Posted by Nick Falvo under aboriginal peoples, Alberta, child benefits, Child Care, corporate income tax, debt, early learning, fiscal federalism, fiscal policy, homeless, housing, income distribution, income support, income tax, Indigenous people, inequality, minimum wage, NDP, poverty, social policy, taxation, women, working time.
February 17th, 2017
Over at the web site of the Calgary Homeless Foundation, I’m co-author of a blog post titled “Poverty Reduction in Alberta.”
Points raised in the blog post include the following:
-The NDP government of Premier Rachel Notley has undertaken important poverty-reduction initiatives since forming a government in 2015.
-Alberta (relative to other provinces) has a considerable amount of income concentrated among a small group of households. We use StatCan data to support this claim.
-Alberta continues to have the lowest level of taxation of any provincial government.
-Relative to other Canadian provinces, Alberta has very little public debt.
A guest blog post from Larry Kazdan, publisher of the “Modern Monetary Theory in Canada” blog: https://mmtincanada.jimdo.com/contact/.
Under legislation that came into effect in December 2015, e-petitions that garner at least 500 on-line signatures and that are sponsored by an MP can be tabled in Parliament. The federal government is then required to provide a written response, also posted online, within 45 days.
Below is an e-petition regarding the Bank of Canada and the reply provided by Finance Minister Bill Morneau. Morneau maintains that low-cost financing of public infrastructure through the BoC would be inflationary, but apparently his own plan – an Infrastructure Bank that would reward investors with 7 – 9% returns and whose costs would be passed on to consumers through tolls, fees, or taxes – does not seem to cause him the same concerns.
The contentions of the finance minister on a number of issues should be challenged. Below is my open letter addressed to him and sent to the media. Please add your own thoughts in the comments section below and be sure to forward them directly to Mr. Morneau who can be reached at House of Commons, Ottawa, ON K1A 0A6 (no postage required) and email at Bill.Morneau@parl.gc.ca.
Petition to the Government of Canada
- Since 1974 Canadians have been paying billions in needless interest to international financiers called the Bank of International Settlements;
- Before this, the publicly-owned Bank of Canada had a mandate and practice of lending interest-free money to federal, provincial, and municipal governments for infrastructure and healthcare spending;
- Since this switch Canadian taxpayers have been needlessly paying anywhere from $20 billion to $60 billion a year in compounded interest; and
- This is money that could have been used to better the lives of every single Canadian, and instead we have been needlessly paying large sums of money with no gain and massive losses for Canada.
We, the undersigned, citizens of Canada, call upon the Government of Canada to restore the use of the Bank of Canada to its original purpose, by exercising its public statutory duty and responsibility. That purpose includes making interest free loans to the municipal, provincial, and federal governments for ‘human capital’ expenditures (education, health, other social services) and/or infrastructure expenditures.
DATE: NOVEMBER 2, 2016
PRINT NAME OF SIGNATORY: THE HONOURABLE BILL MORNEAU
SUBJECT: BANK OF CANADA
Government of Canada marketable debt, which includes treasury bills and marketable bonds, is distributed through competitive auctions to Government Securities Distributors, a group of banks and investment dealers in the Canadian market. These Government Securities Distributors then resell securities bought at auctions to their wholesale and retail clients in private sector markets. Ultimately, Government of Canada marketable securities are mostly held by Canadians, and can be found in retail and institutional investment portfolios, insurance and pension funds, as well as a variety of other investment vehicles. For more information, you may review the Debt Management Report 2014-2015 on the Department of Finance Canada website at http: www.fin.gc.ca/dtman/2014-2015/dmr-rgd15-eng.asp
It is sometimes suggested that the Government of Canada should fund part or all of its debt by borrowing from the Bank of Canada at a low or zero interest rate, rather than by borrowing in private sector markets.
This approach would require the Bank of Canada to either borrow the funds that it loaned to the Government, or create new Canadian currency.
If the Bank of Canada borrowed the funds for the loan, it would have to pay whatever interest rates that prevailed in private sector markets to obtain the funds. Accordingly, it could not afford to re-lend the funds to the Government at lower or zero interest rate.
Alternatively, the Bank of Canada would have to create new Canadian currency, which could lead to adverse economic conditions and costs. The experience of many nations has demonstrated that relying on domestic currency creation to finance government expenditures results in excessive inflation, erodes the value of a country’s currency and often leads to a misallocation of scarce resources.
Since 1991, the Government and the Bank of Canada have jointly agreed that the central objective of monetary policy should be for the Bank of Canada to target an inflation rate of 2 percent. This is the best contribution monetary policy can make to solid economic performance.
Canada’s policy of low, stable and predictable inflation has served Canadians extremely well. This policy has contributed to creating a more stable economic environment relative to that of previous decades and has allowed households and businesses to make better long-term financial plans.
Open letter to Finance Minister Bill Morneau
In your official response to petition 421-00858, you claim that public financing of infrastructure through Bank of Canada low-cost loans would be inflationary.
But does real-world evidence support your contention when applied to advanced countries with large unused productive capacities and that issue their own currencies, such as Japan or Canada?
According to Australian economist William Mitchell, “…the Japanese experience with sustained high fiscal deficits, the world’s largest public debt to GDP ratio, close to zero interest rates, and deflation, was totally at odds with (neo-liberal) economic theories. It was a mind-boggling failure to explain reality.”
The New Economics Foundation recently published “Is Monetary Financing Inflationary? A Case Study of the Canadian Economy, 1935–75”. The report concludes “The 1935?70 period saw the Canadian economy recover quickly from the Great Depression, weather the Second World War, make a rapid transition from war to peace, and then enjoy a 25-year period of relatively stable and high growth with rapid industrialization….. The Bank of Canada played a key supporting role by directly and indirectly financing government debt.”
Under your proposed Infrastructure Bank, investors are expecting a minimum return of 7 – 9%, and it is clear that low and middle class Canadians will bear the brunt of higher costs through tolls, user fees and increased taxes. That is inflationary.
Canadians deserve a finance minister who will challenge economic myths propagated by financial elites who claim no alternatives exist to their high-cost lending.
Mr. Morneau, whose interests will you serve?
1. William Mitchell is a Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at the University of Newcastle, NSW, Australia
“When QE was first introduced in Japan in the 1990s, mainstream economists rushed to predict that the massive expansion in central bank reserves would be inflationary.
Students in every mainstream macroeconomics class, and that means almost all students, would have predicted, based on the nonsense they were learning, that the high deficits and high public debt ratios in Japan at the time, should have driven interest rates sky high, that bond markets should have stopped buying government bonds, that the government should have run out of money, and all the time that these disasters were unfolding, that inflation should have been be galloping towards hyperinflation.
Nothing like that happened.
Neo-liberal economists wrote off their mistakes by claiming that Japan is ‘so strange’ that it is a ‘special case’ and therefore not generally applicable.
Their ad hoc defense was convenient because the Japanese experience with sustained high fiscal deficits, the world’s largest public debt to GDP ratio, close to zero interest rates, and deflation, was totally at odds with their economic theories.
It was a mind-boggling failure to explain reality.”
2. Is Monetary Financing Inflationary? A Case Study of the Canadian Economy, 1935–75
As shown in figure 1, between 20–25% of Canadian public debt was financed and held by the central bank and government from the end of World War II up to the early 1980s but inflation was below 5% right up until the early 1970s…………..
….in the period 1945–70….Federal government capital expenditure funded highways, airports, bridges,schools, hospitals, and other physical infrastructure.
During the period 1960?75, the federal government also introduced virtually all of the major policy innovations that make up Canada’s system of social programs: Canada-wide Medicare, universal pensions, the modern unemployment insurance system, and cost-sharing with the
provinces for higher education and welfare.
For the majority of the period, the Bank was not independent of the government andits primary objective was full employment and growth rather than price stabilization.
3. Economist John Hotson
“When the Bank of Canada encourages the Canadian government, provinces, and municipalities to borrow in New York and Tokyo it is a betrayal of Canada. Where should they borrow when new money is needed for government spending? They should borrow at the government owned Bank of Canada, paying near zero interest rates-just sufficient to cover the Bank’s running expenses.”
Below is a guest post from Norman Mogil and Arthur Donner.
Lessons from the Reagan Era on Managing Twin Deficits
Many in the U.S. are harking back to the Reagan era for guidance on how to implement the pro-growth policies advocated by President Donald Trump and the Republican Congress. When Ronald Reagan took over the leadership of the United States in 1981, he inherited an economy that had endured nearly a decade of stagnant growth combined with accelerating consumer prices.
Tax cuts lay at the heart of the so-called Reagan revolution. Reagan believed that high taxes threatened individual freedom, suppressed overall economic growth, and encouraged wasteful government spending. Thus, the tax laws of 1981 were the single most important piece of legislation to emerge from Reagan’s first term. The sweeping tax cuts slashed federal income tax rates, for taxpayers in every income bracket, by 25% over a three-year period. However, slashing taxes came at high price.
On the fiscal side, Reagan’s failure was his inability to restrain government spending. Reagan ran for office in 1980 as a harsh critic of “tax and spend” liberalism, vowing as President to shrink the size of the government by slashing federal spending. Once in office, however, Reagan found it impossible to deliver on his promises. Simply stated, the Reagan Administration blew up the federal deficit to 6 per cent of GDP in 1985 from just 2 per cent in 1980. (See accompanying table). It was not until the first term of President Clinton that a balanced budget was restored.
|U.S. Budget Deficit as % of GDP||2%||6%||3%|
|U.S. Trade Deficit as % of GDP||0%||3%||4%|
|U.S. $ Index||100||142||90|
|U.S. 10-year bond yield||11%||12%||8%|
First, while still fighting the high inflation created in the 1970s, the Federal Reserve continued with its tight-fisted monetary policy. Long term interest rates remained above 10 per cent for much of the decade and really did not start to make their long decent until the first half of the 1990s. The cost of government debt finance was part of the problem of containing the steep budget deficit. The United States had to fight internal inflationary pressures and at the same attract foreign savings to fund the deficit.The tripling of the American budget deficit was highly stimulating to the economy. In effect, it was the application of a Keynesian strategy that used government to prime the pump of the economy. But the surge in the U.S. budget deficit had unintended consequences.
Second, high interest rates led to a surge in the external value of the U.S. dollar. The U.S. exchange rate index soared by over 40 per cent in the period 1980-85. Because of the fiscal stimulus, the U.S. economy was growing again and savings from abroad contributed to a rapid appreciation of the dollar.
Third, the presence of an expensive dollar and a growing economy took a heavy toll on the U.S. trade account. In 1980 the American trade account was roughly in balance, but it soared into a deficit of 4 per cent of GDP by 1985 and remained so until the end of the decade. There also was a big push in the United States to introduce protectionist policies to deal with the trade deficits. Does this not sound familiar today?
