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A Response to the 2017 Saskatchewan Budget

I have an opinion piece on Saskatchewan’s recent budget in the Regina Leader-Post.

Points raised in the opinion piece include the following:

-Reductions in personal and corporate income taxes help the rich more than the poor (and this budget cut both personal and corporate income taxes).

-Increases in sales tax hurt the poor more than the rich (and this budget increased both the breadth and the rate of the provincial sales tax).

-A one-dollar increase in government spending on public services (e.g., on health, education or child care) creates more jobs than a one dollar reduction in any tax. This budget decreased program spending.

The full opinion piece can be accessed at this link.

Ontario’s Electricity Sector II: Political Economy Update

This is a third guest post by Edgardo Sepulveda, who is a Toronto-based expert in telecommunications and regulatory economics.  Twitter: @E_R_Sepulveda


 

By Edgardo Sepulveda

In my previous post of January 29 I described how decisions by different Ontario governments gave rise to excess electricity generation with an inflated cost structure, leading to higher electricity prices and increased inequality. Since then, the Ontario Minister of Energy delivered a “mea culpa” speech on February 24 (the “Minister’s Speech”) that was followed on March 2 by a Liberal Government announcement to reduce electricity prices starting June (the “Liberal Plan”). The Liberal Plan is currently in the form of a press release and hence the Government will be required to introduce proposed legislation to give it legal effect. On February 27 the opposition NDP also announced its own election-style plan, including a reduction in prices (the “NDP Plan”) The opposition Conservative Party (“PC”) has now announced that it will release its electricity proposals as part of its overall election platform before the June 2018 provincial election. This post provides updated analysis of the issues I discussed previously, taking into account these recent announcements, which are summarized in Table 1.

Read more »

Ten Things To Know About The 2017 Federal Budget

I’ve just written a blog post in which I review the recent federal budget.

Points raised in the blog post include the following:

-The federal government is projecting deficits in the $20B-$30B range for roughly the next five years.

-This was likely the most important federal budget for housing since 1993.

-The budget contains important new announcements for homelessness (my blog post provides a nice bar graph showing newly-announced homelessness funding, which was put together by my colleague Janice Chan).

The link to the full blog post is here.

Transit costs are too darn high

Public transit is a key piece of urban infrastructure, important for getting people where they want to go while limiting congestion and pollution. A central part of the federal government’s infrastructure plan involves expanding and improving public transit, through their newly established Public Transit Infrastructure Fund.

Note that Budget 2017 allocates some amount of the total public transit funding to the Canada Infrastructure Bank, the Smart Cities Challenge, and Superclusters (really?), so I have only included the amount committed to the Public Transit bilateral agreements here.

This falls short of what the Green Economy Network recommended – we estimated the need to be closer to $1.76B annually from the federal government (Table 2), which would lead to a reduction of between 11-20 Mt of GHGs annually, but we are talking about committing serious funding to transit, which is good.

The language around the investment in public transit focuses on reducing congestion, lowering GHGs, and shortening commute times, all issues that the Federation of Canadian Municipalities (FCM) identified in their transit campaign. What isn’t mentioned though, is affordability.

And the cost of a monthly transit pass is, frankly, too. darn. high.

Which is why commuters across Canada were not pleased when Budget 2017 eliminated the (non-refundable) tax credit which allowed users to claim monthly transit passes. While the tax credit wasn’t perfect, it did do something to defray the cost of transit for about 1.7 million transit users.

The justification given by the federal government for getting rid of the tax credit is that it mostly benefited higher income families, and had no measurable impact on increasing ridership. Since it is a non-refundable tax credit (you don’t get anything if you don’t have taxable income), it likely didn’t benefit low income families much. But it is for public transit, so one would guess it benefits the middle of the spectrum, rather than high income folks.

The tax credit could be shared between spouses and their children under 19, so the relevant unit of analysis here is a census family.

You can see that higher income families get a higher average return from the tax credit, and that about a third of families benefiting from the credit have household incomes over $100K. But interestingly, about half of the total tax expenditure is for families with a total annual income below $75,000, and half is for families with incomes above that amount. Median total income in 2014 was $78,870, so that’s a pretty fair distribution for a non-refundable tax credit.

