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Women’s Work

My mother says that when she graduated from high school in 1972, she had two occupational choices: nurse or teacher. Nurse and teacher are still the most popular choices for women entering the workforce. Statistics Canada said that more than 20% of all female university graduates in 2011 were teachers or nurses, unchanged from 1991.

Ontario’s Equal Pay Day got me thinking about women’s work, and the systemic reasons behind the stubborn pay gap. Aside from outright discrimination, occupational segregation and unpaid care demands contribute significantly to women’s lower wages.

Evan Soltas had an interesting piece for the American Equal Pay Day, where he points out that women’s share of male-dominated fields has actually been declining in recent years.

For example, women made up 32% of manufacturing workers in the U.S. in 1990 – that’s fallen to 27% now.

That step backwards has been slightly larger in Canada. In 1990 30% of manufacturing workers were women, by 2013 that had fallen to 24%.

And it’s not just that there are fewer women in male-dominated fields. There are also fewer men in fields traditionally considered “women’s work”. Occupations such as child care, teaching, and health are all now even more female dominated than they were in the late 1980′s.

The chart below compares the proportion of women in selected occupations in 1987 and 2013. There is some good news, such as more women in business and finance professions. But considering that the proportion of young women with a university degree more than doubled over the same period, it hardly looks like much progress has been made.

CANSIM Table 282-0010

CANSIM Table 282-0010

The other big issue for women is the toll of unpaid caregiving. Often a vicious cycle, where the lower earner takes time off paid work to take care of family members, and ends up getting more of a wage penalty as a result.

Who stays at home to care for family members rather than work, and how do we know? Well, the Labour Force Survey asks why people work part-time, and tells us that in 2013 nearly 400,000 workers chose to work part time to accommodate family caregiving duties. More than 90% of these workers were women. An additional 75,000 workers wanted a job, but weren’t looking because of immediate family caregiving responsibilities. And again, 90% of these workers were women.

Compare this to 1997, the farthest back we can get this data, and there isn’t much change. In 1997, 94% of workers scaling back on paid work because of unpaid work were women – in 2013 it was 91%.

Women's work_2

This is why affordable childcare and senior’s home care are such huge issues for core age women. Women pay the price for undertaking essential reproductive economic activities, that I think we can all agree make our society better off.

Occupational choice, unpaid work, discrimination, and societal expectations interact to entrench that wage gap. In some areas, it’s actually getting worse. We need #EqualPayDay, and reports like this from the CCPA to remind us that the wage gap isn’t going away on its own.

About those people without jobs …

Statistics Canada released their latest job vacancy data today, giving us the three month average ending in January 2014. There were 6.7 unemployed workers for every job vacancy, higher than the past two Januaries. Counting un(der)employed workers gives us a ratio of 14.2 un(der)employed workers for every job vacancy.

That’s a lot of workers without jobs.

The higher ratio is mostly because of a fall in the number of job vacancies reported by businesses. Breaking down job vacancies by province shows that the difference between 2014 and 2013 is mostly due to a fall in the number of job vacancies in the oil producing provinces of Alberta, Saskatchewan, and Newfoundland and Labrador.

CANSIM Table 282-0003

CANSIM Table 282-0003

Even with the drop in job vacancies, the “have-oil” provinces have an enviable ratio of only 3 unemployed workers for every job vacancy. For the rest of Canada, there are 8.1 unemployed workers for every job vacancy, reflecting significant slack in the labour market.

When we look at the data by industry at the national level, Health Care and Social Assistance stands out as having the most job vacancies and the lowest unemployed person to job vacancy ratio.

Depressingly, there is also a high concentration of job vacancies in the precarious Accommodation and Food Services sector, as well as the Retail Trade sector. The mix of high skill and low skill industries with job vacancies is a possible sign of labour market polarization.

CANSIM Table 282-0003

CANSIM Table 282-0003

Keep in mind that the industrial data classifies unemployed persons by the last industry they worked in, and so doesn’t count new labour market entrants or re-entrants. So recent graduates or workers returning from parental or sick leave aren’t counted in this table if they’ve been out of the labour market for over 12 months.

And, as I always point out, none of the job vacancy data takes underemployed workers into account. If we do count the more than 1.4 million underemployed workers in Canada during this period, the un(der)employment to job vacancy ratio is 14.2.

CANSIM 282-0003 plus author's calculations

CANSIM 282-0003 plus author’s calculations

For non-oil producing provinces, there are an astounding 17.2 un(der)employed workers for every job vacancy.

Here’s hoping that pivot to exports and business investment that we’ve been waiting for eventually makes its fashionably late entrance – the Canadian labour market could sure use some good news.

In Praise of our Distinguished Predecessor

J. King Gordon (b.1900, d.1989) was not a professional economist, though as a Rhodes Scholar he studied philosophy, politics and economics at Oxford while inhaling the Fabianism in the air. He was a progressive and a political activist who deserves to be remembered by us. Twice in his life he was there at the birth of promising, exciting, progress and in both cases he chose to be part of the movement.

First, he was one of the small group who wrote the 1933 Regina Manifesto that launched the CCF which later morphed into the NDP. He was three times a federal candidate for the CCF, losing the last time by a mere ninety votes. Having been ordained in the United Church of Canada and teaching at a divinity school, he formally went into politics when he was dismissed by the college. He moved from preacher to practioner of the social gospel that was at the heart of progressive politics in Canada at that time. Unelected, unable to find a job, he reluctantly left Canada for New York in 1938 to work in publishing and in 1944 became the managing editor of The Nation.

The second time he was where the action was when the UN was created and located in New York. He became the chief UN correspondent for CBC Radio, and in 1950 he was hired away to become a senior information officer of the UN Secretariat. He served the UN, working in Korea, the Middle East and the Congo. He returned to Canada on his retirement to teach international relations at the University of Alberta and to spread the good word about the UN.

You can learn all of this and much more from the recently published biography of King Gordon by the American scholar Eileen Janzen titled “Growing to One World.” This most appropriate title is from the title of a poem – “We grow to one world” – by another great Canadian progressive and close friend of Gordon, Frank Scott. Scott tells Professor Jantzen “King was the most Canadian of us all.”

He-cession to She-precarious recovery?

As Armine has pointed out recently, women play a key role in economic recoveries: (She says it so well, I have to quote her directly:)

Every recession is a “he-cession”: men lose more jobs than women in a downturn because the first thing to slow is the production in goods-producing industries that are typically male-dominated (mining, forestry, construction, manufacturing). Every early stage of recovery is a “she-covery”: men who lose $30 an hour jobs wince at accepting $15 an hour offers, but women grab them to make sure the bills get paid.

This shows up in the underemployment rate, which captures the large number of women who work part-time jobs while they’re still looking for full-time work.

MenWomenU6

Let’s compare seasonally unadjusted underemployment rates for men and women over the past seven March(s). In the midst of the recession (March 2009), men’s underemployment rate was higher than women’s. While men’s underemployment rate fell between 2009 and 2011, women’s actually rose, and peaked in 2011.

This evidence supports the need for public sector investment / stimulus spending that is outside traditional physical infrastructure. A two pronged approach is required, where we both encourage young women to enter the skilled trades and invest in social infrastructure such as early childcare and education.

Pay equity legislation and living wages are key as well. Because while it’s admirable that women are willing to work low wage part-time jobs to make sure their family has enough to eat, this ends up depressing wages in female dominated sectors such as retail and food services. This contributes to increasing inequality.

wagestable

 

On this, #EqualPayDay2014, I’d just like to point out the gross unfairness of women’s wages already. Go ahead and tell me that women work fewer (paid) hours, or in different occupations, I will tell you that is part of the systemic problem keeping women’s wages low.

Note in the above graph that women in each age / job permanence category gained fewer jobs (or lost more) between 2009 and 2013. Also note, that in each category women’s weekly wages are depressingly far behind their male counterparts.

And always, this data comes with the caveat that the situation is far worse for racialized women, women new to Canada, or women living with disabilities.

Something’s gotta give.

Neoliberalism in Canada: 3 moments, 3 indicators

The current edition of Canadian Dimension magazine has a fascinating series of articles on episodes of economic transition around the world (more of them bad than good in recent times, of course).  It’s a very thoughtful & informative collection, and I highly recommend it (and every progressive economist should subscribe to CD, by the way).

I wrote the article on Canada, reviewing the history of how neoliberalism was implemented here, and discussing some of its unique Canadian features (especially, of course, the unique role of resource extraction in Canada’s neoliberal economy).  Here is the link to the full article in CD.

