone suggested that I might write a biographical study of the constitutional expert Eugene Forsey. Stephen looked at me and quickly and emphatically pronounced on the idea: ¡°how boring,¡± he said, rather to my surprise. He then suggested that there was a dissertation just waiting to be written on the recently-completed Macdonald Royal Commission.[1] I looked at him and thought – but did not have the temerity to say out loud ¨C ¡°how boring.¡± But Stephen was persuasive, and the idea percolated in my mind. The Commission¡¯s signature recommendation had been that Canada enter into a free trade agreement with the United States, an ideas taken up with alacrity by the Mulroney government, and central to the great free trade debate just beginning to unfold across Canada in the run-up to the 1988 election. In the end I undertook a dissertation on that very subject focusing on the debate between nationalists and continentalists. I did so under the guidance par excellence of Stephen Clarkson, whose expert combination of laissez faire and active interventionism as dissertation supervisor proved to be the perfect formula for success.[2]

The other significant early encounter with Stephen was in a graduate course he co-taught with Mel Watkins called Canadian Political Economy. After having taken legions of political science courses, I had finally discovered that there were scholars and a literature which I had previously assumed what political science was all about. Their course had an immense impact on me, as did working as Stephen¡¯s TA for his undergraduate course on Canadian political economy.

As we move into the post-globalization era marked by the renegotiation of the North America Free Trade Agreement (NAFTA), ?Brexit, the cancellation of the Trans Pacific Partnership trade deal, the reassertion of ¡°America first,¡± and the revocation of international free trade principles and practices by the current American administration, it is interesting to look at Clarksonian conceptions of nationalism and continentalism as reflected in Stephen¡¯s thinking over the trajectory of his remarkable career.

Stephen began in the 1960s and 1970s with assessments of the ideational ferment of the times and with a normative and theoretical approach that eventually evolved into a sharply tuned analysis of the pragmatic institutional features of free trade and continentalism. Stephen started with assessments of the policies of the Diefenbaker Conservatives, Walter Gordon, the Pearson and Trudeau Liberals, and left nationalist critiques emerging at that time. He posed provocative questions about the extent of Canadian autonomy, for instance in the collection of essays he edited for the University League for Social Reform entitled An Independent Foreign Policy for Canada? (Stephen always pointed out there was a question mark at the end of the book title) (Clarkson 1968). His Canada and the Reagan Challenge (Clarkson 1985) explored the exercise of American approbation toward the nationalist turn in Canadian government policy regarding the National Energy Program and the Foreign Investment Review Agency (and was dedicated, by the way, to the father figure of liberal Canadian nationalism, Walter Gordon). By the 1990s and 2000s, Stephen turned his focus more sharply to the institutional realities of the Canada-United States Free Trade Agreement (FTA) and NAFTA, as well as the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO), dissecting the meaning of the new supra-constitutional regime and pointing to the legal, institutional and legitimacy limitations of the neoconservative project to make Canada and the world safe for transnational capital.

Underlying Stephen¡¯s work was a normative dimension which reflected the broad currents of nationalism and continentalism in Canadian life. He identified with a value system rooted in nationalism giving top priority to political autonomy, social equality, labour rights, and environmental sustainability; continentalists, on the other hand, he felt saw integration as top priority and prioritized economic growth thereby entrenching reliance on factors beyond national control (Clarkson 2002, 9).

Stephen identified how problematic the gulf in value systems between nationalists and continentalists could be, resulting in a ¡°dialogue of the deaf¡± (Clarkson 2002, 10). Vilification of each side by the other prevented any meaningful exchange, with continentalists condemning nationalists as either ignorant of elementary economics or outright demagogues, and nationalists condemning continentalists as the forces of evil as represented by transnational corporations and neoconservative apologists. These differing perspectives extended to perceptions of the role of the state, with continentalists believing that ¡°who governs least governs best,¡± and nationalists preferring an activist state. One of the most intellectually rewarding aspects of being one of Stephen¡¯s students and later his TA was that he brought prominent representatives of both these broad perspectives into his classrooms and seminars to air their views. He even sometimes put them in the same room together. The fireworks were remarkably instructive.

By the late 1980s and early 1990s the battle had tipped appreciably in favour of the continentalists whose ideological predisposition to free markets and neoconservatism had seen them enact a widespread program of not only free trade, but also privatization, deregulation, lower taxes, and greater corporate freedom. These measures, the nationalists felt, were inimical to the public interest while privileging private interests. Stephen looked on many of these developments with some dismay. But he was conscious of the dangers of nostalgia, even as he took the activist, interventionist Keynesian state of Diefenbaker, Pearson and Trudeau the elder as the point of comparison against which to assess the neoconservative era of Mulroney, Chretien and Harper. Still, Stephen¡¯s sympathies were always clear. In 2002 he wrote that after the ratification of the 1989 FTA:

I mentally wore a black armband. I was in mourning for the exuberant, liveable, creative, hopeful Canada that my generation had tried to build and that ¡®free¡¯ trade seemed to have condemned to a lingering death. I had shared, and helped articulate in my research, the concerns of the millions who opposed Mulroney¡¯s deal. Deeper integration in the American system, we believed, would doom the efforts of many generations to build a better society on the northern third of the continent. CUFTA signalled the end of Canada as we knew it. It would strike at the heart of the government structures and programs in which we had lodged so much of our shared identity (Clarkson 2002, 14).

But Stephen moved from mourning to critical analysis pretty quickly, and produced a series of important works that took the continentalist policies and placed them under a microscope. If the continentalists were going to make claims about the virtues and values of free trade, Stephen was going to subject each and every claim to careful, thoughtful and precise scrutiny, He produced an analysis of astonishing breadth and depth, consisting of a series of dozens of case studies over a thematic trilogy (Clarkson 2002, 2008, Clarkson and Mildenberger 2011) and several other important books, journal articles, reports, public commentaries and studies.

Stephen often observed that one of the conditioning features of the North American relationship was its asymmetry. There is one hegemon and two peripheral powers. This aspect of realpolitik has come home to roost in the recent statements by the current US administration that it would tear up and renegotiate NAFTA, or perhaps just ¡°tweak¡± it, before issuing a directive in May 2017 instructing Congress to begin renegotiations on NAFTA¡¯s future. But Stephen frequently signalled the significance of the power imbalance in the trilateral continental partnership that emerged in the latter part of the late 20th and early 21st century.

Stephen noted that from Bush to Obama, successive efforts to institutionalize the relationship and create a form of North American governance were of little interest to the Americans. With virtually no legislative, executive or administrative presence, with an enfeebled and ineffective dispute-settlement regime and therefore no real judicial capacity, NAFTA was an ephemeral institutional reality. The fact that corporate North America felt impelled to create parallel institutions such as the doomed Security and Prosperity Partnership, or promote the annual Leaders¡¯ Summit between the Prime Cinister and the two Presidents, or create the North American Competitiveness Council signalled the institutional shallowness of NAFTA. So too did the ineffectiveness of NAFTA¡¯s North American Commission on Labour Cooperation and the North American Commission on Environmental Cooperation.

This all added up to the observation that essentially, what the Americans want the Americans get. Consider for instance, the power to renegotiate NAFTA. In 2002, Stephen presciently wrote:

The threat of abrogation has a very different weight in the hands of Washington than in those of Ottawa or Mexico City¡­. Disaster would be the assumed impact on either of the peripheral states should the United States abrogate. Following their virtual complete integration in the continental economy, they would be forced to their knees if Washington threatened to terminate its participation in the agreement¡­ (Clarkson 2002, 41).

I suspect this is an aspect of realpolitik not well understood by the current regime in Ottawa.

Just look at the tremors that shook the Ottawa and the Canadian business establishment when the tweeting president-elect announced in early January 2017 that the major auto companies better produce cars in America or he was going to make them pay heavy border taxes for cars imported from other countries. Or in any of the other examples of Trump shooting off his Twitter, or his appointment of a hard line protectionist as his Trade Representative: In a release issued by the transition team, Trump said Robert Lighthizer will fight for trade deals that “put the American worker first.” These developments are reflective of an earlier crisis in Canadian-American relations which Stephen analyzed ¨C the ascension to power of the Reagan government in 1980 with its own ¡°America first¡± agenda, and the resulting crisis in the relationship characterized by Reagan¡¯s (and corporate America¡¯s) attack on Trudeau¡¯s nationalist initiatives (Clarkson 1985). One key difference today, however, is that while Reagan eventually succumbed to dementia at the end of his presidency, Trump started his as just plain crazy.

Among Stephen¡¯s insights is that the Americans always set the agenda, and if they permit themselves to be the object of policies dictated by the perimeter (ideas Stephen put forward with Matto Mildenberger in 2011 in Dependant America? ¨C note the question mark again), America nonetheless holds the residual power to alter the trajectory of continental relations more or less at will. Stephen noted that the Canadian government negotiated the original FTA ¡°on its knees¡± before their American counterparts. And he observed that Canada jumped into NAFTA as a defensive response to an initiative between the Americans and Mexicans, rather than as a strategic approach to national economic development. And if there was the need for any further proof of the American proclivity for pursuing its own self-interest, the 9/11 terrorist attacks on New York and Washington dispelled any doubts, ¡°promoting an instinctually territorial and autarchic response¡­¡± (Clarkson 2008, 369). The failure on the part of Canadian policy makers to appreciate the ¡°America first¡± position of America is a recurring theme in Canadian-American relations. The continent is a function of American power. Trump is only articulating, in ¡°Make America Great Again¡± a sentiment that is consistent with the assumption and reality of American predominance in the continent.