On top of this, there were other tax credits with more skewed distributional benefits that were left untouched. No wonder Toronto and Vancouver transit users are crying foul.

How about a gender lens? According to CRA T1 Final Statistics for the 2014 tax year, women made up about half of the taxfilers claiming the public transit credit. What’s interesting is the age distribution – slightly more men in core working age groups claim the credit, but both older and younger women outnumber men in their age groups.

With all of that in mind, what kind of policies would a social democrat like myself suggest?

First, I would recommend that some amount of the infrastructure funding be tied to affordability. Some provinces and / or municipalities have subsidized passes, but the current system is failing many low income transit users, and getting out of range for even median income folks.

Secondly, if I were going to eliminate the tax credit entirely, I would at least wait until Phase 1 of the transit infrastructure plan was complete. Removing the subsidy from riders before the spending has had a chance to show improvements to the system could hurt ridership and revenues during this rebuilding phase.

If I wanted to keep the tax credit, I would modify it so that it is refundable, individual, and phased out at higher incomes (say, anything over the median income).

Finally, I would look at ways that we’ve prioritized cars in our cities. Policies such as congestion pricing could raise revenues to support public transit, and provide an added incentive for car users to switch to transit.

This is a great example of how policy design needs to keep distributional impacts in mind, so that we’re not further hurting low income families as we’re racing to meet our commitments on climate change.

A Review of the 2017 Alberta Budget

Over at the web site of the Calgary Homeless Foundation, I’ve written a review of the recent Alberta budget.

Points I make in the blog post include the following:

-Alberta remains the lowest-taxed province in Canada.

-Alberta’s net debt-to-GDP ratio remains the lowest in Canada.

-For the third consecutive year, the Rachel Notley government announced a tuition freeze for (domestic) post-secondary students.

-No major changes were announced to social assistance benefit levels. Thus, a “single employable” adult on social assistance in Alberta will continue to get approximately $8,000 a year to live on.

The link to my full review of the budget is here.

New book on the history of Canadian social housing policy

One of Canada’s foremost authorities on Canadian social housing, Dr. Greg Suttor, has just authored a book on the history of Canadian social housing policy. Titled Still renovating: A history of Canadian social housing policy, it’s published by McGill-Queen’s University Press and covers the period from the end of World War II to 2013.

I’ve recently reviewed the book. Points I make in the review include the following:

-The book does an excellent job of quantifying trends in housing policy and includes excellent visual representations of data.

-The book is very readable.  Chapter 8 itself includes a great summary of the entire book that would be a great reading to assign to students.

-I feel the book had some shortcomings. For example, it didn’t fully explain why government should be involved in housing policy (even though the author is very knowledgeable on the many reasons why government should be involved). The book also provides less attention to neoliberalism than I would have liked.

The link to my full book review is here.

The Calgary Homeless Foundation’s System Planning Frameworks

Over at the web site of the Calgary Homeless Foundation (CHF), I’m co-author of a blog post about CHF’s new System Planning Frameworks.  These frameworks discuss the different programs funded by CHF.

Points made in the blog post include the following:

-CHF disburses approximately $42 million a year to programs for persons experiencing homelessness in Calgary.

-Approximately $37 million of this amount comes from Alberta’s provincial government; most of the rest comes from the federal government.

-While $42 million sounds like a lot of money, it’s insufficient to meet the scale of the problem.

The full post is available here.

The 2017 Federal Budget

Here is the link to my analysis and comments re the Limits of Liberalism.

http://www.broadbentinstitute.ca/andrew_ajackson/2017_federal_budget_end_of_progress

Reflections on the Social Democratic Tradition

The Broadbent Institute and Douglas-Coldwell Foundation have just published a paper of mine as part of a larger project on social democratic renewal, The paper is mainly retrospective, and touches on social democracy as an approach to economic policy.

Comments are most welcome.

