Main menu:

History of RPE Thought

Posts by Tag

RSS New from the CCPA

  • CCPA in Europe for CETA speaking tour October 17, 2017
    On September 21, Canada and the European Union announced that the Comprehensive Economic and Trade Agreement (CETA), a controversial NAFTA-plus free trade deal initiated by the Harper government and signed by Prime Minister Trudeau in 2016, was now provisionally in force. In Europe, however, more than 20 countries have yet to officially ratify the deal, […]
    Canadian Centre for Policy Alternatives
  • Twelve year study of an inner-city neighbourhood October 12, 2017
    What does twelve years of community organizing look like for a North End Winnipeg neighbourhood?  Jessica Leigh survey's those years with the Dufferin community from a community development lens.  Read full report.
    Canadian Centre for Policy Alternatives
  • Losing your ID - even harder to recover when you have limited resources! October 10, 2017
    Ellen Smirl researched the barriers experienced by low-income Manitobans when faced with trying to replace lost, stolen, or never aquired idenfication forms. Read full report here.  
    Canadian Centre for Policy Alternatives
  • CCPA recommendations for a better North American trade model October 6, 2017
    The all-party House of Commons trade committee is consulting Canadians on their priorities for bilateral and trilateral North American trade in light of the current renegotiation of NAFTA. In the CCPA’s submission to this process, Scott Sinclair, Stuart Trew, and Hadrian Mertins-Kirkwood argue for a different kind of trading relationship that is inclusive, transformative, and […]
    Canadian Centre for Policy Alternatives
  • Ontario’s fair wage policy needs to be refreshed September 28, 2017
    The Ontario government is consulting on ways to modernize the province’s fair wage policy, which sets standards for wages and working conditions for government contract workers such as building cleaners, security guards, building trades and construction workers. The fair wage policy hasn’t been updated since 1995, but the labour market has changed dramatically since then. […]
    Canadian Centre for Policy Alternatives
Progressive Bloggers

Meta

Recent Blog Posts

Posts by Author

Recent Blog Comments

The Progressive Economics Forum

Coyne on Pensions

Andrew Coyne takes on public pensions in the current edition of Maclean’s (which does not yet seem to be available online). He not only criticizes the Caisse de Dépôt’s lousy investments, but calls for doing away with the Canada and Quebec Pension Plans (CPP and QPP).

Coyne’s secondary headline (and primary argument) is, “Compulsory plans like the CPP expose older investors to risks they shouldn’t have to face.” His logic is that, whereas risky assets with potentially high returns (e.g. stocks) make sense for young people with decades ahead of them, safer assets with modest returns (e.g. bonds) make sense for people closer to retirement. In buying some risky assets, the CPP Investment Board allegedly forces excessive risk upon older Canadians.

What Coyne seems to miss is that younger Canadians are also members of the CPP. If risky assets are appropriate for young people and safe assets are appropriate for old people, then the CPP should buy a combination of risky and safe assets . . . which is what it does.

Of course, there is undoubtedly legitimate room for debate about the precise mix of assets. But Coyne presents no information on the composition of the CPP’s portfolio.

More generally, one might suggest that public pension plans should pursue public goals other than trying to maximize their risk-adjusted financial return. The CPP used to generate guaranteed returns and facilitate public investments by lending to provincial governments. Through the Caisse de Dépôt, the QPP used to contribute significantly to Quebec’s economic development.

Indeed, it is somewhat ironic that after proponents of Coyne’s free-market philosophy succeeded in advocating that the CPP and the Caisse get into financial markets, he is using the latter’s financial-market misadventure to attack both institutions.

UPDATE (March 12): Coyne’s column is now available online.

Enjoy and share:

Comments

Comment from duncan cameron
Time: March 9, 2009, 2:50 pm

Your irony is well chosen Erin. The financial market misadventure was unfortunate, but not for the reasons Coyne gives.
The public pension system is puny, the sums made available so far to government for public investment are inadequate. Putting the two together is the right recipe for improving both. Public investment funded by pension payroll contributions with interest paid to the pension fund is a better model. Contributions should not be capped, so that higher income people pay more, and get the same payout.
The CPP investment portfolio is ripe for some research. Apparently they have hotels in New Zealand. The Caisse was doing fine until the Charest government decided to push it towards increasing its rate of return. Most of the junk it bought was brokered out of Toronto.

Write a comment





Related articles