Fourth, a soaring U.S. dollar and a rapidly deteriorating trade deficit obliged the international community to intervene alongside with the U.S. The “Plaza Accord” of 1985 called for the United States to devalue its currency in response to its rising current account deficit. The central banks of United States, West Germany, Japan, France, U.K. agreed to intervene in the exchange markets to bring about an orderly devaluation. By the end of the decade, the U.S. dollar declined by about 50 per cent.
Summing up, the Trump Administration is proposing to cut taxes dramatically and simultaneously spend up to $1 trillion over the next decade towards improving the country’s deteriorating infrastructure. Hence, there is a deep concern that the federal budget will explode. The Trump tax cuts will likely result in higher budget deficits, not lower deficits.
And as a reserve currency in uncertain times, the U.S. dollar will likely remain too strong, and increase even further due to the tax cuts and rising interest rates in the United States. A higher dollar will likely lead to a widening of the trade deficit as imports becomes relatively cheaper than today.
As for a new Plaza Accord agreement, this seems most unlikely. The Trump Administration has adopted a very aggressive stance towards it trading partners, and in all likelihood, it has eliminated the goodwill necessary to reach any new agreement.
Lastly, it is hard to see the Canadian dollar strengthening against the U.S. dollar in the early stages of the Trump Presidency.
More likely, as negotiations on revamping NAFTA begin we can expect the Canadian dollar to come under downward pressure, especially if the United States takes a hard line and unilaterally slaps on a broadly based border tax. Right now, the jury is out on the future price of the Loonie.
Posted by Nick Falvo under aboriginal peoples, Balanced budgets, child benefits, Child Care, corporate income tax, CPP, debt, deficits, early learning, economic thought, federal budget, fiscal federalism, fiscal policy, homeless, housing, income distribution, income support, income tax, Indigenous people, inequality, labour market, macroeconomics, OECD, Old Age Security, poverty, privatization, public infrastructure, public services, Role of government, social policy, taxation, women.
February 8th, 2017
Over at the web site of the Calgary Homeless Foundation, I’m co-author of a blog post titled “The Federal Role in Poverty Reduction.”
Points raised in the blog post include the following:
-Canada’s Minister of Families, Children and Social Development has been tasked to lead the development of a Canada Poverty Reduction Strategy.
-Total public social spending in Canada (as a % of GDP) is well below the OECD average.
-Our current federal government has already taken several important initiatives pertaining to poverty reduction.
-Measures our current federal government could take to further reduce poverty in Canada include bringing in a national early learning and child care framework/strategy, expanding the Working Income Tax Benefit, implementing universal pharmacare and providing more funding for affordable housing.
-Macroeconomic policies that could assist with these endeavours include deficit financing, increasing personal income taxes for high-income earners, increasing corporate income taxes, and addressing inequities in our tax-expenditure system.
-Any poverty reduction strategy should be undertaken in partnership with First Nations, Inuit and Métis peoples.
The link to the full blog post is here.
In this guest post Tom Webb gives a summary of the pitch in his new book, that co-operatives are the answer to the problems of the global capitalist agenda.
At the Sobey School of Business at Saint Mary’s University, at the beginning of the new millennium, I was part of a team creating a masters level program for managers of co-operatives and credit unions.
Teaching neoclassical economics and its core belief that the economy should serve the interest of capital was out of the question. There were many good critiques of neoclassical economics, but the only alternative offered seemed to be to lobby governments, which are already captured by corporate interests, to regulate capitalism. My book, From Corporate Globalization to Global Co-operation: We owe it to our grandchildren, was born out of that search for an alternative economics curriculum.
It seemed clear then, as it does now, that the global capitalist economy was in increasing trouble. The capitalist idea that nature should be exploited for an economy whose overriding purpose was maximizing the returns to the 1%, who already owned more than 50% of the world’s wealth, is neither an intelligent way of meeting human needs nor is it sustainable. ‘Triumphant’ capitalism has spawned an inter-related set of growing crises that promises to get worse.
A hard reality is that the investor-driven business model has a strong tendency to ‘make good people do bad things.’ The problem is not business people, but the structure and purpose of the business model. Decisions are driven by commercial potential, regardless of negative impacts. It is a business model that resembles a car with a huge powerful engine but lacking steering or brakes. It lacks a purpose rooted in the admirable, moral and most worthy aspects of human nature.
From Corporate Gobalization to Global Co-operation suggests an alternative with deeper roots in evolution and human nature than competition and greed. The book explores how co-operation has driven evolution and is profoundly imbedded in human nature. It also suggests that the logical outcomes of co-operative values and principles are much less likely to produce antisocial side effects and human suffering than the self-centered hyper-individualism and inherent greed of capitalism. Rather, the purpose of co-operation is to meet member and community needs. This is a far more productive purpose than maximizing returns to the owners of capital.
There are seven related themes in this book:
- There is a set of inter-related destructive trends sweeping our world and it flows from the irrational purpose on which we have focused our society – that the purpose of nature, human society and the economy is to serve capital.
- Neoclassical economics is not an explanation of how our economy works, but a rationale for why all nature, including humans, must serve the needs of capital.
- The investor-owned corporation is a fundamentally flawed structure whose purpose is to serve capital.
- Capitalism is characterized by inherent contradictions and is not sustainable in the long run.
- All life on the planet is rooted in co-operation. It is the key driver of the emergence of complex life forms, and, even more than competition, a key shaper of evolution. Co-operation and altruism are integral to human nature and persistent forces driving constructive human behaviour.
- We can build an economy based on co-operation and that economy will help lessen destructive trends. A solid foundation exists for that economy which, while it needs improvement, already is having a positive impact on our world.
- We can destroy the world as we know it, or we can build a better world. A better, more co-operative world is possible, but not inevitable.
The book does not claim that co-operatives are perfect nor that it is destiny that they will take over as the way humans provide themselves with the goods and services they need to live meaningful, satisfying lives. Their ability to perform is persistently diminished by the extent they have to co-exist with a capitalist economy. They are also run by less than perfect people. Instead, the book explores why they tend to diminish problems like inequality and environmental destruction, to better meet human needs beyond just goods and services, and provide a better opportunity for individual people to make meaningful contributions to creating a better world.
Capitalism has the capacity to destroy nature and human society upon which it depends to exist. Its social and natural world destruction is producing an anger that can fuel progressive alternatives or ugly destruction. The book expresses the real possibility of a massive shift of human consciousness toward global co-operation that can grow co-operatives even larger than their present 250 million workers and 1 billion members who already positively impact the lives of 3 billion people.
There is an alternative to Trump, Brexit and extreme right wing governments fueled by the politics of fear, hatred, violence and revenge. We must choose. Not to choose another direction is to choose growing chaos.
Tom Webb is an educator and author. He was a founder of the Co-operative Management Education program in the Sobey Business School at Saint Mary’s University, Board Chair of the Centre of Excellence in Accounting and Reporting for Co-operatives. You can find out more here.
This provocative guest post submitted by Jonathan Nitzan and Shimshon Bichler, was published earlier this year on their bnarchives website. Nitzan, professor of political economy at York University, and Bichler, who teaches political economy in Israel, are authors of Capital as Power, a Study of Order and Creorder and numerous related articles.
To quote from the statement of purpose of the RECASP journal, “The framework of ‘capital as power’ offers a radical alternative to both liberal and Marxist political economies. In this framework, capital is viewed not as a productive economic entity, but as the central power institution of capitalist society at large, while capitalism as a whole is seen not as mode of production and consumption, but as a mode of power.” We welcome your comments!
Can Capitalists Afford a Trumped Recovery?
Shimshon Bichler and Jonathan Nitzan
Jerusalem and Montreal, January 2017
The presidential election of Donald Trump has rekindled hopes for a U.S. recovery. The new president promises to ‘make America great again’, partly by creating many millions of new jobs for U.S. workers, and judging by the rising stock market, capitalists seem to love his narrative. But if Trump actually delivers on his promise, their attitude is likely to change radically.
- What if Unemployment Falls and Employment Growth Accelerates?
First, the capitalist share of domestic income will probably drop precipitously. Figure 1 – an up-to-date version of a chart first published in Nitzan and Bichler (2014a, 2014b) [link] [link] – shows why. The top part of the chart plots the sum of pretax profit and net interest as a share of domestic income on the left scale, along with the unemployment rate three years earlier on the right. The bottom part of the chart shows the annual rates of change of these two series (with all data smoothed as five-year trailing averages).
Over at the web site of the Calgary Homeless Foundation is a transcript of a recent discussion I had with Dr. Maroine Bendaoud. His recently-defended PhD thesis looks at social housing in BC, Alberta and Quebec from 1975 until 2015.
Points raised in his thesis include he following:
-After Canada’s federal government stopped funding new social housing units in the 1990s, BC and Quebec continued to fund new social housing by themselves (without federal support). Alberta did not.
-Only after encountering a housing crisis beginning in the mid-2000s did Alberta’s provincial government get back into the social housing arena.
-Dr. Bendaoud’s main piece of advice for Alberta’s provincial government is to not wait for another housing crisis before taking action on the housing file.
The link to the transcript of my discussion with Dr. Bendaoud can be found here.
We’re pleased to present this very topical post by Edgardo Sepulveda examining what has caused Ontario’s rising high electricity prices. This is Edgardo’s second guest post as a PEF member, following his, first, which was an analysis of the impact of fiscal policy changes on post-tax income distribution. Edgardo has been an international consulting economist and expert advising Governments and operators in more than 40 countries for more than two decades on telecommunications policy and regulation matters. @E_R_Sepulveda
Rising electricity prices have become by far the most important concern for Ontario voters: more important than heath care, jobs, the economy or taxes, according to a recent poll – and could very well sink the Liberal Government’s hope to retain power in next year’s provincial election. This piece explains how policy and administrative decisions by different provincial governments over the last fifteen years gave rise to excess electricity generation in Ontario with an inflated cost structure, leading to higher electricity prices and increased inequality.
Almost a century ago W.A. Mackintosh and Harold Innis created the staple approach to Canadian studies which came to be the core of “Canadian political economy.” Post World War II the staple approach was revised and rejuvenated, and became the core of what was now called “the New Canadian Political Economy.”
There have always been doubters about the efficacy of the staples approach. One of the most persistent is Paul Kellogg and he has now published a book (U of T Press) cleverly titled Escape from the Staple Trap – by which he means that proponents like myself should “escape” the staple approach – and subtitled Canadian Political Economy after Left Nationalism to signal that he is not only taking on the staple approach but also the nature of nationalism which is notoriously contentious on the left.
