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  • Imagine a Winnipeg...2018 Alternative Municipal Budget June 18, 2018
    Climate change; stagnant global economic growth; political polarization; growing inequality.  Our city finds itself dealing with all these issues, and more at once. The 2018 Alternative Municipal Budget (AMB) is a community response that shows how the city can deal with all these issues and balance the budget.
    Canadian Centre for Policy Alternatives
  • Why would a boom town need charity? Inequities in Saskatchewan’s oil boom and bust May 23, 2018
    When we think of a “boomtown,” we often imagine a formerly sleepy rural town suddenly awash in wealth and economic expansion. It might surprise some to learn that for many municipalities in oil-producing regions in Saskatchewan, the costs of servicing the oil boom can outweigh the benefits. A Prairie Patchwork: Reliance on Oil Industry Philanthropy […]
    Canadian Centre for Policy Alternatives
  • CCPA's National Office has moved! May 11, 2018
      The week of May 1st, the Canadian Centre for Policy Alternatives' National Office moved to 141 Laurier Ave W, Suite 1000, Ottawa ON, K1P 5J2. Please note that our phone, fax and general e-mail will remain the same: Telephone: 613-563-1341 | Fax: 613-233-1458 | Email: ccpa@policyalternatives.ca  
    Canadian Centre for Policy Alternatives
  • What are Canada’s energy options in a carbon-constrained world? May 1, 2018
    Canada faces some very difficult choices in maintaining energy security while meeting emissions reduction targets.  A new study by veteran earth scientist David Hughes—published through the Corporate Mapping Project, the Canadian Centre for Policy Alternatives and the Parkland Institute—is a comprehensive assessment of Canada’s energy systems in light of the need to maintain energy security and […]
    Canadian Centre for Policy Alternatives
  • The 2018 Living Wage for Metro Vancouver April 25, 2018
    The cost of raising a family in British Columbia increased slightly from 2017 to 2018. A $20.91 hourly wage is needed to cover the costs of raising a family in Metro Vancouver, up from $20.61 per hour in 2017 due to soaring housing costs. This is the hourly wage that two working parents with two young children […]
    Canadian Centre for Policy Alternatives
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The Progressive Economics Forum

Carey Doberstein’s book on homelessness governance

I’ve just reviewed Professor Carey Doberstein’s book on homelessness governance (UBC Press). The book looks at the way decisions were made pertaining to funding for homelessness programs in Vancouver, Calgary and Toronto during the 1995-2015 period.

Points raised in my review include the following:

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

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

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

My full review can be read here.

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

Ontario Electricity Sector V – What they knew, and when they knew it…

Last month I published a full-length article in the “The Monitor” magazine providing a “how we got here” analysis of the Ontario electricity sector and some options for the next Government.  Since then, two things have changed: first on May 31 two investigative journalists, Carolyn Jarvis and Brian Hill, wrote an excellent story for Global News about how successive Liberal Ministers of Energy ignored expert agency advice, which resulted in Ontario households having to pay billions of dollars more for electricity (see 3:51 Global News video here); and second, on June 2 the current Liberal Premier conceded that the Liberal party will not win the election to be held tomorrow (June 7).

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

Read more »

Ford Plan for Ontario – Potential Employment Impacts

Ontario Conservative leader Doug Ford finally released a partially costed version of his election promises in his Plan for Ontario in the last week before the election. This includes approximately $7.6 billion in tax cuts and revenue reductions and a net $500 million reduction in annual spending.[I]

At the same time, Ford has also promised that “we will balance (the budget) maybe the third or fourth year” e.g. by 2021/22. While Ford has claimed he wouldn’t lay off public sector workers—unlike his predecessor Tim Hudak who promised he’d lay off 100,000—with his additional billions in tax cuts, it will be impossible to balance Ontario’s budget in three or four years without job losses.