Many people think “in threes”: that is, when they are formulating an argument they include three main points, sections, or pieces of evidence.  My friend and office-mate Frank Stilwell here in Sydney does that all the time, and famously (or infamously) so did my friend and former colleague David Robertson at CAW (so much so that we’d all tease him if he stopped any list after only two items!).  I was obviously thinking “in threes” when I wrote this.

First I identified three main turning points marking the key moments of neoliberal structural change in Canada’s trajectory.  These are the key changes that led the evolution of the firmly business-dominated, resource-dependent, and precariously unequal society we confront today:

1. The advent of high interest rates and abandonment of full employment as the central goal of macroeconomic policy. The sea-change in monetary policy is a common early historical feature of neoliberalism pretty well everywhere, and Canada is no exception. We were slightly late to the party: monetarism (and its more sophisticated descendants, culminating in the present inflation targeting regime) started here in 1981-82 … three years after the Volcker shock kicked it off globally.

2. The implementation of the Canada-U.S. free trade agreement in 1989 (followed, 5 years later, by Mexico’s inclusion into the free trade NAFTA zone).  Apart from its direct and increasingly negative impacts on Canada’s economy, NAFTA has played a terrible role as a “template” for a whole new generation of free trade deals around the world (which are now routinely designed using NAFTA as the cookie-cutter, investor-state dispute settlement and all).

3. The acceleration of resource exports (especially petroleum) beginning around 2002.  This resource-driven restructuring of Canada’s sectoral make-up has had enormous implications: for trade, for federalism, for labour markets, for inequality, for the environment.  It occurred on the foundation laid by the FTA: including its still-unprecedented proportional energy sharing clause (that not even Mexico dared to accept).

It is interesting to note that only one of these three moments coincided with a political decision in Canada’s democratic process (the FTA, which was only confirmed after the Tories won the famous 1988 free-trade election … and even that was not exactly a democratic mandate, given the vagaries of our first-past-the-post voting system).  The other two (neoliberal monetary policy, and the renewed reliance on resource exports) occurred with no direct democratic mandate.  That also says something about how the world works today.

Then, continuing with my “threes,” I chose three summary empirical indicators of Canada’s economic trajectory, that I think well describe the varied impacts of neoliberalism here.

1. The overall importance of exports in GDP.  (Caution: Erin Weir and others have noted this is a misleading indicator of trade-intensity, since it does not adjust for the import content of exports; but it is nevertheless a handy aggregate indicator of trends in trade-intensity over time.) This measure stagnated during the tight-money 1980s, grew dramatically after the FTA (as expected), then counter-intuitively began to decline with the advent of the petro-era. Gross export intensity, perversely, is now not much higher than when the FTA was being negotiated. This certainly gives the lie to the assumption that “globalization” is all about “trade.”  In fact, globalization (as incarnated in NAFTA-like trade deals, anyway) is about something very different.

Export share CD2. Aggregate productivity in the business sector, measured in real outpupt per hour of work, relative to the U.S. This is a shocking graph, first published by Andrew Sharpe’s Centre for the Study of Living Standards (see his Table 6 here). International comparisons of productivity levels are rare (due to methodological difficulties in comparing value-added across currencies, and other data challenges). Canada converged rapidly with the U.S. during the post-war era, driven by rapid investment, sectoral change (the growth of high-value manufacturing, in particular), and a growing public sector.  By 1985, we were no longer “poor northern cousins,” producing at about 95% of U.S. levels.  That convergence has dramaticlaly reversed, despite America’s many problems in the intervening years.  We’re back to 70% of U.S. levels, and still falling.  The growing importance of non-renewable resource extraction, the contraction of manufacturing, and the growth of non-traded low-productivity sectors are the key drivers.  This is a damning refutation of the assumption made by pro-FTA economists that continental integration would automatically harmonize productivity levels; in fact, integration (and Canada’s consequent pigeon-holing as resource producer) has had exactly the opposite effect.

Relative Productivity CD3. In the public sector, all three of my key dimensions of neoliberal transition have contributed to a retrenchment and refocussing of state activity.  Neoliberalism does not necessarily imply a smaller state; its main goal is to reorient state activity in a manner that reinforces business power (collecting less taxes from corporations and the high-income individuals who own them; delivering more services that help business, like training and infrastructure; and providing less services that undermine business power, like income supports for working-age people). In Canada’s case, those have all occurred, but in the context of a general downsizing of state activity that is among the more dramatic in the capitalist world.  Initially, the cold shock of monetarism meant higher state spending (back when most unemployed people could actually qualify for unemployment insurance).  That changed beginning in the 1990s when the social welfare system was forcibly harmonized to fit better with the bitter new macroeconomic reality.  Government spending as a share of GDP has declined by 10 points since 1993, and is now nearly harmonized with the U.S.  FTA critics predicted that continental harmonization would inevitably lead to a form of social harmonization, and in aggregate this has been true — not because of provisions written into a trade deal, but because of the general economic and political forces which neoliberalism (including free trade) has unleashed.  (Despite this general harmonization in the scale of public sector activity, of course, there are still important differences in social policies between Canada and the U.S. that we must fight to protect.)

Govt Spending CDFeedback on my “three and three” analysis is most welcome, as are comparisons to the implementation of neoliberalism in other countries.  And once again I highly recommend the whole CD compilation.

 

The IMF and Progressive Economics in Canada

It is interesting to note that the most recent IMF staff report on Canadian economic issues echoes some key concerns of progressive economists. I have reported these for the Broadbent Institute.

As noted in this summary, the IMF report that corporate Canada’s cash hoard is the biggest in the G7 and has been mainly amassed by energy and mining companies. (This story got picked up by the Globe and Mail.)

And as reported here they more or less endorse the view that linkages from tar sands development to the wider Canadian economy are very under-developed.

The IMF report can be found here.

 

10 Things to Know About the At Home/Chez Soi Study

On Tuesday, April 8, results of the Mental Health Commission of Canada‘s At Home/Chez Soi homelessness study will be released at an Ottawa press conference. The study followed more than 2,000 participants in five Canadian cities.  All were homeless when the study began. Half of them received the Housing First intervention, and half of them did not.  Data was collected from 2009 until 2013.

Here are 10 things you should know about this study.

1. It is one of the most ambitious randomized controlled trials in Canadian history.

2. Its $110 million budget was funded entirely by Health Canada.

3. The decision to fund it was made by the Harper government.

4. At least 30 separate studies will roll out of this project. More than a dozen have already been released.

5. For years to come, many researchers will be able to access raw data from the study for further analysis.

6. The results are being announced in a context of declining federal funding for homelessness. (After adjusting for inflation, annual federal funding for homelessness in 2014 represents just 35% of its 1999 level.)

7. As the study is being released, use of emergency shelters in Canada’s largest city has been on the rise.

8. The report is being released amid some evidence that Toronto shelter conditions have been worsening.

9. Canada’s Minister of State for Social Development is scheduled to attend the release of the study’s findings.

10. The “intervention” being studied (namely, the Housing First approach to homelessness) was explicitly endorsed in last October’s federal throne speech.

2014 PEF Summer School in Heterodox Economics

The Progressive Economics Forum (PEF) will host a Summer School in Heterodox Economics in Vancouver on May 29, 2014, prior to Canadian Economics Association annual conference in Vancouver from May 30 to June 1, 2014. The Summer School is aimed at undergraduate and graduate students of economics or related fields, and working economists in academia, the labour movement and NGOs.

The theme for the summer school is Economics that Works for People and the Planet.

In six hour-long lectures, participants will be introduced to some of the diversity of heterodox approaches to economics, covering perspectives and methods that are overlooked in conventional (neoclassical) economics curricula.  Read more »

Rising Homelessness

In 2010, I wrote a blog post in which I suggested that: a) the recession of 2008-2009 would bring on increased homelessness; and b) there would be a lag effect of roughly three to five years.  Indeed, I suggested that it would not be until 2014 until the full effect of the recession is seen in terms of homeless numbers.

Recent data from the City of Toronto appear to lend support to my prediction.

 

What Have we Learned From the Financial Crisis? Part 4: Bernard Vallageas

What follows are comments from a roundtable discussion held at the University of Ottawa on February 28, organized by Mario Seccareccia, and which featured participation from Marc Lavoie, Louis-Philippe Rochon, Mario Seccareccia, Slim Thabet and Bernard Vallageas.

This is Part 4 of 5 sequential blog entries.

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Bernard Vallageas
Vice-président de l’Association pour le Développement des Etudes Keynésiennes (France)
Ancien membre élu du Conseil National des Universités
Ancien membre du Conseil d’Administration de l’Association Française d’Economie Politique
Faculté Jean Monnet (Collège d’Etudes interdisciplinaires)
Université Paris-Sud, Sceaux, France

Mon intervention porte sur la façon dont est perçue et analysée la crise par l’opinion publique et les groupes de pensée de gauche. J’entends par là des organisations qui pour la France se situent à la gauche du Parti socialiste, car comme l’a fort bien montré Alain Parguez dans son intervention à Ottawa, le Parti socialiste en France se situe, au moins sur le plan de la politique économique, clairement à droite.

