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Enumerating Homeless Persons

Over at the web site of the Calgary Homeless Foundation, I’ve written a blog post titled “Ten things to know about Canadian attempts to count homeless persons through Point-in-Time Counts.”

Points I raise in the post include the following:

-Efforts to enumerate homeless persons in Canada often have mixed objectives.  In part, an attempt is made to capture an accurate picture of who is homeless.  But local officials often see the outcomes of these counts as ‘progress reports’ on their own work responding to homelessness.

-As a result, local officials often find themselves in conflict of interest situations.  Indeed, many want to see fewer homeless persons enumerated than during the previous count, and this may weigh into how they go about counting (methodologies can change from year to year).

-If the federal government were to fund Statistics Canada to assist with these efforts, increased methodological consistency and rigour could be brought into each count.  This could also help address the conflict of interest situation.

The link to my blog post is here.

Canada after Trump: Harold Innis and What to Do When Empires Go Crazy

The Americans shocked the rest of the world by electing Donald Trump last Tuesday. Pierre Trudeau suggested that Canada’s proximity to the US was like “sleeping with an elephant”, and thus Canadians are particularly concerned about what this means.

Canada’s most preeminent political economist, Harold Innis, can offer some lessons. Innis is known for the “staples” approach, which examined the role of natural resource exploitation in Canadian economic development. However, his interest was really about the rise and fall of empires and the role of Canada as a nation on the periphery of the leading nations of the world.

In his later work, Innis explored the role of communications technologies. He contrasted time-based and space-based communications technologies. Time based technologies facilitate the creation of knowledge through dialogue and appreciation of history. Small group discussion and books are examples. Space based technologies enable communication over long distances and thus the quick diffusion of ideas, which is required to exercise power and influence. Social media is a very space-bound technology. A balance between time and space can protect intellectual endeavour and diffuse information. Yet, Innis warned about unbalanced situations where empires become overly focused on the exercise of power to the neglect of the development of time-based knowledge. In these unbalanced situations, communication decreases understanding.

Trump seems to have been elected via the dominance of space-based technologies. He was the ultimate click-bait candidate and twitter troll. The spread of information outpaced consideration of truth. America was working on time-based problems, such as climate change, under the Obama Administration and now Trump’s election puts these initiatives under severe threat. For instance, if Trump cancels climate related programs, some of the country’s top energy experts are going to leave the Department of Energy.

So what is Canada’s role? According to biographer, Alexander John Watson, Innis felt that the “great intellectual contributions that re-energize western civilization” would come from nations like Canada that exist on the periphery of large empires. Peripheral regions have potential to create a protected space for new ideas and focus on grappling with local problems. Innis promoted Canadian independence because he saw the country playing this important role in the world.

The grand theories of Innis have some concrete policy implications. Let’s consider how an Innisian perspectives suggests Canada should react to the potential exodus of clean energy experts from American institutions. It was a joke that Americans might move here in the event of a Trump victory. Yet, perhaps there is a role for Canada as a niche space for sustainable energy knowledge in North America? Canada should consider implementing a talent attraction strategy that welcomes refugee energy experts from the US, and combine the American expertise with domestic capabilities to solve the real sustainable energy transitions problems in Canada. Canada could gain a foothold in clean technology and start to finally reduce its emissions. Most importantly, Canada would be making an important contribution to the rest of the world by maintaining and expanding sustainable energy capabilities on the continent.

Canadians should think about what other values and ideals need to be nourished and preserved on the northern end of the continent. Trump’s election could introduce attacks on basic human rights, and Canada will need to rally with American allies to respect the dignity of all persons, regardless of origin, skin colour, creed, gender, sexual orientation, or political views (as Angela Merkel said).

This is not an argument for Canadian exceptionalism. Canada is not somehow immune to the intolerance and authoritarianism expounded by the Trump campaign. This is not the time for Canadians to rest on any imagined laurels. What Innis’ thought teaches us is that Canada might have a particular role to play when the American Empire gets out of whack. Thus, it is a time for the Canadian nation to actively consider how it can play a constructive role in the changing world order.

Stop Trump copy-cats: Listen to workers

I presented at the Standing Committee on International Trade’s incredibly brief review of the implementing legislation for CETA. With me were representatives from the Business Council of Canada, the Chamber of Commerce, and the Canadian Cattleman’s Association. There are only two more meetings scheduled, and there are no IP experts, no pharmaceutical experts, no representatives from either our shipping industry or labour groups representing seafarers. There were no representatives from municipalities, even though CETA is the first deal to apply at that level of government, and more than 50 municipalities have asked to be carved out of the deal. This is hardly a shining example of how to govern inclusively, transparently, or progressively.

To make matters worse, several presenters indicated that they thought CETA was the answer to global dissatisfaction with trade and investment deals.

This concerned me so much that I strayed from my prepared remarks to inform them that economists such as Dani Rodrik and Thomas Picketty have warned about the inequality that can arise from trade treaties, and that the government would be wise to listen carefully to well-founded critiques of deals such as CETA. Pretending that everything is OK, only listening to advice from those who clearly stand to benefit from this deal, and writing off the rest of us as protectionist or xenophobic – well, that is one of the elements behind Trump’s rise, and it will fuel the rise of the far-right in Europe as well.

In the interest of vibrant public debate, I post my remarks to the committee here:

The labour movement is keenly aware that trade is, and has always been, an important feature of the Canadian economy.  We understand that all governments have an interest in fostering open trade.

Distributional impacts from trade and investment agreements have long been ignored. We are told that trade deals will have winners and losers, but don’t worry, we can compensate the losers. Historically, Canada has done an inadequate job on this front.

And the gains from these deals are never as big as they were projected to be, especially for recent trade and investment agreements. The main gains from open trade comes from reducing tariffs, and much of this was accomplished by the 1990’s. So-called modern trade deals are often more about advancing investor rights. As such, they do not necessarily increase trade, improve economies, or benefit Canadians.

CETA also goes farther than existing trade deals by putting restrictions on local governments. This is despite the fact that more than 50 communities, including Toronto, Victoria, Baie Comeau, Sackville, Hamilton and Red Deer, have already sent a clear message to federal and provincial governments that “buy local” and other public spending policies, as well as municipally-delivered public services, should be excluded from CETA.

Pharmaceutical Patents

While we’re sold free trade deals on the opportunities for Canadian business, and the savings for Canadian consumers, the majority of this 140-page bill features changes to Canada’s intellectual property rules, requiring changes that largely serve European interests.

One of the biggest concerns regarding CETA is the impact on Canada’s health care system. On a per capita basis, Canadian drug costs are already among the highest in the world – only exceeded by the United States – and are among the fastest rising among comparable nations.

Bill C-30 devotes fully 30 pages of amendments to the Patent Act. These ammendments will further exacerbate the rise in costs by:

  • Committing Canada to creating a new system of patent term restoration thereby delaying entry of generic medicines by up to two years;
  • Locking in Canada’s current term of data protection, and creating barriers for future governments wanting to reverse it;
  • Implementing a new right of appeal under the patent linkage system that will create further delays for the entry of generics.

Analysis conducted by Prof. Marc Andre Gagnon and Dr. Joel Lexchin estimates that CETA’s provisions will increase Canadian drug costs by between 6.2% and 12.9% starting in 2023. This is in line with internal government estimates that expected the patent changes to cost between $1B to $2B per year, and the generic industry’s own research that put the price at $3B.

The previous federal government committed to compensating provinces for this increase in cost, but that simply means that the federal government will ask Canadians to pay pharmaceutical companies through higher taxes or cuts to services elsewhere. It also doesn’t take into account that some of this increased cost will fall directly on low income workers who don’t have drug plans. As Lexchin and Gagnon point out in their paper: “cost-related nonadherence is 35% among people with low income and no insurance.”  What this means in real life is that people sometimes won’t even go to the doctor for their illness, because they know they can’t afford the cost of a prescription.

In fact the new legislation on pharmaceuticals found in C-30 are a very good example of what is wrong with the out-dated approach being pursued through CETA.

In 1987, the federal government made a bargain with pharmaceutical companies. They passed legislation strengthening patent protection for drugs, and in return pharmaceutical companies committed to increase their R&D investment in Canada to 10% of sales.

Since 2003 companies have failed to meet this target, and as of June 2016 the Patented Medicine Prices Review Board (PMPRB) reports that R&D investment in Canada is at 5% of sales. Investment in a group of 7 comparable countries, including EU countries France, Italy, Sweden and Germany, has held steady at 20% of sales.

