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  • A critical look at BC’s new tax breaks and subsidies for LNG May 7, 2019
    The BC government has offered much more to the LNG industry than the previous government. Read the report by senior economist Marc Lee.  
    Canadian Centre for Policy Alternatives
  • The 2019 living wage for Metro Vancouver April 30, 2019
    The 2019 living wage for Metro Vancouver is $19.50/hour. This is the amount needed for a family of four with each of two parents working full-time at this hourly rate to pay for necessities, support the healthy development of their children, escape severe financial stress and participate in the social, civic and cultural lives of […]
    Canadian Centre for Policy Alternatives
  • Time to regulate gas prices in BC and stop industry gouging April 29, 2019
    Drivers in Metro Vancouver are reeling from record high gas prices, and many commentators are blaming taxes. But it’s not taxes causing pain at the pump — it’s industry gouging. Our latest research shows that gas prices have gone up by 55 cents per litre since 2016 — and the vast majority of that increase […]
    Canadian Centre for Policy Alternatives
  • CCPA welcomes Randy Robinson as new Ontario Director March 27, 2019
    The Canadian Centre for Policy Alternatives is pleased to announce the appointment of Randy Robinson as the new Director of our Ontario Office.  Randy’s areas of expertise include public sector finance, the gendered rise of precarious work, neoliberalism, and labour rights. He has extensive experience in communications and research, and has been engaged in Ontario’s […]
    Canadian Centre for Policy Alternatives
  • 2019 Federal Budget Analysis February 27, 2019
    Watch this space for response and analysis of the federal budget from CCPA staff and our Alternative Federal Budget partners. More information will be added as it is available. Commentary and Analysis  Aim high, spend low: Federal budget 2019 by David MacDonald (CCPA) Budget 2019 fiddles while climate crisis looms by Hadrian Mertins-Kirkwood (CCPA) Budget hints at priorities for upcoming […]
    Canadian Centre for Policy Alternatives
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Plausible Socialism

After the fall of the Berlin Wall, there was a widespread sense that liberal capitalism had triumphed in the battle of ideas, and that socialism as a plausible alternative was pretty much dead. But the many crises of contemporary capitalism – obscene levels of economic inequality, looming ecological disaster, the rise of the racist and anti democratic populist right, the new threats of surveillance capitalism and the surveillance state – threaten dystopia, an unbearable future. In response, the idea of socialism has been re-discovered by a layer of activists struggling for radical change, especially young people.

But what is socialism? If we are against capitalism, what are we for? Is the socialism we have in mind a more robust version of social democracy, despite its past accommodations to a capitalist economy, or a renewal of past visions of a post capitalist economy and society, of utopia? These questions are being debated in recent books and left journals which will help shape contemporary progressive politics.

Read More https://socialistproject.ca/2019/06/between-dystopia-and-democratic-socialism/

Homelessness, harm reduction and Housing First

I was recently invited to give a presentation at a two-day event discussing the overdose crisis and First Nations, with a focus on southern Alberta. My presentation focused on homelessness, substance use, harm reduction and Housing First.

To read the blog post synthesizing my presentation’s key points, click on this link.

What Impact will the 2019 Federal Budget have on Canada’s Housing Market?

I’ve written a blog post about what the recent federal budget means for Canada’s housing market.

Points I make in the blog post include the following:

-The budget contains several initiatives designed to make it easier for households of modest means to become homeowners.

-Such initiatives are often framed as being win-win propositions, while their unintended consequences are rarely discussed.

The link to the full blog post is here.

Ontario Electricity VII – Committee Testimony

The PC Government in Ontario has introduced Bill 87 which would eliminate the rate-based borrowing to subsidize electricity prices and replace it with Government borrowing.

Last week’s Provincial Budget estimates that the required borrowing to subsidize electricity prices for 2018/19 was $2.8 billion. It is likely to exceed $3 billion in 2019/20.

Ontario is the only jurisdiction in North America where the Government would directly subsidize electricity prices.

Today the Government held Committee hearings on Bill 87 and I was one of 7 individuals/groups that provided our views and were questioned by Committee members.

What follows are my prepared remarks. Readers that have followed my work on the subject will recognize all the main themes.

Opening Remarks by Edgardo Sepulveda to the Standing Committee on General Government on Bill 87. April 15, 2019 – Legislative Assembly of Ontario

Good Afternoon.

Thank you for allowing me to participate in this process.

I am an economist by training and have been a regulatory consultant for more than 20 years, largely in international telecoms, with a recent focus on Ontario’s electricity sector.

My presentation is based on my past research and analysis.  If you wish to refer to it later, I have distributed an article I prepared last year and links to other online research.

I will use my time to focus on three things in relation to Schedule 3 of Bill 87, which replaces off-book borrowing from future rate-bases under the Fair Hydro Plan with public borrowing off the tax-base.

First, how did we get to a situation where we are the only jurisdiction in North America where the Government directly subsidizes electricity prices?

Well, starting in 2005 previous Governments implemented a policy of regulation-exempt, long-term contracts to procure new private sector generation capacity.

The critical design flaw here is that as policy previous Liberal Governments excluded those Contracts from regulatory review and oversight.