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

Ford has said he would balance the budget by achieving “efficiencies” through spending cuts of about 4%, but he hasn’t provided any details of those. Given his promises of over $7.6 billion in annual tax cuts, a 4% cut to the Ontario government’s overall spending still wouldn’t be enough to balance the budget by 2021. He’d need to cut Ontario’s program spending by 4.9% from its projected levels in 2021/22 to eliminate the deficit[v]. In the absence of any further information from Ford and the Conservative party of what degree and how he would cut spending, this analysis considers three scenarios:

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

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

Read more »

The Bank of Canada should target full employment: 61 economists

On May 28th, 61 Canadian economists (myself included) signed the following letter urging the federal government to instruct the Bank of Canada to consider full employment and not only inflation when conducting interest rate decisions.  It was through the great organization of Mario Seccareccia that this was made possible and has received reviews by several media commentators, notably Barrie McKenna and Neil Macdonald.  Follow the links for the PDFs of the English letter, French letter.  This is the text of the English letter:

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

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

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

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

Read more »

Ontario Election: Inequality Impacts of Fiscal Plans

In the context of Ontario’s upcoming June 7 election, I just finalized an article on the CCPA’s “Behind the Numbers” blog, exploring the fiscal plans of the three major political parties from a historical and comparative context. I concluded that while the Ontario election offers voters three distinct fiscal visions, it is also true that all three would maintain Ontario’s comparatively low program expenditures and own-source revenues, at least during their first term. Building on my prior work examining the impact of fiscal policy on inequality, I develop a novel, regression-based model to forecast the impact that each fiscal plan is likely to have on income inequality in Ontario, as measured by the after-tax income Gini coefficient and conclude that the NDP would decrease inequality moderately, the Liberals would decrease it slightly, and the PCs would increase it significantly.

Read more »

NDP Math Error will Help the Party, Not Hurt It

The number-cruncher in me cringed in sympathy for the anonymous research nerds who made the now-famous math error in the Ontario NDP’s fiscal platform. They wrongly added a $700 million contingency reserve to net revenue, instead of to expenses.  The result is an underestimation of the planned deficit (if we include that reserve – more on that below) by $1.4 billion in each year.

Pompous voices predictably crowed that this error confirms the NDP’s supposed lack of fiscal credibility. In practice, though, this accounting tempest will turn out to be a non-event in this dramatic election campaign – and in fact, it may counterintuitively help the party’s surging campaign, rather than hurting it. Read more »

Rethinking the economics of extreme events

Review of Worst-Case Economics: Extreme Events in Climate and Finance by Frank Ackerman

***

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

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

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

Over the years I have greatly admired Frank Ackerman’s work on cost-benefit analysis, the social cost of carbon, and the economics of climate change. This book compiles much of that analysis under one cover, but goes beyond by critically examining how economists think (or don’t think) about extreme events.

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

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

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

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

Ackerman comments that “ ’getting the prices right’ is an incomplete response to climate change and other complex environmental problems.” We don’t actually know when certain tipping points will be reached, and poorly understand the value of expected damages. We can develop estimates from models but they are riddled with uncertainties about the future. At one extreme, the “dismal theorem” proves the value of carbon reductions to be literally infinite if we accept worst-case scenarios that destroy the sources of human well-being or that undermine the ability of the human race to survive.

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

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

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

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

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

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

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

 

Winner of the 2018 Galbraith Prize in Economics: Jim Stanford

The Progressive Economics Forum is pleased to announce Jim Stanford as the winner of the 2018 Galbraith Prize in Economics.

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

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

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

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

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

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

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

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

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

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

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

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

Saskatchewan budget misses opportunity on rental housing assistance

I recently wrote a ‘top 10’ overview blog post about the 2018 Saskatchewan budget. Following on the heels of that, I’ve now written an opinion piece about the budget’s announcement of a phase out a rental assistance program for low-income households.

Points raised in the opinion piece include the following:

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

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

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

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

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

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

 

Ten things to know about the 2018 Saskatchewan budget

I’ve written a ‘top 10’ blog post about the recently-tabled Saskatchewan budget. Points raised in the blog post include the following:

-This year’s budget was quite status quo.

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

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

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

Here’s the link to the full blog post.

The Contemporary Relevance of Karl Polanyi

The political economist Karl Polanyi, author of the 1944 volume The Great Transformation: The Political and Economic Origins of Our Time, is arguably better known today than during his lifetime. The time has come for a major biography of Polanyi, Karl Polanyi: A Life on the Left by Gareth Dale. It is thoroughly excellent and provides the occasion to ponder the relevance of Polanyi today.