So now we are again strengthening patent terms for large pharmaceutical companies, but this time we’re not even asking for assurances of investment in R&D. Why does anyone think the answer to failed neoliberal policies is simply more neoliberal policy?

It is clear that the largest single impact resulting from CETA will be on prescription drugs and there is no clear benefit to Canada from these changes as CETA will only affect drug costs in Canada—not the EU. As well, many EU nations have regulated prices in order to maintain affordability. We are told that nothing in CETA prevents Canada from regulating drug prices either, but we see no indication that the federal government intends to take action on this front.

Coasting Trade Act

Wages and working conditions vary greatly in the global shipping industry, and in recognition of that Canada and the U.S. have placed significant restrictions on the operation of international shipping within Canada. These protections are called cabotage, and are outlined in the Coasting Trade Act.

Bill C-30 undermines cabotage in three ways:

  • Government dredging projects with a value of over 7.8 million dollars will become open to bidding by vessels built and registered in the EU. However, private dredging projects will become open to bidding by EU companies using vessels of any flag.
  • EU companies will be permitted to use a ship of any flag to move empty shipping containers within Canada. This work was normally done by rail in Canada, and it is unclear what the impact will be on those rail workers.
  • EU-registered vessels will be permitted to establish a scheduled feeder service of cargo between the ports of Montreal and Halifax only. (Feeder service is the domestic portion of any international import/export from abroad – not just between Canada and EU countries).
  • Additionally, EU-vessels under “second-registry” will be permitted to perform the same type of service between Montreal and Halifax only if they are on the continuation-leg of their international voyage.

Our position is that this cargo should have remained subject to cabotage rules – i.e. Canadian-flag vessels and Canadian jobs. These protections were in place for a reason, to protect wages and working conditions for all workers in the industry.

Some EU nations such as Cyprus are flags of convenience, but you may not know that all registries in the EU allow for open crewing and the wages paid are shockingly low, and the hours long.  I asked my colleagues at the International Transport Workers Federation (ITF), and the Seafarers International Union of Canada what this means for workers, and they gave me some examples.

The standard work week is 44 hours, plus 85 hours of overtime per month at a fixed wage – that adds up to 276 hours per month. The ILO minimum for a worker at the rank of Able Seaman would be $670 USD per month, including leave pay. This works out to less than $2.50 / hr. Overtime pay on top of that is $3.56 per hour. Ordinary Seaman, or Deck Trainees sometime see wages that work out to only $1.26 per hour. (The ITF posts ILO minimum wages on their webpage.)

On Canadian ships in Canadian waters, wages are much higher. Entry level positions such as Ordinary Seaman start at $20 / hr, with an Able Seaman earning closer to $26 / hr.

You can clearly see that EU wages are in no way comparable to the Canadian reality. This is bad for the workers on the EU vessels doing this work, bad for Canadian workers being displaced, and bad for Canadian companies who cannot compete with such low standards.

The answer to these problems isn’t pretending that they don’t exist. The answer is to listen to more voices, have healthy open debate, and to take action to compensate those who lose out from globalization.

 

Calgary Homeless Foundation’s Research Agenda

The Calgary Homeless Foundation (CHF) has just released its updated Research Agenda (which I co-authored).  CHF is a non-governmental organization that disburses funding to non-profit organizations in Calgary to help persons experiencing homelessness.  Our Research Agenda is a bit like an annual report on our research (except it typically comes out once every two years).

The following points are worth noting:

-A major strength of CHF’s research is its ability to use robust data.

-A major reason CHF is able to use good data is that it oversees a city-wide database system with information pertaining to persons experiencing homelessness. Client-level information (e.g., age, health status, employment status and housing status) is entered into the database. All Calgary programs that receive funding from CHF must use this database system.

-CHF is developing an international reputation for applied, policy-relevant research on homelessness.

You can read more about CHF’s latest Research Agenda here.

Origins of the New Canadian Political Economy

Abridged Text of Remarks to Panel on Canadian Political Economy in Commemoration of Abraham Rotstein and Stephen Clarkson, Department of Political Science, September 16 2016

Let us cast our minds back to the decade of the 1960 – which I recall as the best of times – as the time of the transformation of the old Political Economy centered on Innis into a rejuvenated Canadian political economy.

Innis, who was an economic historian called for an economic history of economic history. I am attempting a political economy of Canadian political economy.

Harold Innis, English Canada’s great intellectual and from 1937 to his death in 1952, Chair of the Department of Political Economy at the University of Toronto, including economics, sociology, and commerce and finance as well as political science, had written back in 1929: “[T]here is evidence to show that the application of the economic theories of old countries to the problems of new countries results in a new form of exploitation with dangerous consequences. The only escape can come from the intensive study of Canadian economic problems and from the development of a philosophy of economic history or an economic theory suited to Canadian needs.” That is surely a deeply nationalist position in defiance of the claim of neo-classical economics to universality.

In 1948, at the beginning of the Cold War, in an essay entitled “Great Britain, the United States and Canada,” he wrote: “In the Anglo-Saxon world we have a new mobilization of force in the United States, with new perils, and all the resources of culture and language of the English-speaking peoples, including those of the United States, will be necessary to resist it. In the crudest terms, military strategy dominated by public opinion would be disastrous.” He concludes: “Whatever hope of continued autonomy Canada may have in the future must depend on her success in withstanding American influence…[T]here is little evidence she is capable of these herculean efforts and much that she shall continue to be regarded as an instrument of the United States.”

My generation of political economists lived in his shadow. The quotes are the book ends between which there emerged, around Innis the old Canadian political economy, from which sprung, in the 1960s and 1970s, the New Canadian Political Economy.

Its context is a surge in Canadian nationalism as a response to a perceived American imperialism which informs the writings of both Rotstein and Clarkson, and of myself, thereby adding to the surge.

Rotstein writes directly about nationalism. He had studied under Karl Polanyi at Columbia. He took Polanyi’s notion of the movement which called forth the countermovement, creating a new balance of forces. American expansionism, led by its invention of the multinational corporation, moved to Canada with the encouragement, by and large, of the Canadian business class and the Canadian state.The countermovement in Canada was, for Rotstein, left nationalism in general and economic nationalism in particular.

There was a striking engagement of intellectuals in politics. Rotstein became the editor of the Canadian Forum, a small but highly influential magazine. He became an informal adviser to Walter Gordon, who was Finance Minister in the first Pearson government and the leader of movement within the government to counter foreign, mainly American ownership. Rotstein was a member of a 1967 federal Task Force of economists to study the matter, which I headed on Rotstein’s recommendation to Mr. Gordon. It led to the creation of the Canada Development Corporation and the Foreign Investment Review Agency by the government.

Clarkson wrote a background paper on Canadian-American relations for the Task Force. In the early 1960s, Canadian-American relations was a deeply boring subject dominated by business and mostly devoted to justifying American ownership; I remember at one point Rotstein and I made a personal commitment to cease attending conferences thereon. Clarkson’s Task Force study gave life to the notion championed by him of an independent foreign policy for Canada.

Clarkson created a popular course on Canadian-American relations involving both Rotstein and myself. He wrote with Christina McCall a marvelous prize-winning biography of Pierre Elliot Trudeau that dealt with his reluctant economic nationalism.

Clarkson opposed the Free Trade Agreement and NAFTA and when they happened he churned out volumes on their workings within a North America that included Mexico. He documents the ways in which the Canadian state has, by its particular management of the American connection, risked the mismanagement of the Canadian nation. He was remarkably productive, publishing more of high quality after he became a senior citizen than many of us do in lifetime. When the Department of Political Economy split asunder in the early 1980, he took a hoard of the now obsolete stationary and when he thought the occasion warranted, used it.

As well as Innis and Polanyi, a central figure intellectually in the 1960 was the Canadian philosopher/theologian George Grant with his books Lament for a Nation and Technology and Empire. (I should add that in the nature of the 1960s, Marxism was in the air we breathed and, in Canada and particularly on this campus, McLuhan, with his ties to Innis, was a genius who could not be ignored.) Grant wrote: “A central aspect of the fate of being a Canadian is that our very existing has at all times been bound up with the interplay of various world empires…What our fate is today becomes most evident in the light of Vietnam. It is clear that in that country the American empire has been demolishing a people rather than letting them live outside the American orbit.” Grant spoke these deeply moving words at a giant teach-in in the war in Vietnam on this campus in 1965; Rotstein and I were among its organizers.