And the Contracts policy was often poorly executed. Many Contracts were inflexible and lopsided, with the public bearing most of the risks.

With no oversight, the Ministry often ignored expert advice and the result was excess capacity and an inflated costs.

Which gets us to the Second point – the solutions on offer.

When prices became a political liability, the previous Government chose to borrow via the Fair Hydro Plan, rather than reviewing the Contracts.

But if that was the worst possible solution, the current proposal to continue with Government borrowing is almost as bad.

According to last week’s Budget, the Government will take on about 3 billion dollars of new debt a year to pay inflated prices to power generators and provide subsidies that will benefit high-income families most.

This is not efficient or equitable fiscal policy.

And it does nothing to address the legacy of excess capacity or inflated costs.

So, we come to the Third point – what to do?

The cancellation of pre-construction Contracts last summer was a start, but that accounted for less than 1% of future generation. You can find another percent or so from conservation, distribution and transmission.

But if you want to make a real dent in the annual subsidy or achieve the election promise of a further 12% cut, you have to look at legacy generation Contracts.

Review of these Contracts would not be an easy or fast process and is subject to legal risk – but this Government knows this – last summer it enacted legislation shielding it from additional claims from cancelling the White Pines project.

As a first step, the Government should direct the OEB or a Government Committee or another entity to undertake a comprehensive review of legacy Contracts to evaluate which have provided or will provide fair and reasonable prices and to make recommendations on how to deal with those that have not, including via renegotiation or a new framework.

Last month the Select Committee released a Cabinet memo that showed the previous Government had considered, but rejected renegotiation.

But could another Government, free from association with past policy mistakes, reconsider this option?

If the current Government can establish a Select Committee to look at how the previous Government tried to cover up past policy mistakes, why can’t it also look at how power generators benefited from those mistakes?

But actual face-to-face renegotiation is only practical for a few Contracts and more importantly, lacks transparency.

Better to create a general rules-based approach. Process and time-tested rules are our best guarantee of fair and reasonable rates. It also happens to be our best defense against litigation from unhappy power generators.

My own proposal for such an approach would be to transition those Contracts that have not or will not provide fair and reasonable prices to a new rules-based regime that would reduce prices by applying a regulated rate of return. This is not rocket-science – it is how here in Ontario the OEB sets rates for transmission, distribution and OPG generation and is the standard way that regulators around the world set rates.

Thank you.  Happy to take your questions.

 

Low taxes are nothing to brag about

I’ve written an opinion piece that appears in today’s Regina Leader-Post. The piece argues that the Saskatchewan government shouldn’t brag about the province’s low-tax climate (which it recently did). Rather, I argue that taxes serve important functions.

The link to the opinion piece is here.

Jason Kenney’s tax plan full of holes

Jason Kenney has proposed that he will revive the Alberta economy and create jobs by cutting corporate taxes from 12% to 8%. The thinking goes that profitable businesses already located in Alberta will take their larger tax returns and make capital investments or hire more workers. This also assumes that businesses in other provinces will decide to move their operations to a lower tax jurisdiction, increasing the tax and employment base for the province.

In practice, cutting tax rates for profitable corporations doesn’t create jobs. It didn’t work for the BC Liberals when they tried it. And recent experience at the federal level showed that it only made it more likely for corporations to sit on ‘dead money’, as former Bank of Canada Governor Mark Carney put it. Bigger tax returns from rate cuts can be, and often are, used to buy back shares to boost share prices or pay bonuses to executives, which have limited benefit beyond the pocketbooks of those who are already wealthy.

Like most tax cuts, this policy would only benefit those businesses who made enough money to be paying taxes in the first place, and arguably aren’t most in need of help funding new investments. The timing of a tax rate cut also blunts the benefits, as it disproportionately benefits those who have made investments in the past, rather than only rewarding new investments.

As for attracting out-of-province relocation, if Alberta’s existing overall tax advantage and competitive real estate markets haven’t prompted significant movement from other jurisdictions, it’s hard to see how this policy will make much of a difference. Even if it did encourage businesses to move, it’s a zero-sum game that steals from neighbours and sets up the expectation that we need to bribe businesses to set up shop. That’s an unsustainable foundation for long term economic growth.

Another difficult truth is that investing in machinery and equipment doesn’t necessarily create jobs. We need look no further than oil sands investments in self-driving trucks to see how corporate investment doesn’t always trickle down to more or better jobs for workers.

The success and impact of such a policy can’t be viewed in isolation, either. Many economists who support corporate tax cuts will tell you that they prefer a more ‘efficient’ form of taxation, such as a broad based sales tax. That’s not what’s on offer here, so we have to look at what Kenney might cut when the predicted jobs never arrive, and how that would impact the Alberta economy. This is especially true if he plans to follow through with promised cuts to education, the foundation for long term prosperity of any economy.

As government expenditures go, a corporate tax rate cut has the lowest bang for the buck in creating jobs and growing the economy. If we really want to encourage more productive investment, a more targeted approach could be used, such as the Alberta Investor Tax Credit (AITC). Or the provincial government could allow businesses to write off the cost of investments in capital faster, like the federal accelerated Capital Cost Allowance (CCA) introduced under Stephen Harper and extended by Justin Trudeau. But overall corporations and holders of capital need to pay higher taxes, not lower. It’s important to remember that decisions around corporate investment are guided by a number of factors, but most significant among them is demand, not corporate tax rates.

