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The Progressive Economics Forum

Drummond Misdiagnoses Ontario’s Economy

The Harvard International Review has posted an interview with Don Drummond. I have posted the following response:

It is good Drummond confesses that his free-market policy prescriptions failed to improve productivity, but old habits apparently die hard: “We have an Employment Insurance scheme that basically dissuades people from going where the jobs are. We still have interprovincial trade barriers.”

The University of Toronto’s recent Mowat Centre EI Task Force concluded: “There is no evidence that regional variation in the unemployment insurance system has altered internal migration patterns in Canada in a substantial manner.” Drummond is presumably familiar with the Task Force’s research since he served on its advisory committee and endorsed its recommendations.

The only possible “interprovincial trade barrier” Drummond identifies throughout the interview is securities regulation. Towards the end, he acknowledges that “most of them have been eliminated by the provinces themselves. Even the security regulators in the provinces have more or less worked out a way to recognize each others’ requirements.”

Drummond also misdiagnoses Ontario’s economy, denying that it has a large stock of unemployed labour: “if that were true, you would be seeing declines in wages. Yet wages have been increasing fairly firmly.”

Over the past year, Ontario’s average hourly wage rose 1%, compared to provincial inflation of 2.4%. So, wages are indeed declining in real terms. A more obvious measure – the provincial unemployment rate – also indicates a large stock of unemployed labour.

By boosting employment, Ontario could certainly grow faster than 2% in real terms. However, Drummond’s prescription of extreme austerity will not help achieve that goal.

Enjoy and share:

Comments

Comment from duncan cameron
Time: February 20, 2012, 10:43 am

Erin makes important points about the views of someone who has become a public figure.
When I was a young civil servant in Finance it was considered bad form for senior officials to go off and sell their skills to the highest bidder. As a result others never learned how wrong-headed they were on analysis, or how facile their solutions to public policy issues.
With D.D. out publicly for some time with his views, we get a better read on the shoddy thinking behind the bad policies of the 90s (when he and the other D.D. were in charge at my old department). Drummonds mea culpa was welcome, but not sufficient for us to forgo serious criticism of the kind of thinking his work represents.

Comment from Paul Tulloch
Time: February 20, 2012, 11:22 am

I watched Armine on TVO the other night

http://theagenda.tvo.org/episode/141110/political-will-and-the-drummond-report

Poor Armine was definitely ganged up on here, but she held her own and I thought really made the point on what you are mentioning Erin.

I am not sure how these other guests were hand picked but they sure are singing the same, Down and out Ontario song that Drummond sings.

If this nihilistic defeatism, pervades the corporate boardrooms across the province, then I am sure we are doomed. But again, despite the claims by Drummond that the economy is stick at 2% are what creates this fate.

I am amazed that these people are in the positions they are in, as the thinking and the battle plans they draw up are self defeating. Drummond’s plan is the antithesis to the solution, and to have that much high priced “talent” sitting around the TVO camera pontificating was a sickening display of leadership in this province.

Our engine in this economy is the auto sector, and I go back to the fact that auto sales have rebounded in the US, so we will see improvement. So instead sitting around deciding about what appendage we should cut off, they should be discussing economic policy for growth.

Duncan, you were a finance stooge? lol

Comment from Paul Tulloch
Time: February 20, 2012, 11:47 am

I should mention that Armine was exempt from my comments and the guy from RBC made a couple of good points, but the others were are the center of the defeat of Ontario.

Drummond and his report remind me of Napoleon’s Grouchy.

Comment from duncan cameron
Time: February 21, 2012, 6:54 pm

I am quite proud to have been part of the Finance Dept. in 1966-7. The socialists were in charge, AW Johnson, and RB Bryce. Stanley Knowles son was in social policy division.
The Canada Pension Plan, Canada Assistance Plan, and Medicare all were put together around that time. That is why what happened 30 years later I find so galling Paul.

Comment from Paul Tulloch
Time: February 22, 2012, 10:12 pm

I am just bugging you Duncan those were mighty fine years indeed, and for sure you should be proud. I did not know that kind of talent was behind the scenes.

The civil service is so huge but the public never gets close to knowing some of the unsung good people. Amazing how they have destroyed the discourse. I worked with some might fine people at Statistics Canada as well, many are retired now, but they taught me a whole lot about life the universe and everything and it was always a huge highlight of my day working with some statistical heavy weights like, Garnett Picot, John McVey and many others.

Comment from Jeff Dean
Time: February 24, 2012, 10:01 am

Don Drummond *face palm*

Comment from B. Meighan
Time: February 25, 2012, 3:04 pm

In the federal civil service from WWII on to early 1970s was acknowledged by domestic politicians and foreign governments as the best civil service lead by individuals like Bob Bryce and many others. They spoke truth to power. Not so since when it became politicized through the Deputy and lower.

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