In the early 1980s when the Macdonald Royal Commission was being established, it created the largest social science research project in Canadian history. Stephen suggested a paper on the determinate power of the US Congress in setting the course for Canada-US relations. He was turned down, and the inquiry did not even commission a single piece of research dedicated to the Canada-US relationship ¨C remember, this was the important national inquiry whose signature recommendation for free trade with the US, quickly taken up by Mulroney, became the new cornerstone of Canadian economic policy to the present day.

As Stephen contemplated the broad implications of the continentalist era, he asserted the emergence of ¡°supra-constitutionalism¡± in the relations between Canada, the United States and, once NAFTA was implemented, Mexico. What did this mean? The continental political economy was overseen by a new set of institutional mechanisms articulated through trade agreements. NAFTA, along with the WTO, had ¡°re-constitutionalized¡± Canada¡¯s legal order. In effect, a new regime of norms, rules, and rights had developed that limited the powers of governments at all levels while also giving foreign corporations a powerful new capacity to challenge domestic regulations (Clarkson and Mildenberger 2011, 263). Stephen, again demonstrating the range of his intellectual curiosity, pursued the political-legal dimension of NAFTA and globalized governance more generally in considerable depth with Stepan Wood in A Perilous Imbalance (Clarkson and Wood 2010).

Stephen¡¯s insight was that the political supra-constitution was underdeveloped even as the economic forces unleashed in free trade arrangements proceeded to integrate the three countries of North America and constrain state power. He wrote that ¡°NAFTA was carefully designed to prevent any form of continental governance from developing¡± (2002, 41). He extended this line of inquiry as the early 20th century unfolded, asking the provocative question ¡°Does North America Exist?¡± (Clarkson 2008). Essentially, he argued, NAFTA reconstituted American hegemony. But having drawn this conclusion, he was not yet satisfied ¨C it required further testing. So he assessed the North American relationship from a counterintuitive perspective challenging conventional wisdom in Dependent America? (Clarkson and Mildenberger 2011) by asking to what extent American power was constructed and constrained by its two continental partners. The answer was mixed. In some matters the peripheral countries contributed to America¡¯s hegemony, but in most cases they were constrained by it.

Recent events seem to support the imperative of American hegemony. As the American President castigated his NATO partners, cozied up to the Russians, pulled out of the Paris climate change agreement, the evidence adds up. Even the current President¡¯s apparent on-again-off-again animosity toward NAFTA is a code for ¡°we will do it our way.¡± So too is the continuous program of trade harassment policies on steel, softwood lumber, the attack on Canadian supply management dairy policies, on wheat and so on.

The paradox of the Canadian position is that the further we continentalize our political economy, the worse off we get, but the policy response then is to try to get in even deeper. The FTA was a lousy deal ¨C we negotiated on our knees and were kicked in the derriere by the Americans; NAFTA was worse. We insisted on joining those negotiations as a defensive counter to the idea of a spoke-and-hub trade regime dominated by the US, and we were kicked in the gut; and now with Trump, Justin Trudeau and his foreign affairs ministers Chrystia Freeland are engaging in shuttle, email and telephone diplomacy, dispatching their key officials Katie Telford and Gerald Butts to no doubt prostrate themselves to the likes of Steve Bannon (before he was ushered out the White house door) and Gerald Kushner. Trudeau has even enlisted the aid of Brian Mulroney and one of his key FTA negotiators, Derrek Burney, to assist in pleading the Canadian case. These are the same two architects of the failed FTA and NAFTA. Canadians should prepare to get kicked in the head. This trifecta full body assault is the product of 30 years of repeating the same behaviours and expecting different results ¨C the definition of insanity.

Stephen and Matto Mildenberger wrote in 2011 about possible future scenarios for North America. They suggested one path would see the US:

¡­go beyond its present mild economic nationalism and reinforce its historical proclivity for isolationism. It could become a Lone Ranger vigilante focusing on sealing its borders rather than promoting connections with its periphery¡­. To the south it could try fortifying its border still further against would-be Mexican workers and narcotics merchants, without paying heed to the economic distress, political chaos, and security bedlam pushing people across the Rio Grande (Clarkson and Mildenberger 2011, 281-2).

These words seem prophetic, but they are more the product of careful and thoughtful analysis that was Stephen¡¯s hallmark.

This does leave us with questions about the current state of Canadian nationalism. In a 1988 essay entitled ¡°Continentalism: The Conceptual Challenge¡±, Stephen reminded us of Samuel Moffat¡¯s 1907 assertion not that Canadians would one day become American, but that they already were and did not know it. But Moffat also held that the complete political, economic and cultural absorption of Canada into the United States was inhibited by what Moffat called a ¡°spirit of nationality.¡± This spirit, Stephen said, evolved through the 20th century experiences of two world wars, the flag debate, the patriation of the Constitution and Charter of Rights and Freedoms, the referenda on sovereignty association and other events and episodes in the collective conscious of Canadians.

How persistent and resourceful this ¡°spirit of nationality¡± remains in the face of 30 years of unrelenting neoconservative attacks on the key structural state-level supports for this spirit is hard to gauge. Like Stephen in 1989, I sometimes find myself figuratively wearing a black arm band to signify my own uncertainty about the continued existence of Canadian autonomy and nationalism under the current conditions. However, to assuage these feelings, I can once again turn to a Clarksonian perspective on future prospects for Canadian nationhood. Stephen made note of a rarely considered dimension of continentalism ¨C namely that the Americans would never stand for annexation of Canada. It would upset the balance of power in the US Congress, he argued, by adding 24 million English speaking Canadians (he assumed Quebec would go its own way) who skew heavily toward the Democrats and for whom state supplied medical care was a core part of their identity. The political headache would be too much to bare.

In such moments, I remind myself that a search for balance infused Stephen¡¯s perspective and work. Nationalists need to articulate and operationalize an approach that begins to rebalance the power of various actors and institutions in the Canadian and continental political economy and that reclaims and reinvigorates a role for the state. I foresee a strategy of quiet, incremental and subtle policy initiatives ¨C nationalism by stealth if you will ¨C that both reflects and supports a paradigmatic shift of the sort which launched the neoconservative continentalist revolution. Eventually, perhaps a new royal commission advocating a ¡°leap of faith¡± into a more boldly autonomous and outward looking approach connecting Canadian interests to the broader global landscape through carefully constructed economic relations which privilege people, the environment and community over private profit and transnational greed might be the launching point.

As I look back on that fateful day when I first met Stephen, I am certainly thankful that he persuaded me to undertake that dissertation on the Macdonald Royal Commission. I also sometimes wonder if any grad student, bright eyed, bushy-tailed and na?ve as I was back then, ever wrote that political biography of Eugene Forsey. If so, I am sure it would have been a thoughtful, careful and insightful piece of work, if indeed a rather boring one. I am glad it wasn¡¯t me, though, because among the many things Stephen helped me to understand, was that the ongoing problematic of nationalism versus continentalism is never boring.



Clarkson, Stephen, ed. 1968. An Independent Foreign Policy for Canada? Toronto: McClelland and Stewart.

Clarkson, Stephen. 1985. Canada and the Reagan Challenge: Crisis and Adjustment 1981-1985. Toronto: Lorimer.

Clarkson, Stephen. 2008. Does North America Exist? Governing the Continent after NAFTA and 9/11. Toronto: University of Toronto Press.

Clarkson, Stephen. 1993. ¡°Economics: The New Hemispheric Fundamentalism,¡± in Ricardo Grinspun and Maxwell A. Cameron, The Political Economy of North American Free Trade. Montreal: McGill-Queen¡¯s University Press, 61-9.

Clarkson, Stephen. 2001. ¡°The Multi-Level State: Canada in the Semi-Periphery of both Continentalism and Globalization.¡± Review of International Political Economy. 8, 3 (January), 501-27.

Clarkson, Stephen. 2002. Uncle Sam and US: Globalization, Neoconservatism, and the Canadian State. Toronto: University of Toronto Press.

Clarkson, Stephen and Matto Mildenberger. 2011. Dependent America? How Canada and Mexico Construct U.S. Power. Toronto: University of Toronto Press.

Clarkson, Stephen and Stepan Wood. 2010. A Perilous Imbalance: The Globalization of Canadian Law and Governance. Vancouver: UBC Press.

[1] Canada. 1985. The Royal Commission on the Economic Union and Development Prospects for Canada.

[2] The dissertation was transformed into book form, again with Stephen¡¯s help, and published as Gregory J. Inwood. 2005. Continentalizing Canada: The Politics and Legacy of the Macdonald Royal Commission. ?Toronto: University of Toronto Press.

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Parental Leave and Pay Equity https://www.google.com//ded/2018/02/26/parental-leave-and-pay-equity/ /ded/2018/02/26/parental-leave-and-pay-equity/#respond Mon, 26 Feb 2018 22:16:36 +0000 /ded/?p=19610 Budget 2018 is being advertised as a truly comprehensive gender budget, with two key pieces of that being use-it-or-lose-it paternity leave, and action on pay equity.