The essence of the staples approach is that it sees the export of relatively unprocessed resources as central to economic growth. A staples trap is when the very importance of resource exports creates barriers to the maturation of the economy. In Innis’s words: “Energy has been directed toward the exploitation of staple products and the tendency has been cumulative…[E]nergy in the colony was drawn into the production of the staple economy both directly and indirectly…Agriculture, industry, transportation, trade, finance, for a more highly specialized manufacturing community. These general tendencies may be strengthened by government policy…”
While Innis is mostly referring here to colonial history, the final sentence has a contemporary ring when we think of how first the Harper government and now the Trudeau government, and the Alberta government throughout bias Canadian policy – to building pipelines and thwarting effective policy on climate change – toward pushing bitumen export. We are prepared to go to bed with the despicable President Trump on these matters rather than think responsibly. The staple trap lives on.
See Brendan Haley on the staple trap and the carbon trap, a major essay in the New Canadian Political Economy. See also W. T. Easterbrook’s North American Patterns on Growth and Development:the Continental Context – a much neglected and very relevant book – on which more later.
Kellogg endlessly analyzes data on Canada’s level of industrialization showing that there is slight evidence of a Canadian deficiency. This is good so far as it goes but Kellogg gets carried away. In the 1950s and 1960s mainstream economists like Harry Eastman, Stefan Stykolt and Ted English wrote about the miniature replica effect where all the American firms came to Canada and split up a much smaller market and there were serious barriers to entry for indigenous Canadian firms. R&D was neglected and head office jobs were elsewhere. Kellogg’s statistics – quantitative rather than qualitative – don’t seem to capture this.
There is likewise the matter of the auto industry and the autopact. This is a very large industry quantitatively, but there are serious problems qualitatively. Canada is the only G7 country that never produced a car of its own – certainly a serious deficiency. In order to get its “fair share” of auto production Canada had to insist on the AutoPact – hardly a sign of strength and efficiency. Kellogg doesn’t explain why the Pact was necessary in the first place. There is no satisfactory quantitative resolution to this problem, a point that Kellogg does not properly grasp.
Easterbrook provides fascinating historical background. His book looks at U.S., Canada and Mexico. Put Mexico aside for present purposes and contrast the US North, the US South and Canada. Distinguish between “patterns of persistence” and “patterns of transformation.” The US North is “transformed” by an American Industrial Revolution. Canada “persists,” caught in a staple trap, and falls prey to American corporate control. Let it be noted that Easterbrook was a much respected economic historian and definitely not on the left and not a nationalist.
Kellogg’s apparent political agenda is to discredit left nationalism, such as the Waffle variant. There is a Global North and a Global South, Canada is part of the imperialist Global North, and therefore cannot practice left nationalism. The first two parts of this statement are true but in so far as Canada is beneath the U.S. in the pecking order it can take an “anti-American” progressive political position. Politics is riddled with contradiction to an extent not always appreciated. Canadian nationalism was alive and well under Lyndon Johnson, and is likely to be again under Donald Trump.
The auto industry is neglected again. No mention is made of what was arguably the biggest event with respect to left nationalism, the creation of an independent autoworkers union – and of other such unions. This made a big difference on the ground at the time of the free trade debate – which Kellogg recognizes as what he calls a nationalist “moment.”
Kellogg deserves the last word. In the final paragraph of the book, he generously pays tribute to the Waffle: “we all owe it a tremendous debt.” Agreed.
We just published a new report, Extracted Carbon: Re-examining Canada’s contribution to climate change through fossil fuel exports, by yours truly. It is part of the Corporate Mapping Project, a new mega research partnership led by CCPA’s Shannon Daub and UVic’s William Carroll.
The new report tallies up all of the carbon Canada extracts as fossil fuel that ends up in the atmosphere. Normally, when emissions for Canada are reported, we don’t count the carbon in the fossil fuels we export. This means only half of the carbon we extract gets counted as part of our Paris Agreement commitments. I crunch these numbers, and also do the math on a carbon budget for Canada, and how that limit compares to planned increased fossil fuel production and new infrastructure like pipelines and LNG plants.
Below is an oped, summarizing the key takeaways, and the full report is here. The Huffington Post also ran this piece, “Green paradox” pushes Canada to extract more oil faster”:
Canada cannot have it both ways on climate and fossil fuel expansion
With great fanfare and a claim that “Canada is back,” Prime Minister Trudeau helped usher in the Paris Agreement on climate change in December 2015. Since then, however, the federal government has pushed to expand fossil fuel production through new bitumen pipelines and LNG terminals.
This contradiction points to a loophole in the Paris Agreement, one that perfectly fits Canada: countries have committed to reducing emissions within their borders, but not the carbon that is extracted and burned elsewhere.
Paris poses no limits or sanctions on the supply of fossil fuels being brought to market by producing countries. For exporters like Canada only the emissions from getting fossil fuels out of the ground and to the border are counted.
As a result, producing countries have a powerful incentive to respond to the Paris Agreement by doubling down on fossil fuels now before their value evaporates.
This “green paradox” is bad news for the climate.
The amount of fossil fuels burned for energy use in Canada has remained relatively flat since 2000. This is because emission increases in Alberta from the oil sands have largely been offset by reductions in Ontario and the Maritimes from the phase-out of coal-fired electricity generation.
But if we look instead at what we dig, not just what we burn within our borders, there has been a relentless rise in carbon emissions.
Extracted carbon – the amount of fossil fuel removed from Canadian soil that ends up in the atmosphere as carbon dioxide – has grown dramatically. These emissions totaled 1.2 billion tonnes of CO2 in 2014, up 26 per cent since 2000.
This increase is almost exclusively because of growing exports of fossil fuels. In 2014, the total amount of emissions embodied in Canada’s total exports of fossil fuels was slightly larger than all of greenhouse gas emissions that occur within Canada.
The major story is that Canada’s exports of crude oil have surged (mostly from the oil sands), while imports have declined. Net exported emissions (exports less imports) from crude oil were more than five times higher in 2015 than 2000.
The Paris Agreement is thus a “good deal” for Canada because only half of the fossil fuels we extract get counted in our greenhouse gas inventory. The remainder is exported and counted where it is burned.
Exported emissions might not be a problem if the commitments made by countries in the Paris Agreement were enough to keep global warming below 1.5 to 2 degrees (above pre-industrial levels – about 200 years ago). Unfortunately, this is not the case. Even if all countries live up to their pledges it would lead to a catastrophic 3 degrees of warming.
If countries were to take the science behind the Paris targets seriously, there is a finite amount of carbon that can enter the atmosphere over the next few decades. This is called a carbon budget.
What would Canada’s plausible share be of such a global carbon budget? Based on our share of global fossil fuel reserves, Canada could continue to extract carbon at current levels for between 11 and 24 years at most (the smaller the carbon budget, the less the damages from climate change). This means a planned, gradual wind-down of these industries needs to begin immediately.
Plans to further grow Canada’s exports of fossil fuels are thus contradictory to the spirit and intentions of the Paris Agreement. Growing our exports could only happen if some other producing countries agreed to keep their fossil fuel reserves in the ground.
The problem with new fossil fuel infrastructure projects, like Liquefied Natural Gas (LNG) plants and bitumen pipelines, is that they lock us in to a high-emissions trajectory for several decades to come, giving up on the 1.5 to 2°C limits of Paris.
Canadian efforts to address climate change must consider supply-side measures, such as rejecting new fossil fuel infrastructure and new leases for exploration and drilling, increasing royalties, and eliminating fossil fuel subsidies.
There is still time for to live up to our Paris Agreement commitments. Canada’s exports of fossil fuels do not need to drop to zero immediately, but nor does it make sense to pursue policies that further ramp up fossil fuel extraction.
For years, we’ve been told the dictates of globalization, and the intrusive and prescriptive terms of free trade agreements in particular, are immutable, natural, and unquestionable. Read more »
In September, I expressed my concerns that the new Canada Child Benefit (CCB) may not be responsible for a 40% reduction in child poverty as claimed by the Minister of Employment and Social Development Canada (ESDC). Using Statcan’s tax modelling software SPSD/M, I calculated that you’d get a 14% drop in child poverty due to the CCB by 2017, not 40%. The only way you’d get a 40% reduction is if you started the clock in 2013 and counted all reductions in child poverty even if they happened prior to the CCB. But I hedged my bets and chalked it up to ESDC using a different model. Turns out, my initial unhedged suspicions were confirmed earlier this week.
Jordan Press, of the Canadian Press, obtained a 20 page Access to Information Request on ESDC’s internal CCB modelling and he shared it with me. The smoking gun was on the second last page of that request and I’ve reproduced it here with some additional calculations based on it:
|Percentage reduction in child poverty since 2013||0%||2.7%||19.6%||30.4%||40.2%|
Source: Projections of ESDC obtained under an Access to Information request by the Canadian Press and author’s calculations
With this table, it’s quite straight forward to see that ESDC is projecting a 40% decline in child poverty between 2013 and 2017. This is a big decline to be sure and something to be trumpeted (although we’re not seeing so dramatic a decline using other poverty measures like LIM-AT). The issue is that most of that decline has already happened prior to the CCB being fully implemented. There is a 30% decline in child poverty between 2013 and 2016, i.e. prior to the CCB being implemented. There is a 10% decline between 2016 and 2017 after the CCB comes into full force.
While it’s certainly correct to say that child poverty is projected to decline by 40% between 2013 and 2017, it’s not correct to say that that was caused by the CCB, as ESDC has been claiming. In fact, 30% of that 40% happened prior to the implementation of the CCB mid-way through 2016. In fact, much of the reduction had already happened prior to the Liberals being elected in late 2015.
All of these issues aside, the Statcan model projects a reduction of 14% due to the CCB, slightly higher than the 10% suggested by the ESDC table above. Frankly a 14% or a 10% reduction in child poverty is good news. But we need to remain transparent about what the CCB is actually responsible for. Clearly it can’t be responsible for reductions that occurred up to three years prior to its implementation.
On a final point, I’m a fan of clear goals for poverty reduction and a 40% reduction in child poverty over a four year mandate is an ambitious goal, although I don’t think this is exactly what ESDC had in mind with this 40% figure. The CCB would get the federal government 10% to 14% of the way there. I hope they keep up their efforts to get to the full 40%.
The 2017 PEF Student Essay Contest is officially open!
The deadline for submitting essays is May 02, 2017.
2017 PEF ESSAY CONTEST RULES
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CONTENT OF THE ESSAY
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.
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Posted by Nick Falvo under Australia, economic history, economic literacy, economic thought, fiscal policy, homeless, housing, income support, macroeconomics, NEO-LIBERAL POLICIES, poverty, progressive economic strategies, social policy, unemployment.
December 14th, 2016
Over at the web site of the Calgary Homeless Foundation, I’ve written a blog post titled “How Housing Policy Benefits from a Socioeconomic Perspective.”
Points raised in the blog post include the following:
-Leaders in Canada’s non-profit housing sector should think beyond just housing, and think hard about the importance of economic and social factors that have an impact on housing and homelessness.
-Even though it’s hard to show how various economic and social factors have impacted housing and homelessness, well-researched arguments can still be made about the impact that major economic and social changes have likely had on housing and homelessness.
