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The Progressive Economics Forum

IRPP: No Denial of Dutch Disease

Canadian Press writes, “Mr. Mulcair’s analysis of what ails Canada’s economy is contradicted by a new independent study produced by the Institute for Research on Public Policy.” Really?

What does the study conclude? As quoted by Canadian Press, “On balance, the evidence indicates that Canada suffers from a mild case of the Dutch disease, which warrants a commensurate policy response.”

What policies does the study recommend? According to Barrie McKenna:

There is a treatment for the relatively mild impacts of Dutch Disease, the authors suggest. The federal government should pump tax revenues into big infrastructure that bolster the competitiveness of manufacturers. And the energy-rich provinces could also help “neutralize” the upward pressure on the loonie by investing “windfall revenues” offshore through sovereign wealth funds. And they rejected more radical solutions, such as capping manufacturing wages or adopting the greenback outright.

How does any of that contradict Mulcair? He has not suggested “capping manufacturing wages or adopting the greenback outright.” He has advocated infrastructure investment.

If anything, this study contradicts Brad Wall and Alison Redford, who have been completely dismissing the concept of Dutch Disease while giving away their provinces’ non-renewable resources rather than collecting appropriate royalties to invest in savings funds.

Enjoy and share:

Comments

Comment from Paul Tulloch
Time: May 16, 2012, 9:37 pm

wow the media is a circus these days. I hope for the NDP’s sake, they start to think a bit more about what they write. I could not believe the headlines today. It was surreal.

They say the study says something that refutes Mulcair and then states the study agrees with him, but only mildly? WTF!

Who is the editor these days of the G&M? He must be having a grand old time with these headlines.

I still for the life of me do not understand how making a case for how the dutch disease has raised the dollar is regionally tearing up the country. Manufacturing and knowledge workers go right across this country. Has anyone lately bothered to look at how many workers we are comparing?

I also have a problem with the study. They are stating how much employment was lost, yet they fail to look at how much potential employment from new investment could have been added. For example, they state that the dutch disease has not hurt the auto sector, that is quite a stretch. I recall just a few months back the Canadian Exec in charge of GM Canada stating that the high dollar has cost Canada investment. That is a serious fault of the study. We know that the dollar has affected many long term investment decisions, and the longer the dollar remains above PPP, the less incentive for corporate HQs, mostly foreign based, and lower investment and less jobs will be created. By excluding that feature from the study introduces a huge amount of bias into the methods by the IRPP, lets be at least a bit realistic here.

Amazing how one small rise in manufacturing data can incite media gurus to nail Mulcair to the cross making such outlandish statements that. “see we had a small gain in manufacturing- Mulcair is trying to destroy the country”

Can you imagine the frenzy these “unbiased” reporters will be in by the time we get close to elections?

Come on you crazy fool media guys stop it already would you! Lets report like we are adults here.

If anybody is trying to tear up the country it is HArper, did anybody in the press report on how Harper’s EI policy will effect seasonal workers, and we all know that given the makeup of specific industries like fishing and construction, seasonality is intrinsic.

Did anybody in the press consider that instead of trying to build a capacity to extract every last drop of tar from those sands in a mater of 10 years, might actually be a bad idea, and given the real effects on the dollar has actually killed off more jobs than it has created?? Did anybody say that potentially tar sand development was actually regionally based! Nope not one mention of that. You phracking reporters call that balanced? I think not.

Comment from Milan
Time: May 17, 2012, 7:11 am

I think the assumption that the oil sands belong to Alberta and that the people of Alberta can therefore use them how they like is faulty.

Everyone depends on the atmosphere and the climate. Alberta doesn’t have the right to disrupt those things for all of humanity, both now and for many future generations.

It’s a depressing sign of how economically obsessed and self-involved we are that we care more about whether the oil sands are hurting manufacturing in Ontario than about how they are killing people in Bangladesh and Sudan.

Comment from Paul Tulloch
Time: May 17, 2012, 8:28 am

Milan, I do realize that threat as well, in fact I would place it above the manufacturing effect that I wrote above as I am well aware of photon interaction with co2 molecules and other green house gases in the outer biospheres of the earth atmosphere. In fact I actually did some math on modelling the photon energy increments (heat) from the green house gas concentrations modelling. Also looked at the heating and cooling of the oceans and how co2 sequestering works with the oceans and how the interaction of heavily concentrated c02 on the top layers of the ocean prevent the ocean from absorbing more.