Trickle-down economic policy is one of those zombie economic myths that will always find strong support among those who stand to benefit from it.

Populism in the Time of Neoliberalism

The way of the world in recent and present time is the preach and the practice of neoliberalism, of pushing markets to their extremes. The Turkish writer and political analyst Ece Temelkuran in her new book How to Lose a Country: the Seven Steps from Democracy to Dictatorship, draws on her Turkish experience and applies its lesson elsewhere, notably to Trump’s America.

What is the relationship between neoliberalism and populism? Temelkuran sees a link and makes a most insightful point: neoliberalism itself lacks a moral centre is without meaning. A vacuum is created which calls forth right-wing populism which provides the necessary narrative of authoritarianism.

Temelkuran believes that people crave a narrative which gives point and purpose to their lives. In the time of liberalism the story was of economic forces yielding a better life. With neoliberalism, many got no such benefit. The authoritarian leader like Trump provides a politics of redemption even though it is likely that this will lead to policies that actually worsen the lot of its hardcore of supporters. The latter exposes a contradiction that may lead to yet more authoritarianism, more repression of dissidents.

This is what has happened in Turkey. Too soon to know the fate of Trumpism, but Temelkuran has given us a way to understand what is going on and to guess as to its consequences.

Help please!

Can anyone out there help me? Just saw a headline on CNN saying that, in spite of Brexit chaos, unemployment was at an historic low. Likewise in US where in spite of Trump — could it really be because of? — unemployment is also at an historic low. Reminds me that back in the late 1970s there was a G-7 summit in London England. There were pictures in the press of the leaders, beginning with Thatcher. For Italy the joke was that politics was so volatile that no one could remember who was its leader. But guess which country had the best performing economy? Answer: Italy.

All of which raises the question: does it really not matter to the economy what is the state of the polity?

Income Inequality and Redistribution in Venezuela

I had been waiting for last month’s publication of the book “Confronting Inequality” before preparing my annual update on income inequality and redistribution in Canada. I am glad I did because the book presents new and exciting empirical findings that shed light on the age-old equity/growth debate (more on that below), but also introduced me to the Standardized World Income Inequality Database (SWIID). Data comparability and granularity has been a challenge for inequality researchers looking at countries outside the OECD and EU. Specifically, the lack of inequality data for market income did not allow researchers to measure and analyze the redistributive effect of Government policy. In contrast, the most recent version of SWIID provides historical estimates of Gini coefficients for disposable and market income for 192 countries generally to 2016. Keen to make use of this new database, I’ve decided to turn my attention south to my birth continent of Latin America and focus on Venezuela.

There is of course much to be analyzed (and debated) about and in Venezuela from a foreign policy/intervention, constitutional legitimacy, humanitarian, political and economic perspective. My objective here is narrow: to present evidence-based analysis of Venezuela’s income inequality performance, from a historical (1990 to 2015) and comparative (other Latin American countries) perspective. I use the same framework of analysis as in previous posts and encourage interested readers to refer to these for further conceptual and technical background. The most recent SWIID data for Venezuela is 2015 and therefore my analysis does not cover the current period of deep economic contraction or hyperinflation, although in the Epilogue I do hypothesize how these severe macro-economic shocks have likely impacted income inequality.

Read more »

Technology and Democracy (continued)

Post the Second World War, the US became dominant in the world economy and a shift from coal to oil was deliberately taken by the state to weaken the power of coal-centred industrialization and tie the Middle East into American and European control. Transport of oil by pipeline and tanker created a fluidity that tended to eliminate nodal points where workers could exercise power.

Technology and Democracy: Contrasting Coal and Oil

The opening sentence of the 2011 book, Carbon Democracy: Political Power in the Age of Oil by the historian Timothy Mitchell, reads “Fossil fuels helped create both the possibility of modern democracy and its limits.” Carbon democracy is “a certain kind of democratic politics.” He observes: “Countries that depend upon petroleum resources for a large part of their earnings from exports tend to be less democratic.” Mitchell wants to moor that democracy in the materiality of coal and oil, which Innis called “dirt economics.” He wants to keep his eye not simply on oil revenues, as most scholars have, but on oil itself.

Coal was the first fossil fuel. Economically, it enabled the Industrial Revolution of sustained exponential economic growth, and politically, mass politics and liberal democracy. The transportation of coal necessitated the development of canals and railways with further powerful spread effects. (You get a sense of the command of history, and particularly economic history, that Mitchell has; this is political economy at its best.) The demand for other goods from distant places led to colonization and imperialism which undermined democratic development at home and abroad. At the same time, however, the concentration of people in cities and factories facilitated the development of new forms of collective democratic action including, for example, trade unions, and notably coal miners with considerable autonomy working underground.

Wilbur Schramm and Noam Chomsky Meet Harold Innis

That’s the actual title of a recent book (2015) by Robert E. Babe, who has a doctorate in economics and is professor of Information and Media Studies at the University of Western Ontario. The sub-title is Media, Power, and Democracy.