-Major economic changes that have taken place in Canada since the 1980s can likely be reversed. Indeed, unemployment likely can come down, and public social spending can increase.
-Leaders in Canada’s non-profit housing sector should try to partner with researchers and advocates in other realms of public policy (I offered the Alternative Federal Budget as an example).
-Even though many non-profit housing providers can’t afford in-house public policy researchers, they can always ask students to write annotated bibliographies on research that has already been done on questions that are of particular interest to them.
The link to the full blog post is here.
This weekend, Quebec unions and activists issued a joint statement on the appeals process in Employment Insurance, calling on Trudeau to review the appeals process. The 2012 budget removed part-time panels of three community representatives – one labour, one business, and one government, and replaced them with full-time adjudicators working on their own. The joint statement contains some very good information about why we think the new appeals process isn’t working, so I’m posting it here in English and French.
Le version français suit.
Statement on challenging Employment Insurance decisions
The unemployed are entitled to neutral and accessible recourse. The right to challenge is fundamental and ensures the legality of decisions made by public authorities.
For 72 years, the boards of referees and umpires were tasked with settling Unemployment Insurance disputes between the authorities and citizens. These administrative tribunals had exclusive jurisdiction over the interpretation and implementation of the Employment Insurance Act and made sure that it was implemented in a reasonable and adequate way by the Employment Insurance Commission (EIC). They offered a simple, fast and accessible recourse to citizens dissatisfied with decisions. Appellants were first heard in person within approximately 30 days by a balanced panel of three persons from the community.
Without consultation or a supporting impact assessment, the Stephen Harper government – under its gutting of Employment Insurance – abolished boards of referees and umpires, created the Social Security Tribunal (SST), and imposed a mandatory administrative review. This new complex, slow and dehumanizing decisional process drastically reduced access to justice for all unemployed citizens as a whole, and by the same token, their ability to affirm their rights.
Three years after this new method of challenging Unemployment Insurance decisions was imposed, the Mouvement autonome et solidaire des sans-emploi (MASSE), Québec central labour bodies (FTQ and CSN) and unions, the Canadian Labour Congress and many protectors of the rights of the unemployed throughout Québec and Canada conclude that there has been a decline of the quality of administrative justice that clearly violates the right of the jobless to be protected against unemployment, as witnessed by the following facts and figures:
- Processing time has skyrocketed, which discourages the unemployed from appealing.
- Average case settlement time for the General Division: 262 days.
- Average case settlement time for the Appeal Division: 395 days.
- The number of appeals has decreased very significantly.
- Boards of referees heard approximately 20,000 appeals per year, compared with approximately 3,500 filed with the General Division of the SST.
- The Appeal Division registered a 74% decrease in the number of appeals filed.
- Administrative review – now mandatory – is an extra step that makes challenging Employment Insurance decisions more complex and longer, which discourages people from moving forward in the SST process. Furthermore, the administrative review is carried out by an entity that is not neutral.
- At the stage of administrative review, appellants do not have access to their file.
- The reviewed decisions are influenced by the pressure brought on the officers of the Employment Insurance Commission, which are required to follow directives that are heavily tainted by cost-benefit objectives.
- Appellants have lost their ipso facto right to appeal since summary dismissal was imposed, and they must now obtain permission to appeal. These new procedures violate the right to be heard.
- Summary dismissal has too often been misused. Indeed, half the challenges of summary dismissal decisions were resolved in favour of the appellants.
- In nearly half the cases (195 out of 427), permission to appeal to the Appeal Division of the SST was refused to the appellants.
- The SST only publishes about 3% of the decisions of the General Division, which creates an imbalance between the parties since the Commission receives all decisions.
- The process to obtain permission to appeal is too complex for a person who is not represented by a lawyer, especially if the high level of functional illiteracy (53% in Québec) is taken into account.
- Decision-makers are now free to choose between various types of hearings while the choice should be made by the appellants. The choice is guided by, among other things, cost reduction objectives that are hardly compatible with real justice.
- The in-person hearing is now marginal (16.4% of General Division hearings and 19.8% of Appeal Division hearings) and the vast majority of hearings (68.5 %) are carried out by telephone.
- Videoconferences and conference calls can hamper consideration of the credibility of the appellants, contribute to dehumanize the process, notably by reducing the empathy that the decision-maker may feel, and increase the stress level of the appellants.
- Decision-makers may now hand down decisions on the record (without holding a hearing), which negates the right to be heard; Appeal Division decision-makers did so in over half the cases (55.5%) in 2014-2015.
This form of justice must be efficient since it has a direct impact on the daily life of the unemployed. We believe that the government must make every effort to ensure that disputes are settled as soon as possible, in view of the very precarious situation of the appellants. Any undue delay or complication of the process contributes to make the unemployed more likely to renounce their right to benefits, rather than follow a long and complex challenge process.
Since those are severe infringements of both access to justice and procedural fairness and the right to be protected against unemployment, the right to freely choose a suitable job and the right to social security, we demand the reestablishment of a fast, effective, fair and humane process respecting the human rights of the unemployed for the settlement of Employment Insurance disputes. We consequently unite to demand the establishment of a tripartite tribunal, the setting up of a process for the selection of its members based on the criteria of neutrality, knowledge of local realities and competency, the abolishment of the mandatory nature of the administrative review and the adoption of procedural rules ensuring that this tribunal respects natural justice.
Déclaration relative au mode de contestation des décisions à l’assurance-emploi
Les chômeuses et chômeurs ont droit à un système de recours neutre et accessible. Le droit de contester est fondamental et nous assure de la légalité des décisions rendues par l’administration publique.
Pendant 72 ans, le conseil arbitral et le juge-arbitre ont eu pour fonction de trancher les litiges en matière d’assurance-chômage opposant l’administration et les citoyen.ne.s. Ces tribunaux administratifs avaient une compétence exclusive dans l’interprétation et l’application de la Loi sur l’assurance-emploi et s’assuraient de sa mise en œuvre de façon raisonnable et adéquate par la Commission de l’assurance-emploi (CAE). Ils offraient un recours à la fois simple, rapide et accessible aux citoyen.ne.s insatisfait.e.s d’une décision. En première instance, les appelant.e.s étaient entendu.e.s en personne dans un délai d’environ 30 jours par un panel équilibré de trois personnes issues de la communauté.
Sans consultation aucune et sans étude d’impact à l’appui, le précédent gouvernement de Stephen Harper – dans le cadre de son saccage de l’assurance-emploi – a aboli le conseil arbitral et le juge-arbitre, créé le Tribunal de la sécurité sociale (TSS) et imposé la révision administrative obligatoire. Ce nouveau processus décisionnel complexe, lent et déshumanisant a freiné drastiquement l’accès à la justice pour l’ensemble des chômeurs et chômeuses et du coup, leur possibilité de faire valoir leurs droits.
Trois ans après l’imposition de ce nouveau mode de contestation des décisions à l’assurance-emploi, le Mouvement autonome et solidaire des sans-emploi (MASSE), les centrales et syndicats québécois, le Congrès du Travail du Canada ainsi que plusieurs intervenant.e.s en défense des droits des chômeurs et chômeuses du Québec et du Canada, constatent l’effritement de la qualité de la justice administrative qui heurte de plein fouet le droit des sans-emploi à une protection contre le chômage. Pour preuve :
- Les délais de traitement ont explosé, ce qui décourage les chômeurs et chômeuses à contester.
- Délai moyen pour le règlement d’un dossier à la division générale : 262 jours.
- Délai moyen pour le règlement d’un dossier à la division d’appel : 395 jours.
- Le nombre d’appels a diminué de façon très significative.
- Les conseils arbitraux entendaient annuellement environ 20 000 appels, comparativement à plus ou moins 3 500 logés à la division générale du TSS.
- À la division d’appel on enregistre une baisse de 74% du nombre d’appels déposés.
- La révision administrative – désormais obligatoire – constitue une étape supplémentaire qui complexifie et rallonge le processus de contestation des décisions à l’assurance-emploi, décourageant ainsi la poursuite des démarches au TSS. De plus, la révision administrative est effectuée par une instance qui n’est pas neutre.
- À l’étape de la révision administrative les appelant.e.s n’ont pas accès à leur dossier.
- Les décisions révisées sont entachées des pressions que subissent les agent.e.s de la Commission de l’assurance-emploi qui doit répondre à des directives fortement teintées d’objectifs de rentabilité.
- Les e.s ont perdu leur appel de plein droit vu l’imposition du rejet sommaire et de la permission d’en appeler. Ces nouvelles modalités contreviennent au droit d’être entendu.
- Le rejet sommaire a trop souvent été utilisé à mauvais escient. En effet, la moitié des contestations de rejets sommaires ont été tranchées en faveur des appelant.e.s.
- Dans près de la moitié des cas (195 sur 427), la permission d’en appeler à la division d’appel du TSS a été refusée aux appelant.e.s.
- Le TSS ne publie qu’environ 3% des décisions de la division générale ce qui crée un déséquilibre entre les parties compte tenu que la Commission reçoit, quant à elle, toutes les décisions.
- Le processus de demande de permission d’en appeler est trop complexe pour une personne non représentée par un.e avocat.e, surtout s’il l’on tient compte du niveau élevé d’analphabétisme fonctionnel (53% au Québec).
- Les décideur.e.s ont maintenant la liberté de choisir entre plusieurs modes d’audience, alors que ce choix devrait plutôt reposer entre les mains des appelant.e.s. Ce choix est entre autres guidé par des objectifs de réduction de coûts qui sont difficilement compatibles avec une justice véritable.
- L’audience en personne est devenue marginale (16,4% des audiences à la division générale et 19,8% à la division d’appel) et la grande majorité des audiences (68,5 %) se déroulent par téléphone.
- La visioconférence et la téléconférence peuvent avoir un impact néfaste sur la prise en compte de la crédibilité des appelant.e.s, contribuer à déshumaniser le processus notamment en diminuant l’empathie que peut ressentir un.e décideur.e et augmenter le niveau de stress des appelant.e.s.
- Les décideur.e.s ont maintenant la possibilité de juger sur la foi du dossier (donc sans tenir une audience) ce qui constitue une négation du droit d’être entendu; les décideur.e.s de la division d’appel y ont eu recours dans plus de la moitié des cas (55,5%) en 2014-2015.
Cette forme de justice se doit d’être efficiente puisqu’elle a un impact direct dans la vie quotidienne des chômeurs et chômeuses. Nous croyons que le gouvernement doit tout mettre en œuvre afin que les litiges se règlent le plus rapidement possible compte tenu de l’état de grande précarité dans laquelle les appelant.e.s se trouvent. Tout délai indu en cette matière ou complexification de la procédure, contribuent à influencer les chômeurs et chômeuses à renoncer à leur droit aux prestations plutôt qu’à se hasarder dans un processus de contestation long et complexe.
