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  • Report looks at captured nature of BC’s Oil and Gas Commission August 6, 2019
    From an early stage, BC’s Oil and Gas Commission bore the hallmarks of a captured regulator. The very industry that the Commission was formed to regulate had a significant hand in its creation and, too often, the interests of the industry it regulates take precedence over the public interest. This report looks at the evolution […]
    Canadian Centre for Policy Alternatives
  • Correcting the Record July 26, 2019
    Earlier this week Kris Sims and Franco Terrazzano of the Canadian Taxpayers Federation wrote an opinion piece that was published in the Calgary Sun, Edmonton Sun, Winnipeg Sun, Ottawa Sun and Toronto Sun. The opinion piece makes several false claims and connections regarding the Corporate Mapping Project (CMP), which we would like to correct. The […]
    Canadian Centre for Policy Alternatives
  • Rental Wage in Canada July 18, 2019
    Our new report maps rental affordability in neighbourhoods across Canada by calculating the “rental wage,” which is the hourly wage needed to afford an average apartment without spending more than 30% of one’s earnings.  Across all of Canada, the average wage needed to afford a two-bedroom apartment is $22.40/h, or $20.20/h for an average one […]
    Canadian Centre for Policy Alternatives
  • Towards Justice: Tackling Indigenous Child Poverty in Canada July 9, 2019
    CCPA senior economist David Macdonald co-authored a new report, Towards Justice: Tackling Indigenous Child Poverty in Canada­—released by Upstream Institute in partnership with the Assembly of First Nations (AFN) and the Canadian Centre for Policy Alternatives (CCPA)—tracks child poverty rates using Census 2006, the 2011 National Household Survey and Census 2016. The report is available for […]
    Canadian Centre for Policy Alternatives
  • Fossil-Power Top 50 launched July 3, 2019
    What do Suncor, Encana, the Royal Bank of Canada, the Fraser Institute and 46 other companies and organizations have in common? They are among the entities that make up the most influential fossil fuel industry players in Canada. Today, the Corporate Mapping Project (CMP) is drawing attention to these powerful corporations and organizations with the […]
    Canadian Centre for Policy Alternatives
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My review of Eric Weissman’s book on intentional homeless communities

I’ve just reviewed Eric Weissman’s book on intentional homeless communities. Points made in the review include the following:

-Intentional communities in general are communities built around specific goals. But in the case of this book, I mean small communities of housing sometimes made from discarded, donated and recycled material, and sometimes purpose-built, to address homelessness.

-Intentional communities are not the same thing as tent cities or tiny home communities. The former tend to have rather sophisticated governance structures, and often have legal status.

The link to my review is here.

Alberta must find alternatives to cutting social spending

I have an opinion piece in today’s Edmonton Journal about Alberta’s current fiscal situation.

Points raised in the blog post include the following:

-The Jason Kenney government will almost certainly announce cuts to social spending in the near future.

-Yet, more than 80% of Alberta’s kindergarten through Grade 3 classes currently exceed the provincial government’s own class-size targets.

-Tuition fees as a share of university operating revenue have roughly tripled in Alberta over the last 30 years.

-Social assistance (i.e., welfare) caseloads have risen substantially in Alberta since the start of the economic downturn.

-Alberta still has, by far, the lowest debt-to-GDP ratio of any Canadian province.

-Albertans are also taxed less than any residents of any other province.

-Meanwhile, Alberta remains the only Canadian province without a provincial sales tax.

The link to the opinion piece is here.

Electrification and Climate I: Scale of the Challenge

Many elements have to come together if Canada is to significantly reduce its greenhouse gas (“GHG”) emissions. There is now a technical consensus that “electrification” – the replacement of fossil fuels with electricity as an energy source – is a necessary condition for decarbonization, and that electrification will require that zero/low-emission electricity generation double or triple by 2050. In this first of a series of electricity-oriented climate-related posts, I summarize the electrification modelling evidence and analyse it in historical context.