So I agree with you 100%, I have been very self-involved in the Canadian scene, as that is where the political levers are, and right now, getting the manufacturing and high value adding workers and industries to recognize the economic negative externalities of oil exploitation at insanely accelerated rates also line up well with the within those green movement goals.

I think Jeff Rubin made a good point last night on Fang and O’feary last night, the whole point of oil, how far can price go before oil is no longer affordable. There are plenty of oil reserves, but the question comes down to economic costs to extract them. I wish we had a stronger environmental awareness that factored in co2 costs as that would definitely push tar sand production into a zone where affordability would mean the tar sands would not be feasible. It is all about extraction costs and right now we only include use a commodicifation process that reifies oil costs in a manner that exlcudes CO2, and hence why Harper is the anti-christ of planet earth!

Comment from Francis Fuller
Time: May 17, 2012, 9:16 am

To follow up on Paul’s comments:

If the world acknowledges the future impacts of AGW and the economic impacts of future scarcity driving the price of energy up to unaffordable levels, does no one think states will take steps to mitigate the economic and environmental impacts?

Harper’s hubris consists of making a low quality, hard to refine, expensive to extract commodity, the centre of Canada’s economic activity at exactly the same time all other nations are seeking to reduce energy consumption, or identify substitutes.

To put this in another way, Canada seeks to maximize its participation in a market facing long term decline. It is like going focusing on the production of buggy whips and horse harness at the dawn of the age of the automobile. This is bad economic policy and this policy is driven by Harper, not Mulcair.

Oil prices continue to edge down. Tar sands production costs close to $80 per bbl, the current market price is around $92 and tar sands oil sells at a $6 discount to WTI. If the world economy continues to slow there will be continued downward pressure on oil prices and the high cost producers i.e. Alberta, will face margin contraction.

If the global downturn continues for any extended duration, Alberta will be in for a world of hurt.

Comment from Purple Library Guy
Time: May 17, 2012, 10:04 am

Mmm . . . I think we’re going to get at least one more price peak before renewables take over for good. And when prices are high, the oil boys make back their investments at amazing speed. Climate change and environmental damage aside (which they shouldn’t be) investing in the tar sands would be worth the money . . . IF the windfall profits weren’t used to game the political system to get us to distort the economy for them.

Unfortunately, they have been able to use the profits to do just that–get us to not just allow them to exploit the tar sands, but let them keep all the rents, ignore all the externalities, allow foreign ownership indiscriminately, rake off extra subsidies. Frankly, Canadians should own the oil companies in Canada publicly like all the non-patsy countries. The only reason we’re not at least charging large royalties and making sure the exploitation of the stuff doesn’t harm the rest of the economy and the environment too bad is concentrated money-based influence-peddling. And the Conservatives go beyond being influenced, they’re practically a political vehicle built and owned by the Alberta oil patch for the specific purpose of harnessing the whole rest of Canada as little more than an enabler for windfall resource rents to be handed to private, mostly foreign, interests.

Comment from Ken Howe
Time: May 17, 2012, 10:26 am

I thought I’d take a peek at comments on the article from the Globe website. No commentator on the first page (all I could stand) noticed that the prescriptions in the study as reported in the article itself match Mulcair’s prescriptions. The article of course contradicts itself quite a bit, but oh well.

Comment from Francis Fuller
Time: May 17, 2012, 1:40 pm

Quote
And the Conservatives go beyond being influenced, they’re practically a political vehicle built and owned by the Alberta oil patch for the specific purpose of harnessing the whole rest of Canada as little more than an enabler for windfall resource rents to be handed to private, mostly foreign, interests.
End Quote

And we all know that this structure of influence is a direct consequnce of the policies of Mr Mulcair and the NDP.

To use the press in this country as fish wrap would be an insult to dead fish.

Comment from Glen
Time: May 20, 2012, 10:24 am

Here is another disease we share with the Dutch.

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