Considérant qu’il s’agit là d’atteintes graves en matière d’accès à la justice et d’équité procédurale d’une part, et de droit à la protection contre le chômage, de droit de choisir librement un emploi convenable, et de droit à la sécurité sociale, d’autre part, nous exigeons le retour à un processus rapide, efficace, juste, humain et respectueux des droits des personnes sans-emploi pour régler les litiges en matière d’assurance-emploi. En conséquence, nous nous unissons afin de réclamer l’établissement d’un tribunal tripartite; la mise en place d’une procédure de sélection des membres respectant des critères de neutralité, de connaissance des réalités locales et de compétence; l’abolition du caractère obligatoire de la révision administrative; et finalement l’établissement de règles procédurales assurant que ce tribunal respecte la justice naturelle.
 Informations tirées d’un document produit par le Mouvement autonome et solidaire des sans-emploi (MASSE), Le Tribunal de l’insécurité sociale, une atteinte aux droits et à l’accès à la justice – Bilan, octobre 2016.
A guest blog post from Mario Seccareccia, Professor of Economics, University of Ottawa
The NDP went through a roller coaster ride in 2015. It would seem that the party still hasn’t fully recovered from the outcome of that election, and it will probably remain so until it elects a new leader and gets its “policy house” in order. At the time, some of us were arguing that the NDP did not have a macroeconomic policy perspective, and we were deeply disappointed that it stuck to a tight script with its commitment to federal balanced budgets. Tom Mulcair, together with his predecessor, Jack Layton, had been explicitly committed to the principle of “sound finance” and to balancing the federal budget, despite the many progressive economists who have been arguing, especially since the global financial crisis of 2008, in favour of functional finance and the need for fiscal deficits to stimulate the Canadian economy. Ironically, it was the Liberals who had come out in favour of fiscal expansion during the elections last year, which was a contributing factor in their victory. In fact, during the campaign, we were being told by Mulcair’s team that the route to prosperity was through balanced budgets. After all, we were told, this economic thinking was supported by Tommy Douglas during his many years as the premier of the province of Saskatchewan and we must remain committed to his views.
This approach, which can be described as a purely “provincialist” perspective to federal public finances, seemed plausible and it suggested to many of us who rejected the Conservative rhetoric of a federal balanced budget “for all seasons” that Tommy Douglas had just never fully grasped the negative macroeconomic consequences of pursuing such an anti-Keynesian policy of budget balance at the federal level. However, recently, thanks to Henri Sader (Parliamentary Assistant to the NDP Member of Parliament, Peter Julian, representing New Westminster-Burnaby in BC), I came across Tommy Douglas’s farewell speech to NDP members in 1971, which actually shows, instead, that he was a highly knowledgeable “macroeconomist” and that he hardly believed in balanced budgets at the federal level to deal with problems of poverty and mass unemployment. Readers could listen to his full speech on the YouTube link provided below. I have edited the text, and provide below an important excerpt from his speech where he does provide us with a clear macroeconomic perspective of the federal public finances, including a supportive role for monetary policy via the accommodating actions of the Bank of Canada. Indeed, you will see from his brilliant and passionate speech that his only real concern was that governments should never rely on foreign borrowing to finance the federal budget deficit, a brutal lesson that many countries have learned, such as Greece since the financial crisis and Argentina before that. At no time, however, did he suggest that we shouldn’t run budget deficits to combat unemployment. It is more important to strengthen the balance sheet of private households in times of recession than to seek an elusive budgetary balance for the public sector.
As the NDP begins its search for a new leader, it is imperative that this issue remains front and centre. Much can be learned from Douglas’s speech that can serve as line of defense against the provincialist leaning that, in part, led to the NDP’s failure in 2015. This provincialist view does not apply to federal budgets. Yet, once we adopt a sound finance approach federally, it leads automatically to austerity policies in times of recession. The electoral mood around the world is telling us that workers are fed up with neoliberal austerity policies, and want governments to be pro-active in their net spending policies, as they had been during the early post-WWII period.
I have pulled some key expressions from his speech to give it what I thought is a more jazzy title, but the whole piece below reproduces the actual transcripts from his famous 1971 farewell speech. I also wish to thank Louis-Philippe Rochon of Laurentian University for his comments and for encouraging me to pull out these transcripts and to post them on the PEF site.
“A Continual War against Poverty, Unemployment, and Social Injustice: Making financially possible what is physically possible”
Excerpts from a farewell speech to the New Democratic Party given by Tommy Douglas (on April 24, 1971):
If I were asked to sum up for the people of Canada and for the New Democratic Party what I have learned from more than a third of a century in public life, I would sum it up by saying to them that it is possible in this country of ours to build a society in which there will be full employment, in which there will be a higher standard of living, in which there will be an improved quality of life, while at the same time maintaining a reasonable stability in the cost of living. ….
We don’t have to choose between unemployment and inflation. … My message to you is that we have in Canada the resources, the technical know-how, and the industrious people who could make this a great land if we were prepared to bring these various factors together in building a planned economy dedicated to meeting human needs and responding to human wants.
Mr. Coldwell and I have seen it happen. In 1937 when the CCF proposed in the House of Commons a $500 million program to put single unemployed to work, the Minister of Finance said where will we get the money? Mr. Benson asked the same question today. My reply at that time was that if we were to go to war, the Minister would find the money. And it turned out to be true.
In 1939, when we declared war against Nazi Germany, for the first time we used the Bank of Canada to make financially possible what was physically possible. We took a million men and women and put them in uniform. We fed and clothed and armed them. The rest of the people of Canada went to work. The government organized over 100 Crown corporations. We manufactured things that had never been manufactured before. We gave our farmers and fishermen guaranteed prices and they produced more food than we had ever produced in peace time. We built the third largest merchant navy in the world and we manned it.
In order to prevent profiteering and inflation, we fixed prices, and we did it all without borrowing a single dollar from outside of Canada. … And my message to the people of Canada is this: that if we could mobilize the financial and the material and the human resources of this country to fight a successful war against Nazi tyranny, we can if we want to mobilize the same resources to fight a continual war against poverty, unemployment, and social injustice.
Over at the web site of the Calgary Homeless Foundation, I’ve written a blog post titled “Ten things to know about Canadian attempts to count homeless persons through Point-in-Time Counts.”
Points I raise in the post include the following:
-Efforts to enumerate homeless persons in Canada often have mixed objectives. In part, an attempt is made to capture an accurate picture of who is homeless. But local officials often see the outcomes of these counts as ‘progress reports’ on their own work responding to homelessness.
-As a result, local officials often find themselves in conflict of interest situations. Indeed, many want to see fewer homeless persons enumerated than during the previous count, and this may weigh into how they go about counting (methodologies can change from year to year).
-If the federal government were to fund Statistics Canada to assist with these efforts, increased methodological consistency and rigour could be brought into each count. This could also help address the conflict of interest situation.
The link to my blog post is here.
The Americans shocked the rest of the world by electing Donald Trump last Tuesday. Pierre Trudeau suggested that Canada’s proximity to the US was like “sleeping with an elephant”, and thus Canadians are particularly concerned about what this means.
Canada’s most preeminent political economist, Harold Innis, can offer some lessons. Innis is known for the “staples” approach, which examined the role of natural resource exploitation in Canadian economic development. However, his interest was really about the rise and fall of empires and the role of Canada as a nation on the periphery of the leading nations of the world.
In his later work, Innis explored the role of communications technologies. He contrasted time-based and space-based communications technologies. Time based technologies facilitate the creation of knowledge through dialogue and appreciation of history. Small group discussion and books are examples. Space based technologies enable communication over long distances and thus the quick diffusion of ideas, which is required to exercise power and influence. Social media is a very space-bound technology. A balance between time and space can protect intellectual endeavour and diffuse information. Yet, Innis warned about unbalanced situations where empires become overly focused on the exercise of power to the neglect of the development of time-based knowledge. In these unbalanced situations, communication decreases understanding.
Trump seems to have been elected via the dominance of space-based technologies. He was the ultimate click-bait candidate and twitter troll. The spread of information outpaced consideration of truth. America was working on time-based problems, such as climate change, under the Obama Administration and now Trump’s election puts these initiatives under severe threat. For instance, if Trump cancels climate related programs, some of the country’s top energy experts are going to leave the Department of Energy.
So what is Canada’s role? According to biographer, Alexander John Watson, Innis felt that the “great intellectual contributions that re-energize western civilization” would come from nations like Canada that exist on the periphery of large empires. Peripheral regions have potential to create a protected space for new ideas and focus on grappling with local problems. Innis promoted Canadian independence because he saw the country playing this important role in the world.
The grand theories of Innis have some concrete policy implications. Let’s consider how an Innisian perspectives suggests Canada should react to the potential exodus of clean energy experts from American institutions. It was a joke that Americans might move here in the event of a Trump victory. Yet, perhaps there is a role for Canada as a niche space for sustainable energy knowledge in North America? Canada should consider implementing a talent attraction strategy that welcomes refugee energy experts from the US, and combine the American expertise with domestic capabilities to solve the real sustainable energy transitions problems in Canada. Canada could gain a foothold in clean technology and start to finally reduce its emissions. Most importantly, Canada would be making an important contribution to the rest of the world by maintaining and expanding sustainable energy capabilities on the continent.
Canadians should think about what other values and ideals need to be nourished and preserved on the northern end of the continent. Trump’s election could introduce attacks on basic human rights, and Canada will need to rally with American allies to respect the dignity of all persons, regardless of origin, skin colour, creed, gender, sexual orientation, or political views (as Angela Merkel said).
This is not an argument for Canadian exceptionalism. Canada is not somehow immune to the intolerance and authoritarianism expounded by the Trump campaign. This is not the time for Canadians to rest on any imagined laurels. What Innis’ thought teaches us is that Canada might have a particular role to play when the American Empire gets out of whack. Thus, it is a time for the Canadian nation to actively consider how it can play a constructive role in the changing world order.
I presented at the Standing Committee on International Trade’s incredibly brief review of the implementing legislation for CETA. With me were representatives from the Business Council of Canada, the Chamber of Commerce, and the Canadian Cattleman’s Association. There are only two more meetings scheduled, and there are no IP experts, no pharmaceutical experts, no representatives from either our shipping industry or labour groups representing seafarers. There were no representatives from municipalities, even though CETA is the first deal to apply at that level of government, and more than 50 municipalities have asked to be carved out of the deal. This is hardly a shining example of how to govern inclusively, transparently, or progressively.
To make matters worse, several presenters indicated that they thought CETA was the answer to global dissatisfaction with trade and investment deals.
This concerned me so much that I strayed from my prepared remarks to inform them that economists such as Dani Rodrik and Thomas Picketty have warned about the inequality that can arise from trade treaties, and that the government would be wise to listen carefully to well-founded critiques of deals such as CETA. Pretending that everything is OK, only listening to advice from those who clearly stand to benefit from this deal, and writing off the rest of us as protectionist or xenophobic – well, that is one of the elements behind Trump’s rise, and it will fuel the rise of the far-right in Europe as well.