Last year’s gender budget implemented the Liberal campaign promise to extend EI parental leave from a total of 12 months to 18 months, despite the fact that the idea was universally panned by feminists, Canada’s unions, and business groups.

The problem? Other than the fact it doesn’t recognize that the primary issue facing parents of young children is the need for a national childcare system, the plan didn’t increase the total amount of funding, it simply extended the current allotment over a longer period of time. Instead of getting 55% of your average earnings for 35 weeks of parental benefits, you can choose to get 33% for 61 weeks. If you earn more than the maximum insurable earnings threshold of $51,700, the 35 week maximum benefit is $547/week, and the 61 week maximum benefit is $328/week. The main benefit for parents taking the 18 month leave would be the accompanying change in the duration of job-protected leave, and some parents might have collective agreement top-ups that make the 18 month leave more attractive (although that will likely change rather quickly).

On the whole, an excellent example of how not to do gender budgeting.

So what should we be looking for to make sure that this year’s changes to parental leave and pay equity will be meaningful?

Well, for any measure we should be looking for how it will affect differently located women – women with disabilities, racialized women, women in rural areas, women with different levels of income … you get the idea.

For parental leave specifically, it is useful to look at Quebec’s program. Andrea Doucet, Lindsey McKay, and Sophie Mathieu, have found?that Quebec’s QPIP does a better job of reaching low income families. There are several features that contribute to this – lower eligibility requirement ($2,000 of income vs. 600 hours of EI eligible employment), dedicated second parent leave, and a higher 70% replacement rate for both the dedicated maternity leave & the dedicated second parent leave, as well as the first seven weeks of parental leave. Any modification of Canada’s parental leave program that only does part of this will likely fall short.

On pay equity, many stakeholders are expecting stand-alone legislation to implement proactive pay equity at the federal level. In the budget, we might see set-asides for what this could be expected to cost the federal government as an employer, as well as funding for independent Pay Equity Commission and Hearings Tribunal, and a commitment to funding to support workers¡¯ and advocacy groups¡¯ access to advice, information, training, and participation in the pay equity process.

Last year I asked how it could be a gender budget without “higher minimum wages, better employment standards enforcement, proactive pay equity legislation, and affordable childcare”. Those are still the questions I’ll be asking this year.

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Ten proposals from the 2018 Alternative Federal Budget https://www.google.com//ded/2018/02/24/ten-proposals-from-the-2018-alternative-federal-budget/ /ded/2018/02/24/ten-proposals-from-the-2018-alternative-federal-budget/#respond Sat, 24 Feb 2018 06:28:40 +0000 /ded/?p=19605 I’ve written a blog post about this year’s Alternative Federal Budget (AFB).

Points raised in the blog post include the following:

-This year’s AFB would create 470,000 (full-time equivalent) jobs in its first year alone. By year 2 of the plan, 600,000 new (full-time equivalent) jobs will exist.

-This year’s AFB will also bring in universal pharmacare, address involuntary part-time employment among women, eliminate tuition fees for all post-secondary students in Canada, speed up implementation of the federal carbon tax, and increase the corporate tax rate from 15% to 21%.

-I’m particularly intrigued by the AFB’s poverty reduction measures, which include a sizeable top-up to the GST rebate, a $4 billion annual transfer to the provinces and territories, increases to seniors’ benefits, and $3.5B in new spending for housing.

The full blog post can be found here.

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The Working Poor and the Working Income Tax Benefit https://www.google.com//ded/2018/02/22/the-working-poor-and-the-working-income-tax-benefit/ /ded/2018/02/22/the-working-poor-and-the-working-income-tax-benefit/#comments Thu, 22 Feb 2018 15:51:47 +0000 /ded/?p=19599 Here is a short research paper I wrote for the Broadbent Institute.


And here is a short summary:

The Liberal government have promised to make progressive changes to the Working Income Tax Benefit (WITB) in next week’s budget.

Let’s hope that they deliver. The increased insecurity of work and low hourly wages for many workers mean that many Canadians live in poverty even though they have a significant attachment to the paid work force.

The WITB is directed to the working poor, that is, individuals and families who have significant earnings, and sometimes even work full-time for a full year, but still live in poverty. About one half of all working age persons living in poverty have significant earnings.

Higher minimum wages in some provinces mean that a single person working full time for a full year will earn enough to be above the poverty line. But most of the working poor can only find part-time and insecure jobs, and need additional income support

The WITB currently delivers a meagre average benefit of just $807 per year, and the benefits for a single person are phased out once income passes a very low threshold of just $12,000, well below the poverty line.

The benefit should be significantly increased, and phased out at a much higher level of earnings.

The WITB was also intended to make work pay and to help people transition from social assistance. But just 8.8% of social assistance recipients get any benefit from the program.

Many social assistance recipients would like to work, but face multiple barriers such as loss of health and housing benefits and high claw back rates on every dollar of earnings. The WITB could help, but benefits are paid only after a long lag of up to one year.

The WITB could, together with decent minimum wages, help lift the working poor out of poverty.

But major changes are needed.




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Homelessness in BC https://www.google.com//ded/2018/02/19/homelessness-in-bc/ /ded/2018/02/19/homelessness-in-bc/#respond Mon, 19 Feb 2018 19:57:52 +0000 /ded/?p=19592 In anticipation of tomorrow’s provincial budget in British Columbia (BC), I’ve written a blog post about the state of homelessness in that province.

Points raised in the blog post include the following:

-Public operating spending by BC’s provincial government has decreased over the past 20 years.

-Even after controlling for inflation, average rent levels across the province increased by 24% between 1990 and 2016.

-Over the past several decades, various reforms to BC’s social assistance system have made it harder to qualify for benefits and have resulted in lower benefit levels to those who are eligible.

-A lack of affordable housing is making it very challenging for front-line practitioners to practice the ‘housing first’ approach (i.e., providing a homeless person with immediate access to affordable housing).

-BC’s new NDP government has undertaken important initiatives that may have the effect of reducing homelessness.

The full blog post can be found at this link.

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Panel discussion at federal NDP policy convention https://www.google.com//ded/2018/02/18/panel-discussion-at-federal-ndp-policy-convention/ /ded/2018/02/18/panel-discussion-at-federal-ndp-policy-convention/#respond Sun, 18 Feb 2018 14:47:45 +0000 /ded/?p=19589 Yesterday I spoke on a panel discussion on economic inequality, along with Andrew Jackson and Armine Yalnizyan. We were guests at the federal NDP’s policy convention in Ottawa. The panel was moderated by Guy Caron.

Topics covered included the minimum wage, basic income, affordable housing, the future of jobs, gender budgeting, poverty among seniors, Canadian fiscal policy in historical perspective, and Canadian fiscal policy in comparison with other OECD countries.

The discussion was 30 minutes long. You can watch it here.

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Toward a Better World https://www.google.com//ded/2018/02/09/toward-a-better-world/ /ded/2018/02/09/toward-a-better-world/#comments Fri, 09 Feb 2018 15:46:43 +0000 /ded/?p=19581 That is the well chosen title of a marvelous new book by Gerry Helleiner,? sub-titled Memoirs of a Life in International and Development Economics. Helleiner, from his home base at the University of Toronto, tells us in this most readable book, in his own modest way, the stories, notably from Africa, of how he?devoted his life as an economist to that end. His rewards include his membership in the Order of Canada.

Helleiner describes himself as a progressive economist and is so judged by scholars. He has a strong commitment to social justice, to aiding the cause of poor countries, particularly the smaller of them, and the poorest within those poor countries.

His advise has been frequently sought by those involved in economic development in what we now call the Global South.? His students have pursued successful careers in developing countries and with NGOs in the developed countries, and he is justly proud of that.

There is an abundance of quotable quotes. “Economics is not where everyone goes for inspiration or excitement. But I must say that my life as a teaching and practicing economist has been deeply fulfilling and at times wildly exciting.” Surely a great recommendation for being a progressive economist.,

For Helleiner economics is not a dismal science. “I believe the record of the past half century [with particular reference of Africa] which, in truth, does make some despair, can instead inspire hope for the kind of dramatic positive change that is possible.” This is a powerful message to progressive economists of hope in hard times.

On an issue that should be dear to the heart of progressive economists, Helleiner appeals for graduate studies in economics to be more heterodox, and less theory-driven . He describes how his own department at Toronto fell victim to these North American tendencies and how this? has adversely affected the program in? economic development. (So too was my own field of economic history.)

Ultimately, of course, economics which preaches the virtue of markets must itself respond to their evident failures. Helleiner’s passionate pleas should hasten that day.

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The Clarkson Story up until Now and the Uncertain Future of The WTO https://www.google.com//ded/2018/01/10/the-clarkson-story-up-until-now-and-the-uncertain-future-of-the-wto/ /ded/2018/01/10/the-clarkson-story-up-until-now-and-the-uncertain-future-of-the-wto/#respond Wed, 10 Jan 2018 22:51:30 +0000 /ded/?p=19555 Stephen Clarkson

The following is a contribution in the blog series on the exceptional contribution of Stephen Clarkson to Canada.? Stephen Clarkson died in 2016. The substantial work he undertook on Canada and international trade is particularly relevant today as negotiations on NAFTA and other trade agreements occur.