In the doom and gloom of current climate news, electrification is a relatively good news story. From the supply side, it shows that deep decarbonization (reductions of 80% or more in GHG) is feasible at current GDP and population growth rates. Because of its energy-efficiency and other conservation measures, electrification would result in reduced energy use while providing us with the same level of “energy services”. However, while there is an appreciation of electrification among many decision-makers and analysts, it has not yet led to significant action (like so many other aspects of climate policy). Some of the reasons are the same political economy challenges to any climate action. But other reasons relate to disagreements among stakeholders on how decarbonization should occur. I discuss these aspects after I summarize the models.

Read more »

Ten things to know about affordable housing in Alberta

I’ve just written a ‘top 10’ overview blog post about affordable housing in Alberta. Points raised in the blog post include the following:

-On a per capita basis, Alberta has far fewer subsidized housing units than the rest of Canada

-Some Alberta cities have much more low-cost rental housing (per capita) than others.

-Going forward, the impact of the federal government’s National Housing Strategy will be modest.

-There are considerable cost savings to be realized when investing in affordable housing, especially when the tenants have serious mental health challenges.

The link to the full blog post is here.

Ten things to know about this year’s Alberta Alternative Budget

The Alberta Alternative Budget (AAB) is an annual exercise whose working group consists of researchers, economists, and members of civil society (full disclosure: I’m the Editor). Our general mandate is to create a progressive vision for Alberta to boost economic growth and reduce income inequality. This year’s document was released today, and here are 10 things to know:

  1. The NDP government of Rachel Notley government made important advances with respect to childcare, but much remains to be done. Specifically, the Notley government introduced a $25/day childcare pilot project and increased the provincial childcare budget by 27% since taking office. However, gender equality and women’s labour market participation in Alberta could be improved even further with universal childcare. This year’s AAB proposes that important steps be taken to get that done by investing an additional $1.65 billion in childcare over the next year.
  2. More than 80% of Alberta’s Kindergarten through Grade 3 classes currently exceed the provincial government’s own class size targets. What’s more, almost half of the province’s Grade 4 through Grade 12 classes exceed the government’s class size targets. And in high schools across the province, roughly half of all core subject classes exceed the Alberta Commission on Learning (ACOL) targets set in 2003. The AAB therefore recommends substantial increases in spending on k-12 education while also recommending that Alberta’s provincial government reduce funding for private schools (which are currently subsidized at higher rates than those in any other province).
  3. When it comes to gender and public policy, Alberta has a long way to go. Women in Alberta face the largest employment gender gap of any province. They are over-represented in lower-paying careers and their hourly pay for full-time work is only 80 cents on a man’s dollar. Further, Alberta lacks pay equity legislation. The AAB recommends that the annual budget of Alberta’s Ministry for Status of Women be increased by 30%, and that the provincial government create a pay equity task force to both investigate the reasons and propose solutions for the large gender pay gaps across industries and occupations in the province.
  4. There are nearly 6,000 reported cases of wage theft (i.e., unpaid wages) in Alberta each year. Further, in 2017/18, only 41% of wage-theft complaints were resolved within 180 days. And it’s generally accepted that formal wage-theft claims represent a small fraction of all instances of wage theft. The AAB therefore proposes that 75 additional employment standards officers be hired in the province, in order to prevent and remedy wage theft.
  5. One in 5 Alberta workers will be injured on the job this year; one in 11 seriously. This year’s AAB will therefore invest an additional $70 million in enforcement of Alberta’s occupational health and safety laws in order to make workplaces safer.
  6. Tuition fees as a share of university operating revenue have roughly tripled in Alberta over the last 30 years. The Notley government did freeze tuition fees in 2015, and recently introduced legislation that would tie tuition fee increases to inflation; but those measures alone don’t cut it. The AAB proposes a five-year ‘phase out’ of tuition fees, starting with a 20% reduction in tuition fees for all post-secondary students, including international students.
  7. Alberta still has, by far, the lowest debt-to-GDP ratio of any province. Alberta’s net debt-to-GDP ratio for 2018-19 is projected to be 6.5%. The next lowest is British Columbia’s, which stands at 15.2%. Though Alberta’s net debt-to-GDP ratio has risen quite quickly since the slump in oil prices, it’s hard to make the claim that the province is living beyond its means.
  8. Albertans collectively are taxed less than residents of any other province. According to Alberta Treasury Board and Finance, if Alberta’s provincial government adopted a tax structures similar to the next lowest-taxed province in the country (British Columbia), Alberta would generate an additional $8.7 billion in annual revenue.
  9. Alberta remains the only Canadian province without a provincial sales tax. The AAB Working Group estimates that the implementation of a 5% provincial sales tax in Alberta would generate approximately $5 billion in new revenue annually. What’s more, even after the implementation of this tax, Alberta would remain Canada’s lowest-taxed province!
  10. This year’s AAB further proposes that a new provincial sales tax be harmonized with the federal Goods and Services tax. The federal government already collects a 5% sales tax in the form of the Goods and Services Tax (GST). Following the lead of several other provinces, we propose that Alberta introduce a Harmonized Sales Tax (HST), which would allow the province to generate its own share of the revenue collected by the federal GST. Introducing a 5% provincial portion of a HST would still leave Alberta with a combined HST of 10%.