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

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

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

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

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

Newly-signed FPT housing framework agreement

I’ve just written a blog post about the newly-signed federal-provincial-territorial housing framework agreement. This agreement builds on (and helps move forward) Canada’s National Housing Strategy, which was released last fall.

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

The link to the full blog post is here.

2018 PEF Student Essay Contest is Open!

The 2018 PEF Student Essay Contest is  open!

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

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

2018 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 2018 competition must have been/be enrolled in a post-secondary educational institution at some point during the period of May 2017 – May 2018.

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 a graduate degree, and are returning to do a second undergraduate degree will only be considered for the graduate student competition. The same holds for student who spend part of the academic year in a graduate program.

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 April 30, 2018, 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 essays that do not infringe upon the rights of any third parties;
? …accepted on re-submission once;

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

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

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 prize 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.

*******

Concours de textes étudiants – édition 2018

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 2018 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 2017 à mai 2018.

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 30 avril 2018, 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 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).

? … ne pas déjà avoir été publié ;
? … 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 jugera 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.

 

A Tale of Two Books

Just published is Volume I of an exhaustive – occasionally exhausting – biography of Paul Samuelson. It’s titled Founder of Modern Economics: Paul A Samuelson Vol I: Becoming Samuelson, 1915-1948 and authored by Roger E Backhouse.

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

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

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

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

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

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

 

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

 

 

Five things to know about the 2018 Alberta budget

On March 22, the NDP government of Rachel Notley tabled the 2018 Alberta budget. I’ve written a blog post discussing some of the major ‘take aways’ from the standpoint of Calgary’s homeless-serving sector (where I work).

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

The full blog post can be read at this link.

Ten proposals from the 2018 Alberta Alternative Budget

The 2018 Alberta Alternative Budget (AAB) was released yesterday—it can be downloaded here. An opinion piece I wrote about the AAB appeared yesterday in both the Calgary Herald and the Edmonton Journal.

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

Here are 10 proposals from this year’s AAB.

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

  Read more »

Media release: Alberta needs a provincial sales tax

(March 20, 2018-Edmonton) Today, a coalition of researchers, economists, and members of civil society released an alternative budget to boost Alberta’s economic growth while reducing income inequality.

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

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

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

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

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

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

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

“Increasing tax revenues would provide a foundation for economic sustainability,” added Falvo.

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

Download report.

– 30 –

Media contact:

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

 

Inequality-redistribution in Canada update

Two years ago I posted my first guest blog focused on income inequality, specifically how changes in Canada’s redistribution over the last three decades have increased after-tax income inequality, and how these changes compared to OECD trends. The figures and analysis in this post update the earlier blog, based on the most recent OECD data to 2015. I also look at the market inequality-redistribution relationship and find that Canada is the only country that combines low market inequality with low redistribution.

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

 

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

 

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

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

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

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

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

 

 

Homelessness and employment: The case of Calgary

I’ve just written a blog post about homelessness and employment, with a focus on Calgary (where I live and work).

Points raised in the blog post include the following:

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

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

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

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

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

The link to the full blog post is here.

How to Measure and Monitor Poverty? LIM vs LICO vs MBM.

The federal government has promised to launch a Canadian Poverty Reduction Strategy in the coming weeks or months on the basis of now completed consultations with Canadians and the still ongoing deliberations of an advisory committee. As part of this process, there has been discussion about which poverty or low income measure or measures should be used for the purpose of monitoring levels and trends in the incidence of poverty and gauging the impact of poverty reduction policies. At various times, there have been calls for an official Canadian poverty line, as exists in the United States and some other countries, and some have called for poverty reduction targets which would require the specification of a poverty line or lines. (See https://www.canada.ca/en/employment-social-development/programs/poverty-reduction/reports/proverty-reduction-strategy-what-we-heard.html#section9 )

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Budget Fails to Crack Down on Private Corp Tax Shelter

The federal Budget changed the rules a bit re the taxation of passive investment income in private corporations, but falls well short of what was promised in terms of extra revenues and more tax fairness. The “small business” lobby helped the wealthy big time.