Clarkson’s writings on the Canadian-American relationship are in one sense a continuing riff on the inadequacy of Canada’s responses to the U.S., which is suggestive of the continuing influence of Grant’s apocalyptic Lament. I cannot refrain from citing the 2003 study by Penny Cousineau-Levine with the revelatory title Faking Death: Canadian Art Photography and the Canadian Imagination which, to quote from its dust jacket, “expresses a collective Canadian wish for a symbolic passage to Canadian national maturity.” That “wish” permeates the New Canadian Political Economy at its origins in the 1960s. It has been successfully transformed into a firm sense of national identity and tolerance of the “Other”, albeit accompanied by the advent of neo-liberalism which restrains national economic policy.

A proliferation of identities and issues has overwhelmed economic nationalism and, quite properly, become central to Canadian political economy. The continuing relevance of nationalism was evident in the sustained effort by the Harper government to recast it as militaristic, monarchical, white, and Christian, as well as the decision by the aboriginal peoples who had been labelled “Indians” and consigned to “reservations” to rename themselves “First Nations.”

The possibility that the limits of the present round of globalization have been reached – indeed exceeded with respect to climate change – is putting the issue of Canada’s place in a chaotic global economy on the agenda of Canadian political economy as it was in the 1960s and 1970s before neo-liberalism stood it on its head.

Parental and Caregiving Leaves

The very narrow and brief on-line consultations around parental and caregiving leaves finishes today. As we’ve done in the past, a coalition of community and labour organizations worked together to develop a common list of policy asks. Even though the official consultation is finished, we encourage concerned individuals and groups to submit their own recommendations to ESDC and Minister Duclos.

le français suit

A Joint Letter from Community and Labour Organizations, concerning Federal Consultations on Parental & Caregiving Leaves and E.I.

 We represent a number of community and labour organizations with concerns about the current federal consultations on amending Employment Insurance and Canada Labour Code provisions for Parental and Compassionate Care leaves. In particular we are concerned that the Government has restricted itself to a very narrow set of options.

There are other, more meaningful options for change. We need more realistic options for working families, with a priority for social equity and anti-poverty measures.

  1. We urge the Government to keep a focus on the big picture which includes our social programs and public services. We are in urgent need of:
    • Improvements in EI access and benefits, especially for those in precarious jobs,
    • A public, universal and affordable childcare program for families across Canada, including infant care,
    • New investments in our health care system, including eldercare.
  1. The evidence in Quebec and internationally demonstrates the success of additional parental benefits which are dedicated ‘use it or lose it’ weeks for the second parent. Such provisions help enormously to improve gender equity and shared parenting with many long-term benefits for society. We propose an additional 8 benefit weeks.
  1. There is little point to improving parental and other EI special benefits if there are still women and men who can’t qualify because they can’t meet EI’s 600 hour minimum. We propose all EI special benefits require the lesser of 300 hours (pre-1996 minimum) or $2,000 income (Quebec minimum for parental benefits).
  1. Workers with a new child, those on sick leave or caring for sick family members require more than 55% of their normal earnings while on leave. We propose a benefit rate of 70% and a minimum EI benefit for low wage earners.
  1. Access to EI special benefits should be restored for all migrant workers. A discriminatory two-tier system was introduced in December 2012.
  1. EI is not an appropriate means to address protective re-assignment/leave benefits. Quebec for example addresses it through the workers compensation system.
  1. Compassionate Care Benefits should be available when caring for someone with a critical illness (but not necessarily at imminent risk of death, as currently required).

Thank you for considering our position.

 

Déclaration commune des groupes communautaires et syndicaux dans le cadre des consultations fédérales portant sur les congés parentaux, les prestations de compassion et l’assurance-emploi

Nous représentons des organisations syndicales et communautaires préoccupées par les consultations qui ont actuellement cours visant à modifier certaines dispositions de la Loi sur et du Code canadien du Travail quant aux congés parentaux et de compassion. En particulier, nous questionnons le fait que votre gouvernement se soit restreint à un nombre aussi limité de mesures proposées.

Nous considérons qu’il y a d’autres options qui seraient plus souhaitables et pertinentes. Nous avons besoin de mesures plus adaptées à la réalité des travailleurs et de leurs familles et qui font de l’équité sociale et de la lutte à la pauvreté des priorités.

  1. Nous pressons le gouvernement d’avoir une vision globale qui tienne compte de nos programmes sociaux et nos services publics. Il est urgent que les mesures suivantes soient mises en oeuvre :
    • Améliorations au niveau de l’accessibilité et de la générosité des prestations régulières d’assurance-emploi, particulièrement pour les travailleurs précaires.
    • Programme national de garderies public, universel et abordable (adapté également aux nourrissons).
    • De nouveaux investissements dans le système de santé canadien, incluant des soins pour les aînés.
  1. L’expérience du Québec et à l’international ont illustré le succès d’octroyer des prestations additionnelles ciblées et non transférables pour le deuxième parent. Ce type de mesure favorise grandement l’équité entre les sexes et le partage des responsabilités familiales, ce qui engendre des bénéfices à long terme pour la société. Nous proposons huit semaines de prestations supplémentaires.
  1. Il s’avère pratiquement inutile d’améliorer les congés parentaux et les prestations spéciales si peu de travailleurs réussissent à s’y qualifier vu qu’ils n’arrivent pas à accumuler les 600 heures assurables nécessaires. Nous proposons que la plus basse des deux options suivantes permettent aux travailleurs de se qualifier à des prestations spéciales: 300 heures (minimum exigé avant la réforme de 1996) ou 2000$ de revenus (seuil d’admissibilité au Régime québécois d’assurance parentale).
  1. Les travailleurs nouvellement parents, ceux en congé de maladie et ceux qui qui prennent soin d’un proche ont besoin de plus que 55% de leur rémunération habituelle. Nous proposons un taux de prestations à 70% et un montant minimal de prestations pour les bas salariés.
  1. Redonner accès aux prestations spéciales pour les travailleurs migrants étant donné qu’un système discriminatoire a été introduit en décembre 2012.
  1. La question du retrait préventif (ou de la réaffectation) de la travailleuse enceinte ne doit pas être prise en charge par le régime d’assurance-emploi puisque ça relève de la santé et de la sécurité au travail. Par exemple, le Québec a son propre régime de santé et de sécurité du travail qui indemnise les travailleuses enceintes.
  1. Les prestations de compassion devraient être accessibles aux travailleurs qui prennent soin d’un proche gravement malade (et non uniquement lorsqu’il y a risque de mort imminente).

Merci de considérer notre position.

Signatories / Signataires

Fédération des travailleurs et des travailleuses du Québec, Canadian Centre for Policy Alternatives, Canadian Child Care Federation, Canadian Federation of Students, Canadian Federation of University Women, Canadian Labour Congress, Child Care Advocacy Association of Canada, Childcare Resource and Research Unit, Community Society End Poverty – Nova Scotia, Family Service Toronto, First Call: BC Child and Youth Advocacy Coalition, Good Jobs for All Coalition, Income Security Advocacy Centre, Migrant Workers Alliance for Change, New Brunswick Common Front for Social Justice, Newfoundland and Labrador Federation of Labour, Ontario Coalition for Better Child Care, Ontario Community Legal Clinic EI Working Group, Parkdale Community Legal Services, Public Service Alliance of Canada, Unemployed Workers Help Centres, Saskatchewan, UNIFOR, United Steelworkers, Urban Alliance on Race Relations, Workers’ Action Centre

Do Calgary and Edmonton need more power and resources?

Over at the web site of the Calgary Homeless Foundation, I’ve written a blog post titled “Do Calgary and Edmonton need more power and resources?” The blog post comes as the Government of Alberta considers the possibility of, well, giving more power and sources to both Calgary and Edmonton.

Points raised in the blog post include the following:

-While most of Canada’s large cities would like to see amendments to Canada’s constitution giving municipalities more power and authority, they tend to take a more pragmatic approach.  Indeed, they often lobby the federal government for more funding, and provincial governments for legislative changes.

-Though the mayors of Calgary and Edmonton have lobbied their provincial government for more power and resources, there are reasons to call into question the wisdom of such a move.  For example, both municipal governments in question have seen major increases in their respective property tax bases in recent years (ergo: it’s not entirely clear why they don’t simply increase property taxes if they wish to generate additional revenue).

The link to the full blog post is here.

Banking on Privatization?

Finance Minister Bill Morneau tables his Fall Economic Statement on 1 November.  We’ll likely find out then whether he has some has real treats, or if they’re planning more privatization tricks for provincial and municipal governments, as his business-dominated Advisory Council on Economic Growth proposed in the form of a public-private infrastructure bank (and through their new term for privatization, creating a “flywheel of reinvestment”).