L’opinion publique en général et ces organisations de gauche sont parfaitement conscientes qu’il y a une crise et sont mécontentes. Les banques en particulier sont très mal aimées et sont fortement ressenties comme coupables de la crise. Mais malgré ce ressentiment l’analyse de la crise par ces organisations est orthodoxe et très sommaire. Pour expliquer cela je prendrai trois exemples : celui du déficit public, celui de la séparation des banques de dépôts et d’investissement et de la création monétaire et enfin celui de la capitalisation des banques.

1° Le déficit public. Le fait que le déficit public (c’est-à-dire l’emprunt public) doit être nul, voire que les excédents budgétaires devraient être positifs, est communément répandue. La seule différence entre la pensée de gauche et celle de droite est le moyen d’obtenir un déficit nul, pour la droite il suffirait de diminuer les dépenses publiques et pour la gauche d’augmenter les impôts sur les riches. Mais quel que soit le procédé, la recherche du déficit nul reste une théorie orthodoxe, produit de la pensée néoclassique et ultra-libérale, selon lequel l’Etat ne devrait pas exister et donc ne devrait pas avoir de déficit. Pourtant la théorie du circuit, comme la comptabilité nationale, montrent que les administrations sont productrices comme les entreprises. La comptabilité nationale qualifie la production des administrations de non marchande et mesure la consommation collective de cette production. La différence entre une entreprise et une administration ne vient pas du mode de production mais de la façon dont cette production est acquise par les ménages : la production marchande est vendue et donc payée par ses consommateurs, tandis que la production non marchande est payée par l’impôt, donc par des ménages qui ne sont pas forcément les consommateurs. Les administrations, étant productrices comme les entreprises, se trouvent comme elles en début de circuit, et comme elles doivent emprunter aux banques pour alimenter le circuit en monnaie. En conséquence la dépense publique est un préalable nécessaire à la perception des impôts. Cette analyse est encore renforcée, si on considère, comme le fait L. Randall Wray dans son ouvrage Understanding Modern Money, que les dépenses et les recettes de l’Etat se font obligatoirement en monnaie créée par la banque centrale : il faut alors que l’Etat dépense préalablement cette monnaie pour pouvoir la récupérer par l’impôt ou l’emprunt auprès des ménages. Force est donc de constater que dans le domaine du déficit budgétaire, la crise n’a pas rendu la théorie du circuit monétaire plus populaire.

2° La création monétaire et la séparation des banques de dépôts et des banques d’affaires. La séparation des banques est bien demandée par les organismes de gauche. Mais les raisons invoquées ne sont pas les bonnes. Dans un circuit les banques créatrices de monnaie, c’est-à-dire les banques de dépôts, et les simples intermédiaires financiers, dont les banques d’affaires, ne sont pas à la même place. Les banques de dépôt apparaissent en tête de circuit pour créer la monnaie nécessaire, tandis que les intermédiaires financiers facilitent les prêts entre les ménages et les entreprises, prêts, qui, avec la consommation des ménages, permettent le reflux de cette même monnaie. Banques et intermédiaires financiers ont des fonctions tout à fait différentes. Les banques créent un objet social, la monnaie, équivalent général, et forment un système autour de la banque centrale, à laquelle elles ont un accès spécifique. Ceci justifie un contrôle renforcé, pour s’assurer notamment que l’argent créé va bien à la production et non pas vers d’autres emplois comme la spéculation. Par contre la monnaie, une fois créée, doit pouvoir circuler librement comme les marchandises, et les intermédiaires financiers ne sont là que pour faciliter cette circulation. Les intermédiaires financiers doivent donc être plus libres que les banques, néanmoins l’épargne publique doit être protégée, ce qui justifie que leur soit appliqué un contrôle de type prudentiel.

Or les organismes de gauche s’appuient sur d’autres raisons qui relèvent de la théorie orthodoxe pour demander la séparation des banques et des intermédiaires : ils invoquent le fait que les banques spéculent avec l’argent des déposants. Cet argument n’est vrai que pour les intermédiaires financiers, qui peuvent, à partir de dépôts d’argent déjà créé, spéculer, c’est-à-dire faire des prêts spéculatifs, mais il est faux pour les banques qui par construction créent de l’argent nouveau lorsqu’elles prêtent y compris lorsque ces prêts sont spéculatifs. Les banques ne spéculent donc pas avec « l ‘argent des autres », mais avec de l’argent spécialement créé à cet effet. Si donc il faut interdire aux banques de spéculer, ce n’est pas pour protéger les dépôts, qui doivent être protégés par d’autres moyens, c’est pour réserver la création monétaire à la production. Un deuxième argument est faussement invoqué pour demander la séparation des banques et des intermédiaires financiers : les établissements actuels seraient trop importants pour faire faillite (too big to fail). Selon cet argument il serait bon que les banques puissent faire faillite, ce qui permettrait d’éliminer les établissements mal gérés et éviterait les spéculations risquées. Or les banques forment un système et on ne peut concevoir qu’une banque fasse faillite sans que ses dépôts soient transférés dans une autre banque. En effet, sans ces transferts il y aurait des faillites en chaîne des déposants. Mais ces transferts ne peuvent qu’entraîner une concentration des banques. On ne peut donc par ce moyen empêcher le too big to fail.

3° La capitalisation des banques. Ainsi qu’on vient de le voir, le contrôle des banques envisagé par les organismes de gauche est un contrôle de type prudentiel, type de contrôle qui ne peut convenir que pour les intermédiaires financiers. Parmi ces contrôles figure la nécessité de recapitaliser les banques ainsi que de surveiller d’autres ratios, contrôles institués par les accords de Bâle III. Je résume rapidement ce que j’ai écrit à ce sujet dans le livre à l’honneur d’Alain Parguez que nous sommes en train de lancer aujourd’hui. La notion de capital n’est pas claire. Pour les accords de Bâle il s’agit du compte capital au sens comptable, donc la mesure de l’apport des actionnaires figurant au passif du bilan, tandis que pour la plupart des théories économiques, il s’agit des immobilisations figurant à l’actif du bilan. Les immobilisations matérielles sont fort réduites pour les banques. Par contre les banques pourraient avoir besoin de réserves de monnaie émise par la banque centrale, mais ce n’est pas ce qui est évoqué par les accords de Bâle.

Quoi qu’il en soit ces accords sont inapplicables pour les banques de dépôt. En effet les ratios imposés par Bâle conduisent à avoir des éléments de passif à maturité plus longue que les éléments d’actif. Or d’une part ceci conduit forcément à une situation inverse pour les autres agents, ce qui constitue pour ces agents une « mauvaise » situation financière, d’autre part cela est tout à fait contraire à la fonction des banques telle qu’elle apparaît dans les circuits. Par construction les banques créent de la monnaie, liquidité absolue, donc les passifs bancaires ont une maturité nulle, tandis que les prêts des banques (à leur actif) ont forcément une maturité plus longue, situation absolument inverse de celle demandée par les accords de Bâle.
Ceci n’empêche pas les organismes de gauche de ne cesser de demander la recapitalisation des banques.

En conclusion j’observe que l’impact de la théorie du circuit monétaire est absolument nul sur la pensée commune dite de gauche, qui continue à s’appuyer plus ou moins consciemment sur les théories orthodoxes.

Alex Usher on Jason Kenney’s Enthusiasm for German Apprenticeships

Alex Usher, one of Canada’s most well-known post-secondary education pundits, has just written a blog post offering some sober second thought on Minister Kenney’s recent enthusiasm for Germany’s apprenticeship system.

Mr. Usher’s blog post can be accessed here.

What Have we Learned From the Financial Crisis? Part 3: Mario Seccareccia

What follows are comments from a roundtable discussion held at the University of Ottawa on February 28, organized by Mario Seccareccia, and which featured participation from Marc Lavoie, Louis-Philippe Rochon, Mario Seccareccia, Slim Thabet and Bernard Vallageas.

This is Part 3 of 5 sequential blog entries.

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Mario Seccareccia
Professor of Economics, University of Ottawa
Editor, International Journal of Political Economy

I would like to argue that policy makers perhaps learned very little, especially in light of the fact that they have recently acted out the same macroeconomic policy script that was written in the 1930s. However, before discussing what they did, I would like to offer a brief analysis of the experience of the 1930s and that of the current Great Recession.