Harold Innis you know. If you don’t, get with the required reading. Noam Chomsky everybody knows. So who is Wilbur Schramm?

He’s the founder of Communication Studies in the U.S., which is your ordinary flourishing discipline, behavioral, quantitative, instant conventional wisdom, wholly helpful to power. In contrast is Innis as founder, with Marshall McLuhan, in Canada, of media studies,  with tell-all titles like Empire and Communications, Bias of Communication, Changing Concepts of Time, and during his transition from studies of Canadian staples to media studies, Political Economy of the Modern State. Not behavioral. Not quantitative. Created paradigm of Canadian Political Economy — which eventually morphed into the New Canadian Political Economy. Dissenting wisdom, as it became increasingly critical of power, and dismissed and ignored by established power.

As for Chomsky, he and Innis are of a kind. That is the convincing case made by Babe in this book. You’ll learn more than you did about each of them and just might decide to emulate them more as activist scholars, particularly if university-based.

Chomsky, immortal, speaks truth to power endlessly. He’s co-author of Manufacturing Consent, of how the mass media can create consensus to do very wrong things. Chomsky, while maintaining his reputation for innovation in linguistic studies, has been extraordinarily active politically, demonstrating and speaking publicly from his opposition to the War in Vietnam, to civil rights in America, to the Iraq war, to today, where he is still speaking out and writing at 89.

Both Innis and Chomsky are motivated by circumstances. Neither was inclined to seek the quiet comfort of the ivory tower. Innis was affected by and responding to the First World War (in which he participated), the Great Depression of the 1930s, the Second World War, the atomic bomb, the beginning of the Cold War, the Korean war, and, throughout to Canada’s willing shift from the British to the American empire, the militarism of which Innis deplored. He was, however, not politically active outside the university and attacked those who were, notably CCFers, while insisting on their freedom of speech. All and all, a persistent intellectual radicalism

Chomsky, in his condemnation of American militarism and imperialism, has likewise strongly condemned those intellectuals who served power.

Babe thinks that Innis and Chomsky have in common a mistrust of elites and of power. We know from today’s populist politics how important that sentiment is. Both attacked power from the protection of a university base — which few academics do. Both were critical of what Galbraith, the Canadian-American professor, called the conventional wisdom. In my view that is the surest sign of their greatness as public intellectuals.

Statistics Canada’s Ongoing Consultation about the Market Basket Measure Needs Recalibration

Things are moving quite fast, even too fast, since the federal government’s first poverty reduction strategy was published in August, at least for the aspects of this strategy which are problematic. The unilateral decision to consider the Market Basket Measure (MBM) as “Canada’s Official Poverty Line” is one of those. It ignores some useful expertise developed about the MBM over the years, notably by the Centre d’étude sur la pauvreté et l’exclusion (CÉPE), the institution meant to provide dependable and objective information on matters concerning the application of Québec’s Act to combat poverty and social exclusion[1], as well as current discussions about the type of living standard effectively assessed by this measure.

In 2009, the CÉPE carefully recommended the use of the MBM “as the baseline measure to monitor situations of poverty from the perspective of coverage of basic needs” (CÉPE’s advice, page 34), stating explicitly that “while the market basket measure makes it possible to monitor the evolution of poverty and the progress achieved, it fails to measure exit from poverty, as based on the definition contained in the Act” (Ibid.)[2]. Yet the definition of poverty given in the federal strategy is quite close to the Québec one[3].

Moreover, the federal decision was announced without waiting for the results of the periodic revision of the MBM (rebasing process) by Statistics Canada, which is still taking place. This decision is now on its way to be legislated through Bill C-87, which was launched on November 6 (and incidentally, does not mention the strategy’s definition of poverty). Meanwhile, Statistics Canada has launched an online consultation asking people’s advice on the MBM… with ill-calibrated data.

Let’s start with this point, since the consultation is ongoing and invitations to respond are circulating within different organizations.

What’s wrong with Statistics Canada’s online MBM consultation

In this survey, held from October 15, 2018 to January 31, 2019, Statistics Canada “is conducting a consultation to gather input from Canadians to help validate how we are measuring poverty”. The ambiguity between the federal government’s haste to set the MBM as the official poverty line and the periodic rebasing process of the MBM by Statistics Canada is ubiquitous in the survey’s presentation, whose stated purpose is “to help validate the methodology of the MBM”:

“Recently, the Government of Canada announced that the Market Basket Measure (MBM) will be used as Canada’s Official Poverty Line. Statistics Canada is currently conducting a comprehensive review of the MBM.

The MBM is a measure of low income which is based on the cost of a basket of goods and services that individuals and families require to meet their basic needs and achieve a modest standard of living. Wherever individuals and families are living across the country, if they cannot afford the cost of this basket of goods and services in their particular community, they will be considered to be living below Canada’s Official Poverty Line.

By participating in this consultation, you will be supporting Statistics Canada’s ability to accurately measure low income and poverty.”

In other words, the frontier of poverty is officially tied to the MBM threshold and then the public is consulted to assess whether it’s indeed the case!?