Today the Hill Times published a column I wrote on this, which I’ve also copied below.

There’s been some top-notch reporting by Bill Curry on this issue, and excellent columns by Tom Walkom, Jennifer Wells and Andrew Jackson.

The institutional investors promoting this (such as Caisse de dépôt et placements CEO Michael Sabia and Blackrock Inc. Managing Director Mark Wiseman) aren’t now publicly admitting private finance would cost much, much more.

In fact financing a project at the 7-9% returns Sabia has previously said institutional investors expect from infrastructure investments would double the total cost of a project financed over 30 years compared to what it would cost if the federal government borrowed directly to finance it (at its current 1.9% 30-year bond rate), as is illustrated in the chart below.

cib-double-the-cost

 

It is perfectly understandable why Sabia, Wiseman and other large investors are aggressively pushing Ottawa to establish an infrastructure bank–so they can boost their returns at the public’s expense–but it would be extraordinarily foolish and irresponsible for any government to do so.

____________________________

Match made in heaven?

Finance Minister Bill Morneau’s Advisory Council on Economic Growth makes it look like match made in heaven. Canada’s public sector has billions in unmet public infrastructure needs while major capital investors have trillions in surplus funds they want to invest to earn stable higher returns.

But in any big-money wedding, someone has to foot the bill. In this case it will be the public through higher costs, lower revenues and new user fees.

The advisory council is calling on Ottawa to create a Canadian Infrastructure Development Bank and fund it with $40 billion. They suggest this would attract an additional $160 billion from private institutional investors to finance large public infrastructure projects, including toll highways and bridges, high-speed rail, ports, airports, power transmission, public transit, “smart-city”, broadband and natural resource infrastructure.

They say the arm’s-length bank should develop a “pipeline of scalable projects with reasonable certainty,” and revenue streams in the form of user fees, availability payments (public funding) and ancillary funding. It would review infrastructure projects over $100 million and select those with enough revenue potential—the cream of the crop—for private financing and investment.

They also recommend Canada “create a flywheel of investment in its infrastructure by catalyzing the participation of institutional capital in existing assets.” This simply means privatization, although they lack the courage to use that word, and say it doesn’t necessarily mean outright sale. Private finance could just suck money out with minority ownership.  This “flywheel of investment” would become an endless cycle of privatization with private finance cannibalizing our public assets for private profit.

Why are these bad ideas?

There’s no shortage of low-cost public financing available to Canadian governments. Ottawa can now borrow at 0.6 per cent over a year and issue 30-year bonds at 1.8 per cent, with provinces a percentage point higher. Long-term borrowing rates have never been this low.

Meanwhile large private infrastructure investors expect “stable, predictable returns in the 7 to 9 per cent range”, according to Michael Sabia who is CEO of Quebec’s Caisse de dépôts pension fund and a member of Morneau’s economic advisory council. This is why he and other major investors are heavily pressuring Canadian governments to include private finance in the hundreds of billions they’re investing in public infrastructure.

It doesn’t take an economist to understand it makes no sense to finance projects at 7 to 9 per cent when you can do so at 2 per cent. Financing at 2 per cent for a $100 million project amortized over 30 years adds $34 million to its cost, while 8 per cent adds $165 million: almost five times as much in financing costs and doubling the total cost, including the principal.

No sensible person would do this with their own mortgage, nor do so in an obvious way with other peoples’ money (OPM) as a politician. That’s why they dress these projects up as public-private partnerships, or “innovative infrastructure financing”, as the Advisory Council proposes with this bank.

The public will always ultimately pay for these higher private financing costs through ongoing public subsidies, lower public revenues, higher user fees and in other ways.

Privatization doesn’t just increase costs, it also results in greater inequality, as user fees are hiked, workers’ wages and benefits are cut, and executive compensation rises. This would severely undermine the Trudeau government’s commitment to support the middle class and reduce inequalities.

It’s unlikely governments would benefit from higher corporate tax revenues, as many projects would be owned by foreign investors and based in tax havens. Foreign ownership also leaves our governments vulnerable to being sued through controversial Investor State Dispute Settlement provisions in trade deals such as NAFTA, CETA and the TPP.

University of Toronto expert Matti Siemiatycki has made much more constructive proposals for a national infrastructure bank that would reduce rather than increase the cost of financing for public infrastructure and increase accountability and transparency over these decisions.

How the Trudeau government responds to these recommendations will be a moment of truth. Will they bend to the interests of private finance or genuinely adopt policies for “inclusive growth” in the interests of all Canadians.

Toby Sanger is the senior economist for the Canadian Union of Public Employees.

This column was first published in the Oct. 31 edition of the Hill Times.

 

 

Ten things to know about the CPP debate

This fall, Canada’s Parliament will debate a proposal to expand the Canada Pension Plan (CPP).  And over at the Behind the Numbers web site, I’m co-author of a blog post titled “Ten things to know about the CPP debate.” The blog post’s other co-authors are Allan Moscovitch and Richard Lochead.

Points raised in the blog post include the following:

-CPP covers a smaller percentage of a retired person’s income than similar schemes in most OECD countries.

-CPP helps reduce poverty in Canada, but it doesn’t provide any of its beneficiaries with sufficient retirement income.

-CPP’s former Chief Actuary has proposed an expanded CPP scheme that would almost eliminate the need for private pension schemes in Canada.  This proposal has been virtually ignored by most of Canada’s elected officials and journalists.

The link to our full blog post is here.

How do you solve a problem like precarious work?

Finance Minister Bill Morneau has taken quite a bit of heat for his tone deaf comments about the reality of precarious work, specifically saying that we should just “get used to job churn”. His policy prescription, an improved social safety net, is actually a valid part of the solution. But must we accept that the precarious will always be with us? That is, what can government actually do to address precarious work?

First of all, has the Finance Minister accurately understood the issue? There is a great deal of hubbub about precarious work, can it be reduced to simply “job churn”?

job-tenure

Hmm, apparently not. The average duration of a job has been remarkably stable since 1976, even for young workers. The distribution is pretty stable too, and aside from the obvious impact of recessions, there is no clear upward trend in short term jobs.

This is because for many workers, precarity doesn’t mean jumping from job to job – it means not knowing how many hours you can count on next week, it means not having any benefits, it means balancing multiple jobs along with caretaking duties and/or furthering your own education. It means working for the same employer for 5 years, but always on six month contracts. It means unpaid internships are the only kind of internship you can find, or not having any recourse when an employer unjustifiably docks your wages or takes your tips for themselves.

Of course there has been an increase in own-account self-employment (has no paid help, but may be incorporated or unincorporated), and contract workers wouldn’t show up in the data on job duration. But the trend in own-account self-employment is most pronounced for workers 25-54.

own-account

Our labour statistics don’t do a good job of measuring precarity – but some indications:

  • Nearly 2 million workers are ‘own-account self-employed’, meaning they have no paid help,
  • About 900K work part time because they can’t find full time work,
  • Another 390K work part time to accommodate unpaid care work,
  • About 1 million have a second or third job.

So, now that we have a better understanding of the problem, what tool(s) does the federal government have at its disposal to address labour market precarity for younger and older workers, now and into the future?

The federal government can try to spur economic growth. The current government is doing that through investment in infrastructure (watch out for privatization schemes here), and investment in green jobs and clean tech.

But the economy has been growing over the past 25 years, when we’ve seen growing precarity in the labour market – so that’s clearly not sufficient. I would advise the economic council to take a look at Senator Bellemare’s work on full employment, and Professor Marc Lavoie’s work on wage led growth. It might lead them in a policy direction that will benefit both growth and well-being.

For example, transfers such as the Canada Child Benefit will help to reduce poverty and inequality. Expanding the Working Income Tax Benefit would help make work pay, and make life a little easier for the working poor.

Expanding the social safety net by improving CPP will help down the road, and it absolutely reduces the stress of precarity when workers know they will have that pension when they retire.

The current design of Employment Insurance amplifies and exacerbates labour market inequalities, and ideally a social insurance system would work to dampen existing inequalities. A lower entrance requirement & minimum benefit level would go a long way to doing that.

The federal government could use Labour Market Development Agreements (LMDAs) with the provinces to provide more opportunities for training and re-training – and better supports for non-EI eligible workers who need access to basic numeracy and literacy training through Labour Market Agreements (LMAs).

High quality public services and social services are critical. I cannot overstate the need for more affordable childcare spaces in Canada, and the beneficial impact this would have on precarious workers.