The link is here:

http://www.broadbentinstitute.ca/reflections_on_the_social_democratic_tradition

1.0 Executive Summary:

The purpose of this paper is to provide a political history, overview and critical evaluation of the social democratic tradition in Western politics with some reference to the Canadian experience. It serves as a starting point for the Broadbent Institute’s new initiative exploring social democratic renewal in Canada, a project that will feature essays from a wide range of left perspectives on the future of social democracy in this critical moment of upheaval, inequality and erosion in democracies around the globe.

The term social democracy designates both a social and political movement and a distinctive political theory that developed in opposition to liberal capitalism in the second half of the nineteenth century. As used here, the term social democracy means the full extension of democratic principles to both the social and economic sphere and overlaps closely with the concept of democratic socialism, which denotes building a different kind of economy. Social democracy is about more than capitalism plus a welfare state, and very much remains a goal rather than a reality.

The historical roots of social democracy lie in the movements of the industrial working class and the ideas of socialist opponents of liberal capitalism. Social democracy thus has a more tangential and more recent relationship to feminism, anti-racism, the environmental movement and struggles for the recognition of disability rights and indigenous rights. Social democratic renewal is very much about building deeper linkages to other social movements promoting equality and recognition of differences other than those based upon social class.

Part 1 of this paper explores the relationship between social democracy and the rise of social citizenship and the recognition of economic and social rights. While social democrats can take a great deal of credit for the (temporary and contested) transformation of liberal capitalism into the Keynesian welfare state, this was not exclusively a social democratic achievement. Moreover, social democrats advanced a distinctive view of the welfare state with rights to education, health and welfare based upon citizenship as opposed to much more narrowly targeted and residual social programs. Social democrats also supported strong labour movements as a key foundation for equality and economic democracy.

The social democratic tradition has recognized that inequality of both condition and opportunity is rooted in the concentrated ownership of private capital and in the fact that the logic of capital accumulation limits the workings of political democracy. Until well into the post-war period, economic democracy in the sense of social ownership and regulation of private capital was very much on the social democratic agenda.

Part 2 of the paper looks at the historical development of the social democratic political movement from the Gilded Age of the late nineteenth century until the Golden Age of the immediate post-war years. Prior to the First World War, the expansion of labour and democratic rights led to increased political representation and socialists had to come to terms with the fact that capitalism was capable of both advancing working-class living standards and implementing social reforms, contrary to the tenets of orthodox Marxism. Socialism came to be seen by some reformists as a goal to be achieved gradually through the political institutions of liberal democracy, as opposed to a moment of transition. The division between democratic and revolutionary socialists became explicit after the Bolshevik Revolution, but democratic socialists retained a vision of a post-capitalist economy. The Great Depression and a divided left kept democratic socialism mainly on the sidelines in the 1930s, with the exception of Swedish social democracy, which promoted Keynesian policies and the expansion of the welfare state.

Part 3 of the paper examines social democracy from the heyday of the Keynesian welfare state to the Great Recession. The post-war period saw the implementation of many social democratic policies and a significant decrease in economic and social inequality alongside full employment and strong economic growth. This seemingly confirmed that capitalism could coexist with the recognition of labour and economic and social rights, leading many to reject socialism in the sense of social ownership as an ultimate goal. This shift also took place against the backdrop of the rise of a skilled middle class, the decline of the traditional industrial working class, the mass entry of women into the workforce and, perhaps, a more individualist political culture. The heyday of social democracy was also marked by the rise of the new social movements and a new left calling for fundamental change, including the pursuit of less material goals than traditional social democracy. The emergence of stagflation (high inflation combined with rising unemployment) in the 1970s set the stage for the return of more market orthodoxy (free-market liberalism, or neoliberalism), including the attack on full employment, government regulation, the labour movement and the welfare state by the political Right. Democratic socialists saw greater socialization of private investment and a major role for public investment as the means to maintain economic growth and full employment, but many social democrats increasingly embraced neo-liberal ideas, albeit with an emphasis on maintaining past advances and maintaining equality of opportunity.

The final section of the paper very briefly summarizes current prospects for social democracy at a time when neoliberalism has clearly failed to deliver shared economic and social progress. The key elements of an alternative economic and social agenda exist, including an emphasis on new forms of social ownership, the importance of public investment, and the central importance of environmental transition. A renewed social democracy will also mean building a broad social movement for change in close alliance with other movements including feminist and anti-racist.