In the interest of vibrant public debate, I post my remarks to the committee here:
The labour movement is keenly aware that trade is, and has always been, an important feature of the Canadian economy. We understand that all governments have an interest in fostering open trade.
Distributional impacts from trade and investment agreements have long been ignored. We are told that trade deals will have winners and losers, but don’t worry, we can compensate the losers. Historically, Canada has done an inadequate job on this front.
And the gains from these deals are never as big as they were projected to be, especially for recent trade and investment agreements. The main gains from open trade comes from reducing tariffs, and much of this was accomplished by the 1990’s. So-called modern trade deals are often more about advancing investor rights. As such, they do not necessarily increase trade, improve economies, or benefit Canadians.
CETA also goes farther than existing trade deals by putting restrictions on local governments. This is despite the fact that more than 50 communities, including Toronto, Victoria, Baie Comeau, Sackville, Hamilton and Red Deer, have already sent a clear message to federal and provincial governments that “buy local” and other public spending policies, as well as municipally-delivered public services, should be excluded from CETA.
While we’re sold free trade deals on the opportunities for Canadian business, and the savings for Canadian consumers, the majority of this 140-page bill features changes to Canada’s intellectual property rules, requiring changes that largely serve European interests.
One of the biggest concerns regarding CETA is the impact on Canada’s health care system. On a per capita basis, Canadian drug costs are already among the highest in the world – only exceeded by the United States – and are among the fastest rising among comparable nations.
Bill C-30 devotes fully 30 pages of amendments to the Patent Act. These ammendments will further exacerbate the rise in costs by:
- Committing Canada to creating a new system of patent term restoration thereby delaying entry of generic medicines by up to two years;
- Locking in Canada’s current term of data protection, and creating barriers for future governments wanting to reverse it;
- Implementing a new right of appeal under the patent linkage system that will create further delays for the entry of generics.
Analysis conducted by Prof. Marc Andre Gagnon and Dr. Joel Lexchin estimates that CETA’s provisions will increase Canadian drug costs by between 6.2% and 12.9% starting in 2023. This is in line with internal government estimates that expected the patent changes to cost between $1B to $2B per year, and the generic industry’s own research that put the price at $3B.
The previous federal government committed to compensating provinces for this increase in cost, but that simply means that the federal government will ask Canadians to pay pharmaceutical companies through higher taxes or cuts to services elsewhere. It also doesn’t take into account that some of this increased cost will fall directly on low income workers who don’t have drug plans. As Lexchin and Gagnon point out in their paper: “cost-related nonadherence is 35% among people with low income and no insurance.” What this means in real life is that people sometimes won’t even go to the doctor for their illness, because they know they can’t afford the cost of a prescription.
In fact the new legislation on pharmaceuticals found in C-30 are a very good example of what is wrong with the out-dated approach being pursued through CETA.
In 1987, the federal government made a bargain with pharmaceutical companies. They passed legislation strengthening patent protection for drugs, and in return pharmaceutical companies committed to increase their R&D investment in Canada to 10% of sales.
Since 2003 companies have failed to meet this target, and as of June 2016 the Patented Medicine Prices Review Board (PMPRB) reports that R&D investment in Canada is at 5% of sales. Investment in a group of 7 comparable countries, including EU countries France, Italy, Sweden and Germany, has held steady at 20% of sales.
So now we are again strengthening patent terms for large pharmaceutical companies, but this time we’re not even asking for assurances of investment in R&D. Why does anyone think the answer to failed neoliberal policies is simply more neoliberal policy?
It is clear that the largest single impact resulting from CETA will be on prescription drugs and there is no clear benefit to Canada from these changes as CETA will only affect drug costs in Canada—not the EU. As well, many EU nations have regulated prices in order to maintain affordability. We are told that nothing in CETA prevents Canada from regulating drug prices either, but we see no indication that the federal government intends to take action on this front.
Coasting Trade Act
Wages and working conditions vary greatly in the global shipping industry, and in recognition of that Canada and the U.S. have placed significant restrictions on the operation of international shipping within Canada. These protections are called cabotage, and are outlined in the Coasting Trade Act.
Bill C-30 undermines cabotage in three ways:
- Government dredging projects with a value of over 7.8 million dollars will become open to bidding by vessels built and registered in the EU. However, private dredging projects will become open to bidding by EU companies using vessels of any flag.
- EU companies will be permitted to use a ship of any flag to move empty shipping containers within Canada. This work was normally done by rail in Canada, and it is unclear what the impact will be on those rail workers.
- EU-registered vessels will be permitted to establish a scheduled feeder service of cargo between the ports of Montreal and Halifax only. (Feeder service is the domestic portion of any international import/export from abroad – not just between Canada and EU countries).
- Additionally, EU-vessels under “second-registry” will be permitted to perform the same type of service between Montreal and Halifax only if they are on the continuation-leg of their international voyage.
Our position is that this cargo should have remained subject to cabotage rules – i.e. Canadian-flag vessels and Canadian jobs. These protections were in place for a reason, to protect wages and working conditions for all workers in the industry.
Some EU nations such as Cyprus are flags of convenience, but you may not know that all registries in the EU allow for open crewing and the wages paid are shockingly low, and the hours long. I asked my colleagues at the International Transport Workers Federation (ITF), and the Seafarers International Union of Canada what this means for workers, and they gave me some examples.
The standard work week is 44 hours, plus 85 hours of overtime per month at a fixed wage – that adds up to 276 hours per month. The ILO minimum for a worker at the rank of Able Seaman would be $670 USD per month, including leave pay. This works out to less than $2.50 / hr. Overtime pay on top of that is $3.56 per hour. Ordinary Seaman, or Deck Trainees sometime see wages that work out to only $1.26 per hour. (The ITF posts ILO minimum wages on their webpage.)
On Canadian ships in Canadian waters, wages are much higher. Entry level positions such as Ordinary Seaman start at $20 / hr, with an Able Seaman earning closer to $26 / hr.
You can clearly see that EU wages are in no way comparable to the Canadian reality. This is bad for the workers on the EU vessels doing this work, bad for Canadian workers being displaced, and bad for Canadian companies who cannot compete with such low standards.
The answer to these problems isn’t pretending that they don’t exist. The answer is to listen to more voices, have healthy open debate, and to take action to compensate those who lose out from globalization.
The Calgary Homeless Foundation (CHF) has just released its updated Research Agenda (which I co-authored). CHF is a non-governmental organization that disburses funding to non-profit organizations in Calgary to help persons experiencing homelessness. Our Research Agenda is a bit like an annual report on our research (except it typically comes out once every two years).
The following points are worth noting:
-A major strength of CHF’s research is its ability to use robust data.
-A major reason CHF is able to use good data is that it oversees a city-wide database system with information pertaining to persons experiencing homelessness. Client-level information (e.g., age, health status, employment status and housing status) is entered into the database. All Calgary programs that receive funding from CHF must use this database system.
-CHF is developing an international reputation for applied, policy-relevant research on homelessness.
You can read more about CHF’s latest Research Agenda here.
Abridged Text of Remarks to Panel on Canadian Political Economy in Commemoration of Abraham Rotstein and Stephen Clarkson, Department of Political Science, September 16 2016
Let us cast our minds back to the decade of the 1960 – which I recall as the best of times – as the time of the transformation of the old Political Economy centered on Innis into a rejuvenated Canadian political economy.
Innis, who was an economic historian called for an economic history of economic history. I am attempting a political economy of Canadian political economy.
Harold Innis, English Canada’s great intellectual and from 1937 to his death in 1952, Chair of the Department of Political Economy at the University of Toronto, including economics, sociology, and commerce and finance as well as political science, had written back in 1929: “[T]here is evidence to show that the application of the economic theories of old countries to the problems of new countries results in a new form of exploitation with dangerous consequences. The only escape can come from the intensive study of Canadian economic problems and from the development of a philosophy of economic history or an economic theory suited to Canadian needs.” That is surely a deeply nationalist position in defiance of the claim of neo-classical economics to universality.
In 1948, at the beginning of the Cold War, in an essay entitled “Great Britain, the United States and Canada,” he wrote: “In the Anglo-Saxon world we have a new mobilization of force in the United States, with new perils, and all the resources of culture and language of the English-speaking peoples, including those of the United States, will be necessary to resist it. In the crudest terms, military strategy dominated by public opinion would be disastrous.” He concludes: “Whatever hope of continued autonomy Canada may have in the future must depend on her success in withstanding American influence…[T]here is little evidence she is capable of these herculean efforts and much that she shall continue to be regarded as an instrument of the United States.”
My generation of political economists lived in his shadow. The quotes are the book ends between which there emerged, around Innis the old Canadian political economy, from which sprung, in the 1960s and 1970s, the New Canadian Political Economy.
Its context is a surge in Canadian nationalism as a response to a perceived American imperialism which informs the writings of both Rotstein and Clarkson, and of myself, thereby adding to the surge.
Rotstein writes directly about nationalism. He had studied under Karl Polanyi at Columbia. He took Polanyi’s notion of the movement which called forth the countermovement, creating a new balance of forces. American expansionism, led by its invention of the multinational corporation, moved to Canada with the encouragement, by and large, of the Canadian business class and the Canadian state.The countermovement in Canada was, for Rotstein, left nationalism in general and economic nationalism in particular.
There was a striking engagement of intellectuals in politics. Rotstein became the editor of the Canadian Forum, a small but highly influential magazine. He became an informal adviser to Walter Gordon, who was Finance Minister in the first Pearson government and the leader of movement within the government to counter foreign, mainly American ownership. Rotstein was a member of a 1967 federal Task Force of economists to study the matter, which I headed on Rotstein’s recommendation to Mr. Gordon. It led to the creation of the Canada Development Corporation and the Foreign Investment Review Agency by the government.
Clarkson wrote a background paper on Canadian-American relations for the Task Force. In the early 1960s, Canadian-American relations was a deeply boring subject dominated by business and mostly devoted to justifying American ownership; I remember at one point Rotstein and I made a personal commitment to cease attending conferences thereon. Clarkson’s Task Force study gave life to the notion championed by him of an independent foreign policy for Canada.
Clarkson created a popular course on Canadian-American relations involving both Rotstein and myself. He wrote with Christina McCall a marvelous prize-winning biography of Pierre Elliot Trudeau that dealt with his reluctant economic nationalism.
Clarkson opposed the Free Trade Agreement and NAFTA and when they happened he churned out volumes on their workings within a North America that included Mexico. He documents the ways in which the Canadian state has, by its particular management of the American connection, risked the mismanagement of the Canadian nation. He was remarkably productive, publishing more of high quality after he became a senior citizen than many of us do in lifetime. When the Department of Political Economy split asunder in the early 1980, he took a hoard of the now obsolete stationary and when he thought the occasion warranted, used it.