http://www.broadbentinstitute.ca/andrew_ajackson/wealthy_get_off_lightly_from_budget_2018_changes_to_the_private_corporation_rules

 

 

Clarksonian Mega-Challenges for Canada and North America Michèle Rioux

Stephen Clarkson

 

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

Michèle Rioux is a Professor in the Department of Political Science, UQAM and Research Director at the Center for research on integration and globalization (Centre d’études sur l’intégration et la mondialisatieon).  Stephen loved Quebec and Montreal and was frequently invited to the Centre to speak, including attending the event to mark the 20th anniversary of NAFTA at la Maison du Développement Durable.

 

Clarksonian Mega-Challenges for Canada and North America

by Michèle Rioux

 

The Neoliberal Trade Agenda @ Bay

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

Burned At The Stake Of International Competition

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

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

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

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

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

 

NAFTA, Neoliberalism and The Trouble with Bad Ideas

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

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

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

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

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

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

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

The Contradictory Impacts of Regional Economic Models

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

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

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

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

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

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

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

Pessimist or Eternal Sceptic?

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

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

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

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

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

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

 

REFERENCES
Ed Broadbent, « Let’s make human rights central to a new NAFTA » The Globe & Mail, May 5th, 2017.

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

Christian Deblock, “From regionalism to cross-regionalism”, Great Insights, December 2016, p. 8-9.

Michèle Rioux, Christian Deblock et Laurent Viau, L’Aléna conjugué au passé, au présent et au futur, PUQ, 2015.

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

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

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

Five Things to Know About the 2018 Federal Budget

I’ve written a blog post about the 2018 federal budget.

Points made in the blog post include the following:

-Important new housing investments were made for First Nations, Inuit and Métis people.

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

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

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

The link to the full blog post is here.

The Stock Market Jitters

The real problem is the absence of a sustainable growth model.

My latest Globe ROB column.

 

 

“Nationalism versus Continentalism: Clarksonian Perspectives”

 

 Greg Inwood

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

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

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

Stephen Clarkson

Nationalism versus Continentalism:  Clarksonian Perspectives

by Greg Inwood

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

As I look back on that fateful day when I first met Stephen, I am certainly thankful that he persuaded me to undertake that dissertation on the Macdonald Royal Commission. I also sometimes wonder if any grad student, bright eyed, bushy-tailed and naïve as I was back then, ever wrote that political biography of Eugene Forsey. If so, I am sure it would have been a thoughtful, careful and insightful piece of work, if indeed a rather boring one. I am glad it wasn’t me, though, because among the many things Stephen helped me to understand, was that the ongoing problematic of nationalism versus continentalism is never boring.

 

Bibliography

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

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

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

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

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

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

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

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

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

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

Parental Leave and Pay Equity

Budget 2018 is being advertised as a truly comprehensive gender budget, with two key pieces of that being use-it-or-lose-it paternity leave, and action on pay equity.

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

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

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

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

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

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

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

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

Ten proposals from the 2018 Alternative Federal Budget

I’ve written a blog post about this year’s Alternative Federal Budget (AFB).

Points raised in the blog post include the following:

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

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

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

The full blog post can be found here.

The Working Poor and the Working Income Tax Benefit

Here is a short research paper I wrote for the Broadbent Institute.

https://d3n8a8pro7vhmx.cloudfront.net/broadbent/pages/7073/attachments/original/1519312305/Canada’s_Working_poor_and_the_Working_Tax_Benefit_-_Report.pdf?1519312305

And here is a short summary:

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

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

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

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

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

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

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

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

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

But major changes are needed.

 

 

 

Homelessness in BC

In anticipation of tomorrow’s provincial budget in British Columbia (BC), I’ve written a blog post about the state of homelessness in that province.

Points raised in the blog post include the following:

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

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

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

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

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

The full blog post can be found at this link.

Panel discussion at federal NDP policy convention

Yesterday I spoke on a panel discussion on economic inequality, along with Andrew Jackson and Armine Yalnizyan. We were guests at the federal NDP’s policy convention in Ottawa. The panel was moderated by Guy Caron.

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

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