While there are obvious similarities between the Great Depression of the 1930s and the current Great Recession, the latter has not degenerated into a serious deflationary episode characterized by rising real interest rates, rising real indebtedness and a dangerous deflationary dynamic of falling money wages and prices. Interestingly both crises have their roots in problems of rising inequality and bubbles in asset markets. The recent collapse, beginning in 2007 with the subprime crisis, was triggered by problems in the housing market, which was then transmitted to the banking and financial markets in 2008 and eventually to the real economy by 2009. During the Great Depression, the sequence was somewhat in reverse, with problems beginning in the stock market, which then led to the collapse of the banking sector and then had obvious ramifications in the real economy, including the housing market. Despite some similarities with each recession being preceded by some type of financial crises, by any measure the Great Depression was more severe than the Great Recession. 

From its peak in 1929 to the trough in 1933, real GDP and employment fell by 30 percent or more in both Canada and the United States. At the same time, real wages rose consistently, initially because prices fell more than wages until 1933, and then because nominal wages began to rise more than prices after 1933. Despite the sharp fall in employment, the reverse movement of real wages served to redistribute purchasing power in such a way as to offset the overall decline in aggregate demand. This was further reinforced by a fall in the personal savings rate until 1933 as households initially sought to maintain their previous consumption norms, despite their fall in nominal income. However, once nominal income and employment began to turn around, the saving rate began to rise after 1933, as households sought to reduce their debt load.

During the Great Recession, the situation was similar in terms of negative fluctuations in output and employment, but these data series displayed only a very mild decline in output and employment after 2007-2008. Indeed in the US, output and employment fell close to 3 and 6 percent respectively, with Canada showing some limited decline in the two series of about 3 percent only during 2009. The collapse in aggregate demand triggered a disinflation in prices but without making any significant dent on money wage growth that continued its inertial slow growth pattern established during the preceding “great moderation”. Hence, unlike the 1930s, real wages continued to rise, but, in this case, because money wages outpaced prices after 2007-2008. There was no massive deflation as during the 1930s. On the other hand, unlike during the Great Depression when the savings rate initially fell, households were so heavily burdened with debt during the recent downturn that, in the face of uncertainty, they quickly raised their saving rate in order to remove some debt off their balance sheets, thereby exacerbating the problem of aggregate demand.

Did policy makers understand the realities of the two economic crises and were the macroeconomic policies that they implemented appropriate for the times? An analysis of the experience of the 1930s would suggest that we repeated some of the same mistakes during the present crisis. In both Canada and the US, the conduct of monetary policy during the Great Depression was not unlike the pursuit of monetary policy during recent years.  The reaction during the 1930s on the part of the US Fed was to pursue an easy money policy of setting nominal interest rates at their lowest possible levels. In Canada, the Bank of Canada only began its operations in 1935. However, prior to 1935 and since the Finance Act of 1914, discount rate policy was under the control of the Minister of Finance.  In all cases, the monetary authorities desperately sought to reduce nominal interest rates to very low levels, despite the fact that prices were falling until 1933, which meant that real interest rates were rising until the mid-1930s. This also meant that income was actually being redistributed towards rentiers, thereby somewhat aggravating the Keynesian problem of effective demand. During the recent crisis, the reaction of the monetary authorities was swift, not only in bailing out the banks (as in the US) or providing loan guarantees for the banks (as in Canada); but, more importantly, central banks immediately cut interest rates to their lowest possible levels and pegged them at those low levels. Moreover, with nominal interest rates pegged at their low nominal levels and with an inflation rate that remained positive, real interest rates actually turned negative. While, according to conventional wisdom, this (as well as so-called quantitative easing) provided a stronger monetary stimulus than in the 1930s, this was insufficient seriously to kick-start the recovery. Hence, it was recognized, as in the 1930s, that low interest-rate pegging was an insufficient tool to achieve growth. That was true then as it has been true over the last half decade.

On the fiscal side, it took some time for the fiscal authorities to react with expansionary fiscal measures. Both Herbert Hoover in the US and R.B. Bennett in Canada were seeking to combat the expanding deficit as tax revenues fell and public spending automatically rose after the 1929 collapse. However, by 1932 in Canada, things did begin to change as there was a greater recognition of the need to implement some public works program. In the case of the US, with the defeat of Hoover in 1932 and the coming of Franklin Roosevelt in 1933, there was the ushering of a package of policies commonly referred to as the New Deal that led to significant growth until 1936. With “green shoots” appearing, the fiscal authorities began to move in reverse gear that caused a double dip recession by 1937, thereby guaranteeing stagnation until the Second World War. In the case of the Great Recession, the fiscal authorities were quick to adopt fiscal stimulus packages with significant deficit spending from the end of 2008 to early in 2010. However, as in the 1930s, once the “green shoots” started to appear, most Western governments began to reverse their policies by instituting austerity, thus aborting a significant recovery.

What can be seen from this cursory history is that the package of macroeconomic policies was similar in both periods first through deep cuts in interest rates, and then followed by some fiscal stimulus. However, in each of these historical periods, the fiscal authorities pursued policies that would eventually mitigate growth and ensure long-term stagnation.  The only difference between the 1930s and the current period is that this was repeated and expedited during a shorter period; but the consequence in terms of long-term stagnation is not dissimilar.  Hence, it can be said that policy makers either learned little, by prematurely withdrawing the fiscal stimulus, or it may be argued, à la Kalecki, that they knew the consequences, but they desired this outcome because the balance of political forces at work were not much different during those two eras: with fears of “unsustainable debt” and the need to ensure the “confidence” of the financial markets being a common theme for both historical periods.

What Have we Learned From the Financial Crisis? Part 2: Louis-Philippe Rochon

What follows are comments from a roundtable discussion held at the University of Ottawa on February 28, organized by Mario Seccareccia, and which featured participation from Marc Lavoie, Louis-Philippe Rochon, Mario Seccareccia, Slim Thabet and Bernard Vallageas.

This is Part 2 of 5 sequential blog entries.

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Louis-Philippe Rochon
Associate Professor of Economics, Laurentian University
Founding co-editor, Review of Keynesian Economics
Co-Director, New Directions in Post-Keynesian Economics – an Edward Elgar Publishing book series

 I have divided my talk into two sections: first, I would like to address what we should have learned from the financial crisis and, second, what we actually learned from it.  For me, there were some clear facts that emerged from the crisis that can only be ignored on pure ideological obstructionism.  While the first part is rather upbeat, the second part is utterly pessimistic.

Here is a brief list of some of the more evident conclusions we should have drawn from this crisis.  Of course, all these notions are well known to post-Keynesians; my point is that they should be now to many of our colleagues in the profession.

1)fragility of markets: markets don’t self-regulate.  The notion that markets are prone to some equilibrium position of stability is a myth, and the financial crisis has shown quite convincingly that in fact, markets are prone to some rather significant instability;

2)greed got in the way of  production. Money managers exploited workers and markets to obtain higher returns;

3)banks and other financial institutions cannot be entrusted to do the right thing.  In fact, if given the opportunity, they will exploit households (predatory lending); regulations are needed;

4) income inequality matters.  Interestingly enough, the IMF recently has sounded off on this important question.  Christine Lagarde has said that there cannot be sustained growth without first addressing the problem of inequality.  More recently, the IMF has even stated that taxing the rich does not impeded on growth. Adding this to its musings on capital control, this represents some courageous and encouraging signs;

5)we should by now recognize a bubble when we see one,

6)Complicated credit instruments are doomed to failure: credit-default swaps, hedge funds and complex derivatives all collapsed.  We need to reform or eliminate them.

Given the above, what then can we say the profession at large, and beyond, has learned from the crisis.  My answer is quite clear: nothing.

With respect to households, this is quite discouraging.  In my casual, ad hoc conversations with many so-called ‘ordinary Canadians’ (a term I despise), I am stunned at how a vast majority blame large deficits and irresponsible governments for the crisis. This is an idea that is very much ingrained in the collective consciousness.  In that sense, we, as heterodox economists, have failed miserably.  Our arguments are either not being heard, or they are and simply discarded against the convincing rhetoric of the neoliberal agenda. Indeed, the idea that the State cannot live beyond its means, like households themselves, is something that is now simply fact for the voters.

I now say voters, rather than households, because this is important.  How can we then expect political parties from advocating deficits when they know voters will reject them at the ballot boxes.  Even the New Democrats, Canada’s “socialist” party accepts the wisdom of balanced budgets.  And what can we say of the Socialist Party of François Hollande in France, which is socialist in name only.

What can I say about my colleagues in the profession? This is perhaps even more disheartening.  After all, we cannot expect households to know economic theory.  In this sense, their inability to analyze the intricacy of the crisis is not surprising.  But the same cannot be said of our colleagues.  Given their knowledge, there was some hope that the crisis would lead to the capitulation of neoclassical theory. 