Stephen Clarkson receiving the Order of Canada


Daniel Drache

Daniel Drache was?a long-time colleague and friend of Stephen. ?He is Professor Emeritus of Political Science at York University and former Director of the Robarts Centre for Canadian Studies. His work focuses on understanding the changing character of the globalisation narrative in its economic, social and cultural dimensions. He has worked extensively on the WTO’s failed Doha Round with particular focus on TRIPS and public health, food security and nutrition, and poverty eradication.?

The Clarkson Story up until Now?and the Uncertain Future of the WTO

Daniel Drache

The Clarkson Gaze

The story so far is about the events roiling the global economy and Stephen¡¯s unique gaze in the way in which he interpreted them. His inexhaustible appetite for research on North America, globalization, political parties, political leaders and, above all, the power dynamics between Uncle Sam and stick figure Johnny Canuck gave him an over-sized palette.[1] He was focused on big ideas, instinctively drawn to the most important: the continuing relevance of sovereignty and state power at a time of interdependence.

In a way that makes history full of surprises, the story until now is that many governments also share a growing scepticism about the effectiveness of the WTO dispute resolution mechanism, a topic which loomed large in Clarkson¡¯s writing and research. In 2014, only seven new cases were filed, a paltry number in a trillion dollar plus commercial world. For the two previous decades, there were 450 cases, the majority were North South and North North. The US, Canada, and the EU were the most litigious, as well as Brazil and India have become? ¡°trade warriors¡± in defence of their core interests. Most other Global South countries had neither the legal culture nor the money to roll the dice in the WTO trade dispute lottery-like system.

In 1994, when the system was brand new, the number of cases averaged about 40 per year, and, since then, with more than 100 new members the trade gendarme of the world barely averages a baker¡¯s dozen. Where have all disputes gone?

Clarkson was aware that WTO rules are very confrontational and thought-provoking in this regard. The WTO permits states to use protectionist policies not always, but frequentlNumerous experts and scholars believed that globalization had made the world borderless, where people, ideas and commodities all moved across the world with few constraints. Conventional wisdom argued that the once mighty Westphalian state was so porous that it could no longer defend national values and goals.[2]?Many scholars embraced the notion that, in an age of global cultural and economic flows, borders were dysfunctional barriers in need of further dismantling. Stephen did not.

Instead his work was a curious hybrid of seeing the world through the eyes of an increasingly bleak dystopia about Canada¡¯s chances of surviving the python-like embrace of market-driven integration. On better days, he became a hard-nosed sceptic about these mega-trade deals when Canada¡¯s policy ¨¦lites were stumbling over each other to ink new ones, first with Uncle Sam, Mexico and then a whole host of other countries including the EU, China, India, Korea and Israel, to name but the most important. He was arguably the best Canadian researcher at documenting and de-constructing this neo-liberal universe, thereby exposing Canada¡¯s chronic dependent relationship on the US with less and less policy-space to manoeuvre with each passing decade.[3]?In his own words,

¡°With NAFTA and an emboldened WTO, Canadian programs suddenly found themselves subject to invasive WTO commercial norms and export centric policies that marginalized any need for industrial strategies to diversify and build stronger Canadian industries as a buffer zone against the excesses of resource dependency.¡±

He raged against the Liberal state machine that was always eager to go with the continental flow of power and resources, and he believed that the big red machine of the Liberal Party could be stopped although it was likely not to happen. So, he was a unique figure who had at the very least two voices: a critical observer of the trade governance system and, in moments of lucidity and despair, an advocate of more radical institutional surgery, namely, to sink the investor state dispute settlement provision (ISDS) and, along with it, much of the system of trade governance.

There is much we can learn from the Clarkson gaze about the tightly-written future and the unpredictable wild swings of global dynamics from global economic integration. With hard Brexit, the election of Trump, the cancellation of the TPP and now the unilateral re-opening of NAFTA, we¡¯ve entered a different and dangerous age with less stability than ever. US President Trump has become Canada¡¯s worst nightmare, attacking Canadian dairy and lumber practices, and demanding fundamental change to the NAFTA agreement. All these projects gave Clarkson a vast canvas and focused his attention on the incompatibility between the requirements of these trade agreements and the anxieties that citizen experience about job loss, threats to the environment, and growing inequality. He also worried that the rise of powerful ¡®nixers¡¯ in Washington and the corrosive forces of structural adjustment had irreversibly transformed the landscape of international relations from everything that went before.[4]

These tropes are still very much with us today to fix, shrink or sink trade governance.[5]?We need to think a lot about fear and anxiety, not only because of the ¡®mad king¡¯ Donald in Washington, but because the pillars of trade multilateralism are no longer coherent, even though they continue to be a force to be reckoned with. We will look at two big picture ideas of his. First, what Stephen identified occurring around us is the emergence of a highly flammable situation. When institutions fail to adapt to novel conditions, frequently like these times contagious, dangerous state policies migrate towards the center right and hard right neo-populist end of the spectrum. Secondly, analytically and intellectually he was absorbed by the deteriorating dynamics of the nixer-fixer crisis-fraught binary many states and social movements adopted in the search for options. This geopolitical positioning inevitably led them and him to radically different solutions about the uncertain future of trade governance.

Paralysis, Fear, and Decay

The growing paralysis triggered by polarized conjunctural politics as well as structural stagnation has its convoluted roots in the architecture and agenda of the WTO, which was oversold to governments as a guarantor and regulator of the world trading system.[6]?It promised a level playing-field for all and a development accelerator for the Global South plus new market-access and increased competitiveness for industries on both sides of the global divide.

In the Clarkson view of the world, he saw something dramatically askew. The institutional wheels had fallen off these clich¨¦d policies because trade deals had become an omnibus multipronged policy. In the process export-centric mega-deals went far beyond their original mandate. Instead, they became invasive investor-centric agreements that ubiquitously challenged the state¡¯s competence to regulate effectively in the public interest. The predictable result was that governments are facing a backlash and push-back from social movements, non-scripted actors, and highly informed non-governmental organizations.[7]

In a primary sense Clarkson understood that that trade agreements were marketed to largely indifferent and often passive publics because there were no credible alternatives to the widely-subscribed belief that ¡°There is no Alternative¡± (TINA). Doom and fatalism were the red lines of political discourse that could not be crossed. However, since 2008, (and often before the global financial crisis in the ¡®Battle for Seattle¡¯), a Niagara of campaigns, street demonstrations and social media mobilization energized publics, particularly in the EU where, in Germany, Belgium and France, grassroots social movements mobilized hundreds of thousands of protesters against the proposed Canada-EU free-trade agreement (CETA).

Still Clarkson¡¯s dark pessimism about the unstoppable momentum of third-generation trade deals found itself on the right side of history. The future of many trade and investment deals are in limbo because European public opinion is increasingly suspicious and hostile to trade and investment deals. In 2017, the explosive decision of the Court of Justice of the European Union (CJEU) on the EU¡¯s exclusive competence to enter into trade treaties without the approval of national legislatures was dealt a death blow. The Court found that the EU would have to submit ISDS agreements to all 30 national and subnational parties for individual approval.[8]?Even critical observers could not have predicted such an outcome. The EU had hoped that the Court would give it exclusive jurisdiction without having to submit a trade treaty for national ratification. Brussel¡¯s expectation was to be able to approve these trade and investment routinely. It did not want a re-occurrence of the Walloons casting a veto that held up the entire CETA ratification process, as it had done in 2016. The CJEU ruled against the EU. In shared jurisdictions with an ISDS provision, individual Member States will be required to give their assent.

One part of the Court¡¯s decision re-inforced the national authority of Member States, but another extended the principle of transnationality. The ECJ gave the EU a green light to take the ISDS clause out of trade and investment treaties and move it into the institutional hands of an International Investment Court which is still to be established.

Stephen would have savoured and probably savaged this landmark decision because the Court not only shrunk the legal authority of the EU¡¯s unilateral power, but it also removed labour, the environment, intellectual property rights, and public procurement as shared competencies that had previously been awarded in an earlier legal judgment. Had these shared competencies remained, it would have made signing new investment deals almost impossible and extremely arduous to negotiate, let alone ratify.

It is not surprising that the CJEU required Brussels to submit ISDS provisions to national governments. India has already imposed legislative restrictions on access to ISDS, Ecuador has withdrawn from 16 of its investment treaties, and South Africa has begun the process of terminating its investment treaties. In 2012, it passed new legislation that gives exclusivity to domestic remedies. Brazil has never signed into law investment-treaty provisions for privatized arbitration.[9]

All these countries are encouraging alternative dispute resolution outlined in ¡°cooperation and investment facilitation¡± kinds of agreements. All this ¡°nixing and fixing¡± of state activity would not have been possible without social media and popular mobilization against governments being sued by powerful corporate interests.