At lot of assumptions are made here through the association between what is meant by basic needs coverage, a modest standard of living (not defined by Statistics Canada[4]) and an official poverty line. What about the respective position of these concepts “within a field of possible thresholds” (CÉPE’s 2009 advice, page 34) in the continuum between poverty and non-poverty? More confusion is added in the questionnaire, where the MBM basket is presented as follows:

“The basket includes items such as healthy food, appropriate shelter and home maintenance, and clothing and transportation.

The items in the basket reflect prices in communities across Canada. […]

By selecting your province, city and family size, you can find out how much your family would need to stay out of poverty. Please tell us if you think these amounts are too high, too low or “about right”.”

Then people are asked to evaluate specific amounts for the basket’s various components.

This seems like a departure from the usual rigour of Statistics Canada, which is not known to have ever broken down the MBM thresholds into specific amounts for the basket’s components for other households’ sizes than the two adults and two children reference family. And there is good reason for this.

In a 2010 empirical study, the CÉPE showed that although it seemed to work for the total content of the basket (i.e., the total MBM threshold), the equivalence scale used to establish corresponding thresholds for other family sizes (the square root of households size) did not accurately represent the breakdown of expenditures for the specific sections of the basket (food, clothing, shelter, transportation, other necessities), at least for one-person households.

For example, the equivalence scale implies that to establish the cost of a basic standard for a single person, one must divide the cost of the basket for a household of four persons by two (the square root of four). However, in practice, the comparable cost of food or housing for a single-person household will not be half of what it is for a family of four. Most likely, it will amount to less than that for food and more, even much more, for housing.

Yet the online consultation (as well as the federal strategy, on pages 69-70) simply uses the equivalence scale ratios to establish the cost of the basket components proposed for evaluation to respondents of various household sizes. The result is that the amounts are broken down in ways that don’t make sense, as shown in the inset.


Unrealistic apportioning of the MBM components in the online consultation


The first part of the table below presents amounts found in Statistics Canada’s online consultation for households of different sizes in Montréal, and calculates their monthly and annuals totals, which are not mentioned in the consultation.

The second part of the table shows that the amounts provided in the online consultation for each component of the basket closely match those obtained with the usual equivalence scale.

The third part of the table uses the coefficients observed by the CÉPE in its 2010 empirical estimation of equivalent expenditure levels between a household of two adults and two children and a single person household. It also adjusts the results to the annual MBM threshold that can be inferred from the consultation for this household. Even though the CÉPE’s coefficients are somewhat dated, they reflect the distribution of expenses as it was actually observed in Québec at the time, which is useful for illustrative purposes (and calls for further research and updated observations for various household sizes).

Indeed, it seems reasonable to suppose that where a Montreal family of four will spend $950 monthly for food, a person living alone is likely to spend closer to three times less (around $307 to $341, which is in line with a $315 recent estimate from Montreal Diet Dispensary), than two times less (480 $) as indicated in the consultation. Likewise, where this family of four will spend $750 for housing, an amount of $595 to $660 will not appear excessive for a person living alone. This time, the amount of $380 indicated in the online consultation is much too low.

Table showing compared breakdowns of the MBM threshold into the components of the basket for various household sizes in Montreal according to various methods, in reference to the amounts given in the current Statistics Canada’s online consultation about the MBM (conducted between October 15, 2018 and January 31, 2019).

What kind of results can be expected from such a consultation if the indicated amounts for the key items in the basket are misleading?

A few pathways forward regardless

Slow and steady wins the race, says the fable. While the political will to reduce poverty is much needed and welcome in Canada, it would be regrettable to lose its potential due to a lack of reliable and credible foundations of its chosen poverty measure.

The MBM is a useful cost-based measure of basic living standards, but it needs proper care and assessment as an indicator within the broader concept of poverty. Choosing it as the official poverty line in Canada without such nuances compromises this proper use.

While consultations about the contents of the MBM are advisable, as we can expect that standards of living change over time, these consultations must be done in a manner that’s orderly and pays attention to the current state of knowledge without skipping a step between what is known and what has to be assessed.

What can be done in the meantime, if the federal government’s intent to reduce poverty is serious?

Here are some suggestions.