As well as Innis and Polanyi, a central figure intellectually in the 1960 was the Canadian philosopher/theologian George Grant with his books Lament for a Nation and Technology and Empire. (I should add that in the nature of the 1960s, Marxism was in the air we breathed and, in Canada and particularly on this campus, McLuhan, with his ties to Innis, was a genius who could not be ignored.) Grant wrote: “A central aspect of the fate of being a Canadian is that our very existing has at all times been bound up with the interplay of various world empires…What our fate is today becomes most evident in the light of Vietnam. It is clear that in that country the American empire has been demolishing a people rather than letting them live outside the American orbit.” Grant spoke these deeply moving words at a giant teach-in in the war in Vietnam on this campus in 1965; Rotstein and I were among its organizers.
Clarkson’s writings on the Canadian-American relationship are in one sense a continuing riff on the inadequacy of Canada’s responses to the U.S., which is suggestive of the continuing influence of Grant’s apocalyptic Lament. I cannot refrain from citing the 2003 study by Penny Cousineau-Levine with the revelatory title Faking Death: Canadian Art Photography and the Canadian Imagination which, to quote from its dust jacket, “expresses a collective Canadian wish for a symbolic passage to Canadian national maturity.” That “wish” permeates the New Canadian Political Economy at its origins in the 1960s. It has been successfully transformed into a firm sense of national identity and tolerance of the “Other”, albeit accompanied by the advent of neo-liberalism which restrains national economic policy.
A proliferation of identities and issues has overwhelmed economic nationalism and, quite properly, become central to Canadian political economy. The continuing relevance of nationalism was evident in the sustained effort by the Harper government to recast it as militaristic, monarchical, white, and Christian, as well as the decision by the aboriginal peoples who had been labelled “Indians” and consigned to “reservations” to rename themselves “First Nations.”
The possibility that the limits of the present round of globalization have been reached – indeed exceeded with respect to climate change – is putting the issue of Canada’s place in a chaotic global economy on the agenda of Canadian political economy as it was in the 1960s and 1970s before neo-liberalism stood it on its head.
The very narrow and brief on-line consultations around parental and caregiving leaves finishes today. As we’ve done in the past, a coalition of community and labour organizations worked together to develop a common list of policy asks. Even though the official consultation is finished, we encourage concerned individuals and groups to submit their own recommendations to ESDC and Minister Duclos.
le français suit
A Joint Letter from Community and Labour Organizations, concerning Federal Consultations on Parental & Caregiving Leaves and E.I.
We represent a number of community and labour organizations with concerns about the current federal consultations on amending Employment Insurance and Canada Labour Code provisions for Parental and Compassionate Care leaves. In particular we are concerned that the Government has restricted itself to a very narrow set of options.
There are other, more meaningful options for change. We need more realistic options for working families, with a priority for social equity and anti-poverty measures.
- We urge the Government to keep a focus on the big picture which includes our social programs and public services. We are in urgent need of:
- Improvements in EI access and benefits, especially for those in precarious jobs,
- A public, universal and affordable childcare program for families across Canada, including infant care,
- New investments in our health care system, including eldercare.
- The evidence in Quebec and internationally demonstrates the success of additional parental benefits which are dedicated ‘use it or lose it’ weeks for the second parent. Such provisions help enormously to improve gender equity and shared parenting with many long-term benefits for society. We propose an additional 8 benefit weeks.
- There is little point to improving parental and other EI special benefits if there are still women and men who can’t qualify because they can’t meet EI’s 600 hour minimum. We propose all EI special benefits require the lesser of 300 hours (pre-1996 minimum) or $2,000 income (Quebec minimum for parental benefits).
- Workers with a new child, those on sick leave or caring for sick family members require more than 55% of their normal earnings while on leave. We propose a benefit rate of 70% and a minimum EI benefit for low wage earners.
- Access to EI special benefits should be restored for all migrant workers. A discriminatory two-tier system was introduced in December 2012.
- EI is not an appropriate means to address protective re-assignment/leave benefits. Quebec for example addresses it through the workers compensation system.
- Compassionate Care Benefits should be available when caring for someone with a critical illness (but not necessarily at imminent risk of death, as currently required).
Thank you for considering our position.
Déclaration commune des groupes communautaires et syndicaux dans le cadre des consultations fédérales portant sur les congés parentaux, les prestations de compassion et l’assurance-emploi
Nous représentons des organisations syndicales et communautaires préoccupées par les consultations qui ont actuellement cours visant à modifier certaines dispositions de la Loi sur et du Code canadien du Travail quant aux congés parentaux et de compassion. En particulier, nous questionnons le fait que votre gouvernement se soit restreint à un nombre aussi limité de mesures proposées.
Nous considérons qu’il y a d’autres options qui seraient plus souhaitables et pertinentes. Nous avons besoin de mesures plus adaptées à la réalité des travailleurs et de leurs familles et qui font de l’équité sociale et de la lutte à la pauvreté des priorités.
- Nous pressons le gouvernement d’avoir une vision globale qui tienne compte de nos programmes sociaux et nos services publics. Il est urgent que les mesures suivantes soient mises en oeuvre :
- Améliorations au niveau de l’accessibilité et de la générosité des prestations régulières d’assurance-emploi, particulièrement pour les travailleurs précaires.
- Programme national de garderies public, universel et abordable (adapté également aux nourrissons).
- De nouveaux investissements dans le système de santé canadien, incluant des soins pour les aînés.
- L’expérience du Québec et à l’international ont illustré le succès d’octroyer des prestations additionnelles ciblées et non transférables pour le deuxième parent. Ce type de mesure favorise grandement l’équité entre les sexes et le partage des responsabilités familiales, ce qui engendre des bénéfices à long terme pour la société. Nous proposons huit semaines de prestations supplémentaires.
- Il s’avère pratiquement inutile d’améliorer les congés parentaux et les prestations spéciales si peu de travailleurs réussissent à s’y qualifier vu qu’ils n’arrivent pas à accumuler les 600 heures assurables nécessaires. Nous proposons que la plus basse des deux options suivantes permettent aux travailleurs de se qualifier à des prestations spéciales: 300 heures (minimum exigé avant la réforme de 1996) ou 2000$ de revenus (seuil d’admissibilité au Régime québécois d’assurance parentale).
- Les travailleurs nouvellement parents, ceux en congé de maladie et ceux qui qui prennent soin d’un proche ont besoin de plus que 55% de leur rémunération habituelle. Nous proposons un taux de prestations à 70% et un montant minimal de prestations pour les bas salariés.
- Redonner accès aux prestations spéciales pour les travailleurs migrants étant donné qu’un système discriminatoire a été introduit en décembre 2012.
- La question du retrait préventif (ou de la réaffectation) de la travailleuse enceinte ne doit pas être prise en charge par le régime d’assurance-emploi puisque ça relève de la santé et de la sécurité au travail. Par exemple, le Québec a son propre régime de santé et de sécurité du travail qui indemnise les travailleuses enceintes.
- Les prestations de compassion devraient être accessibles aux travailleurs qui prennent soin d’un proche gravement malade (et non uniquement lorsqu’il y a risque de mort imminente).
Merci de considérer notre position.
Signatories / Signataires
Fédération des travailleurs et des travailleuses du Québec, Canadian Centre for Policy Alternatives, Canadian Child Care Federation, Canadian Federation of Students, Canadian Federation of University Women, Canadian Labour Congress, Child Care Advocacy Association of Canada, Childcare Resource and Research Unit, Community Society End Poverty – Nova Scotia, Family Service Toronto, First Call: BC Child and Youth Advocacy Coalition, Good Jobs for All Coalition, Income Security Advocacy Centre, Migrant Workers Alliance for Change, New Brunswick Common Front for Social Justice, Newfoundland and Labrador Federation of Labour, Ontario Coalition for Better Child Care, Ontario Community Legal Clinic EI Working Group, Parkdale Community Legal Services, Public Service Alliance of Canada, Unemployed Workers Help Centres, Saskatchewan, UNIFOR, United Steelworkers, Urban Alliance on Race Relations, Workers’ Action Centre
Posted by Nick Falvo under Alberta, cities, economic history, fiscal federalism, GTA, housing, municipalities, Ontario, public infrastructure, public services, public transit, Role of government, taxation, Toronto, transportation.
November 3rd, 2016
Over at the web site of the Calgary Homeless Foundation, I’ve written a blog post titled “Do Calgary and Edmonton need more power and resources?” The blog post comes as the Government of Alberta considers the possibility of, well, giving more power and sources to both Calgary and Edmonton.
Points raised in the blog post include the following:
-While most of Canada’s large cities would like to see amendments to Canada’s constitution giving municipalities more power and authority, they tend to take a more pragmatic approach. Indeed, they often lobby the federal government for more funding, and provincial governments for legislative changes.
-Though the mayors of Calgary and Edmonton have lobbied their provincial government for more power and resources, there are reasons to call into question the wisdom of such a move. For example, both municipal governments in question have seen major increases in their respective property tax bases in recent years (ergo: it’s not entirely clear why they don’t simply increase property taxes if they wish to generate additional revenue).
The link to the full blog post is here.
Finance Minister Bill Morneau tables his Fall Economic Statement on 1 November. We’ll likely find out then whether he has some has real treats, or if they’re planning more privatization tricks for provincial and municipal governments, as his business-dominated Advisory Council on Economic Growth proposed in the form of a public-private infrastructure bank (and through their new term for privatization, creating a “flywheel of reinvestment”).
Today the Hill Times published a column I wrote on this, which I’ve also copied below.
The institutional investors promoting this (such as Caisse de dépôt et placements CEO Michael Sabia and Blackrock Inc. Managing Director Mark Wiseman) aren’t now publicly admitting private finance would cost much, much more.
In fact financing a project at the 7-9% returns Sabia has previously said institutional investors expect from infrastructure investments would double the total cost of a project financed over 30 years compared to what it would cost if the federal government borrowed directly to finance it (at its current 1.9% 30-year bond rate), as is illustrated in the chart below.
It is perfectly understandable why Sabia, Wiseman and other large investors are aggressively pushing Ottawa to establish an infrastructure bank–so they can boost their returns at the public’s expense–but it would be extraordinarily foolish and irresponsible for any government to do so.
Match made in heaven?
Finance Minister Bill Morneau’s Advisory Council on Economic Growth makes it look like match made in heaven. Canada’s public sector has billions in unmet public infrastructure needs while major capital investors have trillions in surplus funds they want to invest to earn stable higher returns.
But in any big-money wedding, someone has to foot the bill. In this case it will be the public through higher costs, lower revenues and new user fees.