Now, the Court of Justice of the European Union has come out against such clauses unless they are submitted to national ratification procedures. Indeed, in the words of Steven Toope, ¡°the world order is shifting¡±. The WTO will not be ¡°great again¡± because its relative position in terms of its hard legal power and the political consensus that once made it unchallengeable has dimmed, if not, decayed. What is different is that, with the fragmentation of the global economy, it is also the time – to the surprise of many experts – to negotiate new rules, as we have just seen. For Clarkson he understood that there is no possibility of a new ¡®grand social bargain¡¯ to support new rights for citizens and labour but, at the margins, popular forces seem to have gained the capacity to mobilize despite neoliberalism and the politics of austerity.

WTO Marginalization in its Core Competence

Clarkson will be always remembered as a fierce critic of neoliberal embeddedness of the WTO. Perhaps the fact that Canadian governments had so unreservedly embraced its legal elite culture pushed Clarkson to embrace the rhetoric of the anti-globalization movement. Other developments have also cooled the ardour of many governments to put their faith in the efficacy of the crown jewels of the WTO dispute resolution system to protect them from the gale-like force of global competition. One of Clarkson¡¯s persistent themes is that governments have turned away from this mechanism to seek relief for their battered industries from the consequences of structural adjustment triggered by open, highly de-regulated, economies. Increasingly, many countries have preferred to seek redress for trade grievances before national tribunals rather than bring cases to the world trade court of the WTO.

It is worth reminding ourselves that 80 per cent of the WTO membership has never used the dispute resolution panels because the majority of the WTO do not have the experience, the money, and the confidence in the system that is slow, unpredictable, and very costly, with no positive track record of handling, let alone, addressing within the terms of reference of its legal culture, the non-commercial aspects present in every trade dispute. These include food security, the need for state subsidies, the limitations of the principle of non-discrimination for industrial policy, the creation of fair labour standards, and the legal support for sustainable environmental practices ¨C each a hot button issue of our times. Does not the narrowness of the WTO¡¯s legal culture explain why so few Global South countries want to chance addressing more substantive issues through this trade body?

Put another way, there are very few WTO victories for ¡°we the people¡±. One of the most iconic articles on the WTO¡¯s legal straitjacket is by Joseph Weiler,[10]?entitled?The Rule of Lawyers and the Ethos of Diplomacy. In it, he warned against the rule of lawyers because the most optimal outcome in most interstate conflicts between governments is the need to find a trade compromise about conflict over a disputed subsidy, stockpiling for food security, incentives to develop local industry rather than an adversarial victory for the strongest state and profit-seeking multinationals.

Weiler predicted that legal principles masquerading as statecraft would eventually erode the underpinnings of its unbalanced legal culture. Weiler¡¯s expectation about the growing illegitimacy of the WTO¡¯s legal culture in the minds of many is dead accurate and has been one of the central factors in sustaining successful mobilization campaigns against third-generation trade and investment deals.

Growing State Scepticism towards the WTO

y when they experience the volatility of global markets endangering employment and entire industries.[11] The WTO gives states the green light to adopt protectionist policies under very restrictive conditions. Countries file complaints against predatory pricing, subsidy abusers and the nuclear ¡°option-of-all-options¡±, safeguards for reasons of national security to protect the national interest when threatened by global conditions such as employment loss, import surges or the open-ended category, ¡°unfair advantage¡± of some kind that governments can use to defend the imposition of tariffs or import duties before a national trade tribunal constituted to litigate such claims.

The Clarkson gaze is an excellent guide to what has happened in the last two decades with respect to countries turning their back on the WTO¡¯s legal crown jewel. It is astonishing to realize that the number of anti-dumping petitions has exploded, totalling more than 4,300 compared with about 400 disputes filed with the WTO.[12] If we are looking for examples of de-stabilization, the contracting out of legal ordering to other authorities, surely, this is it. Countries are turning to their national tribunals and trade courts for short-term relief and can impose tariffs or countervailing duties n order to protect their industries under threat.

In the 1970s, voluntary export restraints were used successfully to protect US interests against Japanese auto imports. This strategy gave the US auto industry breathing space to modernize and upgrade. Of course, trade lawyers and economists rail against anti-dumping as going outside the WTO rules and its jurisdiction. What the experts are opposed to are competing national adjudication bodies which they claim are biased and unreliable. But there are many studies that show that, since these national tribunals largely follow the WTO rules of evidence, norms and practices, their win rate ¨C the test for bias for the home team ¨C are within standards of international practice. This parallel system operates – with all its strengths and weaknesses – quite efficiently to defend the ¡°local¡± from powerful ¡°global¡± interests.

It did not escape Clarkson¡¯s attention that Washington has its own parallel and highly active dispute system accessible to all Americans industries as well as to groups including unions to demand an investigation into allegedly unfair competition.[13] It can impose tariffs, punishing duties and quotas on foreign imports for short-term, medium-term and long-term periods. A large part of the legislation is discretionary and arbitrary. It can give American industries breathing space and restrict foreign competition. Super 301 is an interim measure that cannot reverse the de-industrialization of American jobs and industries, but it can – and does – provide short-term relief to declining American industries and jobs that are at risk![14]

If we want better outcomes to address real dislocation, we require a body akin to the Court of Justice of the European Union or the European Court of Human Rights with a commitment to balance commercial market-based interests with sovereignty norms and practices that sets the standards for citizen-based rights and obligations. The European Court was set up to rule on individual or state application alleging violations of civil, political and human rights. Individuals can apply directly to it and it is delivered more than 10,000 judgments that require governments to change their laws and administrative practices. Is this the kind of Court needed to replace the creaky outmoded legal culture of the WTO?

The Privatized and Secretive Alternative: ISDS

Clarkson understood as well as anyone why trade governance is so dysfunctional at present. Anti-dumping provides an escape hatch against structural adjustment market forces imposed by the neo-liberal global economy. De-globalization paradoxically strengthens and extends neo-liberal norms and practices – often at the local level.? In the Clarkson lexicon it? represents a new and different phenomena in the globalization narrative ¨C namely, the ability of global multinationals to challenge the regulatory sovereignty of nations in the public interest.

The investor state dispute settlement mechanism (ISDS) is highly problematical from a public policy point of view because of the very broad grounds that multinationals have to sue governments, including ¡°fair and equitable treatment¡±, ¡°expropriation of benefits¡±, ¡°non-discrimination¡±, and ¡°national treatment¡±. All these trade-related doctrines impose a heavy burden on governments to demonstrate that foreign multinationals receive ¡°special consideration¡± in private courts, which is not available to nationally-domiciled companies.

State investor disputes are always about money and inevitably about environmental standards and review, health services, access to generic drugs, industrial policy, and labour standards. The rules favour investors, as they challenge the sovereignty and authority of democratically-elected governments to reduce their ability to legislate and defend the public interest.

According to the UNCTAD monitor, in 2016, there were 62 new ISDS cases filed, a record high. The 10 year average is a steady 45 filings a year ¨C compared to the 12 complaints cases filed at the WTO. In the most recent 12 year period, there were more than 550 new cases worth hundreds of millions and millions of dollars in awards against governments without including the 50 billion USD award against Russia. Not surprisingly, the most frequent users are from the advanced block of countries. In the Dutch study of Arbitral Awards, multinational corporations are favoured by a ratio of two to one over states in the arbitral win-loss sweepstakes.[15]

These outcomes are critical standard-setters. Most decidedly, they have become a central feature promoting the growth in privatized commercial arbitration. It is safe to conclude that these out-of-public-sight in-camera arbitrations have outpaced and probably outperformed the WTO disputes resolution mechanism body as far as global capital is concerned. The explosive growth in privatized dispute resolution is itself evidence that? Clarkson¡¯s research led him to the conclusion that free trade agreements are about expanding, protecting and prioritizing investment rights for global finance with its own global dispute resolution mechanism ¨C both characteristically non-transparent and invasive of national sovereignty. Global trade politics reinforced Clarkson¡¯s nationalism and made him a strong defender of Canadian sovereignty in a country whose national narrative is weakly and erratically nationalistic. This, too, is part of the story so far in Clarkson¡¯s long view of trade politics.

The Fixers-Nixers Binary and Conundrum

What he understood at a deep level is that at one end of a very long spectrum of conflicting ideas were those who accepted the idea that the system can be reformed; hence, the term ¡°the fixers¡±. A second group starts at the other end of the spectrum that the mandate of the WTO needs to get back to trade basics, the so-called ¡°shrink it¡± alternative policy option. Finally, a lot of radical social movements accept as true that the WTO is too flawed to save, hence, they want ¡°to sink it¡± and replace it with a different kind of global trade governance organization.

Of the three options, the first believes it is possible to find a way to put the WTO back together again like a Humpty-Dumpty character. Some kind of fixing could make its trade and organizational architecture less clumsy, more fleet of foot, transparent, accountable and functional. There are technical fixes such as scrapping its ¡°all or nothing rule¡± that makes consensus among 160 governments with over 70 per cent from the Global South almost impossible. Before members agree on any new trade round with its dozens of committees, all members have to agree unanimously to it. Effectively, this gives the Global South and the BRIC countries a veto over so-called deal breaking proposals coming from the old coalition, composed of the US, the EU and Japan, a fact that did not escape Clarkson¡¯s acute grasp of the power dynamics that kept the organization deadlocked. But institutional paralysis could not prevent fundamental changes to the global trade agenda and the most important was to expand the rights of global capital to hold governments to account.[16]

The Massachusetts Senator Elizabeth Warren calls the highly contentious investor state dispute settlement (ISDS) the ¡°clause everyone should oppose¡± , a position he heartily endorsed and that plays a large role in Clarkson¡¯s concept of international political economy, precisely because it diminishes state sovereignty and it enhances multinational power to beat back the regulatory authority of government. Under the ISDS, corporations have sued the Mexican government for over 200 million USD and Canada for 157 million USD. At present, a U.S. company is suing Canada for another 250 million USD over a moratorium on fracking for natural gas, and another firm – suing for more than 100 million USD over the rejection of a mining permit after a Canadian environmental impact assessment proved the project to be detrimental – won its case.