This is something that has been promised for quite some time. Each generation it seems holds promise.  The capital debates, and now the crisis.  Yet, neoclassical theory has proven itself quite resilient.  Indeed, our colleagues have no interest in giving up on their theory, no matter how irrelevant its assumptions. In a way, it is the only theory they know. But even when confronted with an alternative, it is so outside their realm that they cannot even consider its validity.

I noticed this for the first time in 2009, at the Eastern Economic Association conferences. I was shocked to see how many (a vast majority) sessions were on ‘business as usual’.  Since then, sessions on the crisis are less and fewer in between.  The profession simply shrugged off the crisis and carried on.

Well, in some way, they did take note of some elements, but they are now incorporating these in their models as imperfections or shocks.  The crisis is just some shock that happened that shook the system, but that eventually, given fiscal discipline, would settle at some new equilibrium.  I predicted this in 2009: like Samuelson’s neoclassical synthesis, neoclassical theory today would simply incorporate some elements of the crisis into their DSGE models to satisfy the critics: “look, we are listening”.  Neoclasical theory is never wrong, but let’s give it some elements of realism.

Now, with respect to students, I am not holding my breath wither. In Canada at least, they are not clamming for pluralism in the curriculum. There is no equivalent of the Rethinking Economics movement in the UK. And despite my hammering them over the head for the last 7 years, only a handful of my students would be able to say something about the crisis.

This said, some would argue that there is some hope yet.  After all, we are seeing some heterodox textbooks coming out (I am working on one with Sergio Rossi for Edward Elgar, among others).  This is a good sign. But I wonder how far it will go. Such textbooks may prove popular, if done well, with some heterodox professors.  I get emails all the time asking me which textbook I use in introductory classes.  So in that sense, this may go some distance. But then, let’s remember Joan Robinson’s effort.

There is also some hope with INET, which is financing a great number of heterodox projects but also working on several other prongs in the assault against the mainstream.  This may prove fruitful yet.

But overall I remain pessimistic. I cannot see the profession changing at all. Maybe a second crisis will do the trick. But the consequences would be simply disastrous on workers. But perhaps this is what is needed.  So, to quote a famous Canadian politician, “Si j’ai bien compris, vous êtes en train de me dire : à la prochaine fois” (if I hear you well, you are telling me, see you next time).

Alain Parguez, whom we are honouring today, always insisted on the need for a revolution. After much thought, I must confess that I agree: we need a true revolution within our profession.
 

What Have we Learned From the Financial Crisis? Part 1: Marc Lavoie

What follows are comments from a roundtable discussion held at the University of Ottawa on February 28, organized by Mario Seccareccia, and which featured participation from Marc Lavoie, Louis-Philippe Rochon, Mario Seccareccia, Slim Thabet and Bernard Vallageas.

Parts 2, 3, 4 and 5 will follow in subsequent blog posts.

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Marc Lavoie
Professor of Economics, University of Ottawa
Co-Editor, European Journal of Economics and Economic Policy:  Intervention

I would be tempted to say that we learned nothing, to end my remarks there and allow the other participants to speak.
The question is somewhat ambiguous: what do we mean by ‘we’?  What did Mario Seccareccia have in mind when he formulated the question? Indeed, by ‘we’, do we mean economists working in large international institutions, in governments, and in central banks? Or do we mean economics professors working in universities?

If by ‘we’ we are referring to the former, it is clear that the crisis has put an end, although perhaps only temporarily, to the deregulation of financial markets. For instance, in Basel, prudential constraints were raised, and  specialists there are discussing counter-cyclical solvency ratios for banks (the famous capital adequacy ratios).  Meanwhile, at the IMF, the crisis certainly created a small revolution. Now, the IMF defends Keynesian expansionary fiscal policies, which were, as we all know, completely forbidden during the 1997 Asian financial crisis.  The current crisis also led the IMF to question income inequalities and their impact on effective demand.

Moreover, it is now doubtful whether the efficient market hypothesis makes any kind of sense.  Indeed, a great many economists and bankers have discovered Minsky’s views on financial fragility and his financial instability hypothesis, according to which banks and financial markets cannot be left to themselves: we need regulations even though regulating markets may not succeed in avoiding another crisis once the memory of the current crisis has faded away.As told to me by a law student recently hired by Blackrock, the largest asset manager in the world, with assets totalling more than 3,500 billion dollars – that’s one and a half times larger than UBS and twice as large as PIMCO – many asset managers are now turning away from hiring neoclassical economists and actually prefer hiring engineers, sociologists and even philosophers. This said, in the end, I believe that this new fondness for heterodox ideas is likely to be short-lived.

Let me move on so as to discuss the university setting, which is decidedly an environment with which I am more familiar. I will discuss four anecdotes to show how in fact my colleagues have learned next to nothing. At the very height of the recession in Canada, in 2009, a few months after the collapse of Lehman Brothers, our doctoral programme came under review. As such, two respected external reviewers audited our programme. During a meeting with all the members of the department, one of the reviewers, from McGill University no less, told us that we needed to offer more mathematics in order to better train our students. I asked in what way more mathematics was going to help our students to better explain the causes and consequences of the financial crisis. The question was met with complete silence.

A few months later, and this is my second anecdote, the curriculum committee of our department met in order to discuss revamping our courses. In light of the meltdown of our financial markets, I would have naturally assumed that the theory of efficient markets would have been banned forever from our programme.  Alas, this was not to be. The newly-proposed course description for ‘Financial Economics’, still contained among its contents the ‘testing the efficiency of markets.’ When I objected to this, given the financial meltdown that we had just witnessed and the irrefutable evidence that this theory did not hold water, I was told that the theory of efficient financial markets still had to be tested to decide of its real-world relevance.

My third anecdote is about the revamping of our graduate courses.  Some two decades ago, Mario Seccarecia and I created a course on alternative views in monetary theory. After the crisis, some of our colleagues from Carleton University, with whom we share the PhD programme, suggested eliminating this course during a brainstorming session involving faculty members associated with this stream. Needless to say this never happened, but it is disheartening, to say the least, to see that despite the crisis our colleagues did not think it was wise for our students to be offered more pluralism and a heterodox perspective.

My fourth and last anecdote takes place at a session of the Canadian Economics Association conference last year, which was held in Montreal.  The session was dedicated to macroeconomics after the crisis. A colleague from McGill University, Christopher Ragan, explained how he had created a course on the financial crisis, in which his students were reading books by Galbraith, Kindleberger and Minsky. It was indeed quite a revelation, and I hope that Mario and I will be able to offer such a course in the future when we are no longer on semi-sabbaticals. But despite this initial glimmer of hope, the other panellists were not as encouraging.  Their message was that they might spend a little more time on the chapter covering money and banking. But in no way would they rethink the theoretical monetary approach and the macroeconomics that are found in these books.

The same can be said in the context of advanced macroeconomics. The famous DSGE models, which occupy many pages in our more illustrious journals, were shown to be quite useless during the financial crisis. Of course, this is not very surprising given the totally unrealistic assumptions of the model. I am told that these models have been greatly enhanced recently. Such models are now able to incorporate banks and the possibility of defaulting on debt. In other words, we are merely adding some semblance of realism in an otherwise unrealistic model describing a completely artificial economy, in which a rise in the rate of interest slows down the economy and leads to a fall in employment because households can afford to work less today because the higher interest rates will procure them as nice a retirement as was the case when interest rates were low.

To conclude, we are witnessing what psychologists call cognitive dissonance. While the financial crisis has shown quite convincingly that the real world bears no resemblance to the divagations of general equilibrium theory or of the efficient market hypothesis, the response from a great many academic economists has either been utter denial or that the financial crisis was the result of government regulations, which then created moral hazard, or the result of irresponsible governments which caused a public finance crisis, as happened in Europe. For almost all of my colleagues, it is not necessary to change economic theories and the efficient market dogma; it is enough to introduce some minor adjustments with minimal consequences.

Where the jobs at?

Mark it in your calendars folks, today, March 25, 2014 is the day that the Canadian labour shortage**  myth officially died. (It may, of course, be resurrected as a zombie).

Responding to a Parliamentary Budget Office report that refutes the existence of a labour shortage or skills mismatch in Canada, Jason Kenney claims the government never suggested any such thing.

Jason Kenney ‏on March 25th, 2014 “@kenneyjason  1/ We consistently say the aggregate labour market information indicates there is *not* a general labour shortage in Canada @globepolitics

Except that Minister Finley repeatedly suggested that it was one of the biggest issues facing the Canadian economy:

Diane Finley speaking  in April 2013 – “Canada is facing major skills shortages that are hurting our economy. “

And while Jason Kenney has been slowly backing away from that position, he uses the more specific ‘skills mismatch’** boogeyman when it proves convenient:

Jason Kenney, speaking in October 2013 -”Our government is committed to fixing the skills mismatch in Canada where we have too many Canadians without jobs and too many jobs without Canadians.”