The Alternative Federal Budget 2017

This year’s Alternative Federal Budget (AFB) was released on March 9. I was proud to be the primary author of its housing chapter (that chapter is available in English here and in French here).

The first AFB exercise began in 1994, with the first AFB being published in 1995. That involved a joint effort between the Canadian Centre for Policy Alternatives (CCPA) and CHO!CES: A Coalition for Social Justice.

Here are 10 things to know:

  1. Job creation has always been a major focus of the AFB. People need employment to earn income and live fulfilling lives. New jobs also creates important goods and services that help the rest of us prosper. And the more people are working, the more taxes they pay, and the less we (as a collective) have to spend on poverty reduction initiatives (such as social assistance). The type of jobs that get created matter too, as do working conditions; indeed, it’s important that people be happy in the workplace. Finally, who gets jobs matters —think gender, think racial diversity, think Indigenous peoples, think persons with disabilities.
  1. The AFB has always proposed a redistribution of income. This year’s document, for example, proposes a transfer of income (through our tax and transfer system) from households in the top six income deciles to those in the bottom four deciles; households in the top decile would the largest ‘loss,’ and households in the bottom decile would receive the lion’s share of the transfer. The AFB proposes to do this in part by closing tax loopholes for companies and high-income individuals. It also proposes to make our income tax system more progressive and to spend more on important social programs. This proposed transfer of income is illustrated in the figure below (which I’ve ‘cut and paste’ from the Macroeconomic Policy chapter of this year’s document).

 

 

Read more »

Foundations for an Alberta Alternative Budget

An Alberta-based volunteer working group, of which I’m a part, recently released a document titled Foundations for an Alberta Alternative Budget (for media coverage, see this Metro article).  Working group members include staff from Alberta’s non-profit sector, labour movement and advocacy sector. While our long-term goal is to emulate the great work of the Alternative Federal Budget, this year’s effort has resulted in a relatively short document that seeks to lay the foundation for what future Alberta budgets might look like.

Here are 10 things to know.

  1. This exercise brought people and groups together for the first time. While some participants knew each other before, most didn’t. A major reason new people were able to meet each other is that Joel French (Executive Director of Public Interest Alberta) made invaluable introductions.  His wealth of advocacy experience put him in the position to be able to do this.  Thanks Joel!
  1. We didn’t seek organizational endorsements of the document. Nor did we ask volunteers who assisted with the effort to stipulate whether or not they were formally representing their respective organizations when they assisted. Organizations like to carefully consider the advantages and disadvantages of making formal endorsements, and we didn’t want to push anyone to ‘put their cards on the table’ too quickly. Since this is a new initiative, we wanted to give organizations an opportunity to reflect on what this year’s document ended up looking like.  We hope this will help groups carefully consider the possibility of more formal participation in future efforts.

Read more »

Alberta Alternative Budget 2017

Media Release

Foundations for an Alberta Alternative Budget released today

(March 14, 2017-Edmonton) Today, a coalition of researchers, economists, and members of civil society released a plan to boost Alberta’s economic growth while reducing income inequality.

“For too long Alberta’s public services have been strained from decades of underfunding and reliance on volatile energy markets,” said contributing economist Robin Shaban, who noted that Alberta has just seen the worst recession in over three decades.

The 20-page document, Foundations for an Alternative Budget, sets a progressive vision encouraging public investment to stabilize tough economic times and create good jobs.

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

The authors note, however, that reducing education fees, increasing funding support for people with disabilities, and increasing public support for long term care are needed to help protect the most vulnerable populations during times of economic recovery.

“Budgets are always about choices,” says economist Garry Sran. “Alberta continues to have the lowest taxes in Canada.”

The province could raise an additional $7.5 billion in tax revenue each year and still be among the lowest taxed regions in the country, he added.

“Increasing tax revenues would provide a foundation for fiscal stability.”

Finally, the report emphasizes that Alberta must forge ahead with a more diverse economy that considers the environment, inclusive growth, export potential, just transitions, and reduced dependence on oil.

Download report.