So, removing the ISDS clause, a source of bitter and prolonged controversy, would be an obvious candidate to drop from trade agreements. The EU and recently Canada have gone on record to support the creation of an International Investment Court to address the growing number of investment conflicts that multinationals face. This, too, is a source of controversy, and it may take years before the Court is established and approved by all 27 parliaments.[17]

The Narrow Ledge of Trade Governance

The fact of the matter is that the WTO, since its establishment, is exclusively a producers¡¯ organization for large multinationals and states, not for consumers, not ¡°for the people¡±. This is why it has such a narrow focus and mandate, an institutional feature that Clarkson pushed to the center of his research analysis. What he documented was that, when commercial interests are found to conflict with environmental protection, access to generic drugs, labour standards, or industrial strategy, global commercial interests inevitably carry the day in the WTO¡¯s court system with its highly constrained legal culture. Why, for instance, is ¡°fair and equitable¡± treatment of a private investor given the status of a constitutional right when it only serves the needs of special interest groups? It is this threshold test, among others, that is so central to WTO legal culture that requires resetting. Without it how could the WTO have a fresh start with a different purpose and organizational architecture around aims such as egalitarianism, development and other socially progressive goals?

If the governance agenda for negotiating a new trade round is limited to only trade issues, the most contentious part of the agenda ¨C intellectual property rights, investment rights, public procurement, access to generic drugs, food security and environmental sustainability require a different solution, one which does not come through the narrow lens of trade. In the Clarksonian gaze, complex policy issues have to be addressed through a different kind of governance body that is equipped to handle the goals and objectives of a broad-based jurisprudence and the right of individuals in all countries to seek redress and transparent arbitration.

It is not a good idea that we think of this new body as setting hard law legislative standards in many areas at the global level. Instead, what is needed is a legal culture of balanced adjudication and arbitration, a European-style court. This is the high standard to consider. The important corollary is that legal cultures are subject to many constraints and the most important is when global standards are low, no global organization can substitute itself for national decision-making bodies.

At present, in a way few predicted the WTO is in relative decline as a global governance body, marginalized by atrophy and growing irrelevance for many nations in the global South. For experts from the advanced industrial countries it is a mistake to think that international institutions are forever, the ¡®eternal, unchanging guardians¡¯ of the world order. The WTO is in a Braudelian ¡°time bubble chamber¡± unable to adapt to the new set of circumstances after the 2008 financial crisis. Its institutional paralysis, if anything, has deepened in the post-Brexit, post Trump era.? The gravitational shift from trade-focused organization to an investment-centric institution has complicated the incredibly difficult task of building a new consensus.

Nor does the WTO have the resources to derail China¡¯s well-advanced plans to create a parallel trade and investment global order with 100 or so countries. For the moment, only India and the United States are boycotting the One Belt, One Road (OBOR) and the Asian Infrastructure Investment Bank.(AIIB) To the surprise of few, bilateralism and regionalism are rapidly becoming the twin pillars of the new international order, largely, and surprisingly sponsored by China , through its $2 trillion global infrastructural initiative. And whatever strong doubts you may have about the efficacy of Beijing¡¯s leadership, Chinese multilateralism is patiently waiting in the wings with its alternative institutions. For the moment we have entered a long transition period.

A Sartrian Dilemma: A World without Dominant Agency

In his last writings Stephen understood instinctively that in a multipolar world we cannot speak of a hegemonic order any longer because the world is so fragmented and fissured. Instead, it is more like a Sartrian moment, Huis clos: L¡¯enfer, c¡¯est les autres. But as Clarkson might have asked who exactly are the others?

Isn¡¯t it more precise to say that it is ourselves and our dystopian fatigue who are responsible for the new age of high anxiety in some important way? This is the dilemma of our time which preoccupied Stephen Clarkson in his research and teaching. In an era of authoritarianism versus democracy, we need to rethink and re-engage with a global order that bears very little relationship with the precise rules and governance practices of global multilateralism. In his dystopian gaze,? Clarkson¡¯s large, expansive ?and rich narrative left little room for doubt that for him at least, there is no ?single scripted or unscripted actor waiting to rescue a deeply troubled global order, today, tomorrow or anytime soon.

[1] ?? Among his many works are: Uncle Sam and Us: Globalization, Neoconservatism and the Canadian State, 2002, Trudeau and our Times (with Christina McCall),1990 and 1994, The Big Red Machine: How the Liberal Party Dominates Canadian Politics, 2005, Canada and the Reagan Challenge: Crisis in the Canadian-American Relationship, 1985, Does North America Exist?: Governing the Continent after NAFTA and 9/11, 2008, A Perilous Imbalance: The Globalization of Canadian Law and Governance (with Stepan Wood), 2010, Dependent America? How Canada and Mexico Construct US Power (with Matto Mildenberger), 2011.

[2] ?? Kenichi Ohmae, A Borderless World: Power and Strategy in the Interlinked Economy, HarperCollins 1994; Daniel Drache, Borders Matter: Homeland Security and the Search for North America, Toronto: Fernwood, 2004.

[3] ?? Clarkson, Uncle Sam and Us, note 1 above.

[4] ?? Stephen J. Toope, ¡°In a Darkening World, It¡¯s Time Canada Moved beyond Fear¡±, The Globe and Mail, 24 May 2016.

[5] ?? Daniel Drache, ¡°The Canada European Free Trade Agreement: Ought we to be Worried?¡±, Transnational Law Institute, King¡¯s College, London, 2016.

[6] ?? Dani Rodrik, The Globalization Paradox: Democracy and the Future of the World Economy, New York: Norton, 2011

[7] ?? Paul Blyth, Austerity: The History of a Dangerous Idea, 2013

[8] ?? International Economic Law Blog, Anthea Roberts, A Turning of the Tide Against ISDS? 19 May 2017. Accessed https://www.ejiltalk.org/a-turning-of-the-tide-against-isds/ ; Arthur Beasley, ¡°EU Singapore ruling charts possible Brexit path¡±, The Financial Times, 16 May 2017.

[9] ?? Roberts, op.cit.

[10] ? Joseph H.H. Weiler, accessible at http://www.jeanmonnetprogram.org/archive/papers/00/000901-01.html

[11] ? See WTO articles, Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (Anti-Dumping Agreement) and Article XIII. Article 12.

[12] ??Daniel Drache & Yin Jiyuan, ¡°A Comparative Analysis Of Unfair Trading Suits By China, India, Canada, The United States And The European Union, 1995 to 2011,¡± in Daniel Drache and Lesley A. Jacobs eds. International Economic Law and Global Governance Crises and Resilience, Vancouver: UBC Press, forthcoming 2018.

[13] ? I.M. Destler, American? Trade Politics, 4th ed. New York:PIIE, 2005.

[14] ? Toope, note 5 above.

[15] ? Dutch study of ISDS Awards, accessible at http://investmentpolicyhub.unctad.org/Upload/Documents/treaty-based-isds-cases-brought-under-dutch-iias-an-overview.pdf

[16] ? Ed Broadbent,¡± Let¡¯s make human rights central to a new NAFTA¡±, Globe and Mail, May 5, 2017, accessible at https://beta.theglobeandmail.com/opinion/lets-make-human-rights-central-to-a-new-nafta/article34898657/?ref=http://www.theglobeandmail.com&, Dani Rodrik, note 6 above, Rorden Wilkinson, What’s Wrong with the WTO and How to Fix it, London, Polity, 2014.

[17] ? Anthea Roberts, IELP, 19 May 2017. https://www.ejiltalk.org/a-turning-of-the-tide-against-isds

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Smooth Sailing Ahead For the Global and Canadian Economy? https://www.google.com//ded/2017/12/20/smooth-sailing-ahead-for-the-global-and-canadian-economy/ /ded/2017/12/20/smooth-sailing-ahead-for-the-global-and-canadian-economy/#comments Wed, 20 Dec 2017 19:26:57 +0000 /ded/?p=19550 The consensus forecast of just about everybody – the IMF, the OECD, the Bank of Canada, the Canadian banks ¨C is that Canada will share in a global recovery from the stagnation which followed the financial crisis of a decade ago. All of the major economies ¨C the US, the EU, China, Japan ¨C are growing; business investment is finally on the upswing from depressed levels; world trade is on the rise again; and fiscal austerity has more or less run its course. Central bankers, we are told, can be counted on to only gradually increase ultra low interest rates even as growth returns to near normal levels and employment recovers.

The world economy is forecast to grow about 3.7% in 2018, and Canada is forecast to grow at a respectable 2.5%, a bit below the rate in 2017.