In Sum. In addition to providing a costed-out public policy alternative to the status quo in Alberta, each AAB chapter also provides a primer on the public policy topic in question. I think the document makes for excellent reading for researchers, educators, students and non-profit leaders. The media release, along with a link to the full document, can be found here.

MEDIA RELEASE: Alberta should increase social spending; cuts are not the way to go

(June 24, 2019-Calgary) With Alberta’s economy still facing challenges and vulnerabilities, the Alberta government should not be doling out tax cuts or cutting social spending, according to the Alberta Alternative Budget (AAB) released today.

“Alberta still has, by far, the lowest debt-to-GDP ratio of any province,” says Nick Falvo, editor of the report. “We are in a good position to increase spending on education, invest in affordable child care, offer free dental care to Albertans under 18 years, and support other programs that would help Albertans facing unpredictability in the job market.”

The AAB is an annual exercise whose working group consists of researchers, economists, and members of civil society. The AAB  aims to create a progressive vision for Alberta to boost economic growth and reduce income inequality.

Today’s report calls for the introduction of a harmonized sales tax to reduce Alberta’s reliance on profit from energy markets, that have always been volatile. Under the previous government, important steps were taken to stabilize the economy through diversification and social spending.

“The UCP government has already cut close to $6 billion in provincial revenue by cancelling the carbon tax and cutting corporate taxes, and this is the wrong direction,” says Falvo. “Instead, investing in programs and infrastructure is what is needed to foster a vibrant Alberta.”

Download the report.

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Contact: Nick Falvo, falvo.nicholas@gmail.com, 587-892-7855

The Economic Pay-Off from Public Education

On a trip back to Toronto this week I attended the launch of a new report commissioned by the Ontario Secondary School Teachers’ Federation, and written by Aimee McArthur-Gupta from the Conference Board of Canada. The report presents some estimates of the economic, fiscal and social benefits of public education programs.

The full report is here. It is a useful resource for all those campaigning against conservative cutbacks to school budgets (such as those in Ontario, Alberta, and Saskatchewan). It’s also an interesting example of economists attempting to put “numbers” on channels of causation which we all knew were important, but which are hard to measure.

The report has two major analytical sections. The first uses the Conference Board’s input-output model to simulate the immediate spin-off economic effects of public education spending. Education is a major driver of economic growth and job-creation — yet conservatives insist on treating it solely as a “cost” or “drain,” something to be minimized rather than optimized. The Conference Board suggests public education (K-12) accounts for 3.2% of provincial GDP, and 290,000 direct and indirect jobs.