– 30 –

Media contacts:

Robin Shaban:  613-898-0026 (cell); contact@robin-shaban.com (email)

Garry Sran:  587-597-7726 (cell); garry_sran@hotmail.com (email)

Five emerging trends in affordable housing and homelessness

Over at the web site of the Calgary Homeless Foundation, I’ve written a blog post titled “Five emerging trends in affordable housing and homelessness.”

Points raised in the blog post include the following:

-The Trudeau government has spent impressive amounts of money on affordable housing and homelessness.  This is time-limited money though.

-There is currently no federal plan in place to deal with the imminent expiry of funding agreements that support existing units of non-profit housing across Canada.

-Many plans to “end homelessness” were put in place by municipalities across Canada in the late-2000s.  Those plans are starting to sunset, yet there’s still a considerable amount of homelessness in most of those muncipalities. The proverbial chickens are coming home to roost.

The link to the full blog post can be found here.

Public Policy and Homelessness: The Case of Calgary

Over at the web site of the Calgary Homeless Foundation, I’ve written a blog post titled “Public Policy and Homelessness:  The Case of Calgary.”

Points raised in the blog post include the following:

-Calgary experienced explosive growth in the size of its homeless population from the mid-1990s until 2008.

-Though causation is hard to establish, the following factors likely had a major impact on this growth: a sharp decrease in federal spending on housing beginning in the early 1990s; a sharp decrease in housing spending by Alberta’s provincial government beginning in the mid-1990s; and strict reforms to social assistance introduced by Alberta’s provincial government in 1993.

-Since 2008, Calgary’s per-capita homeless population has decreased.  Factors that have likely led to this decrease include the implementation of a ‘plan to end homelessness’ in that year; substantial increases in social assistance benefit levels in Alberta brought in after 2008; and (more recently) Calgary’s very high rental vacancy rate (created as an indirect result of the drop in the price of oil, which caused many jobless workers to leave the city).

The link to the full blog post is here.

Poverty Reduction in Alberta

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.

The link to the full blog post is here.

Finance Minister Bill Morneau on the Dangers of Bank of Canada Funding

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

https://petitions.parl.gc.ca/en/Petition/Details?Petition=e-337

Whereas:

  • 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

REPLY

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

Re: http://www.parl.gc.ca/Content/HOC/ePetitions/Responses/421/e-337/421-00858_FIN_E.pdf

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?

Footnotes:

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

The incommensurate aims of the Greek people


“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
http://www.levyinstitute.org/pubs/wp_848.pdf
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
http://livingeconomiesforum.org/1996/15hotson
“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.”

 

 

Lessons from the Reagan Era on Managing Twin Deficits

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.

1980 1985 1988
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.

 

The Federal Role in Poverty Reduction

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.

Alternatives to Corporate Globalization: Cooperatives

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.

Can Capitalists Afford a Trumped Recovery? Guest post by Jonathan Nitzan & Shimshon Bichler

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.

  1. 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).

Read more »

Social Housing in BC, AB and QC (1975-2015)

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.

Ontario’s Electricity Sector: Privatization and deregulation

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

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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.

Read more »

A Critical Take on Staples

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.

Extracted Carbon: Re-examining Canada’s contribution to climate change through fossil fuel exports

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”:

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Canada cannot have it both ways on climate and fossil fuel expansion

Marc Lee

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.

 

 

NAFTA: Suddenly, Everything’s on the Table

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 »

New child benefit impact on child poverty overblown

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%.

2017 PEF Student Essay Contest is Open!

The 2017 PEF Student Essay Contest is officially open!

The deadline for submitting essays is May 02, 2017.

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

2017 PEF ESSAY CONTEST RULES

ELIGIBILE ENTRANTS

  • Open to all Canadian students, studying in Canada and abroad, as well as international students presently studying in Canada. All entrants receive a complimentary 1-year membership in the Progressive Economics Forum.
  • The definition of “student” encompasses full time as well as part time students.
  • Students eligible for the 2017 competition must have been/be enrolled in a post-secondary educational institution at some point during the period of May 2016 – May 2017.

LEVELS OF COMPETITION
There are two levels of competition:

  • One for undergraduates;
  • One for graduates.