But it’s not all about the federal government, since the provinces legislate employment standards for about 90% of workers in Canada.We’re hearing lots about $15 and Fairness, because that’s where the issue is for many precarious workers. Higher minimum wages, access to paid sick leave, the ability to certify a union in one step instead of two-stages (leaving workers open to retaliation and intimidation from employers), anti-scab legislation, and most importantly, proactive employment standards enforcement, like Manitoba has.

(Instead of relying on complaints from affected workers, Manitoba has a Special Investigations Unit that monitors the employers of vulnerable workers. According to their website, in 2014-2015 almost half of their investigations were the result of information received from the public and the Unit identified violations in 80 per cent of these cases.)

So what can government do to address precarious employment? A whole lot, it turns out.

Post Capitalism

Here is a link to my review of an extremely interesting new book by Guardian economics and political columnist Paul Mason.

“Paul Mason is a leading British economic journalist, currently a columnist for The Guardian. He is also a long time left political activist. His new book, Postcapitalism: A Guide to Our Future (Farrar, Strauss and Giroux. New York. 2015) is a challenging, sometimes obscure, sometimes brilliant, eminently worthwhile read, and an optimistic take that the left might, once again, be marching in tune with the forces of history.

Mason is, to say the least, highly original and idiosyncratic. His book is partly addressed to the orthodox Marxist left, endorses and builds upon the labour theory of value, takes seriously the possibility of a planned, non market economy, and pays tribute to the traditions of radical working-class socialism. At the same time, he is emphatically non Leninist, sees networked knowledge workers as the key contemporary agents of social change, and draws heavily on pro capitalist thinkers from Schumpeter, to management theorist Peter Drucker, to contemporary cheerleaders for the supposedly transformative knowledge and network based new knowledge economy.”

 

http://www.socialistproject.ca/bullet/1317.php

 

Denying Globalization’s Downside Won’t Stop Right-Wing Populism

I was somewhat surprised to see Stephen Poloz recently urging economists to do more work identifying and disseminating research on the supposed benefits of free trade.  That’s slightly beyond his job description (perhaps more fitting with his last position as head of Export Development Canada).  But like economic leaders elsewhere in the world, Mr. Poloz is obviously concerned with the disintegration of popular support for neoliberal free trade deals.  That disintegration will have tectonic economic and political consequences. Read more »

Guaranteed Annual Income

Over at the web site of the Calgary Homeless Foundation, I’ve written a blog post titled “Ten things to know about Canada’s guaranteed annual income debate.”

Points raised in the blog post include the following:

-There are people and groups on both the left and right of the political spectrum who favour a Guaranteed Annual Income (also known as a “basic income”).

-One reason for support on both the left and right is that there is considerable discrepancy in terms of how generous the benefit should be.  This also makes it challenging to estimate its annual cost.

-It’s not clear what the desired outcome(s) of such a scheme would be.  This too may depend on which advocates/proponents you talk to.

-The implementation of a Guaranteed Annual Income would require a considerable amount of intergovernmental cooperation.

The link to the full blog post is here.

Canada’s National Housing Strategy Consultations

Over at the web site of the Calgary Homeless Foundation, I’ve written a blog post about Canada’s National Housing Strategy consultations.  The link to the blog post is here.

Points raised in the blog post include the following:

-In Canada, public social spending as a percentage of our GDP is well below the OECD average.

-The amount of housing stock in Canada considered to be “social housing” is also well below the OECD average.

-The history of Canadian housing policy suggests that, when the federal government leads new construction, provinces and territories follow with funding of their own.

The Stylized Facts of Canada-China Trade

Prime Minister Trudeau leads a big entourage to China this week, in hopes of expanding Canada’s foothold in that huge economy.  A couple of interesting media stories today set the stage for the visit: an overview of China’s evolving diplomatic and economic strategies by Andy Blatchford of Canadian Press, and a review of China’s growing emphasis on migrant labour provisions in trade deals by Jeremy Nuttall in the Tyee.

I recently compiled some data on Canada’s present highly lopsided economic relationship with China.  Here are the main features of our current, unbalanced relationship: Read more »

Federal Income Support for Low-Income Seniors

Over at the Behind the Numbers web site, Allan Moscovitch, David Macdonald and I have a blog post titled “Ten Things to Know About Federal Income Support for Low-Income Seniors in Canada.”

The blog post argues—among other things—that if the age of eligibility for Old Age Security were to move from 65 to 67, the percentage of Canadians aged 65 and 66 living in poverty would see a very substantial rise.

The post is based on a recent chapter we’ve written for How Ottawa Spends, an annual publication of Carleton University’s School of Public Policy and Administration.  In the chapter, we estimate the rise in poverty with the help of Statistics Canada’s Social Policy Simulation Database and Model.

The link to the blog post can be found here.

Challenging Inflation Targeting

Every 5 years the federal Finance Minister updates the “marching orders” that guide the Bank of Canada and its conduct of monetary policy.  This process is the one opportunity for democratic oversight of the Bank, which otherwise is deemed to be operating “independently” of government — all the better to ensure that it has the authority to take away the punchbowl whenever the economic party gets going too energetically. Read more »

Central Agencies in Canada

Do you ever lie awake wondering what it is that Finance Canada, the Privy Council Office and Treasury Board Secretariat actually do?  Well, wonder no more my friends!  Over at the web site of the Calgary Homeless Foundation, I’ve written a blog post titled “Ten things to know about central agencies in Canada.”

Here’s the link to the post.

 

First Annual Canadian Homelessness Data Sharing Initiative

Over at the web site of the Calgary Homeless Foundation, I’ve written a blog post about the First Annual Canadian Homelessness Data Sharing Initiative.  The link to the blog post is here.

Another review of Economics for Everyone, 2nd ed.

Here’s another review of Jim Stanford’s Economics for Everyone, 2nd edition, this one by guest contributor and MMT aficionado Larry Kazdan.

Review of Jim Stanford’s /Economics for Everyone

by Larry Kazdan

Jim Stanford has written a superb book which deserves pages of admiration and praise – a truly impressive body of work that introduces to the public an alternative vision of progressive economics. Yet his overview is not without its tragic policy flaw; a flaw which likely renders many of his objectives unachievable. Read more »

Is Slow “Growth” Inevitable?

Most of the world economy (including Canada’s) has performed sluggishly since the Global Financial Crisis of 2008-09.  And many economic and fiscal projections now accept this pattern of slow growth as more-or-less inevitable, as a “new normal.” This argument is typically invoked to justify a ratcheting down of expectations regarding job prospects, incomes, and public services.

In my view it’s important for progressives to dig beneath the observed reality of prolonged stagnation, identify its causes (which I attribute largely to sustained weakness in the dynamism of private business investment), and then identify progressive, relevant responses — instead of assuming that stagnation is inevitable or even (in the eyes of some) beneficial.  Read more »

How not to fund infrastructure

Recycling is supposed to be a good thing, so when the federal Liberals quietly announced that “asset recycling” would be part of their strategy for meeting their much-ballyhooed infrastructure promises, not many eyebrows were raised. They should have been. Asset recycling is an obscure code word for selling our public goods for private profit. It’s privatization by another name.

Don’t have the taxes to pay for new buses? It’s okay, you can sell your electricity utility to pay for them instead. In fact, this is precisely what the Ontario Liberal government is doing. Already 30% of the profitable Hydro One have been sold and another 30% will be sold before 2018. A public Hydro One could more directly fight climate change, lower energy costs for the poor or work with First Nations on whose lands generation often happens. A private Hydro becomes an instrument for profit first with other goals secondary.

What the Liberals have started in Ontario will soon be rolled out across Canada. Here are the problems with these schemes.

Read more »

How to Solve a Problem like Internal Trade Barriers?

In 1995, Canadian First Ministers signed an Agreement on Internal Trade. From the website, “Its purpose is to reduce and eliminate, to the extent possible, barriers to the free movement of persons, goods, services, and investment within Canada and to establish an open, efficient, and stable domestic market.”

Well, it turns out that agreement, although regularly updated and renegotiated, is no longer enough. The previous Conservative government had really, really, really wanted to update AIT to be more in line with their approach to trade in international agreements such as TPP and CETA. The pretty conservative Senate wants it badly too. And it seems the current government is happy to oblige.

The updated agreement on internal trade, which had been moving along nicely, has hit a snag. Negotiators had wanted to open up all government procurement (meaning, not allowing any preferential treatment for local contractors). Alberta has asked to be allowed to require 20% local employment in government procurement.

The other proposed feature of an updated AIT that is particularly troublesome is a switch to a negative list. (A negative list starts from the assumption that all services should be delivered privately, without restriction, and a positive list starts from the assumption that most services should be publicly provided and/or regulated. The language used in these deals is super technical and inaccessible for a reason – it’s harder to organize opposition around something that’s so abstract.)