The advisory council is calling on Ottawa to create a Canadian Infrastructure Development Bank and fund it with $40 billion. They suggest this would attract an additional $160 billion from private institutional investors to finance large public infrastructure projects, including toll highways and bridges, high-speed rail, ports, airports, power transmission, public transit, “smart-city”, broadband and natural resource infrastructure.
They say the arm’s-length bank should develop a “pipeline of scalable projects with reasonable certainty,” and revenue streams in the form of user fees, availability payments (public funding) and ancillary funding. It would review infrastructure projects over $100 million and select those with enough revenue potential—the cream of the crop—for private financing and investment.
They also recommend Canada “create a flywheel of investment in its infrastructure by catalyzing the participation of institutional capital in existing assets.” This simply means privatization, although they lack the courage to use that word, and say it doesn’t necessarily mean outright sale. Private finance could just suck money out with minority ownership. This “flywheel of investment” would become an endless cycle of privatization with private finance cannibalizing our public assets for private profit.
Why are these bad ideas?
There’s no shortage of low-cost public financing available to Canadian governments. Ottawa can now borrow at 0.6 per cent over a year and issue 30-year bonds at 1.8 per cent, with provinces a percentage point higher. Long-term borrowing rates have never been this low.
Meanwhile large private infrastructure investors expect “stable, predictable returns in the 7 to 9 per cent range”, according to Michael Sabia who is CEO of Quebec’s Caisse de dépôts pension fund and a member of Morneau’s economic advisory council. This is why he and other major investors are heavily pressuring Canadian governments to include private finance in the hundreds of billions they’re investing in public infrastructure.
It doesn’t take an economist to understand it makes no sense to finance projects at 7 to 9 per cent when you can do so at 2 per cent. Financing at 2 per cent for a $100 million project amortized over 30 years adds $34 million to its cost, while 8 per cent adds $165 million: almost five times as much in financing costs and doubling the total cost, including the principal.
No sensible person would do this with their own mortgage, nor do so in an obvious way with other peoples’ money (OPM) as a politician. That’s why they dress these projects up as public-private partnerships, or “innovative infrastructure financing”, as the Advisory Council proposes with this bank.
The public will always ultimately pay for these higher private financing costs through ongoing public subsidies, lower public revenues, higher user fees and in other ways.
Privatization doesn’t just increase costs, it also results in greater inequality, as user fees are hiked, workers’ wages and benefits are cut, and executive compensation rises. This would severely undermine the Trudeau government’s commitment to support the middle class and reduce inequalities.
It’s unlikely governments would benefit from higher corporate tax revenues, as many projects would be owned by foreign investors and based in tax havens. Foreign ownership also leaves our governments vulnerable to being sued through controversial Investor State Dispute Settlement provisions in trade deals such as NAFTA, CETA and the TPP.
University of Toronto expert Matti Siemiatycki has made much more constructive proposals for a national infrastructure bank that would reduce rather than increase the cost of financing for public infrastructure and increase accountability and transparency over these decisions.
How the Trudeau government responds to these recommendations will be a moment of truth. Will they bend to the interests of private finance or genuinely adopt policies for “inclusive growth” in the interests of all Canadians.
Toby Sanger is the senior economist for the Canadian Union of Public Employees.
This column was first published in the Oct. 31 edition of the Hill Times.
Posted by Nick Falvo under Austerity, CPP, demographics, employment, income, income support, inequality, labour market, media, OECD, Old Age Security, older workers, part time work, pensions, population aging, poverty, privatization, progressive economic strategies, retirement, Role of government, self-employed, seniors, small business, social policy, taxation, unions.
October 29th, 2016
This fall, Canada’s Parliament will debate a proposal to expand the Canada Pension Plan (CPP). And over at the Behind the Numbers web site, I’m co-author of a blog post titled “Ten things to know about the CPP debate.” The blog post’s other co-authors are Allan Moscovitch and Richard Lochead.
Points raised in the blog post include the following:
-CPP covers a smaller percentage of a retired person’s income than similar schemes in most OECD countries.
-CPP helps reduce poverty in Canada, but it doesn’t provide any of its beneficiaries with sufficient retirement income.
-CPP’s former Chief Actuary has proposed an expanded CPP scheme that would almost eliminate the need for private pension schemes in Canada. This proposal has been virtually ignored by most of Canada’s elected officials and journalists.
The link to our full blog post is here.
Finance Minister Bill Morneau has taken quite a bit of heat for his tone deaf comments about the reality of precarious work, specifically saying that we should just “get used to job churn”. His policy prescription, an improved social safety net, is actually a valid part of the solution. But must we accept that the precarious will always be with us? That is, what can government actually do to address precarious work?
First of all, has the Finance Minister accurately understood the issue? There is a great deal of hubbub about precarious work, can it be reduced to simply “job churn”?
Hmm, apparently not. The average duration of a job has been remarkably stable since 1976, even for young workers. The distribution is pretty stable too, and aside from the obvious impact of recessions, there is no clear upward trend in short term jobs.
This is because for many workers, precarity doesn’t mean jumping from job to job – it means not knowing how many hours you can count on next week, it means not having any benefits, it means balancing multiple jobs along with caretaking duties and/or furthering your own education. It means working for the same employer for 5 years, but always on six month contracts. It means unpaid internships are the only kind of internship you can find, or not having any recourse when an employer unjustifiably docks your wages or takes your tips for themselves.
Of course there has been an increase in own-account self-employment (has no paid help, but may be incorporated or unincorporated), and contract workers wouldn’t show up in the data on job duration. But the trend in own-account self-employment is most pronounced for workers 25-54.
Our labour statistics don’t do a good job of measuring precarity – but some indications:
- Nearly 2 million workers are ‘own-account self-employed’, meaning they have no paid help,
- About 900K work part time because they can’t find full time work,
- Another 390K work part time to accommodate unpaid care work,
- About 1 million have a second or third job.
So, now that we have a better understanding of the problem, what tool(s) does the federal government have at its disposal to address labour market precarity for younger and older workers, now and into the future?
The federal government can try to spur economic growth. The current government is doing that through investment in infrastructure (watch out for privatization schemes here), and investment in green jobs and clean tech.
But the economy has been growing over the past 25 years, when we’ve seen growing precarity in the labour market – so that’s clearly not sufficient. I would advise the economic council to take a look at Senator Bellemare’s work on full employment, and Professor Marc Lavoie’s work on wage led growth. It might lead them in a policy direction that will benefit both growth and well-being.
For example, transfers such as the Canada Child Benefit will help to reduce poverty and inequality. Expanding the Working Income Tax Benefit would help make work pay, and make life a little easier for the working poor.
Expanding the social safety net by improving CPP will help down the road, and it absolutely reduces the stress of precarity when workers know they will have that pension when they retire.
The current design of Employment Insurance amplifies and exacerbates labour market inequalities, and ideally a social insurance system would work to dampen existing inequalities. A lower entrance requirement & minimum benefit level would go a long way to doing that.
The federal government could use Labour Market Development Agreements (LMDAs) with the provinces to provide more opportunities for training and re-training – and better supports for non-EI eligible workers who need access to basic numeracy and literacy training through Labour Market Agreements (LMAs).
High quality public services and social services are critical. I cannot overstate the need for more affordable childcare spaces in Canada, and the beneficial impact this would have on precarious workers.
But it’s not all about the federal government, since the provinces legislate employment standards for about 90% of workers in Canada.We’re hearing lots about $15 and Fairness, because that’s where the issue is for many precarious workers. Higher minimum wages, access to paid sick leave, the ability to certify a union in one step instead of two-stages (leaving workers open to retaliation and intimidation from employers), anti-scab legislation, and most importantly, proactive employment standards enforcement, like Manitoba has.
(Instead of relying on complaints from affected workers, Manitoba has a Special Investigations Unit that monitors the employers of vulnerable workers. According to their website, in 2014-2015 almost half of their investigations were the result of information received from the public and the Unit identified violations in 80 per cent of these cases.)
So what can government do to address precarious employment? A whole lot, it turns out.
Here is a link to my review of an extremely interesting new book by Guardian economics and political columnist Paul Mason.
“Paul Mason is a leading British economic journalist, currently a columnist for The Guardian. He is also a long time left political activist. His new book, Postcapitalism: A Guide to Our Future (Farrar, Strauss and Giroux. New York. 2015) is a challenging, sometimes obscure, sometimes brilliant, eminently worthwhile read, and an optimistic take that the left might, once again, be marching in tune with the forces of history.
Mason is, to say the least, highly original and idiosyncratic. His book is partly addressed to the orthodox Marxist left, endorses and builds upon the labour theory of value, takes seriously the possibility of a planned, non market economy, and pays tribute to the traditions of radical working-class socialism. At the same time, he is emphatically non Leninist, sees networked knowledge workers as the key contemporary agents of social change, and draws heavily on pro capitalist thinkers from Schumpeter, to management theorist Peter Drucker, to contemporary cheerleaders for the supposedly transformative knowledge and network based new knowledge economy.”
I was somewhat surprised to see Stephen Poloz recently urging economists to do more work identifying and disseminating research on the supposed benefits of free trade. That’s slightly beyond his job description (perhaps more fitting with his last position as head of Export Development Canada). But like economic leaders elsewhere in the world, Mr. Poloz is obviously concerned with the disintegration of popular support for neoliberal free trade deals. That disintegration will have tectonic economic and political consequences. Read more »
Posted by Nick Falvo under aboriginal peoples, Alberta, Employment Insurance, fiscal federalism, gender critique, guaranteed annual income, income, income support, Indigenous people, inequality, labour market, Old Age Security, Ontario, poverty, progressive economic strategies, Role of government, social policy, unemployment.
September 30th, 2016
Over at the web site of the Calgary Homeless Foundation, I’ve written a blog post titled “Ten things to know about Canada’s guaranteed annual income debate.”
Points raised in the blog post include the following:
-There are people and groups on both the left and right of the political spectrum who favour a Guaranteed Annual Income (also known as a “basic income”).
-One reason for support on both the left and right is that there is considerable discrepancy in terms of how generous the benefit should be. This also makes it challenging to estimate its annual cost.
-It’s not clear what the desired outcome(s) of such a scheme would be. This too may depend on which advocates/proponents you talk to.
-The implementation of a Guaranteed Annual Income would require a considerable amount of intergovernmental cooperation.
The link to the full blog post is here.
Posted by Nick Falvo under aboriginal peoples, Alberta, Conservative government, federal budget, fiscal federalism, homeless, housing, Indigenous people, poverty, Role of government, social policy.
September 8th, 2016
Over at the web site of the Calgary Homeless Foundation, I’ve written a blog post about Canada’s National Housing Strategy consultations. The link to the blog post is here.
Points raised in the blog post include the following:
-In Canada, public social spending as a percentage of our GDP is well below the OECD average.
-The amount of housing stock in Canada considered to be “social housing” is also well below the OECD average.
-The history of Canadian housing policy suggests that, when the federal government leads new construction, provinces and territories follow with funding of their own.