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

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.

ELIGIBLE SUBMISSIONS
Eligible entries will be…
…sent by email at the latest on May 02, 2017, to: pefessaycontest@gmail.com
…the only submission by the author(s) (i.e., one submission per person);
…between 20-40 pages in length, and typed in 12-point font, double spaced;
…referenced to academic standards (including any data);
…written in either English or French;
…original, single-authored essays that do not infringe upon the rights of any third parties;
…accepted on re-submission once;
…accompanied by a signed scanned file of the completed PEF Essay Contest Submission Form.

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

ADJUDICATION

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

WINNING SUBMISSIONS

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

 

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Concours de textes étudiants – édition 2017

Qui peut participer ?

  • Ouvert à tous les étudiants canadiens, qui étudient au Canada ou à l’étranger, ainsi qu’aux étudiants étrangers étudiant au Canada. Tous les participants deviennent gratuitement membres du Progressive Economics Forum pour un an.
  • Le terme « étudiant » couvre les étudiants à temps plein et les étudiants à temps partiel.
  • Pour être éligible à l’édition 2017 du concours, un étudiant doit avoir été ou être inscrit dans une institution post-secondaire à un moment donné pendant la période allant de mai 2016 à mai 2017.

Niveaux de compétition

Il y a deux niveaux de compétition :

  • Un pour les étudiants prégradués ;
  • Un pour les étudiants gradués.

*NB: Ceux qui ont déjà complété un programme prégradué ou un programme gradué et qui retournent faire un deuxième programme prégradué ne peuvent participer au concours qu’au niveau gradué. C’est la même chose pour tout étudiant ayant passé une partie de l’année dans un programme gradué.

 

Contenu du texte

Les textes peuvent porter sur tout sujet relié à l’économie politique, la théorie économique ou une problématique en lien avec des politiques économiques, qui reflète une approche critique sur le fonctionnement, l’efficience, et les conséquences sociales et environnementales des marchés libéralisés.

Pour être accepté, un texte doit…
… être envoyé par courriel, au plus tard le 2 mai 2017, à l’adresse suivante : pefessaycontest@gmail.com
… être le seul texte envoyé par le(s) auteur(s) (un texte par personne).
… avoir entre 20 et 40 pages, tapé dans une police de taille 12 points, à interligne double.
… avoir des références écrites selon les standards académiques (incluant les données).
… être écrit en anglais ou en français.
… être un texte original, avec un seul auteur, qui n’enfreint pas les droits d’auteurs d’une tierce-partie.

… n’avoir été soumis au maximum qu’une fois auparavant (donc un texte peut être soumis un maximum de deux fois).
… être accompagné par une fiche d’inscription pour le concours de textes du PEF complétée, signée et numérisée.

Les participants acceptent que le Progressive Economics Forum publie les textes des gagnants et de tout autre participant recevant une mention d’honneur.

Tout participant devra soumettre une adresse courriel qui fonctionne, ainsi qu’une adresse postale pour fins de correspondance.

Jugement

  • Un panel de juges choisis et approuvés par le Progressive Economics Forum va juger les textes soumis.
  • Les textes seront évalués selon les critères suivants : substance, originalité, style, ainsi que l’organisation et la cohérence de l’ensemble.
  • Le Progressive Economics Forum se réserve le droit de ne pas décerner un prix, ou quelque prix que ce soit, si aucun texte ne remplit les critères ou n’atteint les standards.

Textes gagnants

  • Les gagnants seront annoncés à l’Assemblée générale annuelle du PEF.
  • Un prix de $1,000 sera attribué au gagnant du concours pour les étudiants gradués et $500 sera attribué au gagnant du concours pour les étudiants prégradués.
  • Les textes gagnants seront publiés sur le site internet du PEF.
  • Les décisions des juges sont sans appel.

 

How Housing Policy Benefits from a Socioeconomic Perspective

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.

Harper’s EI Appeals Process Not Working

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

Fall 2016

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[1]:

  • 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

Automne 2016

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[1] :

  • 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.

[1] 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.

Tommy Douglas was a “macroeconomist”, not a “provincialist”!

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.