The current AIT and all of Canada’s international trade deals operate on a positive list. Only the CETA has been negotiated on a purely negative list (I’ve been told that some elements of TPP are negative list and some are still positive list because of references to WTO rules).

Proponents are trying to argue that a negative list is ‘modern’ – but it’s just privatization and deregulation through the back door. As I told Blacklock’s Reporter, implementing a negative list to solve Canada’s internal trade barriers makes about as much sense as using a chain saw to trim your fingernails.

It seems like a good time to post my comments on behalf of the Canadian Labour Congress to the Senate committee on Banking, Trade, and Commerce.

********************************

Mr. Chair, the labour movement is keenly aware that trade is, and has always been, an important feature of the Canadian economy. We understand the interest that all governments have in fostering healthy trade between jurisdictions, inside and outside of Canada.

Unfortunately, trade agreements can unduly restrict governments’ right to regulate, give huge advantages to larger businesses, and rarely have effective protections for workers or the environment.

As such, they do not always increase trade, improve economies, or benefit Canadians.

So our question is: what problem is an updated Agreement on Internal Trade meant to solve, and is it possible that there are better policy tools available to solve those problems?

Since 1995, many of the impediments to internal trade have been addressed. Most empirical studies have found that the cost of remaining internal trade barriers are quite small, and the benefits of expanding AIT have been grossly exaggerated.

Most often, one hears about the movement of alcohol, or the movement of trained workers.

On the labour front, considerable gains have been made in recent years, for example with the Red Seal program that sets a high standard that is accepted in all provinces. We’re confident that provinces are moving in the right direction on labour mobility, and on harmonizing training as well as certifications.

Do we need to re-open an existing agreement to improve the interprovincial movement of alcohol? It seems that provinces could work together on specific issues, such as that, when they arise.

As Scott Sinclair recently told this committee, it would be a useful exercise to list and estimate the cost of specific trade barriers between provinces. Provincial governments could then cooperate to remove any costly barriers that do not serve any useful purpose, rather than sign onto a far-reaching agreement that may have serious unintended consequences.

One of the other reasons that we’re talking about changing the Agreement on Internal Trade is to make it compliant with international trade agreements such as the Trans Pacific Partnership and the CETA. The labour movement has serious concerns about those agreements, as they contain elements that are harmful to workers, the environment, and local economies.

Particularly, we want to preserve local governments’ ability to deliver high quality public services, and to use procurement policies to promote local economic development and environmental stewardship.

We know that public purchasing policies can have broad benefits, such as reducing waste and energy consumption, developing economic capacity among underserved populations, and supporting smaller suppliers and suppliers who have sustainable and ethical business practices. Expanding the AIT will make it more difficult for provincial and local governments to accomplish this.

In terms of protecting public services, the drive to switch to a negative list in the AIT is very worrisome, particularly in light of investor dispute settlement mechanisms.

A negative list means that any service governments wish to be kept out of a trade deal, such as health care or education, must be specifically named. If new services emerge, or if public consensus grows for new programs such as pharmacare, these services are automatically subject to the trade agreement. This is privatization by default. A positive list would give all governments, and their residents, the chance to decide if they want to protect new areas of public service delivery.

Even for those services that have been protected, standstill and ratchet clauses effectively lock the current level of privatization into place, and only allow increased privatization. If a hospital has outsourced meal, laundry, and cleaning services – but finds that they are getting sub-standard service for higher prices – decision makers subject themselves to an ISDS complaint & potential fine if they want to bring those services back in house – even if that is the best decision economically.

As it stands, the AIT prohibits adopting or maintaining even non-discriminatory measures that “restrict or prevent the movement of persons, goods, services, or investment across provincial boundaries.” This seriously ties the hands of elected officials at all levels of government, in an unnecessary way.

We have followed the policy prescriptions from the OECD and IMF from the 80’s and 90’s in terms of privatization of public services, trade liberalization and lowering corporate taxes, and not seen much economic benefit as a result. We would suggest to you that it is time to try something new, not rehash old policies.

Minimum wages as economic stimulus?

Update: The Alberta government has announced their timeline for getting to $15 / hour, which includes eliminating the lower minimum wage for liquor servers.

The Alberta Federation of Labour has an excellent minimum wage campaign, called “15 is fair”. I provided some research support for a paper they produced on the positive economic impact of increasing minimum wages, which you can read in full here, but I wanted to share some of the key points.

Increasing the minimum wage doesn’t kill jobs

In recent years, several provinces including Alberta have modestly increased minimum wages. Not only has the number of workers in low-wage sectors grown, but economists say that higher minimum wages can be good for reducing poverty, increasing job stability, and providing stimulus to the economy.

Since 2011, Alberta has made five upward adjustments to minimum wage – and at no point did that make a dent in employment growth in low-wage industries such as retail trade or accommodation and food services. In fact, even after the oil shock that devastated Alberta, these two low-wage sectors remain stronger than the overall Alberta labour market.

AB Job growth

 

Increasing the minimum wage does lower inequality

Fortin and Lemieux (2015) show that these increases in the minimum wage actually reduced income inequality in Canada, and that the trend for the bottom 10 per cent of income earners is closely linked to changes in the minimum wage.

This is important for two reasons. First, opponents have argued that increasing the minimum wage is misguided because not all minimum wage earners are working poor. But minimum wage earners are more likely to be working poor than higher wage earners. Secondly, there is now clear evidence that minimum wages reduce inequality – which is an advisable goal separate and apart from poverty reduction.

Minimum wage increases stimulate the economy

The Federal Reserve Bank of Chicago studied the potential impact of minimum wage increases in the United States. They found that increases in the minimum wage lead to significant increases in household spending, which has a stimulative effect on the economy.

This makes sense, if we consider the fact that many low-wage workers currently can’t make ends meet. Low-wage workers are more likely to have un-met basic needs, and so spend extra income right away. Economists call this “a higher marginal propensity to consume.” The good news is that with more income, workers can better meet their basic needs, and local businesses benefit from having customers with more money to spend.

With that in mind, we can attempt to gauge the impact of an increase in the minimum wage, assuming workers spend every extra after-tax dollar in their pocket.

Table 1: Impact of a $1 Minimum Wage increase in Alberta
Wage < $11.20 Wage $11.21-12.20
Number of workers 70,100 88,500
Usual hours of work per week 25.3 25.4
Estimated impact on household spending
Average wage increase $1.23
Weekly increase after CPP, EI, and Federal income tax $3.9 million
Annual increase in household spending $201 million

Source: Labour Force Survey microdata, April 2016 and author’s calculations

Higher wages create more stable & productive jobs

We often talk about how to increase the number of ‘good jobs’ in our economy. Good jobs are ones where workers feel respected, where the job is stable, and where employers invest in workers.

Too often minimum wage jobs are not good jobs. But Canadian research shows that increasing the minimum wage reduces turnover, creating more stable jobs for workers.

The theory is that higher wages force employers to abandon low-wage, high turnover strategies, and instead encourages them to invest in their current workforce. Low-wage, high turnover strategies are actually costly, as it takes time and resources to find and train new employees. Lower turnover means more stable jobs for workers, and a more productive workforce for employers.

UBC economist David Green suggests that increasing the minimum wage is one of the few mechanisms that encourages employers to abandon an inefficient low-wage, high turnover strategy. This is the more important long term impact of increasing wages.

Brexit and Neoliberalism

In the end, what was meant to be a referendum about the economic benefits of remaining in the European Union, was about everything but. There will be countless analyses of the results and of the reasons that motivated the British people to vote to leave the European Union. But in the end, I fear that very few of these analyses will even come close to addressing the true underlying forces at work. Read more »

Summer reading! Review of Stanford’s second edition of Economics for Everyone

Looking for something to take with you to the cottage, the beach or the cafe?  Check out  Jim Stanford’s 2nd edition of Economics for Everyone.  Here’s a review by Peter G. Prontzos first published in the Vancouver Sun.

Book review: A fresh look at the dismal science of economics

Economics for Everyone:A Short Guide to the Economics of Capitalism (2nd Ed.)

By Jim Stanford

Pluto Press

The global economy is still recovering from the “Great Financial Crash” (GFC) of 2008. Understanding the causes of the meltdown is not a simple task, and devising a more stable, prosperous, and egalitarian alternative is even more difficult. That’s why it is fortunate that Jim Stanford has re-written his groundbreaking study, Economics for Everyone.