  • Consider the MBM as a good indicator among a larger set of reliable low income lines and characterize the existing or considered lines in this set in relation to what they specifically reveal about diverse experiences of income poverty across Canada.
  • Modify Bill C-87 accordingly and characterize the MBM differently than as the official poverty line in Canada, e.g. as an official line to follow the experience of poverty from the angle of basic needs coverage, as is done in Québec.
  • Maintain the announced targets for the reduction of low income rates in reference to the MBM for what it is, without linking this line to the difference between being poor or not, and consider alternative measures and targets that could be used to assess and reduce the number of people living in poverty.
  • Implement the announced National Advisory Council on Poverty, with a guaranteed independence in its mandate and entitlements, and a sound representation of rights-based advocacy groups and networks, including persons with a lived experience of poverty.
  • Work closely with this Council in order to develop a plan with concrete policy measures, which are lacking in the strategy, so that these targets can be achieved.
  • Maintain a distinction between having the resources to cover one’s basic needs, as monitored by the MBM, and being free from poverty as broadly defined in the national strategy to include the resources, means, choices and power necessary to acquire and maintain a basic level of living standards and to facilitate integration and participation in society.
  • Expand the definition of poverty and its interpretation in reference to the rights mentioned in the definition of poverty given by the UN Committee on Economic, Social and Cultural Rights.
  • Request Statistics Canada, in reference to the statement published in 1997 by its chief statistician of the time, Ivan P. Fellegi, to investigate what type of income indicator could correspond more fully to a poverty line along this broader definition, with respect notably to what has been published in Canada around the concepts of living wage and living income.
  • Continue the ongoing revision of the MBM by Statistics Canada and ensure a sound maintenance of the surveys needed for its calculation.
  • Temporarily put on hold the items of the online consultation about the MBM which are related to the cost of its various components for household sizes other than the 4 persons reference household, undertake the studies needed to establish realistic coefficients for breaking down expenditures in the sections of the basket of goods and services according to the size of households (in line with the 2010 CÉPE study), and start over with this aspect of the consultation.
  • Observe where all households are situated, below and above the MBM threshold, or any other line used to characterize the experiences of poverty, so that envisioned actions for poverty reduction can be linked to the continuum of existing inequalities in living standards and incomes and to the changes needed more broadly in social, fiscal and economic policy to reduce these inequalities.
  • Acknowledge that this also requires the elimination of structural and systemic barriers, including discrimination, and calls for a variety of income and non-income inequality indicators in the strategy’s dashboard.

There is still time to address these concerns and move the process in the direction needed to produce lasting and desirable results for all Canadians. Let’s hope the federal government listens and understands what is at stake, and then makes the necessary adjustments to get this right. It will be well worth the trouble for what comes next.


[1] An English version of the adopted act, without the enforcement notifications, can be found here.

[2] “For the purposes of this Act, “poverty” means the condition of a human being who is deprived of the resources, means, choices and power necessary to acquire and maintain economic self-sufficiency or to facilitate integration and participation in society” (Québec Act, article 2, French formulation here).

[3] “Poverty is: The condition of a person who is deprived of the resources, means, choices and power necessary to acquire and maintain a basic level of living standards and to facilitate integration and participation in society.” (Opportunity for all, page 7, French formulation here, same page).

[4] Other Statistics Canada’s publications present the MBM basket as “representing a modest, basic standard of living” in English, and  “correspondant à un niveau de vie de base” in French.



Vivian Labrie is an independent researcher, associated to the Institut de recherche et d’informations socioéconomiques (IRIS). She has been involved in various ways since 1997 in the actions that led to the adoption in 2002 of the Act to Combat Poverty and Social Exclusion by the Québec National Assembly, and in the follow up of its implementation afterwards.

This article is a slightly updated English version of the blog post “
Une consultation en ligne sur la MPC à recalibrer”, which was originally published on the IRIS website on October 17, 2018.

2019 PEF Student Essay Contest is Open

The 2019 PEF Student Essay Contest is now open!

Calling all Canadian students anywhere in the world and all post-secondary students in Canada who are working on papers taking a critical approach to the functioning, efficiency, social, and environmental consequences of unconstrained markets. The winning essays will receive a cash prize of $1,000 for the graduate student category and $500 for the undergraduate student category.

You can download a poster in English or Français. Please help us spread the word and post one in your department.

Essay submissions should be made to PEFEssayContest2019@gmail.com and must be accompanied by a signed scanned file of the completed PEF Essay Contest Submission Form or fiche d’inscription pour le concours de textes du PEF. The deadline for submitting an essay for the contest is April 29, 2019.

——

2019 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 2019 competition must have been/be enrolled in a post-secondary educational institution at some point during the period of May 2018 – May 2019.

LEVELS OF COMPETITION

There are two levels of competition:

  • One for undergraduate students;
  • One for graduate students*.

*Note: Those who have previously completed an undergraduate degree or a graduate degree, and are returning to do a second undergraduate degree will only be considered for the graduate student competition. The same holds for students 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, and should reflect 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 April 29, 2019, to: PEFEssayContest2019@gmail.com
  • the only submission by the author(s) (i.e., one submission per person);
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Concours de textes étudiants – édition 2019

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An update on Canada’s National Housing Strategy

Steve Pomeroy, arguably Canada’s top affordable housing policy expert, has written a status update on Canada’s National Housing Strategy (NHS). His overview includes some great background material on Canadian housing policy generally.
Points raised in his analysis include the following:
-The Trudeau government’s much-anticipated NHS was unveiled in November 2017.
-In most provinces and territories, federal funding accounts for less than 10% of homelessness funding. Provincial, territorial and municipal orders of government fund most of the rest. Yet, just 5% of new funding under the NHS has been earmarked towards the Trudeau government’s goal of reducing chronic homelessness by half.
-Our federal government is good at funding/financing affordable housing; provincial/territorial governments, by contrast, are good at housing program design and implementation. Each should stick to what it’s good at (ergo: the federal government should let provincial and territorial governments lead when it comes to program design/implementation). Sadly, history suggests that federal officials will be reluctant to treat provincial/territorial governments as equal partners during the implementation of the NHS.
-Canada’s federal government does a very poor job of enumerating new social (i.e., non-profit) housing builds.
-Steve thinks it’s a mistake for the federal government to require provincial/territorial cost-matching for the Canada Housing Benefit (which is an important component of the NHS); though he’s not suggesting provincial and territorial governments get a ‘free ride’ on it either.
-Non-profit housing providers across Canada have been having trouble accessing funding currently available under the NHS.