A little bit of history re-writing never hurt anyone, as long as we get to the right answer in the end, eh?

Yes, and no. It’s great that the Minister for Employment and Social Development has acknowledged that there is no broad labour shortage in Canada. But, the major cornerstones of this government’s economic policy  - Canada Job Grant, EI Reform, and Temporary Foreign Worker Program for example - still rest on the notion that labour shortages are the most pressing economic problem we’re facing.

The one skill that is in short supply, especially among young workers is “experience”, and it’s incredibly hard to come by. Budget 2014 addresses about 0.5% of the need for jobs among young workers with internship supports. Good luck getting one of those.

So what should this revelation mean for government policy? First, government needs to recognize that in much of Canada there is a job shortage, and an employer training shortage. Programs and policies should be re-oriented around that reality.

The Canada Job Grant could have been an excellent pilot project to support employer-led training initiatives, but due to its poor design is more likely to replace existing employer training of current employees than to support new training initiatives.

Cuts to E.I. mean that too many unemployed workers are falling through the cracks, without income support or re-training support. Even those lucky few who receive E.I. often face lengthy delays in receiving benefits because Service Canada staffing levels are insufficient to meet bare-bones service levels.

The single most important improvement to EI would be a uniform entrance requirement. Urban workers live in areas with low unemployment rates, but fierce competition for precarious and low wage jobs. Across Canada, more and more unemployed workers are new labour market entrants and labour market re-entrants, who need 910 hours to qualify for E.I. A uniform entrance requirement would open EI up to many workers that have paid into the program, and give them access to invaluable training supports.

Cutbacks of public services put a drag on economic growth and full labour market recovery, as the PBO itself has documented.

Once we’ve accepted a job shortage, it would be fantastic if we could also accept a job quality deficit, and start talking about what we can do to foster well-paid and secure jobs for workers in Canada.

I leave you with Toronto artist Mohammad Ali’s young worker anthem “Precarious Work”.

** As the PBO document points out, labour shortages and skills mismatch are two different phenomena – labour shortages occur where there are not enough workers available regardless of skills, and skills shortages occur when there are enough workers, but not with the necessary skills.

Millennials, School, and Work

Given that the 2014 Federal Budget talked a lot about youth unemployment, but didn’t actually do very much, I thought it would be worth going over a few trends for the 20-29 age group.

Young workers are usually hit harder by recessions, and this most recent recession was no different. You can see significant spikes in unemployment rates during recessions in the graph below. Also notice that unemployment rates were much higher in the 1981 and 1990 recessions than they are for this one.

That doesn’t mean that everything is OK now. Alongside trends in unemployment rates are changing contexts. Higher post-secondary participation rates should be expected to dampen unemployment rates, for example.

So did millennials head back to school in large numbers? Throughout the 1980′s and into the 1990′s, 20-24 year old men and women increased full-time education participation significantly. In this recession it looks like some youth pushed out of the labour force went back to school, but certainly not in the numbers of the past two recessions.

For the younger group, 20-24, there was a slight bump for women (38% in 2008 to 40% in 2013), and a larger bump for men (31% in 2008 to 35% in 2013). For 25-29 year olds, full-time school participation increased through the 1990′s, but has remained fairly steady since 2000 at around 10% of the population.

So what proportion of youth were neither in school or in the labour force? As you might expect, this metric has changed for young women much more than it has for young men.

This group, and the precariously employed and underemployed group are of particular concern. This is where young workers are falling through the cracks, and risk long term wage scarring, based largely on whether they were lucky enough, connected enough, privileged enough to score a good job out of school.

This is one mechanism through which inequality is reproduced and extended – unequal economic outcomes have broad social consequences.

As always, it’s useful to note that Canada is not a single labour market. Opportunities vary widely by region. Using Google charts I made a map of young worker underemployment by province. Ontario and BC have rates similar to the Atlantic provinces, and well above Quebec and Manitoba.

Whatever the federal government does or doesn’t do, the provincial governments have significant responsibilities in the areas of education, eliminating the exploitation of young workers in unpaid internships, implementing worker-friendly labour law, and leading regional economic development.

How to calculate un(der)employment

For my day job, I wrote a thing about underemployment in Canada. I thought that it might be useful to post my method here so that other interested parties could calculate it for themselves.

The headline unemployment rate counts all those who are unemployed, available to start work, and actively looking for a job. The internationally accepted measure of the unmet need for employment includes those who are unemployed and adds those who are partially employed but want more hours, those who aren’t able to start work right away, and those who are discouraged from actively looking, but would accept work.

Fortunately, it’s much easier to calculate this statistic than it is to explain it.

Add:

unemployment + 

All involuntary part time (CANSIM Table 282-0014) +

All “Not in the labour force but wanted work” (CANSIM Table 282-0219)

 

Divide by:

employed + unemployed +

All “Not in the labour force but wanted work” (CANSIM Table 282-0219)

 

This gets you pretty close.

There is one tiny component that isn’t directly available on CANSIM, and that is Long-Term Future Starts (LTFS).

You can estimate LTFS from R6, which is (unemployed + recall, replies + long-term future starts) / (employed +unemployed +recall, replies +  long-term future starts).

The number of recall and replies is available in CANSIM Table 282-0219. Or you can request that data from Statistics Canada directly.

LTFS are not counted as part of the labour force, so just like the marginally attached group, you need to add LTFS to both the numerator and the denominator.

R8, Statistics Canada’s most comprehensive underemployment rate only counts about half of the time-related underemployment, and an even smaller portion of the marginally attached group.

R8 = [(unemployed + discouraged searchers + waiting for recall, replies + long-term future starts + involuntary part-timers * (1 - average hours of involuntary part-timers at main job / average hours of full-time workers at main job))
/ (employed + unemployed + discouraged searchers + waiting for recall, replies + long-term future starts)]

(Definitions for all of Statistics Canada’s supplementary unemployment measures can be found in “Inside the Labour Market Downturn”, Perspectives on Labour and Income, 2011).

Statistics Canada already collects this information, and could very easily begin reporting on this measure in its monthly LFS release. Australia, for example, already releases underemployment reports on a quarterly basis, and will soon be releasing seasonally adjusted data monthly, broken down by age, sex, and region.

It’s time to update how we measure the unmet need for employment. Before you can fix a thing, you must first understand it.

Flaherty’s Legacy: Ideological, reckless and just plain lucky

This piece was originally published at the Globe and Mail’s online Report on Business feature, EconomyLab.  

There are two reasons why it is difficult to comment on the legacy of a finance minister.

1) It is a tremendously challenging job, anywhere, any time. Stewarding one of the largest economies in the world through a global economic crisis is no cakewalk, and it has clearly taken a toll on Jim Flaherty. (Canada has fallen from 8th to 11th largest economy since 2006.) Critiquing this performance, when so many factors are beyond an individual’s control, and so much soul-searching takes place behind the scenes, is neither easy nor lovely.

2) Where does a prime minister end and a finance minister begin? There is little sunshine between these two positions in any administration, all the more so with the Stephen Harper administration. Nobody is confused about who is boss. So are we judging Mr. Flaherty’s legacy, or Mr. Harper’s?

Still, Mr. Flaherty’s departure is a good time to trace his eight-year contribution to Canada’s fiscal history.

Here is a contrarian view on four widely touted accomplishments, and two major developments that have received little notice in the round-up of opinion on the Flaherty legacy.

 

Read more »

Tony Blair and the Corporatization of Social Democracy

Tony Blair, by any sensible yardstick, is a douchebag.

Recently, The Guardian, under the headline “Toxic”, detailed Blair’s “downward spiral”. This included the revelation that he may have been having an affair with Wendi Murdoch, the now ex-wife of media mogul Rupert Murdoch. Blair was once good pals with Murdoch and Wendi and is godparent to one of their two children.

Other recent revelations have emerged during the on-going Rebekah Brooks trial over the News of the World phone-hacking scandal playing out in a London courtroom. Brooks was once editor of this Murdoch-owned scandal sheet, which for years hacked into the phones of hundreds of British citizens, politicians and celebrities, while also paying huge sums to police, military and government officials to feed the paper juicy gossip. During 2011 when News was forced to close and Brooks on the verge of being arrested, Blair offered her and Murdoch comfort and advice, even suggesting how they could whitewash and manage the scandal caused by the media empire’s illegal behavior (such as paying off public officials).