Stanford explains how the economic collapse was the direct result of “financial products and practices that were unethical, unstable, and unsustainable”, and which were unregulated by governments. Indeed, in many cases, it was the earlier deregulation of Wall Street — which attended the rise of neo-liberal capitalism — that allowed the financial sector to make such risky moves in the first place.

The author makes the links between the GFC and the imposition of “austerity” demands by governments, whose real agenda is, “to claw back public pensions, reduce income security … drive down wages … and privatize more public assets.” (Greece is perhaps the best-known victim of these counter-productive and inhumane policies).

This market failure, along with the growing gap between the one per cent and everybody else, exemplifies one of the most important points in this discussion: that economic decisions are not necessarily based on an objective “science.” Instead, they are also political choices that societies make.

For instance, it is generally agreed that unemployment could be lowered significantly if the Bank of Canada and the government were not so determined to keep the rate of inflation to around two per cent, which is what giant corporations usually prefer.

On the other hand, many — perhaps most — Canadians would prefer economic policies which would create more jobs (as well as giving a higher return on investment such as RRSPs), even if another result was a slightly higher rate of inflation.

Stanford explains that one of the benefits of high levels of unemployment for corporations is that working people are more likely to tolerate lower wages and more stressful working conditions if they know that there are very few decent jobs available.That’s what Stanford means when he argues that there are indeed alternatives, depending on who is calling the shots. “The economy embodies conflicting interests between different groups,” he notes. Stanford himself, who holds a PhD in economics, is employed by the Unifor, Canada’s largest private sector union, with more than 305,000 members across the country. (He is also a regular panelist on CBC TV’s, The National).

The main goal of his book is to provide exactly what the title implies: a way to understand how the economy works because we are so profoundly affected by it. Fortunately, he explains, “you don’t have to be an economist to know a lot about economics.” Which is not to say that it is an easy read. It takes both time and thought to work your way through its 400 pages. It is, however, clearly written and includes many informative charts, pictures, and figures to explain its ideas and show how the various economic elements interact with each other.

A rather unique feature is the invitation to take part in an interactive dialogue with the author. The reader is invited to weigh in on a number of topics, and some contributions are posted on his website. (Check it out: www.economicsforeveryone.com).

As impressive as this book is, there are a few aspects which could be improved. For example, Stanford rightly explains that Adam Smith celebrated the “deregulation of markets … and policies to protect the profits and property rights of early capitalists.”

It would be helpful to mention that Smith also distrusted capitalists, felt that this economic system is unjust, and was appalled by the way workers were treated. In fact, Smith wrote that most people who have to sell their labour in order to make a living would be psychologically damaged “unless the government takes pains to prevent it” by mandating decent pay and working conditions.

Stanford and Smith (and Marx!) also agree on what is known as the “labour theory of value: “Productive human activity is the only force that adds value to the wealth we were given by nature.”

It follows, then, that those who work the hardest and produce the most value — sweatshop workers, perhaps, and farmers, and child care providers, for instance — should reap the largest rewards.

In contrast, Stanford writes that: “The financial industry is not, in itself, productive,” and he provides a number of examples to support his case.

He ends by urging “workers and poor people … to organize” and fight for a fair distribution of the wealth that they have created.

This book does a commendable job of explaining the workings of our economy, so if you don’t have the time or inclination to take economics courses, you can learn a lot from this volume.

On the other hand, if you are studying mainstream economic theory, this book may be especially valuable, as it provides an alternative perspective to the hegemonic values of orthodox neo-liberalism.

Peter G. Prontzos teaches Political Science at Langara College.

 

 

The TPP is a Bad Idea, part 27

On June 16th the House Committee on International Trade held its 27th meeting about the Trans-Pacific Partnership. The Canadian Labour Congress, the Canadian Association of Research Libraries, Scott Sinclair, and Gus Van Harten were all in Ottawa to tell parliamentarians just how bad the Trans-Pacific Partnership would be for Canada.

We outlined the limitations on governments right to regulate in the public interest, the expensiveness and unpredictability of Investor-State dispute mechanisms, and the ways in which the deal will tie the government’s hands in trying to implement their mandate for economic growth, a green transition, managing health care costs, and indigenous rights.

There was limited time to make our case though, as presentations are limited to 5 minutes, and answers to questions were even shorter. I left the meeting feeling as if I wanted to clarify a few points:

  1. Being pro-trade is not the same as being pro-trade deals. Similarly, being against trade deals doesn’t mean you’re against trade. We’ve long past the point where trade deals have much to do with lowering tariffs. Instead, trade and investment deals have become a convenient back-door for multi-national corporations to lobby for legislative and regulatory changes that they could never get through a democratic process. One example is the extension of copyright duration to life + 70 years, which has some pretty significant benefits for Disney & Hollywood in general, but that the librarians (and others) have significant concerns about. Another example is opening up access to unlimited numbers of temporary work visas, with no right to require needs tests or to set limits, and no mechanism to enforce wages and working conditions for these vulnerable workers. It’s this bypassing of democratic institutions that is most worrying.
  2. Even the most rosy macro-economic analysis of the TPP shows limited benefits for economic growth. And these analyses were undertaken with unrealistic assumptions. They assume that the trade balance stays constant (when actually we’ve seen an increasing trade deficit after signing our trade deal with South Korea, for example), and they assume that employment stays constant. If you use a model that allows these outcomes to vary, like the Tuft’s University study did, you find smaller economic benefits overall, and that workers in all TPP nations lose out. Pointing out that there is the potential for limited micro-level benefits (say, for beef producers) does nothing to change the big picture analysis that Canadians and workers overall would lose out from the TPP.
  3. In general, the process for negotiating trade deals is secretive and not accessible to most Canadians. Scott Sinclair is a veteran of Canadian trade negotiations, and he says that the TPP was the most secretive ever. When you consider that large pharma, energy, and tobacco corporations and lobbyists *are* often included, and civil society organizations are not – it’s not only secret, it’s plain undemocratic.
  4. It is time to come back to more reasonable form of investor protection. A Canadian company has never won an ISDS case against the United States, but we have been successful under WTO processes. Investor protections which should be:
    • subsidiary to national judicial processes,
    • should privilege state-to-state settlements, and
    • should emphasize investors’ responsibilities just as much as the protection of their assets.

If you want more detail, here is a link to Scott Sinclair’s testimony, Gus Van Harten’s new paper on ISDS, and Hassan Yussuff’s statement to the committee.

To learn even more and add your voice to stop the TPP, visit stoptpp.ca

Who earns minimum wage?

UPDATE: All numbers exclude self-employed workers. The Labour Force Survey doesn’t provide wage data for self-employed workers, and self-employed workers aren’t subject to minimum wage laws. “Proportion of workers” is more accurately “Proportion of employees”. The number of employees per province can be found in CANSIM Table 282-0012.

Minimum wages have been getting a lot of attention lately. And for good reason. Workers earning minimum wage often struggle to get enough hours, don’t have predictable schedules or advance notice of shifts, and many don’t even have access to unpaid sick days.

Alberta’s current government was elected on a plan to raise the minimum wage to $15 by 2018, and the Nova Scotia NDP recently tabled a bill that would have the minimum wage increase each January, eventually reaching $15 in 2019.

How many people even earn minimum wage? Well if you take everyone earning less than the primary minimum wage, there were 1,253,000 workers earning minimum wage or less in 2015 (many provinces have exceptions or lower wages for students or alcohol servers).

Minimum wage (2015) Number (000’s) Proportion of workers
BC $10.45 98.2 5.2%
AB $11.20 100.1 5.2%
SK $10.50 22.2 4.7%
MB $11.00 50.4 9.1%
ON $11.25 675.5 11.6%
QC $10.55 232.6 6.6%
NB $10.30 18.5 6.0%
NS $10.60 30.9 7.9%
PEI $10.50 4.7 7.5%
NFLD $10.50 18.0 8.4%

Source: Labour Force Survey microdata 2015, Government of Canada Minimum wage database

But if we’re talking about increasing the minimum wage, workers who earn just above that get a raise too. So how many workers benefit directly from a $15 minimum wage? Well, in 2015 about 25% of all workers in Canada made $15 / hr or less. That’s more than 4 million workers. This varies significantly by province, from 18% of all employees in Alberta, to 38% of all employees in PEI.