Socialism For Realists

I recommend reading Sam Gindin’s paper “Socialism for Realists” to be found in the current issue of the relatively new socialist journal, Catalyst. Sam spent most of his working life as a union economist and assistant to the President of the CAW, and writes often with Leo Panitch, most notably as co-authors of The Making of Global Capitalism.

 

I will not attempt a summary here, except to say that Sam tries to sketch a plausible framework for what a socialist economy might actually look like. By “socialist” he means that the economy would be mainly based on public ownership of the means of production (with a role for small enterprises and for different forms of public ownership), plus meaningful worker control at the workplace. His main focus is on how to strike the needed balance between state economic planning, and decentralization of decision-making to workers and their enterprises.

He stresses that any conceivable socialism will not exist in a post scarcity world and that serious collective decisions will have to be made on what to produce, how to divide output between public and private consumption, and how to divide productivity gains between rising consumption and shorter working time. A strong state will clearly be needed, albeit that the state can become much more democratic and some important decisions can be left to local authorities.

Markets will play a role within a feasible socialism, though as an element in overall planning. A labour market and wage differentials will continue to exist in a context of much greater income equality, some form of guaranteed income or employment, and a high social wage in the form of collective goods and services.

Perhaps the most original part of the paper is a reflection on how sector councils and linkages between them might build a bridge between worker controlled enterprises and central planning.

Hopefully, the paper will be widely read and debated. It challenges even democratic socialists to be much more ambitious, and will resonate with those who agree with Sam that being anti-capitalist is not enough, and that we need some kind of model of a possible future in mind to inspire a strong political movement for radical change.

One quibble — as acknowledged by the author, there is no discussion of how a planned economy would fit into global capitalism, or for that matter, of the feasibility of global socialism. I suspect the framework is only relevant if an economy has a high degree of internal coherence and self-sufficiency, as in the immediate post War period, which will in and of itself be very difficult to achieve.

 

Supportive housing for persons with serious mental health challenges

I’ve recently written a ‘top 10’ review of a new book on supportive housing—i.e., subsidized housing with social work support—for persons with serious mental health challenges. The book’s an anthology that was edited by three Ontario-based researchers.

A key questions that emerges in the book is: Should such housing be owned and operated by for-profit providers, or by non-profit providers? An advantage of non-profit ownership, in my opinion, is that a non-profit entity eventually owns the asset.

My full review can be found here.

Rent Control in Ontario

I’ve just published my new analysis of Ontario’s proposed rent controls and develop an evidence-based comprehensive alternative proposal at the CCPA’s “Behind the Numbers” blog.

 

 

Ten considerations for the next Alberta budget

Over at the Behind The Numbers website, I’ve written a blog post titled “Ten considerations for the next Alberta budget.” The blog post is a summary of a recent workshop organized by the Alberta Alternative Budget Working Group.

The link to the blog post is here.

The Anthropocene and the New World

In recent decades all but the wilfully ignorant have had to face two facts: that climate change is taking place and that it is the result of what we humans are doing. The term Anthropocene was coined in 2000 in recognition of that latter hugely important fact. When had this new era began – and with it the end of the Holocene epoch that had been around for some 11,000 years of climate stability, a transition out of the Ice Ages, that then facilitated the spread of farming and permanent settlements. Some said it was the Industrial Revolution beginning ca 1750 and the enormous increase in the burning of coal and of carbon emissions. Then at a global gathering in 2016, geologists who decide this matter by examination of the earth’s strata ruled by majority vote that this new epoch of the Anthropocene had not actually begun until 1945. Two things were said to be causal. The first was the testing of the first atomic bomb in 1945 and its immediate use and then further testing which left radioactive evidence in the planet’s atmosphere. The second was what has come to be called the Great Acceleration, the leap in global economic growth and in world population post the Second World War facilitated by new global arrangements, and the even more rapid growth of carbon emissions.

At the same time that a consensus was forming on this, it became evident that  human effect on the atmosphere had first happened some five centuries ago with the impact of the Old World of Europe on the New World of the Americas. European disease to which the new world had no immunity was utterly devastating. Fifty to sixty million people died, ninety percent of the population. In consequence, the way of life was pervasively disrupted and destroyed and with that withering of farming and settlement carbon emissions declined drastically. The result was not today’s global warming but global cooling. It was a one-shot event, sharp but short-run , but that it effected climate change in its time tells us how the ‘discovery’ of the New World was the destruction of its population.