The report then simulated the effects of a 1% increase in provincial spending on education (worth $291 million). It produces a multiplied impact on final GDP (with a final multiplier effect of 1.3). Almost one-third of the incremental expense is returned to government in tax revenues (about 40% of that flowing direct to the provincial level). Wages and salaries (direct and indirect) grow by $275 million, and a total of 4234 additional jobs are created (in schools and administration, in the supply chain, and in downstream consumer goods and services provision).

If anything, I would suggest these estimates of immediate spillover impacts are conservative. Other macroeconomic models have identified even stronger multiplier effects from spending on relatively labour-intensive public services like education.

The second analytical section of the report is more novel: it attempts to identify and quantify some of the major long-run social and fiscal effects of education spending. It points out that high school completion rates have improved dramatically in Ontario over the last 15 years. In 2004 only 68% of Ontario students finished high school. It is important to keep in mind that was at the end of the last 8-year period in office of Ontario’s Conservatives — these ones led by Mike Harris. Their term was marked by austerity, education cuts, attacks on the autonomy of local school boards, and historic job action by teachers resisting those cuts.

By 2017, after years of sustained growth in education funding, Ontario’s high school completion rate soared to 86%. The Conference Board report reviews extensive published evidence indicating a link between funding levels and school attainment. It is clear that the improvement in Ontario achievement is linked to the increase in school funding after the Harris Conservatives lost power.

The Conference Board report then considers just a few of the fiscal and social benefits of better school attainment. It identifies three main channels: reduced social assistance expenses, reduced health care costs, and reduced criminal justice costs. In every case, strong correlations are visible in published literature between higher education and better health, income, and criminality results. The report estimates that if high school completion were to drop back down only partially as a result of funding cuts (in their scenario it falls to 83%), additional public fiscal costs would be incurred in just those three areas totaling $3.8 billion over the next 20 years.

I give the Conference Board an “A” for effort in their effort to quantify these effects, but in reality I think the true impacts on government’s fiscal line of education cutbacks will actually be considerably larger than this. One immediate impact, of course, is the fact that people who do not finish high school generate far lower incomes over their lifetimes than those who do. The Conference Board considers the impacts of lower income on these 3 key dimensions of social well-being, but there are many others — including the fact that revenues flowing back to government in income taxes and GST revenues will be suppressed as a result of lower incomes.

In summary, I find the Conference Board report to be a valid, cautious, and credible first step in exploring the broader economic and social consequences of education funding (or, in the case of Doug Ford’s chaotic government, its absence). I think the true spillover impacts on both immediate economic activity and long-run economic and social well-being are likely to be considerably larger than what this report has suggested. Nevertheless, it makes an important contribution to the discussion in Ontario (and elsewhere) about why it is so crucial to preserve and expand investments in quality, accessible public education.

Good luck to the OSSTF and other advocates for public education in their continuing efforts to defeat the Ford government’s austerity. The dismay that is being expressed in communities around Ontario at the prospect of much larger class sizes, cancelled option and specialist classes, and ultimately school closures is exacting a well-deserved toll on this government — which has become the most unpopular in Ontario’s history, after just a year in office. Momentum is on our side, and this initiative will be important and helpful as the movement to defend public education grows.

Plausible Socialism

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

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

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

Homelessness, harm reduction and Housing First

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

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

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

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

Points I make in the blog post include the following:

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

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

The link to the full blog post is here.

Ontario Electricity VII – Committee Testimony

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

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

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

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

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

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

Good Afternoon.

Thank you for allowing me to participate in this process.

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

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

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

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

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

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

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

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

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

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

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

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

This is not efficient or equitable fiscal policy.

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

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

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

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

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

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

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

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

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

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

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

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

Thank you.  Happy to take your questions.

 

Low taxes are nothing to brag about

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

The link to the opinion piece is here.

Jason Kenney’s tax plan full of holes

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

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

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

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

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

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

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

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

Populism in the Time of Neoliberalism

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

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

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

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

Help please!

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

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

Income Inequality and Redistribution in Venezuela

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

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

Read more »

Technology and Democracy (continued)

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

Technology and Democracy: Contrasting Coal and Oil

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

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

Wilbur Schramm and Noam Chomsky Meet Harold Innis

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


Unrealistic apportioning of the MBM components in the online consultation


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

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

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

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

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

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

A few pathways forward regardless

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

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

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

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

Here are some suggestions.