Number (000’s) Proportion of workers
BC 482.5 25.5%
AB 350.5 18.2%
SK 106.6 22.7%
MB 162.8 29.6%
ON 1,670.1 28.6%
QC 971.4 27.5%
NB 111.5 36.0%
NS 130.6 33.5%
PEI 23.9 38.4%
NFLD 69.6 32.6%

Source: Labour Force Survey microdata, 2015

We also often hear that low wage workers are young workers, living with their parents, and raising the minimum wage will only hurt them – making it harder for young workers to break into the labour market. David Green, a professor at UBC, reviewed the existing literature on minimum wages and found that “Estimated [employment] effects for young adult and adult workers range from insignificant to non-existent.” He also found the Canadian evidence shows that increasing the minimum wage reduces turnover – so raising the minimum wage actually creates more stable jobs for workers too.

And while lots of young workers are employed in low wage jobs, many adults are as well. Besides, young workers deserve a fair wage for their labour too.

Finally, women are disproportionately represented in these low wage jobs – fully one-third of women earn less than $15 / hr, compared to only 22% of men.

Employees earning less than $15 (000’s) Low wage employees as % of all employees
Men Women Men Women
15-24 776.5 892.0 65% 74%
25-54 681.1 1,112.9 13% 22%
55+ 243.1 373.9 18% 29%
Total 1,700.7 2,378.8 22% 32%

Source: Labour Force Survey microdata, 2015

It’s also important to note that many in the Fight for $15 movement have made associated improvements in employment standards part of their campaign. In Ontario, the 15 and fairness campaign addresses issues such as sick days, predictable scheduling, and contract flipping.

Fight for $15 is a concrete way to push back against growing inequality and precarious work – join the fight for decent work in your province!

Winner of the 2016 Galbraith Prize

The Progressive Economics Forum is pleased to announce Marjorie Griffith Cohen as the winner of the 2016 Galbraith Prize in Economics. Our selection committee included past winner Lars Osberg, Joan McFarland (St. Thomas University), Angella MacEwen (CLC), Fletcher Baragar (Manitoba)  and David Pringle (PEF), and was chaired by Marc Lee (CCPA-BC). Marjorie has accepted the Prize and will deliver the Galbraith Lecture at the Canadian Economics Association meetings in Ottawa on Saturday, June 4. Thanks to our judges and to the Galbraith family.

Below is the nomination of Prof. Griffith Cohen by Iglika Ivanova, Brenda Spotton-Visano, Armine Yalnizyan, Duncan Cameron and Jim Stanford, which does a great job to summarize her extensive career.

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It is our honour to nominate Marjorie Griffin Cohen for the PEF’s Galbraith Prize in Economics for her contributions to political economy in Canada. Marjorie Cohen is a professor of Political Science and Gender, Sexuality, and Women’s Studies at Simon Fraser University. She is a scholar in the feminist tradition, who writes on public policy and economics with special emphasis on issues concerning the Canadian economy, Canadian public policy, women, labour, international trade agreements and deregulation of the electricity sector. She is well known and highly regarded for her work on women’s work and income security, and more recently the implications of climate change for labour in Canada.

Professor Cohen is an activist with a strong commitment to social justice. She was a director of NewGrade Energy (Sask) and has served on several boards and commissions in British Columbia including the B.C. Industrial Inquiry Commission on the Fisheries; Board of Directors of B.C. Hydro; Board of Directors of B.C. Power Exchange.  She was also instrumental in establishing the Canadian Centre for Policy Alternatives in B.C., was its first Chair, and is on its Board of Directors.

She is a scholar and an activist whose work perfectly exemplifies the PEF’s goal of supporting thorough-going, progressive democratic structural change in the policies and institutions that currently govern the economy (including macroeconomic policy; labour market institutions and regulations; policies affecting both paid and unpaid work;  the regulation of international economic relationships; and environmental protection and regulation), and a desire to participate in the strengthening and promotion of these alternative policies.

She is currently involved in two research projects related to global warming and gender and a project on the gender and economic crises. Her large scale research project in Economic Security (funded by the Social Science and Humanities Research Council) brought together 22 community-based researchers, 22 researchers from universities in B.C. and many students in the study of the impact of government policies on vulnerable populations. Its most significant work is to try to establish new public policy that would meet the economic security needs of this population.

In addition to several scholarly articles and policy papers, she has authored and edited several books on women’s work and globalization.

  1. Free Trade and the Future of Women’s Work: Manufacturing and Service Industries (University of Toronto Press, Higher Education Division, 2013)
  2. Public Policy for Women (University of Toronto Press, 2009)
  3. Remapping Gender in the New Global Order (London & New York: Routledge 2007),
  4. Training the Excluded for Work: Access and Equity for Women, Immigrants, First Nations, Youth, and People with Low Income (UBC Press 2003)
  5. Governing Under Stress: Middle Powers and the Challenge of Globalization (Fernwood Press, 2004), with Stephen Clarkson
  6. Global Turbulence: Social Activists’ and State Responses to Globalization (Ashgate 2003), with Stephen McBride
  7. Canadian Women’s Issues: Volume II: Bold Visions (James Lorimer & Company, 1995) with Ruth Roach Pierson
  8. Women’s Work, Markets, and Economic Development in Nineteenth-century Ontario (University of Toronto Press, 1988)

House price inflation and what to do about it

I have a new report out today on affordable housing in Metro Vancouver. While it’s mostly of regional interest, I think the analysis and framework for housing solutions could have a much wider audience. The report looks at what’s driving the spectacular rise in housing prices in Vancouver, summarizing what we know from a wide range of sources. It looks at the how rising prices have widened the growing gap between rich and poor. And it outlines five themes for a solutions agenda.

Here’s the oped length summary of key measures, including restricting absentee ownership, major new public investments in affordable housing stock, and a more progressive property tax system.

A Solutions Agenda for Vancouver’s Housing Market

Marc Lee

Metro Vancouver’s housing market is broken. While most of the attention has been on the soaring price of housing, there is also a crisis in the rental market, and the complete absence of any secure housing for the most needy. Together, these factors have fuelled a widening gap between rich and poor.

To address this crisis we must stop treating housing primarily as an investment rather than a place to live. Vancouver’s housing should be owned by the people of Vancouver, not absentee owners or corporations.

First, we need to take external capital out of the game. The ability of outside wealth whether Chinese, Russian, American or Albertan to come into the housing market is largely unquestioned. But when Vancouverites have to compete for housing with the world’s super-rich, locals cannot win.

In London’s even crazier real estate market, the UK government has acted to curb foreign money inflows by making its property transfer tax steeply progressive (topping out at 12% above $3 million), and adding a 3% transfer tax on purchases of second homes and rental properties.

BC’s property transfer tax could easily be amended along these lines to keep outside money at bay, and to address other ills of the real estate market like speculation. Over the longer term, though, we need to have a conversation about outright restrictions on absentee ownership.

In addition to cooling demand, we need to build public housing supply, lots of it. The development industry maximizes its profits when it can sell exclusive, luxury units to the top bidder. We need to revive the role of public enterprises to build the housing that local people need, not what investors want.

The tools for such public investment are already in place, from CMHC to BC Housing to regional/municipal housing agencies, not to mention potential partnerships with a wide array of non-profit housing providers.

We can start with an ambitious expansion of the rental housing stock, ideally with cooperative and social housing models. We need about 5,000 new units per year just to keep pace with demand. And more if want to address the housing backlog, from thousands of homeless people up to the estimated 145,000 households considered in “core housing need” (meaning they spend more than 30% of their gross income on housing).

In addition to rental, a building program should also explore innovative affordable ownership models, like community land trusts, where constraints on resale price serve to lock in affordability over the long term. Whistler also provides an excellent BC example of developing affordable ownership for local workers.

The challenge is how to fund the upfront costs of building new housing, typically about $250,000 per unit (800 square feet, mid-rise apartment). That means an annual investment of between $1.25 and $2.5 billion per year to build 5,000 to 10,000 units per year, less where land is contributed or development charges waived. That said, most of that upfront cost would get repaid over the lifetime of the building through rent.

To finance such as build out, and to make the tax system more fair, we should reform how we tax property. For example, a progressive property surtax kicking in at $1 million of assessed value would only affect the top one-third of homeowners, but would raise $1-2 billion per year.

Similarly, the windfall capital gains from housing price escalation should be subject to tax, just like income from working is or (to a lesser extent) income from selling stocks. A lifetime capital gains exemption of $500,000 could be included, with only gains above this amount taxed.

The surge in real estate prices has further increased the gap between rich and poor, with homeowners essentially winning the lottery. A portion of those winnings should be taxed to build the affordable housing we need.

It’s clear that we need a more rational management of housing in the interests of the people who live and work in the city. We have plenty of examples of success from our own history to actions taken in other jurisdictions. The real challenge is political will, and overcoming the powerful collection of vested interests in the housing market.