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The Progressive Economics Forum

Macdonald-Laurier Institute on Dutch Disease

Here is my Economy Lab piece on the study by Philip Cross released yesterday. On close examination, his “expanding sectors” turn out to be low value-added resource processing and his argument that Canadian manufacturing is not in decline does not hold water. The decline in output has been far greater than in the US and productivity growth much slower. Looks like structural regression to me.

Enjoy and share:

Comments

Comment from Paul Tulloch
Time: January 17, 2013, 5:39 pm

I would really like to know about these Expanding sectors! Amazing, and just think, if it were not for sub-prime auto loan lending in the USA, GM, Ford and Chrysler would be deep in the red right now, and then where would central Canada be? Have a look at the miracle of the auto sector – and you will see the same ugly warts that propped up the housing sector and the entirety of the US financial system. Sure a little bit of looking the other way on car loans in the USA is not the great beast the housing bubble was, but let me say this, it is flimsy excuse for a recovery.

Give or make Philip a dataset and he will abstract away until the low value adding resource sector come home – or the cows- to employ another hundred thousand highly scarce pipefitters and welders in the oil patch. I love the Canada action plan that the tories have going, the resource sector in Alberta will create 900K jobs across the nation! Yes and it will only cost us about 600k manufacturing jobs and a whole lot of foreign investment because of an over appreciated dollar.

Why is it nobody on the right will admit that an exchange rate 20 points above PPP is a problem? Is it that they do not agree with that economic fact? Is it they do not understand such economic machinations? Or is it merely an inconvenience that gets in the way of their mathematical abstractions to fit the direction they want things to go.

One has got to be checking into a meth clinic and seeking professional help for opiate abuse to make the claim that manufacturing is just fine! Show me something that even remotely points to that and I will show you abstractions gone wrong, especially in Ontario. The tea reading surely needs some new brew, I think it is time some people moved along. How much can we take in this country before our ability to produce anything but oil is jeopardized by even more wrong headed policy and research.

A massive culture of innovation is in dire need within Canadian Industry and it is a long complicated road to build such a high wage high value adding and production economy. Resource extraction of the dirtiest oil on the planet may be great for a third world country, but it is not nearly enough for our economy.

To not understand that the world needs a robust dynamic Canadian economy, is a travesty. And to say that Canadian manufacturing is doing fine, is irresponsible on so many levels of abuse to workers and their families in central Canada- Philip must like taking the daily bread from workers mouths, because that is exactly what that paper does. It makes out things are fine and growing.

Look at the data, long term unemployed layed off in manufacturing (the only sector that has taken a major beating) have not found work. Long term lay-off are still at elevated levels from pre-recession times. Involuntary part- time workers are still massively above per-recession levels. Income polarization and wage stagnation dominate the pay packets of Canadians. Austerity now reigns amongst most levels of government. These are not what I would call a success in the center of ones economy- being manufacturing and high value adding knowledge economy.

Day by day we fall further behind in asset development of the global value chain, and day by day, investment goes elsewhere, because there is no plan in Canada- except developing quick and dirty profits that the markets label profitable. Except a over inflated dollar that foreign investors see as a road block to investment returns.

We can be profitable, innovative and high value adding, but it takes the work of many actors in the economy, not just the short term profits of share holders and the short sighted think tanks that they sponsor.

I am glad I never sold out the way some have- and to think at least the tea parties actually confess they do not believe in data and research- at least they are honest about their idiocy.

Paul

Comment from mel watkins
Time: January 18, 2013, 8:34 am

Excellent piece, Andrew. Unfortunately, I think only Globe subscribers can access it.

Comment from Larry Kazdan
Time: January 23, 2013, 2:09 am

Letter in Barrie Examiner

Industrial policy a real circus

Cirque du Soleil is laying off 400 staff from its Montreal headquarters, and has partly blamed a high Canadian dollar.

That the steep decline in high-value Canadian manufacturing has also not been significantly impacted by the rise in the Canadian dollar (from $.67 US in 2003 to $1.02 US today) is frankly implausible.

Manufacturing now constitutes only 12.1% of Canada’s gross domestic product (GDP), and the Conservative government is turning us into a Third World raw material exporter.

At least banana republics don’t run out of bananas, but we will eventually run out of oil.

If Canada wants good manufacturing jobs with good wages, then we immediately need a comprehensive industrial policy.

Larry Kazdan

Vancouver, B.C.

http://www.thebarrieexaminer.com/2013/01/21/industrial-policy-a-real-circus

(with photo of Cirque du Soleil)

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