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

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


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

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

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

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



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

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

2019 PEF Student Essay Contest is Open

The 2019 PEF Student Essay Contest is now open!

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

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

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

——

2019 PEF ESSAY CONTEST RULES

ELIGIBILE ENTRANTS

  • Open to all Canadian students, studying in Canada and abroad, as well as international students presently studying in Canada. All entrants receive a complimentary 1-year membership in the Progressive Economics Forum.
  • The definition of “student” encompasses full time as well as part time students.
  • Students eligible for the 2019 competition must have been/be enrolled in a post-secondary educational institution at some point during the period of May 2018 – May 2019.

LEVELS OF COMPETITION

There are two levels of competition:

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

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

CONTENT OF THE ESSAY

Entries may be on any subject related to political economy, economic theory or an economic policy issue, and should reflect a critical approach to the functioning, efficiency, social and environmental consequences of unconstrained markets.

ELIGIBLE SUBMISSIONS

Eligible entries will be:

  • sent by email at the latest on April 29, 2019, to: PEFEssayContest2019@gmail.com
  • the only submission by the author(s) (i.e., one submission per person);
  • between 20-40 pages in length, and typed in 12-point font, double spaced;
  • referenced to academic standards (including any data);
  • written in either English or French;
  • original, single-authored essays that do not infringe upon the rights of any third parties;
  • accepted on re-submission once;
  • accompanied by a signed scanned file of the completed PEF Essay Contest Submission Form.

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

ADJUDICATION

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

WINNING SUBMISSIONS

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

*******

Concours de textes étudiants – édition 2019

Qui peut participer?

  • Ouvert à tous les étudiants canadiens, qui étudient au Canada ou à l’étranger, ainsi qu’aux étudiants étrangers étudiant au Canada. Tous les participants deviennent gratuitement membres du Progressive Economics Forum pour un an.
  • Le terme « étudiant » couvre les étudiants à temps plein et les étudiants à temps partiel.
  • Pour être éligible à l’édition 2019 du concours, un étudiant doit avoir été ou être inscrit dans une institution post-secondaire à un moment donné pendant la période allant de mai 2018 à mai 2019.

Niveaux de compétition

Il y a deux niveaux de compétition:

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

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

Contenu du texte

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

Pour être accepté, un texte doit:

  • être envoyé par courriel, au plus tard le 29 avril 2019, à l’adresse suivante: PEFEssayContest2019@gmail.com;
  • être le seul texte envoyé par le(s) auteur(s) (un texte par personne);
  • avoir entre 20 et 40 pages, tapé dans une police de taille 12 points, à interligne double;
  • avoir des références écrites selon les standards académiques (incluant les données);
  • être écrit en anglais ou en français;
  • être un texte original, avec un seul auteur, qui n’enfreint pas les droits d’auteurs d’une tierce-partie;
  • n’avoir été soumis au maximum qu’une fois auparavant (donc un texte peut être soumis un maximum de deux fois);
  •  être accompagné par une fiche d’inscription pour le concours de textes du PEF complétée, signée et numérisée.

Les participants acceptent que le Progressive Economics Forum publie les textes des gagnants et de tout autre participant recevant une mention d’honneur. Tout participant devra soumettre une adresse courriel qui fonctionne, ainsi qu’une adresse postale pour fins de correspondance.

Jugement

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

Textes gagnants

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

An update on Canada’s National Housing Strategy

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

Socialism For Realists

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

 

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

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

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

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

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

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

 

Supportive housing for persons with serious mental health challenges

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

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

My full review can be found here.

Rent Control in Ontario

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

 

 

Ten considerations for the next Alberta budget

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

The link to the blog post is here.

The Anthropocene and the New World

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

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

Possessive Individualism

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

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

Crashed: How a Decade of Financial Crises Changed the World

Book Review

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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