This relatively optimistic outlook may well be true for next year. Many economic indicators are indeed very positive. But there are grounds to think that structural obstacles to a global recovery remain formidable. Indeed this view is registered by the financial markets in continued very low long term interest rates, which are based on an expectation of slow growth and low inflation over the next decade.

As widely noted, the recent upturn has been felt almost everywhere only very weakly in terms of wage growth, which is in turn by far the major determinant of household demand. Wages are generally lagging behind even weak labour productivity growth despite a significant fall in unemployment rates in the United States, Canada and even the European Union. In Canada, household spending growth has remained dependent upon increased debt rather than rising wages, even as the job market has seemingly tightened.

While the consensus forecast assumes that wages will gradually pick up, it is unclear what mechanism will reconnect wages to productivity growth in the absence of major structural changes such as the revival of a shrinking labour movement or hikes to minimum wages. The rise of insecure work seems to be limiting wage increases even at low levels of unemployment.

High and rising economic inequality is also a structural drag on growth. The continuing tilt of income growth to the most affluent means that a relatively high proportion of income gains will be saved rather than spent. The excess of financial savings over real investment is another reason why long term interest rates remain low.

High levels of household debt in many countries, again very much including Canada, also weigh against consumption and thus final demand growth. The pace of borrowing is likely to slow as interest rates creep up, making spending even more dependent upon wage growth.

Again as widely noted, following a very slow recovery, business investment remains sub par despite expectations of growth, and a large share of buoyant corporate profits is still being hoarded as cash or paid out to shareholders rather than re-invested. Part of the reason seems to be that growth has become more tilted towards the ¡°new¡± high tech/digital economy where costly physical capital requirements are low compared to the ¡°old¡±economy where expansion was based on major investments in new machinery and equipment rather than in intangible and relatively cheap intellectual and human capital.

Productivity growth remains low. For all of the talk of the emergence of a highly dynamic digital economy and the threat to jobs from artificial intelligence and the robots, growth in output per hour has been generally low, not least in the United States, and even more so in Canada. Pessimists point to the still small weight of the digital economy in the overall economy, which tends to low productivity growth due to the increasing weight of labour intensive services which cannot easily be automated.

The lack of global economic co-ordination also undermines the potential for sustained growth. The basic economic strategy of most countries, certainly including Canada, is to increase global market share through higher business investment combined with a competitive cost structure. Global competition and labour cost arbitrage by global corporations weighs against wage and income growth, fettering the growth of the overall global market. This structural problem may be exacerbated by openly protectionist trade policies if Trump prevails against liberal trade deals such as NAFTA and the WTO. Part of the solution is to co-ordinate expansionary fiscal policies and also to promote labour rights and standards across the global economy.

Added to the structural barriers to growth is the potential for systemic financial problems to once again undermine stability. A decade long run of very low interest rates has inflated numerous asset bubbles. Many countries, including Canada, have highly inflated housing markets which are vulnerable to a correction which would have a big negative impact on household wealth and spending. Equity markets are widely considered to be significantly over-valued, as are high risk corporate securities, creating risks for the financial system should prices fall. Many corporations have taken on excessive debt to pay out dividends to shareholders.

In sum, there are reasons to believe that the prospects for a sustained recovery of the global economy are not quite as robust as the new consensus would have us believe.

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Extreme Wealth Inequality Persists https://www.google.com//ded/2017/12/10/extreme-wealth-inequality-persists/ /ded/2017/12/10/extreme-wealth-inequality-persists/#comments Sun, 10 Dec 2017 17:15:52 +0000 /ded/?p=19544 There was little or no media coverage of the release of data on the distribution of the wealth of Canadians in 2016 last week, perhaps because there has been little or no change since the last Survey of Financial Security in 2012.

The top 20% of Canadians own 67.3% of all net worth (assets of all kinds minus liabilities), almost exactly the same as in 2012.

The bottom 20% have no net worth, and the bottom 40% collectively own just 2.3% of all net worth.

The top 20% also own 74.6% of all financial assets (stocks, bonds, bank deposits etc) held outside of RRSPs and registered pension plans, while the bottom 40% collectively own just 3.5% of such assets. Financial assets outside of pensions total $1.4 trillion.

Unfortunately, the new data does not detail the breakdown within the top 20%. Even within this group, wealth is highly concentrated in the hands of the top 10% and top 1%.

Clearly, taxable income from financial assets (interest, dividends, capital gains, stock options) flows overwhelmingly to a relatively small number of people. If the federal government was serious about progressive tax reform, they would be reducing the preferential treatment of such income in the personal income tax system. Over to you, Minister Morneau.

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Canada¡¯s newly-unveiled National Housing Strategy https://www.google.com//ded/2017/12/01/canadas-newly-unveiled-national-housing-strategy/ /ded/2017/12/01/canadas-newly-unveiled-national-housing-strategy/#respond Fri, 01 Dec 2017 16:20:07 +0000 /ded/?p=19538 Over at the website of the Calgary Homeless Foundation, I’ve? written a blog post about the Trudeau government’s recently-unveiled National Housing Strategy.

Points raised in the post include the following:

-One of the Strategy’s stated objectives is to reduce chronic homelessness in Canada by 50% over 10 years.

-The Trudeau government claims that this is Canada’s “first ever” national housing strategy. That claim may not be accurate.

-The Trudeau government appears to be overstating the likely impact of the Strategy. Specifically, they claim this will result in four times as many new builds (annually) going forward as were built annually between 2005 and 2015. Yet, the evidence does not appear to support that claim.

The link to the full blog post is here.

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Ten considerations for the next Alberta budget https://www.google.com//ded/2017/11/29/ten-considerations-for-the-next-alberta-budget/ /ded/2017/11/29/ten-considerations-for-the-next-alberta-budget/#respond Wed, 29 Nov 2017 13:47:10 +0000 /ded/?p=19532 On November 17, the working group of the Alberta Alternative Budget (AAB) sponsored a one-day workshop at the University of Alberta. The event¡¯s main purpose was to discuss recent developments in Alberta public policy, as well as expectations for the upcoming Alberta budget. Twenty speakers presented in total.

In light of what was discussed at the event, here are 10 considerations for the upcoming provincial budget:

  1. Governments often face pressure to privatize important public services¡ªyet, privatization sometimes comes with its own costs. According to my long-time social policy mentor Allan Moscovitch, privatization ¡°refers to the movement from public to private service delivery.¡± Governments of all stripes typically want to reduce the short-term cost of delivering important services. However, privatizing important public services can result in higher costs of services, reduced quality of services, and a deterioration in working conditions. For example, during her presentation, Hitomi Suzuta noted that public long-term care facilities (operated by Alberta Health Services) provide approximately four hours of direct care per senior in a typical day, while for-profit facilities in the long-term care sector provide just three hours of direct care per day (for more on this, see this recent report by David Campanella).

  1. Provincial funding needs to account for demographic changes. In his presentation, Jonathan Teghtmeyer noted that, since 2009-10, the number of students attending K-12 schools in one of Alberta¡¯s public, separate or francophone school boards has increased by 18% (as a result of both high birth rates and high rates of in-migration to Alberta). During this same period, approximately 3,000 new teachers were hired¡ªbut according to Jonathan¡¯s research, Alberta would have needed 6,000 new teachers in order to maintain the previous teacher-student ratios.


  1. Inflation erodes the value of funding, and new funding levels need to reflect this. During our workshop, John Kolkman noted that, since the election of the NDP government of Rachel Notley in 2015, there¡¯ve been no increases to social assistance benefit levels.[1] Yet, during this time, there¡¯s been roughly 4% inflation¡ªthat means that the value of annual benefits received by Alberta¡¯s social assistance recipients has decreased by this same amount. Considering that a ¡®single employable¡¯ adult on social assistance in Alberta (without dependents) receives approximately $8,000 a year to live on, such an erosion in annual income can make life challenging. (For a recent overview of inflation in Alberta, see this November 2017 piece. And for an overview of social assistance in Alberta, see this blog post.)


  1. When it comes to annual spending by Alberta¡¯s provincial government, there¡¯s potential for cost savings. In the K-12 education sector, the Alberta government gives $263 million annually to private schools¡ªyet, not everyone considers this to be money well spent. Speaking at our workshop, Barb Silva noted: ¡°Many Albertans have no idea that private schools in their province receive public funding.¡± And in the homelessness sector, it¡¯s well known that targeted spending on affordable housing can reduce public spending in other sectors, most notably the health and justice sectors.


  1. In order for crucial public services to be financed in Alberta, there¡¯s a need for tax reform. During his presentation, Nathan Jackson (an Edmonton-based economist) noted that Alberta is the only Canadian province without a provincial sales tax; he also suggested that Alberta introduce one (along with a rebate for low-income households). This, he argued, could help stabilize provincial revenue. A 5% provincial sales tax (with rebates for low-income households) could result in more than $4 billion in additional annual revenue for the province.


  1. Gender matters. In her presentation, Angele Alook stated that in communities where there¡¯s a lot of resource extraction, there are high rates of violence against women. She also noted that, in those communities, most of the high earning jobs in those sectors go to men. Perhaps not surprisingly, Alberta has the highest gender income gap of any Canadian province. It should also be noted that Alberta has yet to introduce pay equity legislation.