Possessive Individualism

That’s what the political theorist C.B. Macpherson (1911-1987) saw emerging historically with the rise of capitalism. Frank Cunningham in his just published intellectual biography of Macpherson, The Political Thought of C.B. Macpherson: Contemporary Applications describes possessive individualism as “The individual is proprietor of his own person, for which he owes nothing to society”. That sounds like an apt description of what is true today in the time of neoliberalism. In Cunningham’s words: “possessive individualism now stares one in the face at every turn.” Pervasive marketization has turned amenities and social services into commodities: “university students become clients; homes become real estate investments; cities become global competitors; ideas become marketable possessions.”  This book ably demonstrates that and helps an economist of the progressive persuasion analyse our predicament.

Cunningham quite properly insists that possessive individualism is not an essential part of human nature – as is seriously argued by ascending cognitive science – but is historically constructed as political economy tells us.  Cunningham likewise tells us that, for Macpherson, the alternative to possessive individualism was “developmental democracy” which transcends market capitalism.  Economists can benefit from reading Cunningham’s analysis of what that means with respect to contemporary issues such as globalization, intellectual property, and inequality.

Crashed: How a Decade of Financial Crises Changed the World

Book Review

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Abraham Rotstein and the Radical Decade from the mid-sixties to the mid-seventies

Remarks at a posthumous book launch of his Myth, Mind and Religion at Massey College, University of Toronto, October 2018

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

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

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

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

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

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

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

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

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

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

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

Is there life after NAFTA?

 

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

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

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

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

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

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

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

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

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

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

 

 

The New Language of Resource Exploitation: From Staples Dependency to Extraction Empire

“Staples dependency” we know from Innis onwards.  It can mean reliant upon, dependent on, the export of staples, and permits of a staple theory of linkages as economic theory. It can also mean a resource margin of a more developed imperium. Economic theory is infused by the power relations inherent in “dependency” and is transformed into political economy. In the shifting fashions of scholarship, over time “dependency” came not to be permitted as appropriate political economy. This in turn meant the purging of “nationalism” as a tolerable response at the risk of losing a political edge.  But the idea of a “staples trap” implicit in Innis could not be wished away.

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

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

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

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

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

 

Teaching macroeconomics as though Lehmans didn’t happen

September 15th marked the tenth anniversary of the fall of Lehman Brothers, destabilizing Western economies at levels not seen since the 1930s. It also marked the second week of fall classes, with many economics graduate students cranking through equations that define the discipline’s conventional macroeconomic models. With such names as New Classical, Real Business Cycle and New Keynesian, these models can all be traced to the rational expectations revolution of the 1970s, which sought to explain stagflation when the conventional Keynesian framework could not. The rational expectations approach attempted to provide more precise behavioral microfoundations than the Keynesian model by positing that economic actors can form expectations of future economic values, say inflation, such that on average, their predictions of future values tend to be correct. This assumes the actors share the same understanding of the structure of the economy and past economic data. This research program would come to dominate macroeconomic scholarship and strongly influence policy makers, culminating in the creation of the dynamic stochastic general equilibrium (DSGE) model, a popular forecasting and policy analysis tool used in central banks and finance departments.

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

On Canadian campuses, however, where the next generation of macroeconomists are being trained, there is no clear signal that similar changes are being made in the curriculum of grad-level macroeconomics. A recent panel discussion among academic economists featured the admission that the 2008 crisis was the most embarrassing empirical failure of the profession since the Great Inflation of the 1970. Yet, in the same breath, that professor said he wouldn’t change a thing in his teaching. Indeed, a glance at the macroeconomics syllabuses of several top Canadian grad schools find little evidence of a shift away from teaching the rational expectations-grounded macro models that have come under criticism.

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

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

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

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

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

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

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

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

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

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

CLC Senior Economist Job Opening

There’s an exceptional opportunity for a bright and critical-minded economist who is as passionate about social justice and working on behalf of unions and working people as they are about working with spreadsheets: CLC Senior Economist.

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

Call for federal support of cancelled Ontario basic income project

Members of the Progressive Economists Forum noted with dismay the premature cancellation of Ontario’s basic income pilot and have penned an open letter to Federal Minister Jean-Yves Duclos (Families, Children and Social Development) calling for federal support for the project. So far, the letter has been signed by 50 Canadian economists and researchers.

_____

Dear Minister Duclos:

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

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

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

Thank you for your consideration.

Sincerely,

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

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

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

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

5. Jordan Brennan, Economist, Unifor

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

37. Eric Miller, Contract Faculty, York University

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

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

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

41. David Pringle, Progressive Economics Forum

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

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

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

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

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

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

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

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

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

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

When tenants ‘graduate’ from Housing First programs

Over at the Research Blog of the Calgary Homeless Foundation, I’ve written a ‘top 10’ overview of a study on which I’m co-author. It essentially asks the question: “When homeless people are placed into subsidized housing with social work support, for how many months/years do they require that social work support?”

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

The blog post can be accessed here.

Rotstein’s Monumental Epitaph

The late Abraham/Abe Rotstein (1929-2015) was an economist of a leftist persuasion, literally a Left Liberal. He left behind an almost completed manuscript which he had been working on for more than three decades. It has now been published.  Its title Myth, Mind and Religion: The Apocalyptic Narrative is indicative of its extraordinary breadth.

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

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

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

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

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

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