Blair, of course, was once the leader of Britain’s Labour Party and UK prime minister for 10 years. He was a proponent of New Labour and its “Third Way” mantra – the party’s right-wing wing element that steered it to the center and embraced neo-liberal economic policies while curtailing the influence of the labour movement.

Since leaving office in 2007, Blair has continued to champion a corporate ideology for personal gain. He’s joined the 1% globe-hopping elite, becoming an advisor to the American bank JP Morgan in 2008 just as the credit crisis was cresting (paying him $4-million a year), created a consulting firm that includes oil-rich and authoritarian Kazakhstan among its clientele (a country where torture is commonplace), and hobnobbing with the likes of Bill Gates and Warren Buffett. He bought a pricey mansion in England’s countryside and a big London flat. Meanwhile, he continues his efforts to whitewash his government’s mendacity during and after the run up to the 2003 war in Iraq, where he claimed Saddam Hussein had weapons of mass destruction, despite knowing that this was not the case (evidence has since emerged that Blair ordered his intelligence service “to find” the evidence after George W. Bush persuaded him to join the invasion cause).

And then there is Blair’s chummy relationship with Rupert Murdoch. Blair first wooed the arch-conservative, union-busting media mogul before the 1997 election for reasons of political expediency. Murdoch’s backing of the Tory party helped Thatcher and Major win four straight elections. Blair managed to persuade Murdoch to switch to Labour, which undoubtedly helped Blair defeat the Tories. But Blair’s relationship with Murdoch continued long after Blair left office and right up until there was suspicions he may have been having a fling with Wendi Murdoch. Given how Murdoch, the owner of the Fox Network, has used his media clout on behalf of the most rabidly conservative elements of the corporate elite and its political supporters – including helping foster the quasi-fascist Tea Party movement in the US – Blair’s friendship with Murdoch defies explanation, beyond his craven need to be close to the circles of economic power. A desire that includes helping Murdoch when his media empire’s decades-long efforts to co-opt and corrupt the British state were finally exposed (which included doing reputational “hits” and hiring private investigators to spy on critics of Murdoch).

The story of Blair is a cautionary one for social democrats who believe his route to power should be copied. He embodies the belief that quaint notions like “socialism” and workers’ controlling the commanding heights of the economy should be dispensed with in order to win elections. Hence, by the time he won power in 1997, the Labour Party was no longer willing to re-nationalize any element of the British economy that was privatized during the Thatcher and Major years. The party, in effect, had become a liberal party in the guise currently embodied by Canada’s Liberal Party. Read more »

StatCan Reports Fewest Vacant Jobs on Record

Statistics Canada reported today that there were only 199,700 vacant jobs in December 2013, the fewest recorded since it first reported these figures for March 2011.

Statistics Canada began tracking job vacancies in response to claims of a labour shortage by governments and corporate Canada. But the number of vacancies falling below 200,000 casts further doubt on the notion that Canada is suffering from a shortage of workers.

The real problem is a shortage of jobs. Statistics Canada calculates that there are 6.3 unemployed workers per available job.

Policymakers should focus on creating jobs and providing adequate benefits to the unemployed, rather than on alleviating phantom labour shortages.

UPDATE (March 19): Interviewed on last night’s The National (CBC video) and quoted in today’s Globe & Mail (page A10), Regina Leader-Post (page D1) and Saskatoon StarPhoenix (page D4).

Oil as a Staple

“By 1901, Baku [then part of the Russian Empire, now the capital of Azerbaijan Republic] produced half the world’s oil…Baku was a melting pot of pitiful poverty and incredible wealth…[T]he derricks and the refineries poisoned the city and corrupted the people…[O]il townships were polluted slums. The 48,000 workers toiled in terrible conditions, living and fighting each other in grimy streets…Life expectancy was just thirty.”

Simon Sebaj Montefiore, Young Stalin (2008)

Surely lighthouses are simply a good thing?

“From a conventional view of progress, there were few projects more useful and less problematic than building lighthhouses to save life and cargo. From the shore, however, this was not so obvious. Among the local population were wreckers, who waited for storms to drive vessels ashore which they looted for cargo and parts – or who even lured vesssels to shipwreck by posting false beacons….From their perspective, lighthouse beams projected the military power of the state and the economic power of global trade at the expense of the livelihood of local populations. What the engineer [who built the lighthouses] intented as a beacon of progress, could be experienced as an intrusion of empire….[albeit] soft imperialism….”
Rosalind Williams, The Triumph of Human Empire” – a recent and excellent book that helps us understand “globalization”

Harper’s Justice Agenda: Theory vs. the Evidence

What follows is a guest post by Craig Jones, former Executive Director of the John Howard Society of Canada.

Champions of harsher justice measures in the Harper government would have us believe that longer sentences are a win-win-win: for victims, for safe streets and for future victims. To that end, the government enacted a number of mandatory minimum sentences – which almost always involves incarceration – in the belief that Canada’s judiciary are too lenient. In some cases, these crimes would not have warranted incarceration but for the requirement imposed by a mandatory minimum sentence – in other cases, the length of the sentence is longer than it would otherwise be due to the mandatory sentence. It has been thought impolite to ask, “what is the impact on those who experience harsher measures?” or “at what cost?”

 The operative theory holds that offenders learn from the experience of others (general deterrence) or from their own direct experience (specific deterrence). In particular, after they have served a sentence, offenders will not re-offend because their experience has taught them that harsh sentences are a consequence of repeat offending. Coincidentally, the theory that harsher sentences lead to lower rates of re-offending has been tested in the closest thing social scientists have to a natural randomized controlled trial. Across the United States, mandatory minimum sentences – many for drug-related crimes – have attracted popular support for their “get tough” ethic. There has also been wide variability in the harshness of imposed sentences, even in cases that were substantially similar, across contiguous jurisdictions where mandatory sentences are not as prevalent. This variability in sentencing decisions across jurisdictions permits outcome tracking of these sentences to enable – with some confidence – robust conclusions about how well these sentences actually accomplish what their champions claim for them.

 The results show either no effect or higher rates of re-offending in jurisdictions with mandatory sentencing compared to non-prison options. Put another way: focusing on the high quality research into deterrence-based sentencing – most of it conducted in an environment as close to random assignment as social scientists ever enjoy – leads to the conclusion that there is either no deterrent effect or, ironically, that deterrence-based sentencing leads, in practice, to higher rates of re-offending when compared with non-prison alternatives.

 What about settings with more homogeneous criminal populations? Here too, no evidence can be found to support deterrence-based sentencing and what evidence exists points in the opposite direction: incarceration makes people more likely to re-offend rather than less. Interestingly, this same conclusion emerges across different methodologies and in different countries. Worse, drug offenders sent to prison seem to be more likely to reoffend than those sentenced to probation – and this seems to be true irrespective of the sex. So the policy choice to employ mandatory minimum sentences turns out to be a policy choice not only to increase the rate of incarceration, but to create a cohort of people who will continue to re-offend irrespective of the length of their previous sentence. Worse, it appears from the evidence that those sent to prison for the first time are more likely to re-offend than similar offenders sentenced to a community-based option. The experience of imprisonment – so it appears – is criminogenic, a finding which substantially confirms what criminologists and sociologists of crime have been arguing for decades: prisons “do succeed in punishing,” concluded Richard Nixon’s 1973 National Commission on Criminal Justice Standards and Goals, “but they do not deter. They change the committed offender, but the change is likely to be more negative than positive.” A similar finding emerged in the United Kingdom at about the same time: “the inmate who has served a longer amount of time … has had his tendencies toward criminality strengthened and is therefore more likely to recidivate than the inmate who has served a lesser amount of time.”[1] Worse, harsher prison conditions seem to produce more violent prisoners.[2]

 The annual average cost per inmate (in current dollars) has climbed steadily since 2006-7 from $93,030 to $114.364 in 2010-11. Over the last decade, the number of women admitted to federal jurisdiction increased 69.6% from 204 in 2002-03 to 346 in 2011-12, with costs per year per offender rising from $166,830 to $214,614 by 2010-11.[3] It would appear to be true, as a British Home Secretary realized, that “prison is an expensive way to make bad people worse.”

 A priority for the next non-Conservative government must include unwinding the regressive, expensive and counter-productive “justice agenda” enacted during the Harper regime – preferably in one massive omnibus bill that limits deliberation by parliamentarians. Going further, the next Prime Minister should re-constitute a law reform commission and begin the task of bringing coherence, human rights and logic back to Canada’s justice and correctional systems. Canadians can do better than spending money on measures that have already failed in the United States.

 The irrationality, cost and ineffectiveness of the Harper justice agenda is the theme of my forthcoming chapter in the next edition of How Ottawa Spends from McGill-Queen’s University Press.