  1. Alberta not only needs more jobs¡­it needs more ¡®good jobs.¡¯ It¡¯s important to discuss the quality and cost of public services delivered. But it¡¯s also important to remember that the workers who deliver those services often need to raise families and maintain healthy lifestyles themselves. Wages need to be in line with Alberta¡¯s high cost of living, and job security matters. In his presentation, Christopher Smith discussed wages in Alberta¡¯s early childhood education sector. He noted that the average worker in this sector receives an hourly wage somewhere in the $16-$23-per-hour range. (Of course, the Notley government¡¯s move to increase the minimum wage by nearly 50% over four years is consistent with a move toward higher-quality jobs.)


  1. Not every community in the province has the same needs. For example, Medicine Hat¡¯s municipal government is in an exceptionally sound fiscal position. On a per capita basis, its annual revenue is more than six times the average for a Canadian municipality. Medicine Hat¡¯s municipal government owns several public utility companies (something that¡¯s quite unusual for a Canadian municipality). It owns both an oil exploration company and a gas exploration company. And it owns more than 4,000 gas wells. All of this is very good for the city¡¯s bottom line, allowing it to have the lowest property taxes in the country and the lowest utility costs in the province (and all of which contribute to Medicine Hat having a relatively low cost of living). This also makes it relatively easy for Medicine Hat¡¯s municipal government to donate land for the purposes of subsidized housing¡ªtypically, the donated land covers one-third of the capital cost of new subsidized housing. (The dynamic whereby some governments having more resources than others at the same level is sometimes referred to as a horizontal fiscal imbalance.) Perhaps not surprisingly, Medicine Hat has very little homelessness relative to other municipalities; by contrast, there are more people experiencing homelessness in Calgary than there are in the rest of Alberta combined (a point made by my colleague Victoria Ballance during her presentation).[2]


  1. Good public policy needs to be well-funded, but regulation matters too. In his presentation, Christopher Smith noted that, when it comes to child care, Alberta has regulated spaces for just one in three children aged 0 to 5. In her presentation on long-term care, Hitomi Suzuta recommended that the Alberta government introduce regulations for supportive living facilities stipulating minimum staffing requirements. And in his presentation, Ian Hussey noted that the Notley government has announced the ¡®phase out¡¯ of coal-powered electricity production (by 2030) and that this will come with compensation for the plant owners, as well as a $40 million transition fund for coal sector workers.[3]


  1. Even in the context of discussions about Alberta¡¯s provincial budget, the role of federal government remains crucial. Social spending in Canada often relies on federal leadership and cost-sharing with other orders of government. For example, during her presentation, Victoria Ballance noted that Alberta, along with all other provinces and territories, receives funding on an annual basis from Canada¡¯s federal government to operate existing social housing units (mostly for low-income tenants). This funding does not simply cover the mortgages; it also helps with the ongoing operating costs¡ªthat is, the difference between the rent received from tenants and what it actually costs the housing provider to keep the units in a decent state of repair. Funding agreements, which typically last between 35 and 50 years, have already started to sunset and are scheduled to end altogether in 2039. Fortunately, on November 22, Canada¡¯s federal government unveiled its much-anticipated National Housing Strategy which, among other things, announced a 10-year plan to preserve the affordability of those units (the plan requires provincial and territorial cost-sharing). This federal plan was excellent news for social housing providers across Canada!


In Sum. As the Notley government prepares to release another provincial budget, Albertans need to be mindful of the many layers of analysis required to properly assess the document. With that in mind, our November 17 workshop helped shed light some of the wrinkles involved in a provincial budget. My hope is that this November workshop, held on the eve of the Parkland Institute¡¯s annual conference, becomes an annual event.



I wish to thank the following individuals for assistance in preparing this blog post: Laurie Adkin, Angele Alook, Sandra Azocar, Victoria Ballance, Carolyn Blasetti, Dave Campanella, Ian Hussey, John Kolkman, Lindsay Lenny, Mel McMillan, Rick Mueller, Nathan Jackson, John Kolkman, Michael Parker, Jenn Prosser, Barb Silva, Christopher Smith, Garry Sran, Hitomi Suzuta, Jonathan Teghtmeyer and Trevor Zimmerman. Any errors are mine.


[1] Specifically, he noted that since 2012 benefit levels for Alberta¡¯s ¡®big three¡¯ income support programs haven¡¯t increased (representing a 10% loss in their real value during this time). He was referring to Assured Income for the Severely Handicapped, Income Support, and the Alberta Seniors Benefit program. He also noted that income thresholds to qualify for child care subsidies were last increased in 2012.

[2] For more on how homelessness differs across Alberta communities, see this web link.

[3] The funding will ¡®top up¡¯ Employment Insurance benefits to 75% of a worker¡¯s previous earnings. It will also provide some post-secondary education assistance and training. Approximately 2,000 workers will be affected.

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Gimme shelter: is Core Housing Need a useful measure? https://www.google.com//ded/2017/11/27/gimme-shelter-is-core-housing-need-a-useful-measure/ /ded/2017/11/27/gimme-shelter-is-core-housing-need-a-useful-measure/#respond Mon, 27 Nov 2017 17:40:13 +0000 /ded/?p=19518 For a new CCPA blog post on housing (un)affordability, I dove into the latest Census data for Metro Vancouver. I used two series on shelter cost and shelter-to-income ratio, and found that 32% of households were paying more than 30% of income on shelter (all households, owners and renters) and 16% of households more than 50% of income on shelter. The latter number is pretty alarming: one in six households in Vancouver paying more than half their income just to keep a roof over their heads; that’s 150,430 households!

Then I noticed that “core housing need” (CHN) in Metro Vancouver was 17.6%, a figure that is way lower. I have always understood CHN as three dimensions: affordability, measured as households paying more than 30% of income; adequacy, whether the housing is in need of repair; and suitability, if you have enough rooms for everyone.

So, my thinking went, CHN should be all of the un-affordability I discovered, and then some to reflect the other two dimensions. How then could CHN be so much lower than the share of households with shelter-to-income ratio above 30%??My instinct was to go back and check my sources and my math, hoping I had not made a major error somewhere. But that was all solid. So I did a deeper dive on CHN to figure this out.

First, some households paying more than 30% of income on housing but are just taken out. Those who are paying more than 100% of income are pulled out. This would be folks who have a relative paying their bills, for example, but also people who are using debt or other income not captured in their total (perhaps capital gains or inheritances).

Also exempted are students, and I found this on the CHN entry in the Census dictionary:

Non-family?households with at least one maintainer aged?15 to 29?attending school are considered not to be in ‘core housing need’ regardless of their housing circumstances. Attending school is considered a transitional phase, and low incomes earned by student households are viewed as being a temporary condition.

This seems odd to me, saying you are too young to be in housing need, even if you are spending a large share of income on housing.

Next, there is this page with the new Census data on CHN, which states that after tallying the three dimensions of CHN I cite above, then:

The second stage established whether the household could be expected to have affordable access to suitable and adequate alternative housing by comparing the household¡¯s total income to an income threshold based on local housing costs. Only those households who could not afford alternative housing would be considered in core housing need.

That’s a bit of a muddle. I also found this 2008 livescoreทีเด็ด discussing the concept, which notes:

Much work has been, and is being done, to examine those who spend 30 per cent or more of their household income to determine if they do so out of choice, through having the means and preference to spend more than the norm for housing, or out of necessity, because of their low incomes.

In other words, there are some households who pay more than 30% of income, but do so by choice, and if they wanted to they could move into cheaper digs and no longer pay more than 30% of income for housing. There’s some logic to this, I suppose, but in Vancouver the vacancy rate is below 1%, and that’s driving up rents. For ownership, home prices have surged such that few can afford to buy the house they live in ¨C? if they did not already own it. Unless you have a super-high income, on the margin you are looking at more than 30% of income in Vancouver for shelter.

The second stage is a black box, and perhaps that black box needs fixing. Whereas the share of households paying more than 30% is easy to understand, the determination of “comparing the household¡¯s total income to an income threshold based on local housing costs” is not transparent. Rents in Vancouver according to CMHC have not gone up much in recent years, but that is because they are only counting decades-old purpose-built rental , while not counting the secondary suites and condos that have become a substantial part of the rental stock more recently. It is among the latter where loopholes allowing landlords “renovictions” and “fixed term leases” undermine rent controls, and have fed the dizzying cost of renting on the margin.

So Core Housing Need is looking to me more like the Low Income Cut Off is for measuring poverty: it is not straightforward in terms of measurement; was instead created by Canadian statisticians a long time ago to provide a more nuanced statistic; but, may no longer be relevant or helpful given changes in housing markets. There may also be some measurement issues.

Finally, I note that Steve Pomeroy makes some comments about CHN, welfare incomes and the feds’ national housing strategy plans in this piece for the Caledon Institute. He concludes:

As this analysis has revealed, core need is an ineffective and distorted measure of outcomes. Indeed, the federal and provincial/territorial governments could invest hundreds of millions of dollars to reform welfare and create a national housing benefit only to find that the levels of core need have not declined, even though housing affordability problems for many households had been alleviated.

So there you go, if you were wondering what the difference is between shelter cost greater than 30% of income and core housing need.



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