 


[1]D. R. Jaman, R. M. Dickover & L.A. Bennett, “Parole outcome as a function of time served,” British Journal of Criminology, 12 (1972), p.7.

[2] M.K. Chen & J.M. Shapiro, “Does Prison Harden Inmates?” p. 19, online at http://sentencing.nj.gov/downloads/pdf/articles/2007/Jan2007/document08.pdf

[3]2012 Corrections and Conditional Release Statistical Overview, online at http://www.publicsafety.gc.ca/cnt/rsrcs/pblctns/2012-ccrs/index-eng.aspx#b3

Corporate Cash Stash Surpasses National Debt

Today’s National Balance Sheet Accounts indicate that the amount of cash held by private non-financial corporations in Canada soared from $591 billion in the third quarter of 2013 to $626 billion in the fourth quarter of 2013. Corporate Canada’s accumulated stock of cash now exceeds the federal government’s accumulated deficit, which was $612 billion at the end of 2013.

Corporate Canada’s cash stash had been on track to exceed $600 billion at the start of 2013, but Statistics Canada narrowed its definition of “total currency and deposits.” Even under the new definition, this hoard of dead money surpassed the $600-billion mark by the end of 2013.

The corporate sector’s aggressive accumulation of cash helps to explain the lack of investment and employment growth. It also strengthens the case for reversing corporate tax cuts to fund needed investments in public services and infrastructure. If corporate Canada will not invest its dead money, the government should resuscitate some of it.

Did the US Take a Bite Out of Canada-Korea Trade?

On last night’s The National, Terry Milewski introduced the Canada-Korea trade deal as follows:

The truth is that Canada is a latecomer to free trade with South Korea. The European Union and the United States both got there first, and their free trade deals took a big bite out of Canada’s exports. So, the government really had to catch up.

It is true that trade deals with South Korea came into force in mid-2011 for the EU and in early 2012 for the US, but how did they affect Canadian exports?

In US dollars, Canada’s international exports edged up from $451.6 billion in 2011 to $458.1 billion in 2013. Within those totals, exports to South Korea fell from $5.1 billion to $3.3 billion – a big bite out of this small trade flow, but a nibble of less than half of one percent of Canada’s worldwide exports.

And 2011 is hardly a representative base of comparison. In no other year has Canada ever sold more than $3.7 billion of merchandise to South Korea. Last year’s $3.3 billion was pretty typical of our annual exports to South Korea since 2006. Read more »

IWD 2014: The “girl effect” reduces inequality, but Canada can’t coast on that much longer

Every year when International Women’s Day rolls by, I can’t help but reflect on power, how it’s shared, and how women use the power they have. This year, I am struck by women’s power to reduce inequality, and not just to help ourselves. Women are key to reducing income inequality.

It’s been dubbed the girl effect, more powerful than the Internet, science, the government, and even money.

Canada is actually a poster girl (sorry) for the truth that education and hard work can transform not just lives but societies.

OECD GINI WOMEN EMPLOYMENT

Look around the world and you’ll see a tight relationship between the level of income inequality in a nation and the proportion of women who work in the paid labour force, as the OECD chart unequivocally shows. (For more, see here.)

There is no simple link between inequality and growth, but we know the more talent you can unleash and develop, the more you can change the course of a community and its history.  Often hard times are what unlock doors.

Every recession is a “he-cession”: men lose more jobs than women in a downturn because the first thing to slow is the production in goods-producing industries that are typically male-dominated (mining, forestry, construction, manufacturing).  Every early stage of recovery is a “she-covery”: men who lose $30 an hour jobs wince at accepting $15 an hour offers, but women grab them to make sure the bills get paid.

This is a story about women’s determination and effort, but it’s also a story about public policy. Read more »

Staples Redux: Wheat and Canola

Acceptance or rejection of genetically modified food has tended to be analyzed with respect to the attitudes of consumers. But the attitudes of producers matter. For example, western grain farmers have mostly accepted GM canola and most rejected GM wheat. Emily Eaton of the University of Regina explores why in a new book Growing Resistance: Canadian Farmers and the Politics of Genetically Modified Wheat. Wheat was a superstaple with a long history, with deep roots in the economic livelihoods of prairie farmers, in agrarian protest and politics. A message bound to please the staple theorist/historian.

More on Secular Stagnation

Tom Palley has an interesting piece on his blog re differing approaches to the theme of secular stagnation, drawing a distinction between Marxist and structural Keynesian perspectives. As he notes, neo liberals such as Summers  have got on the bandwagon without really exploring in depth the roots of the problem.

University Governance

This afternoon I spoke on a panel on university governance at a conference titled Future U:  Creating the Universities We Want, organized by the Ontario Confederation of University Faculty Associations.  Also presenting on the panel were Professor Glen Jones and Professor Claire Polster.

Future U: Creating the Universities We want
Future U: Creating the Universities We want

My speaking notes can be downloaded at this link.

Points I raised in my presentation include the following:

The BasicsTypically in Canada, a university has both a board of governors (BoG) and a senate.   The former (which was the focus of my presentation) has responsibility for both “administrative and fiscal matters,” while the latter has responsibility for “academic matters.”

Internal vs. External MembersApproximately one-third of a university’s BoG members usually consists of “internal” members (i.e. students, faculty and staff).  The other two-thirds of a BoG’s members typically come from outside the university community, and are sometimes referred to as “external” members.  External members are not democratically elected; rather, they are either appointed by government or by the board itself.  On this basis, I would argue that Canada’s House of Commons, all provincial/legislative assemblies in Canada, public school boards and most membership-based non-profits are more directly accountable to their constituencies than are university BoGs.

External Members.  One advantage of having external members on a BoG is that they often bring expertise on various topics, including finance, auditing, capital projects and communications.  However, a drawback of external members (in my opinion) is that they sometimes are quite distant from some of the day-to-day concerns of a university.  For example, it is quite common for the external members of a university’s BoG to consist of high-income individuals.  This may make it challenging for some of them to fully appreciate concerns such as student debt and working conditions of cleaning and maintenance staff.  They may also arrive to the BoG without a nuanced understanding of what has transpired on campus in the previous 20-30 years (notwithstanding the fact that, in many cases, they may have been a student at that university at one point).

Information Flow.  As Robert F. Clift has pointed out, a university’s president (i.e. the university’s most senior staff person) is very much in control of what information makes its way to a university’s BoG.  It is therefore important for BoG members to make a presence on campus, read campus newspapers, and talk to students, staff and faculty.

Access to Board Members.  Many BoGs in Canada feature very basic information about their members online.  However, in many cases, contact information is not available for BoG members at a university’s web site.  If contact information were available online for university BoG members, I think that would encourage members of the university community to contact BoG members from time to time; and I think this could lead to at least four possible outcomes.  First, this would make it harder for the university’s president to contain the flow of information to each BoG member.  Second, if contact information of BoG members were publicly available, BoG members would have to be ‘on their toes’ more often (answering e-mails, for example).  Third, if contact information for BoG members were publicly available, some campus groups might ‘spam’ BoG members with unsolicited e-mails from time to time (for example, when protesting a decision by the University’s president or the BoG itself).  Fourth, if members of the campus community had easy access to individual BoG members, cracks in the BoG’s official messaging (i.e. the ‘party line’) might be exposed from time to time.

Inner Boards.  If a BoG is not careful, an  ‘inner board’ (consisting of, say, four or five BoG members) can emerge, effectively relegating the rest of the BoG to the status of an advisory committee.  This appears to be what happened at Concordia a few years ago.

Meeting Minutes.  I think BoGs need to be careful about the kinds of minutes they keep.  In particular, I would argue that there is a drawback to keeping minimalist versions of meeting minutes.  For example, if a meeting lasts two hours and includes several important debates, it is possible for the recording secretary to produce just one or two pages of minutes from the meeting; such a minimalist version of the minutes might capture attendance, motions made and decisions taken.  But it is also possible for the recording secretary to produce much more detailed minutes that include an overview of what key points were raised during debate and by whom.  I think the latter approach lends to increased board transparency.   Any university BoG that is serious about board transparency has a rather clear path it could take:  it could simply direct its recording secretary to produce a detailed version of minutes of each meeting.

Staples Redux: Oil and Honey

Oil is a staple. Honey isn’t. That’s the point.

The odd coupling comes from Bill McKibben’s most recent book, which is titled “Oil and Honey.”

Oil is crude. Honey is sweet. That says it all.

The central point that McKibben is making is that oil is global and honey is local, and that the disruptive climate change that is taking place, while worsened by oil, is tipping the scales against the global and toward the local.”

McKibben writes: “we need new local economies if for no other reason than that they will weather the coming storms a little bit better. In place of our two-big-to-fail systems of banking and energy and agriculture, we need squat, hardy, scaled-down versions.”